$4,000,000.00
LOAN AND SECURITY AGREEMENT
---------------------------
by and among
NEW YORK HEALTH CARE, INC.
NYHC NEWCO PAXXON, INC.
("Borrower")
and
HELLER HEALTHCARE FINANCE, INC.
("Lender")
November 28, 2000
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made as of November
28, 2000, by and among NEW YORK HEALTH CARE, INC., a New York corporation, and
NYHC NEWCO PAXXON, INC., a New York corporation (collectively, "Borrower"), and
HELLER HEALTHCARE FINANCE, INC., a Delaware corporation ("Lender").
RECITALS
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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 hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
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As used in this Agreement, unless otherwise specified, all references to
"Sections" shall be deemed to refer to Sections of this Agreement, and the
following terms shall have the meanings set forth below:
SECTION 1.1. ACCOUNT. "Account" means any right to payment for goods
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sold or leased or services rendered, whether or not evidenced by an instrument
or chattel paper, and whether or not earned by performance, including, without
limitation, the right to payment of management fees.
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
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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
1
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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
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two and one half percent (2.5%) 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
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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.
SECTION 1.10. CERTIFICATE OF VALIDITY. "Certificate of Validity" means
-----------------------
that Certificate of Validity issued by an officer of Borrower for the benefit of
lender and dated as of even date with this Agreement.
SECTION 1.10a. CHANGE IN CONTROL. "Change in Control" means (a)
--------------------
individuals who, as of the Closing Date, constituted the board of directors of
Borrower (together with any new directors whose election by that board of
directors or whose nomination for election by the stockholders of Borrower was
approved by two-thirds of the directors of Borrower then still in office who
were either directors at the beginning of the period or whose election or
nomination for election was previously approved), cease for any reason to
constitute a majority of the board of directors of Borrower then in office, or
(b) either of Jerry Braun or Jacob Rosenberg (i) ceases to be a director of
Borrower, or (ii) ceases to be President and Chief Executive Officer or Vice
President and Secretary, respectively, or otherwise ceases to act as an
executive officer who is vested with the management of the business of Borrower
by the board of directors of Borrower, as determined by Lender in its sole
discretion.
SECTION 1.11. CLOSING; CLOSING DATE. "Closing" and "Closing Date" have
----------------------
the meanings set forth in Section 5.3.
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SECTION 1.12. COLLATERAL. "Collateral" has the meaning set forth in
----------
Section 3.1.
SECTION 1.13. COMMITMENT FEE. "Commitment Fee" has the meaning set
----------------
forth in Section 2.4(a).
SECTION 1.14. CONCENTRATION ACCOUNT. "Concentration Account" has the
-----------------------
meaning set forth in Section 2.3.
SECTION 1.15. CONTROLLED GROUP. "Controlled Group" means all
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businesses that would be treated as a single employer under Section 4001(b) of
ERISA.
SECTION 1.16. 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 1.17. DEFAULT RATE. "Default Rate" means a rate per annum
--------------
equal to five percent (5%) above the then applicable Base Rate.
SECTION 1.18. ERISA. "ERISA" has the meaning set forth in Section
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4.12.
SECTION 1.19. EVENT OF DEFAULT. "Event of Default" and "Events of
-------------------
Default" have the meanings set forth in Section 8.1.
SECTION 1.20. GAAP. "GAAP" means generally accepted accounting
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principles applied in a consistent manner.
SECTION 1.21. 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 1.22. HAZARDOUS MATERIAL. "Hazardous Material" means any
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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 applicable to Borrower
or its business, operations or assets.
SECTION 1.23. HIGHEST LAWFUL RATE. "Highest Lawful Rate" has the
----------------------
meaning set forth in Section 2.7.
SECTION 1.24. 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.
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<PAGE>
SECTION 1.25. LENDER. "Lender" has the meaning set forth in the
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Preamble.
SECTION 1.26. LOAN. "Loan" has the meaning set forth in Section
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2.1(a).
SECTION 1.27. LOAN DOCUMENTS. "Loan Documents" means and includes this
---------------
Agreement, the Note, the Certificate of Validity, and each and every other
document now or hereafter delivered in connection with this Agreement, as any of
them may be amended, modified, or supplemented from time to time.
SECTION 1.28. LOAN MANAGEMENT FEE. "Loan Management Fee" has the meaning
--------------------
set forth in Section 2.4(c).
SECTION 1.29. LOCKBOX. "Lockbox" has the meaning set forth in Section
--------
2.3.
