Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 000-21505
INTENSIVA HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 43-1690769
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7733 FORSYTH BLVD., 8TH FLOOR, ST. LOUIS, MISSOURI 63105
(Address of principal executive offices) (Zip Code)
(314) 725-0112
(Registrant's telephone number, including area code)
- --------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the registrant's Common Stock, par value
$0.001 per share, at July 31, 1998, was 10,078,838 shares.
Page 1
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
INTENSIVA HEALTHCARE CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30,
1998 December 31,
Assets (Unaudited) 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 334,593 $ 247,943
Accounts receivable, less allowance for doubtful
accounts of $2,721,000 and $1,736,000,
respectively 43,837,938 31,376,641
Inventories 1,149,389 781,317
Prepaid expenses 645,294 855,429
-------------- ------------
Total current assets 45,967,214 33,261,330
Property and equipment, net 8,444,490 6,882,957
Organizational and preopening costs, net 627,756 382,777
Other assets 963,237 1,047,842
-------------- ------------
$ 56,002,697 $ 41,574,906
============= ============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term obligations $ 877,166 $ 781,315
Current portion of revolving credit facility 8,404,950 463,525
Accounts payable and accrued expenses 6,775,176 7,589,180
Accrued salaries, wages and benefits 2,202,957 2,245,741
Accrued third-party payor settlements 6,362,418 2,152,911
------------- ------------
Total current liabilities 24,622,667 13,232,672
Long-term obligations, less current portion 1,434,880 1,312,234
Revolving credit facility, less current portion 3,024,301 1,935,575
Deferred rent expense 1,398,548 1,301,984
Stockholders' equity:
Common stock, $0.001 par value, 70,000,000
shares authorized, 9,980,021 and 9,969,045
shares issued and outstanding, respectively 9,980 9,969
Additional paid-in capital 30,204,434 30,193,647
Accumulated deficit (4,692,113) (6,411,175)
------------- ------------
Total stockholders' equity 25,522,301 23,792,441
------------- ------------
$ 56,002,697 $ 41,574,906
============= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 2
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net patient service revenues $ $26,350,145 $ 14,258,880 $ 52,083,662 $ 26,659,263
Costs and expenses:
Operating expenses 21,899,840 12,437,232 44,060,176 22,895,616
General and administrative 1,365,975 1,187,837 2,648,535 2,200,560
Provision for doubtful accounts 651,162 195,624 1,168,908 1,058,958
Depreciation and amortization 684,871 313,302 1,227,504 606,512
---------------- ---------------- ---------------- ----------------
Total costs and expenses 24,601,848 14,133,995 49,105,123 26,761,646
---------------- ---------------- ---------------- ----------------
Operating income (loss) 1,748,297 124,885 2,978,539 (102,383)
Interest income - 122,531 - 325,258
Interest expense (355,085) (49,902) (522,735) (110,911)
--------------- --------------- --------------- ----------------
Income before income taxes 1,393,212 197,514 2,455,804 111,964
Provision for income taxes 417,964 - 736,742 -
---------------- ---------------- ---------------- ----------------
Net income $ 975,248 $ 197,514 $ 1,719,062 $ 111,964
================ ================ ================ ================
Basic income per share $ 0.10 $ 0.02 $ 0.17 $ 0.01
================ ================ ================ ================
Diluted income per share $ 0.09 $ 0.02 $ 0.16 $ 0.01
================ ================ ================ ================
See accompanying notes to condensed consolidated financial statements.
</TABLE>
Page 3
<PAGE>
INTENSIVA HEALTHCARE CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,719,062 $ 111,964
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,227,504 606,512
Provision for doubtful accounts 1,168,908 1,058,958
Increase in accounts receivable (13,630,205) (8,779,920)
Decrease (increase) in inventories,
prepaid expenses and other assets (209,131) 266,204
Increase (decrease) in accounts
payable and accrued expenses (814,004) 1,176,251
Increase (decrease) in accrued
salaries, wages and benefits (42,784) 322,168
Increase in accrued third-party
payor settlements 4,209,507 (295,604)
Increase (decrease) in
deferred rent expense 96,564 (4,328)
-------------- ------------
Net cash used in operating activities (6,274,579) (5,537,795)
------------- ------------
Cash flows from investing activities:
Additions to property and equipment (1,692,102) (1,413,285)
Organizational and preopening costs (483,573) (268,516)
Maturities of short-term investments - 6,458,746
-------------- ------------
Net cash provided by (used in)
investing activities (2,175,675) 4,776,945
-------------- ------------
Cash flows from financing activities:
Proceeds from issuance of stock options 10,798 -
Net borrowings under revolving credit facility 9,030,151 -
Debt issuance costs incurred (81,702) -
Payments on long-term obligations (422,343) (336,452)
-------------- ------------
Net cash provided by (used in)
financing activities 8,536,904 (336,452)
-------------- ------------
Increase (decrease) in cash and
cash equivalents 86,650 (1,097,302)
Cash and cash equivalents, beginning of period 247,943 2,884,977
-------------- ------------
Cash and cash equivalents, end of period $ 334,593 $ 1,787,675
============== ============
Supplemental cash flow information:
Cash paid for interest $ 522,735 $ 110,911
Cash paid for income taxes 355,641 -
Supplemental information - noncash activity:
Acquisition of equipment through capital leases $ 640,840 $ 1,217,456
============== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 4
<PAGE>
INTENSIVA HEALTHCARE CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The condensed consolidated balance sheet as of June 30, 1998 and the
related condensed consolidated statements of operations and cash flows for
the three and six month periods ended June 30, 1998 and 1997 contained in
this Form 10-Q, which are unaudited, include the accounts of Intensiva
HealthCare Corporation and its wholly-owned subsidiaries ("Intensiva" or
the "Company"). All significant intercompany accounts have been eliminated
in consolidation. In the opinion of management, all adjustments, consisting
of normal recurring items, necessary for a fair presentation of such
financial statements have been included. The results of operations for the
three and six month periods ended June 30, 1998 are not necessarily
indicative of the results to be expected for the year ended December 31,
1998.
The condensed consolidated financial statements do not include all
information and footnotes necessary for a complete presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. Reference is made to the
Company's audited financial statements and the related notes, included in
the registrant's annual report on Form 10-K for the year ended December 31,
1997.
(2) Net Income Per Share
Basic and diluted income per share was computed using net income and the
weighted average number of shares of common stock and common stock
equivalents. The weighted average numbers of shares of common stock and
common stock equivalents used in the computation of income per share for
each of the periods presented is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Shares Used in
Computation of 1998 1997 1998 1997
- ------------------------ --------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Basic income per share 9,978,344 9,905,062 9,973,720 9,905,062
Diluted income per share 10,496,676 10,455,335 10,485,368 10,458,483
</TABLE>
For each of the periods presented, the difference between the amounts
relates to the effect of dilutive stock options and warrants.
(3) Comprehensive Earnings
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income", on January 1, 1998,
which requires reporting of comprehensive income (earnings) and its
components in the statement of operations and statement of equity,
including net income as a component. Comprehensive income is the change in
equity of a business from transactions and other events and circumstances
from non-owner sources.
Page 5
<PAGE>
(4) Start-Up Activities
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-5, "Reporting on the Costs of
Start-Up Activities". SOP 98-5 requires costs of start-up activities and
organizational costs to be expensed as incurred. The Company is required to
adopt SOP 98-5 on January 1, 1999 as a cumulative effect of a change in
accounting principle. The total amount of unamortized organizational and
preopening costs at June 30, 1998 was $627,756.
(5) Reclassifications
Certain prior year amounts have been reclassified to conform with current
year presentation.
Page 6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Intensiva provides highly specialized, acute long-term care for critically
ill or injured patients who require intensive medical monitoring and treatment,
and who often have multiple medical conditions and are medically unstable. The
Company provides high quality, cost effective, specialized care for its
patients, who typically require an average length of stay of greater than 25
days in an intensive inpatient setting. Intensiva's medical staffs provide
specialized medical services, as well as nursing and respiratory care, and the
Company is expanding disease-specific pathways to treat pulmonary, cancer, renal
and cardiac conditions, among others. The Company's clinical programs utilize
specialized staff, equipment and protocols for the treatment of its patients.
Intensiva leases underutilized space from general acute care hospitals
("Host Hospitals") in underserved markets, creating a separate "hospital within
a hospital." By leasing space from the Host Hospital, Intensiva is able to
minimize capital and overhead costs, including the costs to purchase and operate
the physical plant and expensive medical and diagnostic equipment. The Company
is able to purchase certain services from its Host Hospitals, such as laboratory
and radiology (MRI, CAT Scan, X-Ray), as well as hotel services such as laundry,
housekeeping, dietary and property management. The Company's business model
contemplates for each of its specialized hospitals to become certified by
Medicare as "long-term care hospitals" exempt from the Prospective Payment
System ( PPS) after approximately seven months of operations. This exemption
will enable the hospitals to receive cost-based reimbursement (subject to
certain caps), which the Company believes is more appropriate given the medical
condition of its patients. In addition, the Company's business model seeks to
maintain the anticipated payor mix which includes both non-governmental and
governmental payors. The Company is reimbursed by non-governmental payors on per
diem or per discharge basis, through fee for service arrangements, or through
negotiated discounts from established charges.
Operations begin approximately four to five months after an agreement is
executed (and a Certificate of Need is approved, if necessary) with a Host
Hospital. During the qualification period, the Company spends approximately one
million dollars per facility on renovation costs, equipment purchases,
pre-opening costs and working capital before the facility becomes eligible for
certification as a long-term care hospital. Patient volumes are lower during the
qualification phase while physicians, case managers, and payors are educated as
to the benefits of the Company's clinical services.
The Company currently operates 20 facilities in nine states. In addition, as
of June 30, 1998, the Company had signed agreements involving seven other
facilities.
Page 7
<PAGE>
Sources of Revenues
The Company receives payment for health care services primarily from the
federal government and state governments under the Medicare, Medicaid and other
governmental programs and from non-governmental payors such as managed care
organizations (e.g. preferred provider and health maintenance organizations) and
other commercial health insurance carriers (e.g. traditional indemnity insurance
plans). Consistent with initiatives to control health care costs, the Company
generally negotiates payments with non-governmental payors based upon the type
and extent of services to be provided to individual patients. The following
table sets forth the approximate percentages of the Company's net patient
service revenues derived from the specified payor sources indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Medicare 62.0% 74.0% 64.9% 77.3%
Medicaid 9.0 2.5 8.6 1.6
HMO 4.7 4.1 4.0 2.7
PPO 4.3 8.9 3.8 9.6
Other negotiated arrangements 20.0 10.5 18.7 8.8
------ ------ ------- -------
100.0% 100.0% 100.0% 100.0%
====== ====== ======= =======
</TABLE>
The level of Medicare net revenues as a percentage of total net revenues is
a reflection of the maturation of a number of the Company's hospitals. Other
consists of traditional indemnity insurance and all other arrangements with
third-party payors (primarily those negotiated on a case by case basis).
Results of Operations
Net Revenues. Net revenues for the three and six month periods ended June
30, 1998 increased $12.1 million, or 84.8%, and $25.4 million, or 95.4%,
respectively, from the comparable periods in 1997. This growth is primarily a
result of the increase in the number of operational facilities, as the Company
had 20 operational facilities at June 30, 1998 as compared to 13 operational
facilities at June 30, 1997. In addition, increased census at maturing
facilities has been a significant factor in the increase in net revenues. The
thirteen facilities in operation at June 30, 1997 had patient days of 22,301 and
13,689 during the second quarters of 1998 and 1997, respectively.
Operating Expenses. Operating expenses for the three and six month periods
ended June 30, 1998 increased $9.5 million, or 76.1%, and $21.2 million, or
92.4%, respectively, from the comparable periods in 1997. This increase is
attributable to the same factors as those relating to the net revenues growth.
As a percentage of net revenues, operating expenses for the three months ended
June 30, 1998 decreased to 83% from 86% during the three months ended March 31,
1998 and 87% during the three months ended June 30, 1997. The Company expects
this percentage to continue to decline as more of its facilities mature,
although at a slower rate.
General and Administrative. General and administrative expenses for the
three and six month periods ended June 30, 1998 increased $178,000, or 15.0%,
and $448,000, or 20.4%, respectively, from the comparable periods in 1997. The
increase in expenses was primarily attributable to salaries, related payroll
taxes, and employee benefits relating to additional personnel retained to
support the Company's growth
Page 8
<PAGE>
strategy. As a percentage of net revenues, general and administrative expenses
for the three months ended June 30, 1998 were 5%, consistent with the percentage
for the three months ended March 31, 1998, and down from 8% for the three months
ended June 30, 1997. The Company expects that its general and administrative
expenses will continue to decrease as a percentage of net revenues as the
Company grows and achieves certain economies of scale, although at a slower
rate.
Provision for Doubtful Accounts. The provision for doubtful accounts for
the three and six month periods ended June 30, 1998 increased $456,000, or
232.9%, and $110,000, or 10.4%, respectively, from the comparable periods in
1997. As a percentage of net revenues, the provision for doubtful accounts for
the three months ended June 30, 1998 was 2.5%, up from 2.0% for the three months
ended March 31, 1998 and 1.4% for the three months ended June 30, 1997. The
increase has resulted primarily from the growth of non-Medicare net revenues.
Depreciation and Amortization. Depreciation and amortization for the three
and six month periods ended June 30, 1998 increased $372,000, or 118.6%, and
$621,000, or 102.4%, respectively, from the comparable periods in 1997. The
increase relates primarily to depreciation and amortization related to the
property and equipment acquired for the seven facilities opened between July 1,
1997 and June 30, 1998.
Income Taxes. The Company's income tax provision for the three and six month
periods ended June 30, 1998 contemplates the utilization of substantially all of
the Company's available federal net operating loss carryforwards during 1998.
Such net operating loss carryforwards offset all of the Company's taxable income
for the three and six month periods ended June 30, 1997.