SECTION 1.30. LOCKBOX ACCOUNT. "Lockbox Account" means an account
-----------------
maintained by Borrower at the Lockbox Bank into which all collections of
Accounts are paid directly.
SECTION 1.31. LOCKBOX BANK. "Lockbox Bank" has the meaning set forth
--------------
in Section 2.3.
SECTION 1.31a. MATERIAL ADVERSE EFFECT. "Material Adverse Effect"
--------------------------
shall mean any event or condition that, alone or when taken with other events or
conditions occurring or existing concurrently with such event or condition (a)
has or is reasonably expected to have a material adverse effect on the business,
operations, condition (financial or otherwise), assets, liabilities, prospects,
or properties of Borrower; (b) has or is reasonably expected to have any
material adverse effect on the validity or enforceability of this Agreement or
any Loan Document; (c) materially impairs or is reasonably expected to
materially impair the ability of Borrower to pay and perform the Obligations;
(d) materially impairs or is reasonably expected to materially impair the
ability of Lender to enforce its rights and remedies under this Agreement or any
of the Loan Documents; or (e) has or is reasonably expected to have any
material adverse effect on the Collateral, the liens of Lender in the Collateral
or the priority of such liens.
SECTION 1.32. MAXIMUM LOAN AMOUNT. "Maximum Loan Amount" has the
----------------------
meaning set forth in Section 2.1(a).
SECTION 1.33. MEDICAID/MEDICARE ACCOUNT DEBTOR. "Medicaid/ Medicare
-----------------------------------
Account Debtor" means any Account Debtor that is (a) the United States of
America acting under the Medicaid/Medicare program established pursuant to the
Social Security Act, (b) 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.
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<PAGE>
SECTION 1.34. MEDICAL SERVICES. "Medical Services" means 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
that 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 1.35. NOTE. "Note" has the meaning set forth in Section
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2.1(c).
SECTION 1.36. OBLIGATIONS. "Obligations" has the meaning set forth in
------------
Section 3.1.
SECTION 1.37. PATIENT. "Patient" means any Person receiving Medical
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Services from Borrower and all Persons legally liable to pay Borrower for such
Medical Services other than Insurers.
SECTION 1.38. PERMITTED LIENS. "Permitted Liens" means: (a) deposits
-----------------
or pledges to secure obligations under workmen's compensation, social security
or similar laws, or under unemployment insurance; (b) 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; (c) mechanic's,
workmen's, materialmen's or other like liens arising in the ordinary course of
business with respect to obligations that 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
risk of the sale, loss or forfeiture of such property or assets or any interest
therein); (d) liens and encumbrances in favor of Lender; and (e) liens set forth
on Schedule 1.38.
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SECTION 1.39. PERSON. "Person" means an individual, partnership,
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corporation, trust, joint venture, joint stock company, limited liability
company, association, unincorporated organization, Governmental Authority, or
any other entity.
SECTION 1.40. PLAN. "Plan" has the meaning set forth in Section 4.12.
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SECTION 1.41. PREMISES. "Premises" has the meaning set forth in
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Section 4.14.
SECTION 1.42. PRIME RATE OF INTEREST. "Prime Rate of Interest" means that
-----------------------
rate of interest designated as such by Fleet Bank, N.A., or any successor
thereto, as the same may from time to time fluctuate.
SECTION 1.42a. PRIVATE PAY ACCOUNT. "Private Pay Account" has the
----------------------
meaning set forth in Section 1.44(a).
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SECTION 1.43. 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 that is not exempt under Section 407 or
Section 408 of ERISA or Section 4975(c)(2) or (d) of the Internal Revenue Code
or under a class exemption granted by the U.S. Department of Labor.
SECTION 1.44. 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 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 of the Account is payable by an individual beneficiary, recipient or
subscriber individually and not directly to Borrower by a Medicaid/Medicare
Account Debtor or other third party payor acceptable to Lender in its sole
discretion ("Private Pay Accounts"); (b) the Account remains unpaid more than
one hundred fifty (150) days past the claim or invoice date (but in no event
more than one hundred sixty five (165) days after the applicable Medical
Services have been rendered); (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; (f) if
the Account arises from the performance of Medical Services and the Medical
Services have not been actually been performed or the Medical Services were
undertaken in violation of any law; (g) the Account is subject to a lien other
than a Permitted Lien; (h) Borrower knows 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) sixty percent
(60%) or more of the aggregate unpaid Accounts from any single Account Debtor
are not deemed Qualified Accounts under this Agreement following the date of
execution of this Agreement; (m) 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); (n) any covenant, representation or warranty contained in the
Loan Documents with respect to such Account has been breached; or (o) the
Account fails to meet such other specifications and requirements which may from
time to time be established by Lender.
SECTION 1.45. REPORTABLE EVENT. "Reportable Event" means a "reportable
-----------------
event" as defined in Section 4043(c) of ERISA for which the notice requirements
of Section 4043(a) of ERISA are not waived.
SECTION 1.46. REVOLVING CREDIT LOAN. "Revolving Credit Loan" has the
-----------------------
meaning set forth in Section 2.1(b).
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SECTION 1.47. TERM. "Term" has the meaning set forth in Section 2.8.
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SECTION 1.48 TERMINATION FEE. "Termination Fee " shall mean a fee
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equal to (a) two percent (2%) of the Maximum Loan Amount in the event the
effective date of termination of this Agreement is on or before the first
anniversary of the execution of this Agreement, or (b) zero percent (0%) of the
Maximum Loan Amount in the event the effective date of termination of this
Agreement is after the first anniversary but prior to the second anniversary of
the execution of this Agreement.
ARTICLE II
LOAN
----
SECTION 2.1. TERMS.
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(a) The maximum aggregate principal amount of credit extended by
Lender to Borrower under this Agreement (the "Loan") that will be outstanding at
any time is Four Million and No/100 Dollars ($4,000,000.00) (the "Maximum Loan
Amount").
(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, 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
availability within the Borrowing Base for advances or extensions of credit
shall be made by Lender in its sole discretion and shall be 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 (as amended, modified,
---------
restated or replaced from time to time, the "Note"), dated the date of this
Agreement, payable to the order of Lender in accordance with the terms thereof.
The Note shall bear interest on the outstanding principal balance of the Note
from the date of the Note 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 the occurrence and during the continuance of 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 into and made a part of this Agreement by
this reference.
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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
eighty-five percent (85%) of Qualified Accounts due and owing from any
Medicaid/Medicare Account Debtor, Insurer or other Account Debtor (the
"Borrowing Base"). Lender, in its sole credit judgment, may further adjust the
Borrowing Base by applying percentages (known as "liquidity factors") to
Qualified Accounts by payor class based upon Borrower's actual recent collection
history for each such payor class (i.e., Medicare, Medicaid, commercial
insurance, etc.) in a manner consistent with Lender's underwriting practices and
procedures.(1) Such liquidity factors may be adjusted by Lender throughout the
Term as warranted by collection histories.
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
written 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 two (2) Business Days before the proposed
borrowing date; provided, however, that no such request may be made at a time
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when there exists an Event of Default; or (ii) when any amount required to be
paid under this Agreement, whether as interest or for any other Obligation,
becomes due, such event shall be deemed irrevocably to be a request for a
Revolving Credit Loan on the day following the due date in the amount required
to pay such interest or other Obligation if such was not paid by Borrower on the
due date.
(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 pursuant to written direction from Borrower; and (ii) the proceeds of
each Revolving Credit Loan deemed to be 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.
______________________
1 To demonstrate the methodology, the following is an illustration of the
application of liquidity factors: If Borrower historically collects x% of
invoiced insurance claims (where x is a number between 0 and 100) within the
eligibility period, the liquidity factor would be x%, so that availability
against such class of Accounts in the aggregate would be equal to Qualified
Accounts multiplied by an x% liquidity factor and then multiplied by the 85%
----
advance rate.
8
<PAGE>
(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
that 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 shall provide Borrower on a monthly basis with a
statement of Revolving Credit Loans, charges and payments made pursuant to this
Agreement, and such statement provided by Lender shall be deemed final, binding
and conclusive upon Borrower, absent manifest error, unless Lender is notified
by Borrower in writing to the contrary within thirty (30) days of the date each
accounting is mailed to Borrower. Such notice shall be deemed an objection to
those items specifically objected to in the notice.