Selected Quarterly Financial Results
The following table presents unaudited quarterly operating results for each
of the eight quarters in the period from July 1, 1996 through June 30, 1998. The
Company believes that all necessary adjustments have been included in the
amounts stated below to present fairly the following selected quarterly
information when read in conjunction with the financial statements included
elsewhere in this Form 10-Q.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------------------------------
Sept 30, Dec 31, Mar 31, June 30, Sept 30, Dec 31, Mar 31, June 30,
1996 1996 1997 1997 1997 1997 1998 1998
---- ---- ---- ---- ---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues $4,663 $8,009 $12,400 $14,259 $19,495 $23,435 $25,734 $26,350
Operating income (loss) (1,623) (1,780) (227) 125 687 968 1,230 1,748
Income (loss) before
income taxes (1,597) (1,639) (86) 198 701 918 1,063 1,393
Provision for income taxes - - - - - 94 319 418
Net income (loss) (1,597) (1,639) (86) 198 701 824 744 975
</TABLE>
Page 9
<PAGE>
Liquidity and Capital Resources
Since November 1997, the Company has financed its operations primarily
through borrowings under its $20 million revolving credit facility. In April
1998, the Company terminated its existing Loan and Security Agreement and
entered into a Loan and Security Agreement with another lender to obtain a $20
million revolving credit facility with a term of three years. Although the
Company has begun to generate positive cash flows from certain of its mature
facilities, overall cash flows from operations have not been sufficient to
support ongoing operations primarily due to the time lag that is required to
obtain Medicare provider numbers at new facilities and the continuing
development of new facilities in accordance with the Company's growth strategy.
Cash flows used in investing activities have consisted primarily of capital
renovations, equipment purchases and organizational and pre-opening costs
incurred prior to providing patient services at each new facility.
The Company made capital expenditures of approximately $1,692,000 and
$1,413,000 during the six months ended June 30, 1998 and 1997, respectively.
Additional equipment was acquired through capital leases, amounting to
approximately $641,000 and $1,217,000 for the six months ended June 30, 1998 and
1997, respectively.
During March 1996, the Company entered into a sale-leaseback agreement with
a third-party to take advantage of favorable borrowing rates and maintain
liquidity. As part of this agreement, the Company obtained a $1 million
commitment from the third-party to finance additional capital expenditures. In
May 1997, this agreement was amended to extend an additional commitment of
$500,000 through January 1998 (subsequently extended through August 1998).
Unutilized borrowing capacity under the commitment was approximately $310,000 at
June 30, 1998.
The accounts receivable balance at June 30, 1998 increased $12.5 million
from December 31, 1997, and decreased $700,000 from March 31, 1998. The accrued
third-party payor settlements balance at June 30, 1998 increased $4.2 million
from December 31, 1997. The majority of the increase in accounts receivable
since December 31, 1997 relates to increased census at the Company's facilities
and the time required in obtaining new Medicare provider numbers from the
Medicare fiscal intermediaries once a facility opens and upon completion of the
qualification period. The time lag can result in initial Medicare payments being
received in excess of six months after a facility opens. Of the 20 facilities
operating as of June 30, 1998, 14 have received certification as long-term care
hospitals and have received long-term care provider numbers. Two of the 14
received provider numbers during the second quarter of 1998 and therefore did
not begin receiving payments until July 1998. These facilities had a combined
Medicare accounts receivable balance of $5.3 million at June 30, 1998 and
received payments of approximately $2.3 million in July 1998. Of the remaining
six facilities, two have received initial provider numbers by June 30, 1998. The
combined accounts receivable balance for these facilities at June 30, 1998 was
$3.3 million. In addition, two facilities received Medicaid provider numbers
during the second quarter, and have begun to receive payments on the Medicaid
accounts. The Medicaid accounts receivable balance for these two facilities at
June 30, 1998 was $5.2 million. Approximately $1 million was received on these
accounts during July 1998. The Company anticipates that it will ultimately
receive long-term care certification and provider numbers for all existing
facilities.
Page 10
<PAGE>
Working capital at June 30, 1998 was $21.3 million, representing a $1.3
million increase from December 31, 1997. This increase resulted primarily from
the utilization of borrowings under the revolving credit facility to fund
operations.
The Company leases space from Host Hospitals under operating lease
agreements having initial terms of five or more years. The Company leases
corporate office space under a noncancellable operating lease which expires in
the year 2002. Minimum annual lease payments on noncancellable operating leases
with maturities in excess of one year are as follows: $3.8 million in 1998, $8.0
million in 1999, $8.0 million in 2000, $7.7 million in 2001, $5.9 million in
2002 and $2.5 million thereafter.
The Company estimates that borrowings under the revolving credit facility
will be sufficient to fund its continued development and meet anticipated cash
needs of the Company for at least the next 12 months.
Health Care Legislation
In recent years, an increasing number of legislative proposals have been
introduced or proposed in Congress and in some state legislatures which could
result in major changes in the health care system. Management cannot predict to
what extent such proposed legislation would affect long-term care hospitals,
whether such proposed legislation will be adopted, or if adopted, what effect,
if any, such proposed legislation would have on the operations of the Company.
Forward Looking Statements
Certain of the statements made herein are forward looking statements, as
that term is defined under Section 27(a) of the Securities Exchange Act of 1933,
Section 21(e) of the Securities Exchange Act of 1934, the Private Securities
Litigation Reform Act of 1995, and releases by the Securities and Exchange
Commission. The Company cautions readers that actual results could be materially
different as a result of various possibilities and differences between
anticipated and actual developments. Factors that could cause actual results to
differ from anticipated results include, but are not limited to changes in
health care regulation and/or health care reform, changes in the regulation of
relationships among health care providers, difficulty in obtaining necessary
licenses or certifications, ability to collect accounts receivable, changes in
reimbursement policies or procedures, changes in payor mix, changes in referral
source practices, changes in relationships with Host Hospitals and/or the leases
with such Host Hospitals, competition, and the adequacy of professional
liability insurance. Additional information concerning such factors is set forth
under "Risk Factors" in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, which information is incorporated herein by this
reference. The Company undertakes no obligation to publicly release the results
of any revisions to any forward looking statements contained herein which may be
made to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Item 2. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Page 11
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
There are no reportable proceedings.
Item 2. Change in Securities
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
Item 3. Defaults Upon Senior Securities
(a) Not applicable.
(b) Not applicable.
Item 4. Submission of Matters to Vote of Security Holders
(a) The Annual Meeting of the Stockholders of the Company was held
on May 22, 1998. Of the 9,969,045 shares entitled to vote at
such meeting, 9,180,609 were represented by proxy.
(b) Mr. David W. Cross and Mr. Jeffrey J. Collinson were elected
as Class II Directors of the Company. Mr. Phillip M. Nudelman,
Ph.D., and Mr. James B. Tananbaum, M.D., continue as Class I
Directors. Mr. Wilfred E. Jaeger, M.D., and Mr. David L.
Steffy continue as Class III Directors.
(c) The results of the voting for Class I Directors were as follows:
Number of Shares Voted
Nominee For Withheld
--------------------------- --- --------
Mr. David W. Cross 9,127,859 52,750
Mr. Jeffrey J. Collinson 9,127,859 52,750
The Stockholders approved the adoption of an amendment to the
Intensiva HealthCare Corporation Stock Option Plan increasing
the number of shares subject to the Stock Option Plan by
500,000 shares of Common Stock, and the reservation of an
additional 500,000 shares of Common Stock for issuance under
the Stock Option Plan. 7,658,830 shares voted in favor of the
resolution, 103,342 shares voted against the resolution, and
484,936 shares abstained.
The Stockholders approved the appointment of KPMG Peat Marwick
LLP as independent auditors for the Company. 8,842,247 shares
voted in favor of the resolution, 3,525 shares voted against
the resolution, and 334,837 shares abstained.
(d) Not applicable.
Page 12
<PAGE>
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index for list of Exhibits.
(b) Not applicable.
Page 13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTENSIVA HEALTHCARE CORPORATION
Date: August 11, 1998 By /s/ JOHN P. KEEFE
John P. Keefe, Chief Financial Officer
(Principal Financial and Accounting Officer)
Page 14
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
10.31 Revolving Credit Facility Between Intensiva HealthCare
Corporation and Its Subsidiary Corporations and HCFP Funding,
Inc. in the amount of $20,000,000, dated April 21, 1998
27.1 Financial Data Schedule
Page 15
$20,000,000.00
LOAN AND SECURITY AGREEMENT
by and between
INTENSIVA HEALTHCARE CORPORATION
INTENSIVA HOSPITAL OF AKRON, INC.
INTENSIVA HOSPITAL OF COLUMBUS, INC.
INTENSIVA HOSPITAL OF CORPUS CHRISTI, INC.
INTENSIVA HOSPITAL OF EASTERN OKLAHOMA, INC.
INTENSIVA HOSPITAL OF EVANSVILLE, INC.
INTENSIVA HOSPITAL OF FLINT, INC.
INTENSIVA HOSPITAL OF FORT WAYNE, INC.
INTENSIVA HOSPITAL OF GREATER ST. LOUIS, INC.
INTENSIVA HOSPITAL OF INDIANAPOLIS, INC.
INTENSIVA HOSPITAL OF KANSAS CITY, INC.
INTENSIVA HOSPITAL OF KNOXVILLE, INC.
INTENSIVA HOSPITAL OF MACOMB COUNTY, INC.
INTENSIVA HOSPITAL OF WESTERN MICHIGAN, INC.
INTENSIVA HOSPITAL OF NORTHWEST INDIANA, INC.
INTENSIVA HOSPITAL OF OKLAHOMA CITY, INC.
INTENSIVA HOSPITAL OF PITTSBURGH, INC.
INTENSIVA HOSPITAL OF SOUIX FALLS, INC.
INTENSIVA HOSPITAL OF TACOMA, INC.
INTENSIVA HOSPITAL OF TOPEKA, INC.
INTENSIVA HOSPITAL OF CINCINNATI, INC.
INTENSIVA HOSPITAL OF ANN ARBOR, INC.
INTENSIVA HOSPITAL OF BATTLE CREEK, INC.
INTENSIVA HOSPITAL OF PHILADELPHIA/AEMC, INC.
INTENSIVA HOSPITAL OF PONTIAC, INC.
INTENSIVA HOSPITAL OF RENO, INC.
INTENSIVA HOSPITAL OF WICHITA, INC.
("Borrower")
and
HCFP FUNDING, INC.
("Lender")
April 21, 1998
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made as of April
21, 1998, by and among INTENSIVA HEALTHCARE CORPORATION, a Delaware corporation,
INTENSIVA HOSPITAL OF AKRON, INC., a Missouri corporation, INTENSIVA HOSPITAL OF
COLUMBUS, INC., a Missouri corporation, INTENSIVA HOSPITAL OF CORPUS CHRISTI,
INC., a Missouri corporation, INTENSIVA HOSPITAL OF EASTERN OKLAHOMA, INC., a
Missouri corporation, INTENSIVA HOSPITAL OF EVANSVILLE, INC., a Missouri
corporation, INTENSIVA HOSPITAL OF FLINT, INC., a Missouri corporation,
INTENSIVA HOSPITAL OF FORT WAYNE, INC., a Missouri corporation, INTENSIVA
HOSPITAL OF GREATER ST. LOUIS, INC., a Missouri corporation, INTENSIVA HOSPITAL
OF INDIANAPOLIS, INC., a Missouri corporation, INTENSIVA HOSPITAL OF KANSAS
CITY, INC., a Missouri corporation, INTENSIVA HOSPITAL OF KNOXVILLE, INC., a
Missouri corporation, INTENSIVA HOSPITAL OF MACOMB COUNTY, INC., a Missouri
corporation, INTENSIVA HOSPITAL OF WESTERN MICHIGAN, INC., a Missouri
corporation, INTENSIVA HOSPITAL OF NORTHWEST INDIANA, INC., a Missouri
corporation, INTENSIVA HOSPITAL OF OKLAHOMA CITY, INC., a Missouri corporation,
INTENSIVA HOSPITAL OF PITTSBURGH, INC., a Missouri corporation, INTENSIVA
HOSPITAL OF SOUIX FALLS, INC., a Missouri corporation, INTENSIVA HOSPITAL OF
TACOMA, INC., a Missouri corporation, INTENSIVA HOSPITAL OF TOPEKA, INC., a
Missouri corporation, INTENSIVA HOSPITAL OF CINCINNATI, INC., a Missouri
corporation, INTENSIVA HOSPITAL OF ANN ARBOR, INC., a Missouri corporation,
INTENSIVA HOSPITAL OF BATTLE CREEK, INC., a Missouri corporation, INTENSIVA
HOSPITAL OF PHILADELPHIA/AEMC, INC., a Missouri corporation, INTENSIVA HOSPITAL
OF PONTIAC, INC., a Missouri corporation, INTENSIVA HOSPITAL OF RENO, INC., a
Missouri corporation, and INTENSIVA HOSPITAL OF WICHITA, INC., a Missouri
corporation ("collectively, "Borrower"), and HCFP FUNDING, INC., a Delaware
corporation ("Lender").
RECITALS
A. Borrower desires to establish certain financing arrangements with
and borrow funds from Lender, and Lender is willing to establish such
arrangements for and make loans and extensions of credit to Borrower, on the
terms and conditions set forth below.
B . The parties desire to define the terms and conditions of their
relationship and to reduce their agreements to writing.
NOW, THEREFORE, in consideration of the promises and covenants
contained in this Agreement, and for other consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
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ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
Section 1.1. Account. "Account" means any right to payment for goods sold
or leased or services rendered, whether or not evidenced by an instrument or
chattel paper, and whether or not earned by performance.
Section 1.2. Account Debtor. "Account Debtor" means any Person obligated on
any Account of Borrower, including without limitation, any Insurer and any
Medicaid/Medicare Account Debtor.
Section 1.3. Affiliate. "Affiliate" means, with respect to a specified
Person, any Person directly or indirectly controlling, controlled by, or under
common control with the specified Person, including without limitation their
stockholders and any Affiliates thereof. A Person shall be deemed to control a
corporation or other entity if the Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and business of the
corporation or other entity, whether through the ownership of voting securities,
by contract, or otherwise.
Section 1.4. Agreement. "Agreement" means this Loan and Security Agreement,
as it may be amended or supplemented from time to time.
Section 1.5. Base Rate. "Base Rate" means a rate of interest equal to one
percent (1.0%) above the Prime Rate of Interest; provided, however, that the
Base Rate for borrowings against Qualified Unbilled Accounts shall be at a rate
of interest equal to two percent (2.0%) above the Prime Rate of Interest.
Section 1.6. Borrowed Money. "Borrowed Money" means any obligation to repay
money, any indebtedness evidenced by notes, bonds, debentures or similar
obligations, any obligation under a conditional sale or other title retention
agreement and the net aggregate rentals under any lease which under GAAP would
be capitalized on the books of Borrower or which is the substantial equivalent
of the financing of the property so leased.
Section 1.7. Borrower. "Borrower" has the meaning set forth in the
Preamble.
Section 1.8. Borrowing Base. "Borrowing Base" has the meaning set forth in
Section 2.1(d).
Section 1.9. Business Day. "Business Day" means any day on which financial
institutions are open for business in the State of Maryland, excluding Saturdays
and Sundays.
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Section 1.10. Closing; Closing Date. "Closing" and "Closing Date" have the
meanings set forth in Section 5.3.
Section 1.11. Collateral. "Collateral" has the meaning set forth in Section
3.1.
Section 1.12. Commitment Fee. "Commitment Fee" has the meaning set forth in
Section 2.4(a).
Section 1.13. Concentration Account. "Concentration Account" has the
meaning set forth in Section 2.3.
Section 1.14. Controlled Group. "Controlled Group" means a "controlled
group" within the meaning of Section 4001(b) of ERISA.
Section 1.15. Cost Report Settlement Account. "Cost Report Settlement
Account" means an "Account" owed to Borrower by a Medicaid/Medicare Account
Debtor pursuant to any cost report, either interim, filed or audited, as the
context may require.
Section 1.16. Default Rate. "Default Rate" means a rate per annum equal to
three percent (3%) above the then applicable Base Rate.
Section 1.17. ERISA. "ERISA" has the meaning set forth in Section 4.12.
Section 1.18. Event of Default. "Event of Default" and "Events of Default"
have the meanings set forth in Section 8.1.
Section 1.19. GAAP. "GAAP" means generally accepted accounting principles
applied in a manner consistent with the financial statements referred to in
Section 4.7.
Section 1.20. Governmental Authority. "Governmental Authority" means and
includes any federal, state, District of Columbia, county, municipal, or other
government and any department, commission, board, bureau, agency or
instrumentality thereof, whether domestic or foreign.
Section 1.21. Hazardous Material. "Hazardous Material" means any substances
defined or designated as hazardous or toxic waste, hazardous or toxic material,
hazardous or toxic substance, or similar term, by any environmental statute,
rule or regulation or any Governmental Authority.
Section 1.22. Highest Lawful Rate. "Highest Lawful Rate" means the maximum
lawful rate of interest referred to in Section 2.7 that may accrue pursuant to
this Agreement.
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Section 1.23. Insurer. "Insurer" means a Person that insures a Patient
against certain of the costs incurred in the receipt by such Patient of Medical
Services, or that has an agreement with Borrower to compensate Borrower for
providing services to a Patient.
Section 1.24. Lender. "Lender" has the meaning set forth in the Preamble.
Section 1.25. Loan. "Loan" has the meaning set forth in Section 2.1(a).
Section 1.26. Loan Documents. "Loan Documents" means and includes this
Agreement, the Note, and each and every other document now or hereafter
delivered in connection therewith, as any of them may be amended, modified, or
supplemented from time to time.
Section 1.27. Loan Management Fee. "Loan Management Fee" has the meaning
set forth in Section 2.4(c).
Section 1.28. Lockbox. "Lockbox" has the meaning set forth in Section 2.3.
Section 1.28 a. Lockbox Account. "Lockbox Account" means an account
maintained by Borrower at the Lockbox Bank into which all collections of
Accounts are paid directly.
Section 1.29. Lockbox Bank. "Lockbox Bank" has the meaning set forth in
Section 2.3.
Section 1.30. Maximum Loan Amount. "Maximum Loan Amount" has the meaning
set forth in Section 2.1(a).
Section 1.31. Medicaid/Medicare Account Debtor. "Medicaid/ Medicare Account
Debtor" means any Account Debtor which is (i) the United States of America
acting under the Medicaid/Medicare program established pursuant to the Social
Security Act, (ii) any state or the District of Columbia acting pursuant to a
health plan adopted pursuant to Title XIX of the Social Security Act or (iii)
any agent, carrier, administrator or intermediary for any of the foregoing.
Section 1.32. Medical Services. Medical and health care services provided
to a Patient, including, but not limited to, medical and health care services
provided to a Patient and performed by Borrower which are covered by a policy of
insurance issued by an Insurer, and includes physician services, nurse and
therapist services, dental services, hospital services, skilled nursing facility
services, comprehensive outpatient rehabilitation services, home health care
services, residential and out-patient behavioral healthcare services, and
medicine or health care equipment provided by Borrower to a Patient for a
necessary or specifically requested valid and proper medical or health purpose.
Section 1.33. Note. "Note" has the meaning set forth in Section 2.1(c).
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Section 1.34. Obligations. "Obligations" has the meaning set forth in
Section 3.1.
Section 1.35. Patient. "Patient" means any Person receiving Medical
Services from Borrower and all Persons legally liable to pay Borrower for such
Medical Services other than Insurers.
Section 1.36. Permitted Liens. "Permitted Liens" means: (a) liens for taxes
not delinquent, or which are being contested in good faith and by appropriate
proceedings which suspend the collection thereof and in respect of which
adequate reserves have been made (provided that such proceedings do not, in
Lender's sole discretion, involve any substantial danger of the sale, loss or
forfeiture of such property or assets or any interest therein); (b) deposits or
pledges to secure obligations under workmen's compensation, social security or
similar laws, or under unemployment insurance; (c) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of business; (d) mechanic's,
workmen's, materialmen's or other like liens arising in the ordinary course of
business with respect to obligations which are not due, or which are being
contested in good faith by appropriate proceedings which suspend the collection
thereof and in respect of which adequate reserves have been made (provided that
such proceedings do not, in Lender's sole discretion, involve any substantial
danger of the sale, loss or forfeiture of such property or assets or any
interest therein); (e) liens and encumbrances in favor of Lender; (f) liens
granted in connection with the lease or purchase of property or assets financed
by borrowings permitted by Section 7.1 (provided, however, that no such
borrowings permitted by Section 7.1 may be secured by liens on any of the
Collateral); and (g) liens set forth on Schedule 1.36.
Section 1.37. Person. "Person" means an individual, partnership,
corporation, trust, joint venture, joint stock company, limited liability
company, association, unincorporated organization, Governmental Authority, or
any other entity.
Section 1.38. Plan. "Plan" has the meaning set forth in Section 4.12.
Section 1.39. Premises. "Premises" has the meaning set forth in Section
4.15.
Section 1.40. Prime Rate of Interest. "Prime Rate of Interest" means that
rate of interest designated as such by Fleet National Bank of Connecticut, N.A.,
or any successor thereto, as the same may from time to time fluctuate.
Section 1.41. Prohibited Transaction. "Prohibited Transaction" means a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975(c)(1) of the Internal Revenue Code.
Section 1.42. Qualified Account. "Qualified Account" means an Account of
Borrower generated in the ordinary course of Borrower's business from the sale
of goods or rendition of
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medical services which Lender, in its sole credit judgment, deems to be a
Qualified Account. Without limiting the generality of the foregoing, no Account
shall be a Qualified Account if: (a) the Account or any portion thereof is
payable by an individual beneficiary, recipient or subscriber individually and
not directly to Borrower by a Medicaid/Medicare Account Debtor or commercial
medical insurance carrier acceptable to Lender in its sole discretion; (b) the
Account remains unpaid more than one hundred twenty (120) days past the claim or
invoice date; (c) the Account is subject to any defense, set-off, counterclaim,
deduction, discount, credit, chargeback, freight claim, allowance, or adjustment
of any kind; (d) any part of any goods the sale of which has given rise to the
Account has been returned, rejected, lost, or damaged; (e) if the Account arises
from the sale of goods by Borrower, such sale was not an absolute sale or on
consignment or on approval or on a sale-or-return basis or subject to any other
repurchase or return agreement, or such goods have not been shipped to the
Account Debtor or its designee; (f) if the Account arises from the performance
of services, such services have not been actually been performed or were
undertaken in violation of any law; (g) the Account is subject to a lien other
than a Permitted Lien; (h) Borrower knows or should have known of the
bankruptcy, receivership, reorganization, or insolvency of the Account Debtor;
(i) the Account is evidenced by chattel paper or an instrument of any kind, or
has been reduced to judgment; (j) the Account is an Account of an Account Debtor
having its principal place of business or executive office outside the United
States; (k) the Account Debtor is an Affiliate or Subsidiary of Borrower; (l)
more than fifty percent (50%) of the aggregate balance of all Accounts owing
from the Account Debtor obligated on the Account are outstanding more than one
hundred fifty (150) days past their invoice date; (m) fifty percent (50%) or
more of the aggregate unpaid Accounts from any individual Account Debtor are not
deemed Qualified Accounts hereunder; (n) the total unpaid Accounts of the
Account Debtor, except for a Medicaid/Medicare Account Debtor, exceed twenty
percent (20%) of the net amount of all Qualified Accounts (including
Medicaid/Medicare Account Debtors); (o) any covenant, representation or warranty
contained in the Loan Documents with respect to such Account has been breached;
or (p) the Account fails to meet such other specifications and requirements
which may from time to time be established by Lender.
Section 1.42a. Qualified Unbilled Account. "Qualified Unbilled Account"
means any Account that would otherwise qualify as a Qualified Account in all
other respects, but for the fact that the particular Borrower that generated
such Account has not yet been issued a Medicare provider number; provided,
however, that at no time during the term of this Agreement shall the aggregate
amount of Revolving Credit Loans outstanding with respect to Qualified Unbilled
Accounts exceed fifteen percent (15%) of the aggregate outstanding Revolving
Credit Loans. Any Account that would otherwise qualify as a Qualified Account in
all other respects except that such Account remains unbilled shall nevertheless
be considered a Qualified Account at such time as the particular Borrower that
generated such Account has been issued a Medicare provider number.
Section 1.43. Reportable Event. "Reportable Event" means a "reportable
event" as defined in Section 4043(b) of ERISA.
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Section 1.44. Revolving Credit Loan. "Revolving Credit Loan" has the
meaning set forth in Section 2.1(b).
Section 1.45. Term. "Term" has the meaning set forth in Section 2.8.
ARTICLE II
LOAN
Section 2.1. Terms.
(a) The maximum aggregate principal amount of credit extended by Lender to
Borrower hereunder (the "Loan") that will be outstanding at any time is Twenty
Million and No/100 Dollars ($20,000,000.00) (the "Maximum Loan Amount").
Notwithstanding the above, until such time as the aggregate outstanding
Revolving Credit Loans equals or exceeds Fifteen Million Dollars
($15,000,000.00) (the "Loan Sublimit") the Usage Fee under Section 2.4(b) and
the termination fee under Section 2.8(c) shall be calculated on the basis of the
Loan Sublimit.
(b) The Loan shall be in the nature of a revolving line of credit, and
shall include sums advanced and other credit extended by Lender to or for the
benefit of Borrower from time to time under this Article II (each a "Revolving
Credit Loan") up to the Maximum Loan Amount depending upon the availability in
the Borrowing Base, the requests of Borrower pursuant to the terms and
conditions of Section 2.2 below, and on such other basis as Lender may
reasonably determine. The outstanding principal balance of the Loan may
fluctuate from time to time, to be reduced by repayments made by Borrower (which
may be made without penalty or premium), and to be increased by future Revolving
Credit Loans, advances and other extensions of credit to or for the benefit of
Borrower, and shall be due and payable in full upon the expiration of the Term.
For purposes of this Agreement, any determination as to whether there is ability
within the Borrowing Base for advances or extensions of credit shall be made by
Lender in its sole discretion and is final and binding upon Borrower.
(c) At Closing, Borrower shall execute and deliver to Lender a promissory
note evidencing Borrower's unconditional obligation to repay Lender for
Revolving Credit Loans, advances, and other extensions of credit made under the
Loan, in the form of Exhibit A to this Agreement (the "Note"), dated the date
hereof, payable to the order of Lender in accordance with the terms thereof. The
Note shall bear interest from the date thereof until repaid, with interest
payable monthly in arrears on the first Business Day of each month, at a rate
per annum (on the basis of the actual number of days elapsed over a year of 360
days) equal to the Base Rate, provided that after an Event of Default such rate
shall be equal to the Default Rate. Each Revolving Credit Loan, advance and
other extension of credit shall be deemed evidenced by the Note, which is deemed
incorporated by reference herein and made a part hereof.
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(d) Subject to the terms and conditions of this Agreement, advances under
the Loan shall be made against a borrowing base equal to twenty-five percent
(25%) of Qualified Unbilled Accounts plus ninety percent (90%) of Qualified
Accounts due and owing from any Medicaid/Medicare, Insurer or other Account
Debtor (the "Borrowing Base").
Section 2.2. Loan Administration. Borrowings under the Loan shall be as
follows:
(a) A request for a Revolving Credit Loan shall be made, or shall be deemed
to be made, in the following manner: (i) Borrower may give Lender notice of its
intention to borrow, in which notice Borrower shall specify the amount of the
proposed borrowing and the proposed borrowing date, not later than 2:00 p.m.
Eastern time one (1) Business Days prior to the proposed borrowing date;
provided, however, that no such request may be made at a time when there exists
an Event of Default; and (ii) the becoming due of any amount required to be paid
under this Agreement, whether as interest or for any other Obligation, shall be
deemed irrevocably to be a request for a Revolving Credit Loan on the due date
in the amount required to pay such interest or other Obligation.
(b) Borrower hereby irrevocably authorizes Lender to disburse the proceeds
of each Revolving Credit Loan requested, or deemed to be requested, as follows:
(i) the proceeds of each Revolving Credit Loan requested under subsection
2.2(a)(i) shall be disbursed by Lender by wire transfer to such bank account as
may be agreed upon by Borrower and Lender from time to time or elsewhere if
pursuant to written direction from Borrower; and (ii) the proceeds of each
Revolving Credit Loan requested under subsection 2.2(a)(ii) shall be disbursed
by Lender by way of direct payment of the relevant interest or other Obligation.
(c) All Revolving Credit Loans, advances and other extensions of credit to
or for the benefit of Borrower shall constitute one general Obligation of
Borrower, and shall be secured by Lender's lien upon all of the Collateral.
(d) Lender shall enter all Revolving Credit Loans as debits to a loan
account in the name of Borrower and shall also record in said loan account all
payments made by Borrower on any Obligations and all proceeds of Collateral
which are indefeasibly paid to Lender, and may record therein, in accordance
with customary accounting practice, other debits and credits, including interest
and all charges and expenses properly chargeable to Borrower. All collections
into the Concentration Account pursuant to Section 2.3 shall be applied first to
fees, costs and expenses due and owing under the Loan Documents, then to
interest due and owing under the Loan Documents, and then to principal
outstanding with respect to Revolving Credit Loans.