SECTION 2.3. COLLECTIONS, DISBURSEMENTS, BORROWING AVAILABILITY, AND
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LOCKBOX ACCOUNT. Borrower shall maintain a lockbox account (the "Lockbox") with
---------------
Fleet National Bank (the "Lockbox Bank"), subject to the provisions of this
Agreement, and shall execute with the Lockbox Bank a Lockbox Agreement in the
form attached as Exhibit B, and such other agreements related to the Lockbox
----------
Agreement as Lender may require. Borrower shall ensure that all collections of
Accounts, except Private Pay 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, N.A., or
such other financial institution as determined by Lender in its sole discretion,
by written notice to Borrowers and the Lockbox Bank (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)), and all 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, except Private Pay
Accounts, 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 Lender will suffer immediate and irreparable injury and
have no adequate remedy at law if Borrower, through its acts or omissions,
causes or permits Account Debtors to pay other than to the Lockbox Account, or
if Borrower fails to immediately deposit collections of Accounts or proceeds of
other Collateral in the Lockbox Account as herein required; provided, that any
non-compliance with the foregoing provisions, which non-compliance causes the
aggregate amount of deposits made to the Lockbox Account in any calendar quarter
to be up to $15,000 less than the amount that should have been deposited in the
Lockbox Account absent such non-compliance, shall be permitted hereunder.
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Upon Borrower's failure to comply with the terms of this Section 2.3, Lender
shall be entitled, in addition to exercising any other rights and remedies
available to it, 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.
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 three (3) 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, and no
event or circumstance which, with notice or the passage of time or both, would
constitute an Event of Default, exists.
SECTION 2.4. FEES.
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(a) By executing this Agreement, Borrower agrees unconditionally
to pay to Lender a commitment fee equal to three quarters of one percent (.75%)
of the Maximum Loan Amount (the "Commitment Fee"), which Commitment Fee shall be
payable by Borrower to Lender in installments as follows:
(i) On the date of execution of this Agreement, Borrower
shall pay Lender Ten Thousand and No/100 Dollars ($10,000) in immediately
available funds, representing one-third (1/3) of the aggregate amount of
the Commitment Fee. Borrower hereby authorizes Lender to deduct the amount
due under this Section 2.4(a)(i) from the amount of the initial Revolving
Credit Loan made hereunder;
(ii) On that date that is sixty (60) days from the date
of execution of this Agreement, Borrower shall pay Lender Ten Thousand and
No/100 Dollars ($10,000) in immediately available funds, representing
one-third of the aggregate amount of the Commitment Fee; and
(iii) On that date that is one hundred twenty (120) days
from the date of execution of this Agreement, Borrower shall pay Lender Ten
Thousand and No/100 Dollars ($10,000) in immediately available funds,
representing one-third of the aggregate amount of the Commitment Fee.
(b) INTENTIONALLY LEFT BLANK
(c) INTENTIONALLY LEFT BLANK
(d) Provided that no Event of Default exists under this Agreement
or any of the other Loan Documents, Borrower shall be required to pay to Lender
all out-of-pocket audit and appraisal fees in connection with audits and
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<PAGE>
appraisals of Borrower's books and records and such other matters as Lender
shall deem appropriate up to a maximum of $30,000.00 per year; provided,
--------
however, that upon the occurrence and during the continuance of any Event of
-------
Default under this Agreement or any of the other Loan Documents, the foregoing
cap shall not apply, and (i) Borrower shall be obligated to pay for any and all
fees described in this Section 2.8(d) that are incurred during such period, and
(ii) the aggregate amount of the fees incurred pursuant to (i) above shall not
be applied towards the amount of such annual cap. All fees required to be paid
by Borrower pursuant to this Section 2.8(d) 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. Notwithstanding anything in this
Section 2.8(d) to the contrary, Lender shall not be limited in the number of any
audits, appraisals or other actions conducted or permitted to be conducted under
this Section 2.8(d).
(e) Borrower shall pay to Lender, on demand, any and all fees,
costs or expenses that 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 the
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
(a) the receipt by Borrower or Lender of any payments on or proceeds from any of
the Collateral, to the extent of such proceeds, (b) the occurrence of an Event
of Default if the Loan and the maturity of the payment of the Obligations are
accelerated, or (c) the termination of this Agreement pursuant to Section 2.8 of
this Agreement; provided, however, that if any advance made by Lender in excess
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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 (a) the first Business Day of each month
(for the immediately preceding month), computed on the last calendar day of the
preceding month, (b) the occurrence of an Event of Default if the Loan and the
maturity of the payment of the Obligations are accelerated, or (c) the
termination of this Agreement pursuant to Section 2.8. 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 under this
Agreement, 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.