(e) Lender will account to Borrower monthly with a statement of Revolving
Credit Loans, charges and payments made pursuant to this Agreement, and such
accounting rendered by Lender shall be deemed final, binding and conclusive upon
Borrower unless Lender is notified by Borrower in writing to the contrary within
thirty (30) days of the date each
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accounting is mailed to Borrower. Such notice shall be deemed an objection to
those items specifically objected to therein.
Section 2.3. Collections, Disbursements, Borrowing Availability, and
Lockbox Account. Borrower shall maintain one or more lockbox accounts (each a
"Lockbox") with NationsBank, N.A. (the "Lockbox Bank"), subject to the
provisions of this Agreement, and shall execute with the Lockbox Bank a Lockbox
Agreement in substantially the form attached as Exhibit B, and such other
agreements related thereto as Lender may require. Borrower shall ensure that all
collections of Accounts are paid directly from Account Debtors into the Lockbox,
and that all funds paid into the Lockbox are immediately transferred into a
depository account maintained by Lender at Bank One Arizona, N.A. or U.S. Bank
N.A., as determined by Lender in its sole discretion and communicated to
Borrower (the "Concentration Account"). Lender shall apply, on a daily basis,
all funds transferred into the Concentration Account pursuant to this Section
2.3 to reduce the outstanding indebtedness under the Loan (in accordance with
Section 2.2(d)) with future Revolving Credit Loans, advances and other
extensions of credit to be made by Lender under the conditions set forth in this
Article II. To the extent that any collections of Accounts or proceeds of other
Collateral are not sent directly to the Lockbox but are received by Borrower,
such collections shall be held in trust for the benefit of Lender and
immediately remitted, in the form received, to the Lockbox Bank for transfer to
the Concentration Account immediately upon receipt by Borrower. Borrower
acknowledges and agrees that its compliance with the terms of this Section 2.3
is essential, and that upon its failure to comply with any such terms Lender
shall be entitled to assess a non-compliance fee which shall operate to increase
the Base Rate by two percent (2%) per annum during any period of non-compliance;
provided, however, that such non-compliance fee shall not apply unless and until
any collections not sent directly to the Lockbox exceeds $25,000.00 in the
aggregate for any particular day. Lender shall be entitled to assess such fee
whether or not an Event of Default is declared or otherwise occurs. All funds
transferred from the Concentration Account for application to Borrower's
indebtedness to Lender shall be applied to reduce the Loan balance, but for
purposes of calculating interest shall be subject to a five (5) Business Day
clearance period. If as the result of collections of Accounts pursuant to the
terms and conditions of this Section 2.3 a credit balance exists with respect to
the Concentration Account, such credit balance shall not accrue interest in
favor of Borrower, but shall be available to Borrower at any time or times for
so long as no Event of Default exists.
Section 2.4. Fees.
(a) At Closing, Borrower shall unconditionally pay to Lender a commitment
fee equal to Fifty Six Thousand Two Hundred Fifty and No/100 Dollars
($56,250.00) (the "Commitment Fee").
(b) For so long as the Loan is available to Borrower, Borrower
unconditionally shall pay to Lender a monthly usage fee (the "Usage Fee") equal
to two one hundredths of one percent (0.02%) of the average amount by which the
Maximum Loan Amount
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exceeds the average amount of the outstanding principal balance of the Revolving
Credit Loans during the preceding month. The Usage Fee shall be payable monthly
in arrears on the first Business Day of each successive calendar month.
(c) For so long as the Loan is available to Borrower, Borrower
unconditionally shall pay to Lender a monthly loan management fee of $2,000.00
(the "Loan Management Fee"). The Loan Management Fee shall be payable monthly in
arrears on the first day of each successive calendar month.
(d) Borrower shall pay to Lender all out-of-pocket audit and appraisal fees
in connection with audits and appraisals of Borrower's books and records and
such other matters as Lender shall deem appropriate, which shall be due and
payable on the first Business Day of the month following the date of issuance by
Lender of a request for payment thereof to Borrower.
(e) Borrower shall pay to Lender, on demand, any and all fees, costs or
expenses which Lender or any participant pays to a bank or other similar
institution (including, without limitation, any fees paid by Lender to any
participant) arising out of or in connection with (i) the forwarding to Borrower
or any other Person on behalf of Borrower, by Lender, of proceeds of Revolving
Credit Loans made by Lender to Borrower pursuant to this Agreement, and (ii) the
depositing for collection, by Lender or any participant, of any check or item of
payment received or delivered to Lender or any participant on account of
Obligations.
Section 2.5. Payments. Principal payable on account of Revolving Credit
Loans shall be payable by Borrower to Lender immediately upon the earliest of
(i) the receipt by Borrower of any proceeds of any of the Collateral, to the
extent of such proceeds, (ii) the occurrence of an Event of Default in
consequence of which the Loan and the maturity of the payment of the Obligations
are accelerated, or (iii) the termination of this Agreement pursuant to Section
2.8 hereof; provided, however, that if any advance made by Lender in excess of
the Borrowing Base shall exist at any time, Borrower shall, immediately upon
demand, repay such overadvance. Interest accrued on the Revolving Credit Loans
shall be due on the earliest of (i) the first Business Day of each month (for
the immediately preceding month), computed on the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in consequence of
which the Loan and the maturity of the payment of the Obligations are
accelerated, or (iii) the termination of this Agreement pursuant to Section 2.8
hereof. Except to the extent otherwise set forth in this Agreement, all payments
of principal and of interest on the Loan, all other charges and any other
obligations of Borrower hereunder, shall be made to Lender to the Concentration
Account, in immediately available funds.
Section 2.6. Use of Proceeds. The proceeds of Lender's advances under the
Loan shall be used solely for working capital and for other costs of Borrower
arising in the ordinary course of Borrower's business.
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Section 2.7. Interest Rate Limitation. The parties intend to conform
strictly to the applicable usury laws in effect from time to time during the
term of the Loan. Accordingly, if any transaction contemplated hereby would be
usurious under such laws, then notwithstanding any other provision hereof: (i)
the aggregate of all interest that is contracted for, charged, or received under
this Agreement or under any other Loan Document shall not exceed the maximum
amount of interest allowed by applicable law (the "Highest Lawful Rate"), and
any excess shall be promptly credited to Borrower by Lender (or, to the extent
that such consideration shall have been paid, such excess shall be promptly
refunded to Borrower by Lender); (ii) neither Borrower nor any other Person now
or hereafter liable hereunder shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Highest Lawful Rate; and
(iii) the effective rate of interest shall be reduced to the Highest Lawful
Rate. All sums paid, or agreed to be paid, to Lender for the use, forbearance,
and detention of the debt of Borrower to Lender shall, to the extent permitted
by applicable law, be allocated throughout the full term of the Note until
payment is made in full so that the actual rate of interest does not exceed the
Highest Lawful Rate in effect at any particular time during the full term
thereof. If at any time the rate of interest under the Note exceeds the Highest
Lawful Rate, the rate of interest to accrue pursuant to this Agreement shall be
limited, notwithstanding anything to the contrary herein, to the Highest Lawful
Rate, but any subsequent reductions in the Base Rate shall not reduce the
interest to accrue pursuant to this Agreement below the Highest Lawful Rate
until the total amount of interest accrued equals the amount of interest that
would have accrued if a varying rate per annum equal to the interest rate under
the Note had at all times been in effect. If the total amount of interest paid
or accrued pursuant to this Agreement under the foregoing provisions is less
than the total amount of interest that would have accrued if a varying rate per
annum equal to the interest rate under the Note had been in effect, then
Borrower agrees to pay to Lender an amount equal to the difference between (i)
the lesser of (x) the amount of interest that would have accrued if the Highest
Lawful Rate had at all times been in effect, or (y) the amount of interest that
would have accrued if a varying rate per annum equal to the interest rate under
the Note had at all times been in effect, and (ii) the amount of interest
accrued in accordance with the other provisions of this Agreement.
Section 2.8. Term.
(a) Subject to Lender's right to cease making Revolving Credit Loans to
Borrower upon or after any Event of Default, this Agreement shall be in effect
for a period of three (3) years from the Closing Date, unless terminated as
provided in this Section 2.8 (the "Term"), and this Agreement shall be renewed
for one-year periods thereafter upon the mutual written agreement of the
parties.
(b) Notwithstanding anything herein to the contrary, Lender may terminate
this Agreement without notice upon or after the occurrence of an Event of
Default.
(c) Upon at least thirty (30) days prior written notice to Lender, Borrower
may terminate this Agreement prior to the third annual anniversary of the
Closing Date, provided
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that, at the effective date of such termination, Borrower shall pay to Lender
(in addition to the then outstanding principal, accrued interest and other
Obligations owing under the terms of this Agreement and any other Loan
Documents) as liquidated damages for the loss of bargain and not as a penalty,
an amount equal to: (i) three percent (3%) of the Maximum Loan Amount if the
effective date of such termination by Borrower is on or prior to the first
annual anniversary of the Closing Date, (ii) two percent (2%) of the Maximum
Loan Amount if the effective date of such termination by Borrower is after the
first annual anniversary of the Closing Date and prior to the second annual
anniversary of the Closing Date, and (iii) one percent (1%) of the Maximum Loan
Amount if the effective date of such termination by Borrower is after the second
annual anniversary of the Closing Date and prior to the third annual anniversary
of the Closing Date.
(d) All of the Obligations shall be immediately due and payable upon the
termination date stated in any notice of termination of this Agreement. All
undertakings, agreements, covenants, warranties, and representations of Borrower
contained in the Loan Documents shall survive any such termination and Lender
shall retain its liens in the Collateral and all of its rights and remedies
under the Loan Documents notwithstanding such termination until Borrower has
paid the Obligations to Lender, in full, in immediately available funds.
(e) Notwithstanding any provision of this Agreement which makes reference
to the continuance of an Event of Default, nothing in this Agreement shall be
construed to permit Borrower to cure an Event of Default following the lapse of
the applicable cure period, and Borrower shall have no such right in any
instance unless specifically granted in writing by Lender.
Section 2.9. Joint and Several Liability; Binding Obligations. Each entity
comprising Borrower and executing this Agreement on behalf of Borrower shall be
jointly and severally liable for all of the Obligations. In addition, each
entity comprising Borrower hereby acknowledges and agrees that all of the
representations, warranties, covenants, obligations, conditions, agreements and
other terms contained in this Agreement shall be applicable to and shall be
binding upon each individual entity comprising Borrower, and shall be binding
upon all such entities when taken together.
ARTICLE III
COLLATERAL
Section 3.1. Generally. As security for the payment of all liabilities of
Borrower to Lender, including without limitation: (i) indebtedness evidenced
under the Note, repayment of Revolving Credit Loans, advances and other
extensions of credit, all fees and charges owing by Borrower, and all other
liabilities and obligations of every kind or nature whatsoever of Borrower to
Lender, whether now existing or hereafter incurred, joint or several, matured or
unmatured, direct or indirect, primary or secondary, related or unrelated, due
or to become due,
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including but not limited to any extensions, modifications, substitutions,
increases and renewals thereof, (ii) the payment of all amounts advanced by
Lender to preserve, protect, defend, and enforce its rights hereunder and in the
following property in accordance with the terms of this Agreement, and (iii) the
payment of all expenses incurred by Lender in connection therewith
(collectively, the "Obligations"). Borrower hereby assigns and grants to Lender
a continuing first priority lien on and security interest in, upon, and to the
following property (the "Collateral"):
(a) All of Borrower's now-owned and hereafter acquired or arising Accounts,
accounts receivable and rights to payment of every kind and description, and any
contract rights, chattel paper, documents and instruments with respect thereto;
(b) All of Borrower's now owned and hereafter acquired or arising general
intangibles of every kind and description pertaining to its Accounts, accounts
receivable and other rights to payment, including, but not limited to, all
existing and future customer lists, choses in action, claims, books, records,
contracts, licenses, formulae, tax and other types of refunds, returned and
unearned insurance premiums, rights and claims under insurance policies, and
computer information, software, records, and data;
(c) All of Borrower's now or hereafter acquired deposit accounts into which
Accounts are deposited, including the Lockbox Account;
(d) All of Borrower's monies and other property of every kind and nature
now or at any time or times hereafter in the possession of or under the control
of Lender or a bailee or Affiliate of Lender;
(e) All of Borrower's now owned or hereafter acquired inventory of every
description which is held by Borrower for sale or lease or is furnished by
Borrower under any contract of service or is held by Borrower as raw materials,
work in process or materials used or consumed in a business, wherever located,
and as the same may now and hereafter from time to time be constituted, together
with all cash and non-cash proceeds and products thereof;
(f) All of Borrower's now owned or hereafter acquired machinery, equipment
(other than leased equipment), computer equipment, tools, tooling, furniture,
fixtures, goods, supplies, materials, work in process, whether now owned or
hereafter acquired, together with all additions, parts, fittings, accessories,
special tools, attachments, and accessions now and hereafter affixed thereto
and/or used in connection therewith, all replacements thereof and substitutions
therefor, and all cash and non-cash proceeds and products thereof; and
(g) The proceeds (including, without limitation, insurance proceeds) of all
of the foregoing.
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Section 3.2. Lien Documents. At Closing and thereafter as Lender deems
necessary in its sole discretion, Borrower shall execute and deliver to Lender,
or have executed and delivered (all in form and substance satisfactory to Lender
in its sole discretion):
(a) UCC-1 Financing statements pursuant to the Uniform Commercial Code in
effect in the jurisdiction(s) in which Borrower operates, which Lender may file
in any jurisdiction where any Collateral is or may be located and in any other
jurisdiction that Lender deems appropriate; provided that a carbon,
photographic, or other reproduction or other copy of this Agreement or of a
financing statement is sufficient as and may be filed in lieu of a financing
statement; and
(b) Any other agreements, documents, instruments, and writings deemed
necessary by Lender or as Lender may otherwise request from time to time in its
sole discretion to evidence, perfect, or protect Lender's lien and security
interest in the Collateral required hereunder.
Section 3.3. Collateral Administration.
(a) All Collateral (except deposit accounts) will at all times be kept by
Borrower at its principal office(s) as set forth on Schedule 4.15 hereto and
shall not, without the prior written approval of Lender, be moved therefrom.
(b) Borrower shall keep accurate and complete records of its Accounts and
all payments and collections thereon and shall submit to Lender on such periodic
basis as Lender shall request a sales and collections report for the preceding
period, in form satisfactory to Lender. In addition, if Accounts in an aggregate
face amount in excess of $250,000.00 become ineligible because they fall within
one of the specified categories of ineligibility set forth in the definition of
Qualified Accounts or otherwise, Borrower shall notify Lender of such occurrence
on the first Business Day following such occurrence and the Borrowing Base shall
thereupon be adjusted to reflect such occurrence. If requested by Lender,
Borrower shall execute and deliver to Lender formal written assignments of all
of its Accounts weekly or daily, which shall include all Accounts that have been
created since the date of the last assignment, together with copies of claims,
invoices or other information related thereto.
(c) Whether or not an Event of Default has occurred, any of Lender's
officers, employees or agents shall have the right, at any time or times
hereafter, in the name of Lender, any designee of Lender or Borrower, to verify
the validity, amount or any other matter relating to any Accounts by mail,
telephone, telegraph or otherwise. Borrower shall cooperate fully with Lender in
an effort to facilitate and promptly conclude such verification process.
(d) To expedite collection, Borrower shall endeavor in the first instance
to make collection of its Accounts for Lender. Lender retains the right at all
times after the occurrence of an Event of Default, subject to applicable law
regarding Medicaid/Medicare
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Account Debtors, to notify Account Debtors that Accounts have been assigned to
Lender and to collect Accounts directly in its own name and to charge the
collection costs and expenses, including attorneys' fees, to Borrower.
Section 3.4. Other Actions. In addition to the foregoing, Borrower (i)
shall provide prompt written notice to each private indemnity, managed care or
other Insurer who either is currently an Account Debtor or becomes an Account
Debtor at any time following the date hereof that Lender has been granted a
first priority lien and security interest in, upon and to all Accounts
applicable to such Insurer, and hereby authorizes Lender to send any and all
similar notices to such Insurers by Lender, and (ii) shall do anything further
that may be lawfully required by Lender to secure Lender and effectuate the
intentions and objects of this Agreement, including but not limited to the
execution and delivery of lockbox agreements, continuation statements,
amendments to financing statements, and any other documents required hereunder.
At Lender's request, Borrower shall also immediately deliver to Lender all items
for which Lender must receive possession to obtain a perfected security
interest. Borrower shall, on Lender's demand, deliver to Lender all notes,
certificates, and documents of title, chattel paper, warehouse receipts,
instruments, and any other similar instruments constituting Collateral.
Section 3.5. Searches. Prior to Closing, and thereafter (as and when
requested by Lender in its sole discretion), Borrower shall obtain and deliver
to Lender the following searches against Borrower (the results of which are to
be consistent with Borrower's representations and warranties under this
Agreement), all at its own expense:
(a) Uniform Commercial Code searches with the Secretary of State and local
filing offices of each jurisdiction where Borrower maintains its executive
offices, a place of business, or assets;
(b) Judgment, federal tax lien and corporate and partnership tax lien
searches, in each jurisdiction searched under clause (a) above; and
(c) Good standing certificates showing Borrower to be in good standing in
its state of formation and in each other state in which it is doing and
presently intends to do business for which qualification is required.
Section 3.6. Power of Attorney. Each of the officers of Lender is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
Borrower (without requiring any of them to act as such) with full power of
substitution to do the following: (i) endorse the name of Borrower upon any and
all checks, drafts, money orders, and other instruments for the payment of money
that are payable to Borrower and constitute collections on Borrower's Accounts;
(ii) execute in the name of Borrower any financing statements, schedules,
assignments, instruments, documents, and statements that Borrower is obligated
to give Lender hereunder; and (iii) do such other and further acts and deeds in
the name of Borrower that Lender
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may deem necessary or desirable to enforce any Account or other Collateral or
perfect Lender's security interest or lien in any Collateral.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each entity comprising Borrower represents and warrants to Lender, and
shall be deemed to represent and warrant on each day on which any Obligations
shall be outstanding hereunder, that:
Section 4.1. Subsidiaries. Except as set forth in Schedule 4.1, Intensiva
HealthCare Corporation has no subsidiaries.
Section 4.2. Organization and Good Standing. Borrower is a corporation duly
organized, validly existing, and in good standing under the laws of its state of
formation, is in good standing as a foreign corporation in each jurisdiction in
which the character of the properties owned or leased by it therein or the
nature of its business makes such qualification necessary, has the corporate
power and authority to own its assets and transact the business in which it is
engaged, and has obtained all certificates, licenses and qualifications required
under all laws, regulations, ordinances, or orders of public authorities
necessary for the ownership and operation of all of its properties and
transaction of all of its business.
Section 4.3. Authority. Borrower has full corporate power and authority to
enter into, execute, and deliver this Agreement and to perform its obligations
hereunder, to borrow the Loan, to execute and deliver the Note, and to incur and
perform the obligations provided for in the Loan Documents, all of which have
been duly authorized by all necessary corporate action. No consent or approval
of shareholders of, or lenders to, Borrower and no consent, approval, filing or
registration with any Governmental Authority is required as a condition to the
validity of the Loan Documents or the performance by Borrower of its obligations
thereunder.
Section 4.4. Binding Agreement. This Agreement and all other Loan Documents
constitute, and the Note, when issued and delivered pursuant hereto for value
received, will constitute, the valid and legally binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms.
Section 4.5. Litigation. Except as disclosed in Schedule 4.5, there are no
actions, suits, proceedings or investigations pending or threatened against
Borrower before any court or arbitrator or before or by any Governmental
Authority which, in any one case or in the aggregate, if determined adversely to
the interests of Borrower, could have a material adverse effect on the business,
properties, condition (financial or otherwise) or operations, present or
prospective, of Borrower, or upon its ability to perform its obligations under
the Loan Documents. Borrower is
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not in default with respect to any order of any court, arbitrator, or
Governmental Authority applicable to Borrower or its properties.
Section 4.6. No Conflicts. The execution and delivery by Borrower of this
Agreement and the other Loan Documents do not, and the performance of its
obligations thereunder will not, violate, conflict with, constitute a default
under, or result in the creation of a lien or encumbrance upon the property of
Borrower under: (i) any provision of Borrower's articles of incorporation or
bylaws, (ii) any provision of any law, rule, or regulation applicable to
Borrower, or (iii) any of the following: (A) any indenture or other agreement or
instrument to which Borrower is a party or by which Borrower or its property is
bound; or (B) any judgment, order or decree of any court, arbitration tribunal,
or Governmental Authority having jurisdiction over Borrower which is applicable
to Borrower.
Section 4.7. Financial Condition. The annual financial statements of
Borrower as of December 31, 1996 and December 31, 1997, which have been
delivered to Lender, fairly present the financial condition of Borrower and the
results of its operations and changes in financial condition as of the dates and
for the periods referred to, and have been prepared in accordance with GAAP.
There are no material unrealized or anticipated liabilities, direct or indirect,
fixed or contingent, of Borrower as of the dates of such financial statements
which are not reflected therein or in the notes thereto. There has been no
adverse change in the business, properties, condition (financial or otherwise)
or operations (present or prospective) of Borrower since December 31, 1997. The
federal tax identification number and fiscal year end for each entity comprising
Borrower is set forth on Schedule 4.7.
Section 4.8. No Default. Borrower is not in default under or with respect
to any obligation in any respect which could be adverse to its business,
operations, property or financial condition, or which could adversely affect the
ability of Borrower to perform its obligations under the Loan Documents. No
Event of Default or event which, with the giving of notice or lapse of time, or
both, could become an Event of Default, has occurred and is continuing.
Section 4.9. Title to Properties. Borrower has good and marketable title to
its properties and assets, including the Collateral and the properties and
assets reflected in the financial statements described in Section 4.7, subject
to no lien, mortgage, pledge, encumbrance or charge of any kind, other than
Permitted Liens. Borrower has not agreed or consented to cause any of its
properties or assets whether owned now or hereafter acquired to be subject in
the future (upon the happening of a contingency or otherwise) to any lien,
mortgage, pledge, encumbrance or charge of any kind other than Permitted Liens.
Section 4.10. Taxes. Borrower has filed, or has obtained extensions for the
filing of, all federal, state and other tax returns which are required to be
filed, and has paid all taxes shown as due on those returns and all assessments,
fees and other amounts due as of the date hereof. All tax liabilities of
Borrower were, as of December 31, 1996 and are now, adequately provided for
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on Borrower's books. No tax liability has been asserted by the Internal Revenue
Service or other taxing authority against Borrower for taxes in excess of those
already paid.
Section 4.11. Securities and Banking Laws and Regulations.
(a) The use of the proceeds of the Loan and Borrower's issuance of the Note
will not directly or indirectly violate or result in a violation of the
Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including without limitation
Regulations U, T, G, or X of the Board of Governors of the Federal Reserve
System. Borrower is not engaged in the business of extending credit for the
purpose of the purchasing or carrying "margin stock" within the meaning of those
regulations. No part of the proceeds of the Loan hereunder will be used to
purchase or carry any margin stock or to extend credit to others for such
purpose.
(b) Borrower is not an investment company within the meaning of the
Investment Company Act of 1940, as amended, nor is it, directly or indirectly,
controlled by or acting on behalf of any Person which is an investment company
within the meaning of that Act.
Section 4.12. ERISA. No employee benefit plan (a "Plan") subject to the
Employee Retirement Income Security Act of 1974 ("ERISA") and regulations issued
pursuant thereto that is maintained by Borrower or under which Borrower could
have any liability under ERISA (a) has failed to meet minimum funding standards
established in Section 302 of ERISA, (b) has failed to comply with all
applicable requirements of ERISA and of the Internal Revenue Code, including all
applicable rulings and regulations thereunder, (c) has engaged in or been
involved in a prohibited transaction (as defined in ERISA) under ERISA or under
the Internal Revenue Code, or (d) has been terminated. Borrower has not assumed,
or received notice of a claim asserted against Borrower for, withdrawal
liability (as defined in the Multi-Employer Pension Plan Amendments Act of 1980,
as amended) with respect to any multi-employer pension plan and is not a member
of any Controlled Group (as defined in ERISA). Borrower has timely made when due
all contributions with respect to any multi-employer pension plan in which it
participates and no event has occurred triggering a claim against Borrower for
withdrawal liability with respect to any multi-employer pension plan in which
Borrower participates.
Section 4.13. Compliance with Law. Except as described in Schedule 4.13,
Borrower is not in violation of any statute, rule or regulation of any
Governmental Authority (including, without limitation, any statute, rule or
regulation relating to employment practices or to environmental, occupational
and health standards and controls). Borrower has obtained all licenses, permits,
franchises, and other governmental authorizations necessary for the ownership of
its properties and the conduct of its business. Borrower is current with all
reports and documents required to be filed with any state or federal securities
commission or similar Governmental Authority and is in full compliance with all
applicable rules and regulations of such commissions.
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Section 4.14. Environmental Matters. To the best of Borrower's knowledge,
no use, exposure, release, generation, manufacture, storage, treatment,
transportation or disposal of Hazardous Material has occurred or is occurring on
or from any real property on which the Collateral is located or which is owned,
leased or otherwise occupied by Borrower (the "Premises"), or off the Premises
as a result of any action of Borrower, except as described in Schedule 4.14. All
Hazardous Material used, treated, stored, transported to or from, generated or
handled on the Premises, or off the Premises by Borrower, has been disposed of
on or off the Premises by or on behalf of Borrower in a lawful manner. To the
best of Borrower's knowledge, there are no underground storage tanks present on
or under the Premises owned or leased by Borrower and no other environmental,
public health or safety hazards exist with respect to the Premises.
Section 4.15. Places of Business. The only places of business of Borrower,
and the places where it keeps and intends to keep the Collateral and records
concerning the Collateral, are at the addresses set forth in Schedule 4.15.
Schedule 4.15 also lists the owner of record of each such property.
Section 4.16. Intellectual Property. Borrower exclusively owns, is licensed
to use or otherwise has the right to use, all intellectual property used in or
necessary for the conduct of its business as currently conducted. A list of all
such intellectual property (indicating the nature of Borrower's interest), as
well as all outstanding franchises and licenses given by or held by Borrower, is
attached as Schedule 4.16.
Section 4.17. Stock Ownership. The identity of the stockholders of record
of all classes of the outstanding stock of Borrower (other than Intensiva
HealthCare Corporation), together with the respective ownership percentages held
by such stockholders, are as set forth on Schedule 4.17.
Section 4.18. Material Facts. Neither this Agreement nor any other Loan
Document nor any other agreement, document, certificate, or statement furnished
to Lender by or on behalf of Borrower in connection with the transactions
contemplated hereby contains any untrue statement of material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading. There is no fact known to Borrower that adversely
affects or in the future may adversely affect the business, operations, affairs
or financial condition of Borrower, or any of its properties or assets.
Section 4.19. Investments, Guarantees, and Certain Contracts. Borrower does
not own or hold any equity or long-term debt investments in, have any
outstanding advances to, have any outstanding guarantees for the obligations of,
or have any outstanding borrowings from, any Person, except as described on
Schedule 4.19. Borrower is not a party to any contract or agreement, or subject
to any corporate restriction, which adversely affects its business.
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Section 4.20. Business Interruptions. Within five years prior to the date
hereof, neither the business, property or assets, or operations of Borrower has
been adversely affected in any way by any casualty, strike, lockout, combination
of workers, or order of the United States of America or other Governmental
Authority, directed against Borrower. There are no pending or threatened labor
disputes, strikes, lockouts, or similar occurrences or grievances against
Borrower or its business.
Section 4.21. Names. Within five years prior to the date hereof, Borrower
has not conducted business under or used any other name (whether corporate,
partnership or assumed) other than as shown on Schedule 4.21. Borrower is the
sole owner of all names listed on that Schedule and any and all business done
and invoices issued in such names are Borrower's sales, business, and invoices.
Each trade name of Borrower represents a division or trading style of Borrower
and not a separate Person or independent Affiliate.
Section 4.22 Joint Ventures. Borrower is not engaged in any joint venture
or partnership with any other Person, except as set forth on Schedule 4.22.