11
<PAGE>
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 by this
Agreement or the Note would be usurious under such laws, then notwithstanding
any other provision of this Agreement or the Note: (a) the aggregate of all
interest that is contracted for, charged, or received under this Agreement, the
Note 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); (b) neither Borrower nor any other Person now or hereafter
liable under this Agreement shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Highest Lawful Rate; and (c)
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 this Agreement or the Note exceeds the
Highest Lawful Rate, the rate of interest to accrue pursuant to this Agreement
and the Note shall be limited, notwithstanding anything to the contrary in this
Agreement or the Note, to the Highest Lawful Rate, but any subsequent reductions
in the Base Rate shall not reduce the interest to accrue pursuant to this
Agreement or the Note 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 this Agreement or the
Note had at all times been in effect. If the total amount of interest paid or
accrued pursuant to this Agreement or the Note 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 this Agreement or the Note had been
in effect, then Borrower agrees to pay to Lender an amount equal to the
difference between (x) the lesser of (A) the amount of interest that would have
accrued if the Highest Lawful Rate had at all times been in effect, or (B) the
amount of interest that would have accrued if a varying rate per annum equal to
the interest rate under this Agreement or the Note had at all times been in
effect, and (y) the amount of interest accrued in accordance with the other
provisions of this Agreement or the Note.
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 two (2) years from the Closing Date, unless earlier
terminated as provided in this Section 2.8 (the "Term").
(b) Notwithstanding anything in this Agreement 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
(the "Termination Notice Period"), Borrower may terminate this Agreement,
provided however, that on the effective date of any 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 and not as a penalty, an amount equal to the
Termination Fee.
12
<PAGE>
(d) All of the Obligations shall be immediately due and payable
upon the termination date stated in any notice of termination of this Agreement
(the "Termination Date"); provided that, notwithstanding anything in Section
2.8(c) to the contrary, the Termination Date shall be effective no earlier than
the first Business Day of the month following the expiration of the Termination
Notice Period.
(e) Notwithstanding any provision of this Agreement that 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.
ARTICLE III
COLLATERAL
----------
SECTION 3.1. GENERALLY. As security for the payment of all liabilities of
---------
Borrower to Lender, including without limitation: (A) indebtedness evidenced
under the Note, repayment of Revolving Credit Loans, advances and other
extensions of credit, all fees and charges owing by Borrower, (including without
limitation the Termination Fee) 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, including but
not limited to any extensions, modifications, substitutions, increases and
renewals thereof, (B) the payment of all amounts advanced by Lender to preserve,
protect, defend, and enforce its rights under this Agreement and in the
following property in accordance with the terms of this Agreement, and (C) 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 all of Borrower's contract rights, chattel paper, documents and
instruments with respect thereto, and all of Borrower's rights, remedies,
security and liens, in, to and in respect of the Accounts, including, without
limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, guaranties or other contracts of suretyship with respect to the Accounts,
deposits or other security for the obligation of any Account Debtor, and credit
and other insurance;
13
<PAGE>
(b) All moneys, securities and other property and the proceeds
thereof, now or hereafter held or received by, in transit to, in possession of,
or under the control of Lender or a bailee or Affiliate of Lender, from or for
Borrower, whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all of Borrower's deposits (general or special), balances, sums
and credits with Lender at any time existing;
(c) All of Borrower's right, title and interest in, to and in
respect of all goods relating to, or which by sale have resulted in, Accounts,
including, without limitation, all goods described in invoices or other
documents or instruments with respect to, or otherwise representing or
evidencing, any Account, and all returned, reclaimed or repossessed goods;
(d) All of Borrower's now owned or hereafter acquired deposit
accounts into which Accounts are deposited, including the Lockbox Account;
(e) All of Borrower's now owned and hereafter acquired or arising
general intangibles and other property of every kind and description with
respect to, evidencing or relating 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, ledger cards,
contracts, licenses, formulae, tax and other types of refunds, returned and
unearned insurance premiums, rights and claims under insurance policies, and
computer programs, information, software, records, and data, as the same relates
to the Accounts;
(f) All of Borrower's other general intangibles (including,
without limitation, any proceeds from insurance policies after payment of prior
interests), patents, unpatented inventions, trade secrets, copyrights, contract
rights, goodwill, literary rights, rights to performance, rights under licenses,
choses-in-action, claims, information contained in computer media (such as data
bases, source and object codes, and information therein), things in action,
trademarks and trademarks applied for (together with the goodwill associated
therewith) and derivatives thereof, trade names, including the right to make,
use, and vend goods utilizing any of the foregoing, and permits, licenses,
certifications, authorizations and approvals, and the rights of Borrower
thereunder, issued by any governmental, regulatory, or private authority,
agency, or entity whether now owned or hereafter acquired, together with all
cash and non-cash proceeds and products thereof;
(g) 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;
(h) All of Borrower's now owned or hereafter acquired machinery,
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
14
<PAGE>
(i) The proceeds (including, without limitation, insurance
proceeds) of all of the foregoing.