Section 4.23 Accounts. Lender may rely, in determining which Accounts are
Qualified Accounts, on all statements and representations made by Borrower with
respect to any Account or Accounts. Unless otherwise indicated in writing to
Lender, with respect to each Account:
(a) It is genuine and in all respects what it purports to be, and is not
evidenced by a judgment;
(b) It arises out of a completed, bona fide sale and delivery of goods or
rendition of services by Borrower in the ordinary course of its business and in
accordance with the terms and conditions of all purchase orders, contracts,
certification, participation, certificate of need, or other documents relating
thereto and forming a part of the contract between Borrower and the Account
Debtor;
(c) It is for a liquidated amount maturing as stated in a duplicate claim
or invoice covering such sale or rendition of services, a copy of which has been
furnished or is available to Lender;
(d) Such Account, and Lender's security interest therein, is not, and will
not (by voluntary act or omission by Borrower), be in the future, subject to any
offset, lien, deduction, defense, dispute, counterclaim or any other adverse
condition, and each such Account is absolutely owing to Borrower and is not
contingent in any respect or for any reason;
(e) There are no facts, events or occurrences which in any way impair the
validity or enforceability of any Accounts or tend to reduce the amount payable
thereunder from the face amount of the claim or invoice and statements delivered
to Lender with respect thereto;
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(f) To the best of Borrower's knowledge, (i) the Account Debtor thereunder
had the capacity to contract at the time any contract or other document giving
rise to the Account was executed and (ii) such Account Debtor is solvent;
(g) To the best of Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against any Account Debtor thereunder
which might result in any material adverse change in such Account Debtor's
financial condition or the collectibility of such Account;
(h) It has been billed and forwarded (or otherwise meets the requirements
as a Qualified Account in accordance with the provisions of Section 1.42a
hereof) to the Account Debtor for payment in accordance with applicable laws and
compliance and conformance with any and requisite procedures, requirements and
regulations governing payment by such Account Debtor with respect to such
Account, and such Account if due from a Medicaid/Medicare Account Debtor is
properly payable directly to Borrower; and
(i) Borrower has obtained and currently has all certificates of need,
Medicaid and Medicare provider numbers, licenses, permits and authorizations as
necessary in the generation of such Accounts.
Section 4.24. Solvency. Both before and after giving effect to the
transactions contemplated by the terms and provisions of this Agreement, (i)
Borrower (taken as a whole) owns property whose fair saleable value is greater
than the amount required to pay all of Borrower's Indebtedness (including
contingent debts), (ii) Borrower (taken as a whole) was and is able to pay all
of its Indebtedness as such Indebtedness matures, and (iii) Borrower (taken as a
whole) had and has capital sufficient to carry on its business and transactions
and all business and transactions in which it about to engage. For purposes
hereof, the term "Indebtedness" means, without duplication (a) all items which
in accordance with GAAP would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Borrower as of the date
on which Indebtedness is to be determined, (b) all obligations of any other
person or entity which such Borrower has guaranteed, and (c) the Obligations.
ARTICLE V
CLOSING AND CONDITIONS OF LENDING
Section 5.1. Conditions Precedent to Agreement. The obligation of
Lender to enter into and perform this Agreement and to make Revolving Credit
Loans is subject to the following conditions precedent:
(a) Lender shall have received two (2) originals of this Agreement and all
other Loan Documents required to be executed and delivered at or prior to
Closing (other than
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the Note, as to which Lender shall receive only one original), executed by
Borrower and any other required Persons, as applicable.
(b) Lender shall have received all searches and good standing certificates
required by Section 3.5.
(c) Borrower shall have complied and shall then be in compliance with all
the terms, covenants and conditions of the Loan Documents.
(d) There shall have occurred no Event of Default and no event which, with
the giving of notice or the lapse of time, or both, could constitute such an
Event of Default.
(e) The representations and warranties contained in Article IV shall be
true and correct.
(f) Lender shall have received copies of all board of directors resolutions
of Borrower, and other corporate action taken by Borrower to authorize the
execution, delivery and performance of the Loan Documents and the borrowing of
the Loan thereunder, as well as the names and signatures of the officers of
Borrower authorized to execute documents on its behalf in connection herewith,
all as also certified as of the date hereof by Borrower's chief financial
officer, and such other papers as Lender may require.
(g) Lender shall have received copies, certified as true, correct and
complete by a corporate officer of each Borrower, of the articles of
incorporation of each Borrower, with any amendments to any of the foregoing, and
all other documents necessary for performance of the obligations of Borrower
under this Agreement and the other Loan Documents.
(h) Lender shall have received a written opinion of counsel for Borrower,
dated the date hereof, substantially in the form of Exhibit C.
(i) Lender shall have received such financial statements, reports,
certifications, and other operational information required to be delivered
hereunder, including without limitation an initial borrowing base certificate
calculating the Borrowing Base.
(j) Lender shall have received the Commitment Fee.
(k) The Lockbox and the Concentration Account shall have been established.
(l) Lender shall have received a certificate of Borrower's chief financial
officer, dated the Closing Date, certifying that all of the conditions specified
in this Section have been fulfilled.
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Section 5.2. Conditions Precedent to Advances. Notwithstanding any other
provision of this Agreement, no Loan proceeds, Revolving Credit Loans, advances
or other extensions of credit under the Loan shall be disbursed hereunder unless
the following conditions have been satisfied or waived immediately prior to such
disbursement:
(a) The representations and warranties on the part of Borrower contained in
Article IV of this Agreement shall be true and correct in all respects at and as
of the date of disbursement or advance, as though made on and as of such date
(except to the extent that such representations and warranties expressly relate
solely to an earlier date and except that the references in Section 4.7 to
financial statements shall be deemed to be a reference to the then most recent
annual and interim financial statements of Borrower furnished to Lender pursuant
to Section 6.1 hereof).
(b) No Event of Default or event which, with the giving of notice or the
lapse of time, or both, could become an Event of Default shall have occurred and
be continuing or would result from the making of the disbursement or advance.
(c) No adverse change in the condition (financial or otherwise),
properties, business, or operations of Borrower shall have occurred and be
continuing with respect to Borrower since the date hereof.
Section 5.3. Closing. Subject to the conditions of this Article V, the Loan
shall be made available on the date as is mutually agreed by the parties (the
"Closing Date") at such time as may be mutually agreeable to the parties upon
the execution hereof (the "Closing") at such place as may be requested by
Lender.
Section 5.4. Waiver of Rights. By completing the Closing hereunder, or by
making advances under the Loan, Lender does not waive a breach of any
representation or warranty of Borrower hereunder or under any other Loan
Document, and all of Lender's claims and rights resulting from any breach or
misrepresentation by Borrower are specifically reserved by Lender.
ARTICLE VI
AFFIRMATIVE COVENANTS
Each entity constituting Borrower covenants and agrees that for so long as
Borrower may borrow hereunder and until payment in full of the Note and
performance of all other obligations of Borrower under the Loan Documents:
Section 6.1. Financial Statements and Collateral Reports. Borrower will
furnish to Lender (i) a sales and collections report and accounts receivable
aging schedule on a form acceptable to Lender within fifteen (15) days after the
end of each calendar month, which shall
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include, but not be limited to, a report of sales, credits issued, and
collections received; (ii) payable aging schedules within fifteen (15) days
after the end of each calendar month; (iii) internally prepared quarterly
financial statements for Borrower, certified by the chief financial officer of
Borrower, within forty-five (45) days of the end of each calendar quarter,
accompanied by management analysis and actual vs. budget variance reports; (iv)
to the extent prepared by Borrower, annual projections, profit and loss
statements, balance sheets, and cash flow reports (prepared on a monthly basis)
for the succeeding fiscal year within thirty (30) days before the end of each of
Borrower's fiscal years; (v) internally prepared annual financial statements for
Borrower within sixty (60) days after the end of each of Borrower's fiscal
years; (vi) annual audited financial statements for Borrower prepared by KPMG
Peat Marwick, or a firm of independent public accountants satisfactory to
Lender, within one hundred thirty-five (135) days after the end of each of
Borrower's fiscal years; (vii) promptly upon receipt thereof, copies of any
reports submitted to Borrower by the independent accountants in connection with
any interim audit of the books of Borrower and copies of each management control
letter provided to Borrower by independent accountants; (viii) as soon as
available, copies of all financial statements and notices provided by Borrower
to all of its stockholders; and (ix) such additional information, reports or
statements as Lender may from time to time request. Annual financial statements
shall set forth in comparative form figures for the corresponding periods in the
prior fiscal year. All financial statements shall include a balance sheet and
statement of earnings and shall be prepared in accordance with GAAP.
Section 6.2. Payments Hereunder. Borrower will make all payments of
principal, interest, fees, and all other payments required hereunder, under the
Loan, and under any other agreements with Lender to which Borrower is a party,
as and when due.
Section 6.3. Existence, Good Standing, and Compliance with Laws. Borrower
will do or cause to be done all things necessary (a) to obtain and keep in full
force and effect all corporate existence, rights, licenses, privileges, and
franchises of Borrower necessary to the ownership of its property or the conduct
of its business, and comply with all applicable present and future laws,
ordinances, rules, regulations, orders and decrees of any Governmental Authority
having or claiming jurisdiction over Borrower; and (b) to maintain and protect
the properties used or useful in the conduct of the operations of Borrower, in a
prudent manner, including without limitation the maintenance at all times of
such insurance upon its insurable property and operations as required by law or
by Section 6.7 hereof.
Section 6.4. Legality. The making of the Loan and each disbursement or
advance under the Loan shall not be subject to any penalty or special tax, shall
not be prohibited by any governmental order or regulation applicable to
Borrower, and shall not violate any rule or regulation of any Governmental
Authority, and necessary consents, approvals and authorizations of any
Governmental Authority to or of any such disbursement or advance shall have been
obtained.
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Section 6.5. Lender's Satisfaction. All instruments and legal documents and
proceedings in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to Lender and its counsel, and
Lender shall have received all documents, including records of corporate
proceedings and opinions of counsel, which Lender may have requested in
connection therewith.
Section 6.6. Taxes and Charges. Borrower will timely file all tax reports
and pay and discharge all taxes, assessments and governmental charges or levies
imposed upon Borrower, or its income or profits or upon its properties or any
part thereof, before the same shall be in default and prior to the date on which
penalties attach thereto, as well as all lawful claims for labor, material,
supplies or otherwise which, if unpaid, might become a lien or charge upon the
properties or any part thereof of Borrower; provided, however, that Borrower
shall not be required to pay and discharge or cause to be paid and discharged
any such tax, assessment, charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith and by appropriate proceedings
by Borrower, and Borrower shall have set aside on their books adequate reserve
therefor; and provided further, that such deferment of payment is permissible
only so long as Borrower's title to, and its right to use, the Collateral is not
adversely affected thereby and Lender's lien and priority on the Collateral are
not adversely affected, altered or impaired thereby.
Section 6.7. Insurance. Borrower will carry adequate public liability and
professional liability insurance with responsible companies satisfactory to
Lender in such amounts and against such risks as is customarily maintained by
similar businesses and by owners of similar property in the same general area.
Section 6.8. General Information. Borrower will furnish to Lender such
information as Lender may, from time to time, request with respect to the
business or financial affairs of Borrower, and permit any officer, employee or
agent of Lender to visit and inspect any of the properties, to examine the
minute books, books of account and other records, including management letters
prepared by Borrower's auditors, of Borrower, and make copies thereof or
extracts therefrom, and to discuss its and their business affairs, finances and
accounts with, and be advised as to the same by, the accountants and officers of
Borrower, all at such times and as often as Lender may require.
Section 6.9. Maintenance of Property. Borrower will maintain, keep and
preserve all of its properties in good repair, working order and condition and
from time to time make all needful and proper repairs, renewals, replacements,
betterments and improvements thereto, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
Section 6.10. Notification of Events of Default and Adverse Developments.
Borrower promptly will notify Lender upon the occurrence of: (i) any Event of
Default; (ii) any event which, with the giving of notice or lapse of time, or
both, could constitute an Event of
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Default; (iii) any event, development or circumstance whereby the financial
statements previously furnished to Lender fail in any material respect to
present fairly, in accordance with GAAP, the financial condition and operational
results of Borrower; (iv) any judicial, administrative or arbitration proceeding
pending against Borrower, and any judicial or administrative proceeding known by
Borrower to be threatened against it which, if adversely decided, could
adversely affect its condition (financial or otherwise) or operations (present
or prospective) or which may expose Borrower to uninsured liability of
$25,000.00 or more; (v) any default claimed by any other creditor for Borrowed
Money of Borrower other than Lender; and (vi) any other development in the
business or affairs of Borrower which may be adverse; in each case describing
the nature thereof and (in the case of notification under clauses (i) and (ii))
the action Borrower proposes to take with respect thereto.
Section 6.11. Employee Benefit Plans. Borrower will (i) comply with the
funding requirements of ERISA with respect to the Plans for its employees, or
will promptly satisfy any accumulated funding deficiency that arises under
Section 302 of ERISA; (ii) furnish Lender, promptly after filing the same, with
copies of all reports or other statements filed with the United States
Department of Labor, the Pension Benefit Guaranty Corporation, or the Internal
Revenue Service with respect to all Plans, or which Borrower, or any member of a
Controlled Group, may receive from such Governmental Authority with respect to
any such Plans, and (iii) promptly advise Lender of the occurrence of any
Reportable Event or Prohibited Transaction with respect to any such Plan and the
action which Borrower proposes to take with respect thereto. Borrower will make
all contributions when due with respect to any multi-employer pension plan in
which it participates and will promptly advise Lender: (i) upon its receipt of
notice of the assertion against Borrower of a claim for withdrawal liability;
(ii) upon the occurrence of any event which could trigger the assertion of a
claim for withdrawal liability against Borrower; and (iii) upon the occurrence
of any event which would place Borrower in a Controlled Group as a result of
which any member (including Borrower) thereof may be subject to a claim for
withdrawal liability, whether liquidated or contingent.
Section 6.12. Financing Statements. Borrower shall provide to Lender
evidence satisfactory to Lender as to the due recording of termination
statements, releases of collateral, and Forms UCC-3, and shall cause to be
recorded financing statements on Form UCC-1, duly executed by Borrower and
Lender, in all places necessary to release all existing security interests and
other liens in the Collateral (other than as permitted hereby) and to perfect
and protect Lender's first priority lien and security interest in the
Collateral, as Lender may request.
Section 6.13. Financial Records. Borrower shall keep current and accurate
books of records and accounts in which full and correct entries will be made of
all of its business transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP.
Section 6.14. Collection of Accounts. Borrower shall continue to collect
its Accounts in the ordinary course of business.
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Section 6.15. Places of Business. Borrower shall give thirty (30) days'
prior written notice to Lender of any change in the location of any of its
places of business, of the places where its records concerning its Accounts are
kept, of the places where the Collateral is kept, or of the establishment of any
new, or the discontinuance of any existing, places of business.
Section 6.16. Business Conducted. Borrower shall continue in the business
presently conducted by it using its best efforts to maintain its customers and
goodwill. Borrower shall not engage, directly or indirectly, in any line of
business substantially different from the business conducted by it immediately
prior to the Closing Date, or engage in business or lines of business which are
not reasonably related thereto.
Section 6.17. Litigation and Other Proceedings. Borrower shall give prompt
notice to Lender of any litigation, arbitration, or other proceeding before any
Governmental Authority against or affecting Borrower if the amount claimed is
more than $25,000.00.
Section 6.18. Bank Accounts. Borrower shall assign all of its depository
and disbursement accounts to Lender.
Section 6.19. Submission of Collateral Documents. Borrower will, on demand
of Lender, make available to Lender copies of shipping and delivery receipts
evidencing the shipment of goods that gave rise to an Account, medical records,
insurance verification forms, assignment of benefits, in-take forms or other
proof of the satisfactory performance of services that gave rise to an Account,
a copy of the claim or invoice for each Account and copies of any written
contract or order from which the Account arose. Borrower shall promptly notify
Lender if an Account becomes evidenced or secured by an instrument or chattel
paper and upon request of Lender, will promptly deliver any such instrument or
chattel paper to Lender.
Section 6.20. Licensure; Medicaid/Medicare Cost Reports. Borrower will
maintain all certificates of need, provider numbers and licenses necessary to
conduct its business as presently conducted, and take any steps required to
comply with any such new or additional requirements that may be imposed on
providers of medical products and services. If required, all Medicaid/Medicare
cost reports will be properly filed.
Section 6.21. Officer's Certificates. Together with the quarterly financial
statements delivered pursuant to clause (iii) of Section 6.1, and together with
the audited annual financial statements delivered pursuant to clause (vi) of
that Section, Borrower shall deliver to Lender a certificate of its chief
financial officer, in form and substance satisfactory to Lender:
(a) Setting forth the information (including detailed calculations)
required to establish whether Borrower is in compliance with the requirements of
Articles VI and VII as of the end of the period covered by the financial
statements then being furnished; and
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(b) Stating that the signer has reviewed the relevant terms of this
Agreement, and has made (or caused to be made under his supervision) a review of
the transactions and conditions of Borrower from the beginning of the accounting
period covered by the income statements being delivered to the date of the
certificate, and that such review has not disclosed the existence during such
period of any condition or event which constitutes an Event of Default or which
is then, or with the passage of time or giving of notice or both, could become
an Event of Default, and if any such condition or event existed during such
period or now exists, specifying the nature and period of existence thereof and
what action Borrower has taken or proposes to take with respect thereto.
Section 6.22. Visits and Inspections. Borrower agrees to permit
representatives of Lender, from time to time, as often as may be reasonably
requested, but only during normal business hours, to visit and inspect the
properties of Borrower, and to inspect, audit and make extracts from its books
and records, and discuss with its officers, its employees and its independent
accountants, Borrower's business, assets, liabilities, financial condition,
business prospects and results of operations.
ARTICLE VII
NEGATIVE COVENANTS
Each entity constituting Borrower covenants and agrees that so long as
Borrower may borrow hereunder and until payment in full of the Note and
performance of all other obligations of Borrower under the Loan Documents:
Section 7.1. Borrowing. Borrower will not create, incur, assume or suffer
to exist any liability for Borrowed Money except: (i) indebtedness to Lender;
(ii) indebtedness of Borrower secured by mortgages, encumbrances or liens
expressly permitted by Section 7.3 hereof; (iii) accounts payable to trade
creditors and current operating expenses (other than for borrowed money) which
are not aged more than one hundred twenty (120) days from the billing date or
more than thirty (30) days from the due date, in each case incurred in the
ordinary course of business and paid within such time period, unless the same
are being contested in good faith and by appropriate and lawful proceedings, and
Borrower shall have set aside such reserves, if any, with respect thereto as are
required by GAAP and deemed adequate by Borrower and its independent
accountants; (iv) borrowings incurred in the ordinary course of its business and
not exceeding $150,000.00 in the aggregate outstanding at any one time; (v)
borrowings or indebtedness under capital leases or loans for the purpose of
financing leasehold improvements and equipment at hospital facilities not to
exceed $2,500,000.00 in the aggregate outstanding at any time; and (vi)
indebtedness existing on the Closing Date and identified on Schedule 7.1.
Borrower will not make prepayments on any existing or future indebtedness for
Borrowed Money to any Person (other than Lender, to the extent permitted by this
Agreement or any subsequent agreement between Borrower and Lender).
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Section 7.2. Joint Ventures. Borrower will not invest directly or
indirectly in any joint venture for any purpose without the prior written notice
to, and the express written consent of, Lender, which consent may be withheld in
Lender's sole discretion.
Section 7.3. Liens and Encumbrances. Borrower will not create, incur,
assume or suffer to exist any mortgage, pledge, lien or other encumbrance of any
kind (including the charge upon property purchased under a conditional sale or
other title retention agreement) upon, or any security interest in, any of its
Collateral, whether now owned or hereafter acquired, except for Permitted Liens.
Section 7.4. Merger, Acquisition, or Sale of Assets. Borrower will not
enter into any merger or consolidation with or acquire all or substantially all
of the assets of any Person, and will not sell, lease, or otherwise dispose of
any of its assets except in the ordinary course of its business.
Section 7.5. Sale and Leaseback. Borrower will not, directly or indirectly,
enter into any arrangement whereby Borrower sells or transfers all or any part
of its assets and thereupon and within one year thereafter rents or leases the
assets so sold or transferred without the prior written notice to, and the
express written consent of, Lender, which consent may be withheld in Lender's
sole discretion.
Section 7.6. Dividends, Distributions and Management Fees. Upon notice from
Lender to Borrower of the existence of an Event of Default hereunder, Borrower
will not declare or pay any dividends or other distributions with respect to,
purchase, redeem or otherwise acquire for value any of its outstanding stock now
or hereafter outstanding, or return any capital of its stockholders, nor shall
Borrower pay management fees or fees of a similar nature to any Person.
Section 7.7. Loans. Borrower will not make loans or advances to any Person,
other than (i) trade credit extended in the ordinary course of its business, and
(ii) advances for business travel and similar temporary advances in the ordinary
course of business to officers, stockholders, directors, and employees.
Section 7.8. Contingent Liabilities. Borrower will not assume, guarantee,
endorse, contingently agree to purchase or otherwise become liable upon the
obligation of any Person, except by the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business.
Section 7.9. Subsidiaries. Borrower will not form any subsidiary, or make
any investment in or any loan in the nature of an investment to, any other
Person without prior written notice to Lender.
Section 7.10. Compliance with ERISA. Borrower will not permit with respect
to any Plan covered by Title IV of ERISA any Prohibited Transaction or any
Reportable Event.
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Section 7.11. Certificates of Need. Borrower will not amend, alter or
suspend or terminate or make provisional in any material way, any certificate of
need or provider number without the prior written consent of Lender.
Section 7.12. Transactions with Affiliates. Borrower will not enter into
any transaction, including without limitation the purchase, sale, or exchange of
property, or the loaning or giving of funds to any Affiliate or subsidiary,
except in the ordinary course of business and pursuant to the reasonable
requirements of Borrower's business and upon terms substantially the same and no
less favorable to Borrower as it would obtain in a comparable arm's length
transaction with any Person not an Affiliate or subsidiary, and so long as the
transaction is not otherwise prohibited hereunder. For purposes of the
foregoing, Lender consents to the transactions described on Schedule 7.12.
Section 7.13. Use of Lender's Name. Borrower will not use Lender's name (or
the name of any of Lender's affiliates) in connection with any of its business
operations. Borrower may disclose to third parties that Borrower has a borrowing
relationship with Lender. Nothing herein contained is intended to permit or
authorize Borrower to make any contract on behalf of Lender.
Section 7.14. Change in Capital Structure. There shall occur no change in
Borrower's capital structure as set forth in Schedule 4.17.
Section 7.15. Contracts and Agreements. Borrower will not become or be a
party to any contract or agreement which would breach this Agreement, or breach
any other instrument, agreement, or document to which Borrower is a party or by
which it is or may be bound.
Section 7.16. Margin Stock. Borrower will not carry or purchase any "margin
security" within the meaning of Regulations U, G, T or X of the Board of
Governors of the Federal Reserve System.
Section 7.17. Truth of Statements and Certificates. Borrower will not
furnish to Lender any certificate or other document that contains any untrue
statement of a material fact or that omits to state a material fact necessary to
make it not misleading in light of the circumstances under which it was
furnished.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1. Events of Default. Each of the following (individually, an
"Event of Default" and collectively, the "Events of Default") shall constitute
an event of default hereunder:
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(a) A default in the payment of any installment of principal of, or
interest upon, the Note when due and payable, whether at maturity or otherwise,
or any breach of Section 2.3 of this Agreement, which default or breach, as
applicable, shall have continued unremedied for a period of five (5) days after
written notice thereof from Lender to Borrower;
(b) A default in the payment of any other charges, fees, or other monetary
obligations owing to Lender arising out of or incurred in connection with this
Agreement when such payment is due and payable, which default shall have
continued unremedied for a period of five (5) days after written notice from
Lender;
(c) A default in the due observance or performance by Borrower of any other
term, covenant or agreement contained in any of the Loan Documents, which
default shall have continued unremedied for a period of twenty (20) days after
written notice from Lender;
(d) If any representation or warranty made by Borrower herein or in any of
the other Loan Documents, any financial statement, or any statement or
representation made in any other certificate, report or opinion delivered in
connection herewith or therewith proves to have been incorrect or misleading in
any material respect when made, which default shall have continued unremedied
for a period of ten (10) days after written notice from Lender;
(e) If any obligation of Borrower (other than its Obligations hereunder)
for the payment of Borrowed Money is not paid when due or within any applicable
grace period, or such obligation becomes or is declared to be due and payable
prior to the expressed maturity thereof, or there shall have occurred an event
which, with the giving of notice or lapse of time, or both, would cause any such
obligation to become, or allow any such obligation to be declared to be, due and
payable;
(f) If Borrower makes an assignment for the benefit of creditors, offers a
composition or extension to creditors, or makes or sends notice of an intended
bulk sale of any business or assets now or hereafter conducted by Borrower;
(g) If Borrower files a petition in bankruptcy, is adjudicated insolvent or
bankrupt, petitions or applies to any tribunal for any receiver of or any
trustee for itself or any substantial part of its property, commences any
proceeding relating to itself under any reorganization, arrangement,
readjustment or debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or there is commenced against
Borrower any such proceeding which remains undismissed for a period of sixty
(60) days, or any Borrower by any act indicates its consent to, approval of, or
acquiescence in, any such proceeding or the appointment of any receiver of or
any trustee for a Borrower or any substantial part of its property, or suffers
any such receivership or trusteeship to continue undischarged for a period of
sixty (60) days;
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(h) If one or more final judgments against Borrower or attachments against
its property not fully and unconditionally covered by insurance shall be
rendered by a court of record and shall remain unpaid, unstayed on appeal,
undischarged, unbonded and undismissed for a period of twenty (20) days;
(i) A Reportable Event which might constitute grounds for termination of
any Plan covered by Title IV of ERISA or for the appointment by the appropriate
United States District Court of a trustee to administer any such Plan or for the
entry of a lien or encumbrance to secure any deficiency, has occurred and is
continuing thirty (30) days after its occurrence, or any such Plan is
terminated, or a trustee is appointed by an appropriate United States District
Court to administer any such Plan, or the Pension Benefit Guaranty Corporation
institutes proceedings to terminate any such Plan or to appoint a trustee to
administer any such Plan, or a lien or encumbrance is entered to secure any
deficiency or claim;
(j) If any outstanding stock of any entity comprising Borrower is sold or
otherwise transferred by the Person owning such stock on the date hereof and
such transfer results in more than fifty percent (50%) of all outstanding shares
of such Borrower's stock becoming owned by a Person who is not a shareholder of
Borrower as of the Closing Date;
(k) If there shall occur any uninsured damage to or loss, theft or
destruction of any portion of the Collateral;
(l) If Borrower breaches or violates the terms of, or if a default or an
event which could, whether with notice or the passage of time, or both,
constitute a default, occurs under any other existing or future agreement
(related or unrelated) between Borrower and Lender;
(m) Upon the issuance of any execution or distraint process against
Borrower or any of its property or assets;
(n) If Borrower ceases any material portion of its business operations as
presently conducted;
(o) If any indication or evidence is received by Lender that Borrower may
have directly or indirectly been engaged in any type of activity which, in
Lender's discretion, might result in the forfeiture of any property of Borrower
to any Governmental Authority, which default shall have continued unremedied for
a period of ten (10) days after written notice from Lender;
(p) Borrower or any Affiliate of Borrower, shall challenge or contest, in
any action, suit or proceeding, the validity or enforceability of this
Agreement, or any of the other Loan Documents, the legality or the
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Lender;
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(q) Borrower shall be criminally indicted or convicted under any law that
could lead to a forfeiture of any Collateral.
(r) There shall occur a material adverse change in the financial condition
or business prospects of Borrower, or if Lender in good faith deems itself
insecure as a result of acts or events bearing upon the financial condition of
Borrower or the repayment of the Note, which default shall have continued
unremedied for a period of ten (10) days after written notice from Lender.
Section 8.2. Acceleration. Upon the occurrence of any of the foregoing
Events of Default, the Note shall become and be immediately due and payable upon
declaration to that effect delivered by Lender to Borrower; provided that, upon
the happening of any event specified in Section 8.1(g) hereof, the Note shall be
immediately due and payable without declaration or other notice to Borrower.
Section 8.3. Remedies.
(a) In addition to all other rights, options, and remedies granted to
Lender under this Agreement, upon the occurrence of an Event of Default Lender
may (i) terminate the Loan, whereupon all outstanding Obligations shall be
immediately due and payable, (ii) exercise all other rights granted to it
hereunder and all rights under the Uniform Commercial Code in effect in the
applicable jurisdiction(s) and under any other applicable law, and (iii)
exercise all rights and remedies under all Loan Documents now or hereafter in
effect, including the following rights and remedies (which list is given by way
of example and is not intended to be an exhaustive list of all such rights and
remedies):
(i) The right to take possession of, send notices regarding, and
collect directly the Collateral, with or without judicial process, and to
exercise all rights and remedies available to Lender with respect to the
Collateral under the Uniform Commercial Code in effect in the
jurisdiction(s) in which such Collateral is located;
(ii) The right to (by its own means or with judicial assistance) enter
any of Borrower's premises and take possession of the Collateral, or render
it unusable, or dispose of the Collateral on such premises in compliance
with subsection (b), without any liability for rent, storage, utilities, or
other sums, and Borrower shall not resist or interfere with such action;
(iii) The right to require Borrower at Borrower's expense to assemble
all or any part of the Collateral and make it available to Lender at any
place designated by Lender;
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(iv) The right to reduce the Maximum Loan Amount or to use the
Collateral and/or funds in the Concentration Account in amounts up to the
Maximum Loan Amount for any reason; and
(v) The right to relinquish or abandon any Collateral or any security
interest therein.
(b) Borrower agrees that a notice received by it at least five (5) days
before the time of any intended public sale, or the time after which any private
sale or other disposition of the Collateral is to be made, shall be deemed to be
reasonable notice of such sale or other disposition. If permitted by applicable
law, any perishable Collateral which threatens to speedily decline in value or
which is sold on a recognized marked may be sold immediately by Lender without
prior notice to Borrower. At any sale or disposition of Collateral, Lender may
(to the extent permitted by applicable law) purchase all or any part of the
Collateral, free from any right of redemption by Borrower, which right is hereby
waived and released. Borrower covenants and agrees not to interfere with or
impose any obstacle to Lender's exercise of its rights and remedies with respect
to the Collateral.
Section 8.4. Nature of Remedies. Lender shall have the right to proceed
against all or any portion of the Collateral to satisfy the liabilities and
Obligations of Borrower to Lender in any order. All rights and remedies granted
Lender hereunder and under any agreement referred to herein, or otherwise
available at law or in equity, shall be deemed concurrent and cumulative, and
not alternative remedies, and Lender may proceed with any number of remedies at
the same time until the Loans, and all other existing and future liabilities and
obligations of Borrower to Lender, are satisfied in full. The exercise of any
one right or remedy shall not be deemed a waiver or release of any other right
or remedy, and Lender, upon the occurrence of an Event of Default, may proceed
against Borrower, and/or the Collateral, at any time, under any agreement, with
any available remedy and in any order.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Expenses and Taxes.
(a) Borrower agrees to pay, whether or not the Closing occurs, a reasonable
documentation preparation fee, together with actual audit and appraisal fees and
all other out-of-pocket charges and expenses incurred by Lender in connection
with the negotiation, preparation and execution of each of the Loan Documents
and preparation for Closing; provided, however, that the aggregate amount of
such fees and expenses shall not exceed $20,000.00. In addition, Borrower shall
pay all fees associated with any amendments to the Loan Documents following
Closing. Borrower also agrees to pay all out-of-pocket charges and expenses
incurred by Lender
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<PAGE>
(including the fees and expenses of Lender's counsel) in connection with the
enforcement, protection or preservation of any right or claim of Lender and the
collection of any amounts due under the Loan Documents.
(b) Borrower shall pay all taxes (other than taxes based upon or measured
by Lender's income or revenues or any personal property tax), if any, in
connection with the issuance of the Note and the recording of the security
documents therefor. The obligations of Borrower under this clause (b) shall
survive the payment of Borrower's indebtedness hereunder and the termination of
this Agreement.
Section 9.2. Entire Agreement; Amendments. This Agreement and the other
Loan Documents constitute the full and entire understanding and agreement among
the parties with regard to their subject matter and supersede all prior written
or oral agreements, understandings, representations and warranties made with
respect thereto. No amendment, supplement or modification of this Agreement nor
any waiver of any provision thereof shall be made except in writing executed by
the party against whom enforcement is sought.
Section 9.3. No Waiver; Cumulative Rights. No waiver by any party hereto of
any one or more defaults by the other party in the performance of any of the
provisions of this Agreement shall operate or be construed as a waiver of any
future default or defaults, whether of a like or different nature. No failure or
delay on the part of any party in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to any party hereto at law, in equity or
otherwise.
Section 9.4. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and personally delivered, mailed by
registered or certified mail (return receipt requested and postage prepaid),
sent by telecopier (with a confirming copy sent by regular mail), or sent by
prepaid overnight courier service, and addressed to the relevant party at its
address set forth below, or at such other address as such party may, by written
notice, designate as its address for purposes of notice hereunder:
(a) If to Lender, at:
HCFP Funding, Inc.
2 Wisconsin Circle, 4th floor
Chevy Chase, Maryland 20815
Attention: Ethan D. Leder, President
Telephone: (301) 961-1640
Telecopier: (301) 664-9860
35
<PAGE>
(b) If to Borrower, at:
Intensiva HealthCare Corporation
7733 Forsyth Blvd., 8th Floor
St. Louis, Missouri 63105
Attention: John P. Keefe, CFO
Telephone: (314) 725-0112
Telecopier: (314) 725-0443
If mailed, notice shall be deemed to be given five (5) days after being sent, if
sent by personal delivery or telecopier, notice shall be deemed to be given when
delivered, and if sent by prepaid courier, notice shall be deemed to be given on
the next Business Day following deposit with the courier.
Section 9.5. Severability. If any term, covenant or condition of this
Agreement, or the application of such term, covenant or condition to any party
or circumstance shall be found by a court of competent jurisdiction to be, to
any extent, invalid or unenforceable, the remainder of this Agreement and the
application of such term, covenant, or condition to parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition shall be valid and
enforced to the fullest extent permitted by law. Upon determination that any
such term is invalid, illegal or unenforceable, the parties hereto shall amend
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner.
Section 9.6. Successors and Assigns. This Agreement, the Note, and the
other Loan Documents shall be binding upon and inure to the benefit of Borrower
and Lender and their respective successors and assigns. Notwithstanding the
foregoing, Borrower may not assign any of its rights or delegate any of its
obligations hereunder without the prior written consent of Lender, which may be
withheld in its sole discretion. Lender may sell, assign, transfer, or
participate any or all of its rights or obligations hereunder without notice to
or consent of Borrower.
Section 9.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one instrument.
Section 9.8. Interpretation. No provision of this Agreement or any other
Loan Document shall be interpreted or construed against any party because that
party or its legal representative drafted that provision. The titles of the
paragraphs of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement. Any pronoun used in this
Agreement shall be deemed to include singular and plural and masculine, feminine
and neuter gender as the case may be. The words "herein," "hereof," and
"hereunder" shall be deemed to refer to this entire Agreement, except as the
context otherwise requires.
36
<PAGE>
Section 9.9. Survival of Terms. All covenants, agreements, representations
and warranties made in this Agreement, any other Loan Document, and in any
certificates and other instruments delivered in connection therewith shall be
considered to have been relied upon by Lender and shall survive the making by
Lender of the Loans herein contemplated and the execution and delivery to Lender
of the Note, and shall continue in full force and effect until all liabilities
and obligations of Borrower to Lender are satisfied in full.
Section 9.10. Release of Lender. Borrower releases Lender, its officers,
employees, and agents, of and from any claims for loss or damage resulting from
acts or conduct of any or all of them, unless caused by Lender's recklessness,
gross negligence, or willful misconduct.
Section 9.11. Time. Whenever Borrower is required to make any payment or
perform any act on a Saturday, Sunday, or a legal holiday under the laws of the
State of Maryland (or other jurisdiction where Borrower is required to make the
payment or perform the act), the payment may be made or the act performed on the
next Business Day. Time is of the essence in Borrower's performance under this
Agreement and all other Loan Documents.
Section 9.12. Commissions. The transaction contemplated by this Agreement
was brought about by Lender and Borrower acting as principals and without any
brokers, agents, or finders being the effective procuring cause. Borrower
represents that it has not committed Lender to the payment of any brokerage fee,
commission, or charge in connection with this transaction. If any such claim is
made on Lender by any broker, finder, or agent or other person, Borrower will
indemnify, defend, and hold Lender harmless from and against the claim and will
defend any action to recover on that claim, at Borrower's cost and expense,
including Lender's counsel fees. Borrower further agrees that until any such
claim or demand is adjudicated in Lender's favor, the amount demanded will be
deemed a liability of Borrower under this Agreement, secured by the Collateral.
Section 9.13. Third Parties. No rights are intended to be created hereunder
or under any other Loan Document for the benefit of any third party donee,
creditor, or incidental beneficiary of Borrower. Nothing contained in this
Agreement shall be construed as a delegation to Lender of Borrower's duty of
performance, including without limitation Borrower's duties under any account or
contract in which Lender has a security interest.
Section 9.14. Discharge of Borrower's Obligations. Lender, in its sole
discretion, shall have the right at any time, and from time to time, without
prior notice to Borrower if Borrower fails to do so, to: (i) obtain insurance
covering any of the Collateral as required hereunder; (ii) pay for the
performance of any of Borrower's obligations hereunder; (iii) discharge taxes,
liens, security interests, or other encumbrances at any time levied or placed on
any of the Collateral in violation of this Agreement unless Borrower is in good
faith with due diligence by appropriate proceedings contesting those items; and
(iv) pay for the maintenance and preservation of any of the Collateral. Expenses
and advances shall be added to the Loan, until reimbursed to Lender
37
<PAGE>
and shall be secured by the Collateral. Any such payments and advances by Lender
shall not be construed as a waiver by Lender of an Event of Default.
Section 9.15. Information to Participants. Lender may divulge to any
participant it may obtain in the Loan, or any portion thereof, all information,
and furnish to such participant copies of reports, financial statements,
certificates, and documents obtained under any provision of this Agreement or
any other Loan Document.
Section 9.16. Indemnity. Borrower hereby agrees to indemnify and hold
harmless Lender, its partners, officers, agents and employees (collectively,
"Indemnitee") from and against any liability, loss, cost, expense, claim,
damage, suit, action or proceeding ever suffered or incurred by Lender
(including reasonable attorneys' fees and expenses) arising from Borrower's
failure to observe, perform or discharge any of its covenants, obligations,
agreements or duties hereunder, or from the breach of any of the representations
or warranties contained in Article IV hereof. In addition, Borrower shall defend
Indemnitee against and save it harmless from all claims of any Person with
respect to the Collateral. Notwithstanding any contrary provision in this
Agreement, the obligation of Borrower under this Section 9.16 shall survive the
payment in full of the Obligations and the termination of this Agreement.
Section 9.17. Choice of Law; Consent to Jurisdiction. THIS AGREEMENT AND
THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF
CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS AGREEMENT OR THE NOTE IS
COMMENCED BY LENDER IN THE STATE COURTS OF THE STATE OF MARYLAND OR IN THE U.S.
DISTRICT COURT FOR THE DISTRICT OF MARYLAND, BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN
THE STATE OF MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF
MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS DESCRIBED
IN SECTION 9.4 HEREOF.
Section 9.18. Waiver of Trial by Jury. BORROWER HEREBY (A) COVENANTS AND
AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND
(B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT
SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY BORROWER, AND THIS WAIVER IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND
REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE
SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE
38
<PAGE>
EVIDENCE OF BORROWER'S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, BORROWER
HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING LENDER'S
COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER WILL
NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
Section 9.19. Intentionally Deleted.
39
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
LENDER:
ATTEST: HCFP FUNDING, INC.
a Delaware corporation
By: /s/ Dwayne O. Leslie By: /s/ Howard Widra [SEAL]
Name: Name: Howard Widra
Title: Title:Vice President
BORROWER:
ATTEST: INTENSIVA HEALTHCARE CORPORATION
a Delaware corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF AKRON, INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF COLUMBUS,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
40
<PAGE>
ATTEST: INTENSIVA HOSPITAL OF CORPUS
CHRISTI, INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF EASTERN
OKLAHOMA, INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF FLINT, INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF EVANSVILLE,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF FORT WAYNE,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
41
<PAGE>
ATTEST: INTENSIVA HOSPITAL OF GREATER ST.
LOUIS, INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF INDIANAPOLIS,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF KANSAS CITY,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF KNOXVILLE,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
42
<PAGE>
ATTEST: INTENSIVA HOSPITAL OF MACOMB
COUNTY, INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF WESTERN
MICHIGAN, INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF NORTHWEST
INDIANA, INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF OKLAHOMA
CITY, INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
43
<PAGE>
ATTEST: INTENSIVA HOSPITAL OF PITTSBURGH,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF SOUIX FALLS,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF TACOMA, INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF TOPEKA, INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
44
<PAGE>
ATTEST: INTENSIVA HOSPITAL OF CINCINNATI,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF ANN ARBOR,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF BATTLE CREEK,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF
PHILADELPHIA/AEMC, INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
45
<PAGE>
ATTEST: INTENSIVA HOSPITAL OF PONTIAC,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF RENO,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
ATTEST: INTENSIVA HOSPITAL OF WICHITA,
INC.
a Missouri corporation
By: /s/ Mike Oligschlaeger By: /s/ John P. Keefe [SEAL]
Name: John P. Keefe
Title:Treasurer
46
<PAGE>
LIST OF EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Lockbox Agreement
Exhibit C - Form of Legal Opinion
47
<PAGE>
LIST OF SCHEDULES
Schedule 1.36 - Permitted Liens
Schedule 4.1 - Subsidiaries
Schedule 4.5 - Litigation
Schedule 4.7 - Tax Identification Numbers/Fiscal Year End
Schedule 4.13 - Non-Compliance with Law
Schedule 4.14 - Environmental Matters
Schedule 4.15 - Places of Business
Schedule 4.16 - Licenses
Schedule 4.17 - Stock Ownership
Schedule 4.19 - Borrowings and Guarantees
Schedule 4.21 - Trade Names
Schedule 4.22 - Joint Ventures
Schedule 7.12 - Transactions with Affiliates
48
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's interim unaudited consolidated financial statements as of and for
the six months ended June 30, 1998, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Jun-30-1998
<CASH> 334,593
<SECURITIES> 0
<RECEIVABLES> 43,837,938
<ALLOWANCES> 2,721,000
<INVENTORY> 1,149,389
<CURRENT-ASSETS> 45,967,214
<PP&E> 10,725,827
<DEPRECIATION> 2,281,337
<TOTAL-ASSETS> 56,002,697
<CURRENT-LIABILITIES> 24,622,667
<BONDS> 0
0
0
<COMMON> 9,980
<OTHER-SE> 25,512,321
<TOTAL-LIABILITY-AND-EQUITY> 56,002,697
<SALES> 0
<TOTAL-REVENUES> 52,083,662
<CGS> 0
<TOTAL-COSTS> 44,060,176
<OTHER-EXPENSES> 2,648,535
<LOSS-PROVISION> 1,168,908
<INTEREST-EXPENSE> 522,735
<INCOME-PRETAX> 2,455,804
<INCOME-TAX> 736,742
<INCOME-CONTINUING> 1,719,062
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,719,062
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.16
</TABLE>