SECTION 3.2. LIEN DOCUMENTS. At Closing and thereafter as Lender deems
---------------
necessary in its sole discretion, Borrower shall execute and deliver, or have
executed and delivered, to Lender (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 reasonably request from
time to time in its sole discretion to evidence, perfect, or protect Lender's
lien and security interest in the Collateral required under this Agreement.
SECTION 3.3. COLLATERAL ADMINISTRATION.
---------------------------
(a) All Collateral (except deposit accounts) shall at all times be
kept by Borrower at its principal office(s) as set forth on Schedule 4.15 and
-------------
shall not be moved from such locations without (i) providing prior written
notice to Lender in accordance with Section 6.15, and (ii) obtaining the prior
written consent of Lender, which consent shall not be unreasonably withheld.
(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 $50,000.00 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 on a quarterly basis, 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.
15
<PAGE>
(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 or 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 and during the continuance of an Event
of Default, subject to applicable law regarding Medicaid/Medicare 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 (a)
--------------
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 of this Agreement that directs each
Account Debtor to make payments into the Lockbox, and hereby authorizes Lender,
upon Borrower's failure to send such notices within ten (10) days after the date
of this Agreement (or ten (10) days after the Insurer becomes an Account
Debtor), to send any and all similar notices to such Insurers, and (b) shall
take any and all other such action lawfully required by Lender to secure Lender
and effectuate the intentions and objects of this Agreement, including but not
limited to executing and delivering lockbox agreements, continuation statements,
amendments to financing statements, and any other documents required under this
Agreement. 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. Before Closing, and thereafter (as and when
--------
determined by Lender in its sole discretion), Lender will perform the searches
described in clauses (a) and (b) below against Borrower (the results of which
are to be consistent with Borrower's representations and warranties under this
Agreement):
(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.
16
<PAGE>
Provided that no Event of Default exists under this Agreement or any of the
other Loan Documents, Borrower shall pay, or shall reimburse Lender, as the case
may be, for the cost of up to three (3) searches per Borrower or Borrower
facility performed by Lender hereunder per calendar year during the Term of this
Agreement; provided, however, that upon the occurrence and during the
-------- -------
continuance of any Event of Default under this Agreement or any of the other
Loan Documents, the limitation set forth in the foregoing sentence shall not
apply, and (i) Borrower shall be required to pay, or to reimburse Lender, as the
case may be, for the cost of any and all searches described in this Section 2.5
that may be performed by Lender during such period and (ii) any searches
performed pursuant to (i) above shall not be applied towards such annual limit.
Notwithstanding anything in this Section 3.5 to the contrary, Lender shall not
be limited in the number of any searches performed or permitted to be performed
under this Section 3.5. In addition, prior to Closing, at Borrower's expense,
Borrower shall obtain and deliver to Lender 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 currently intends to do business for which
qualification is required.
SECTION 3.6. POWER OF ATTORNEY. (a) Upon the occurrence and during the
-------------------
continuance of any Event of Default or (b) ten (10) days following any request
by Lender that Borrower take any or all of the following actions, unless
Lender's rights would be materially impaired by virtue of Borrower's failure to
take any or all of such actions during such 10-day period, in which case the
provisions of this Section 3.6 shall become automatically effective, 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: (x) 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; (y) execute in the name of Borrower any financing
statements, schedules, assignments, instruments, documents, and statements that
Lender may deem necessary or desirable to enforce any Account or other
Collateral or perfect Lender's security interest or lien in any Collateral; and
(z) do such other and further acts and deeds in the name of Borrower that Lender
may deem necessary or desirable to enforce any Account or other Collateral or
perfect Lender's security interest or lien in any Collateral. In addition, if
Borrower breaches its obligation to direct payments of the proceeds of the
Collateral to the Lockbox Account, Lender, as the irrevocably made, constituted
and appointed true and lawful attorney for Borrower pursuant to this paragraph,
may, by the signature or other act of any of Lender's officers (without
requiring any of them to do so), direct any federal, state or fiscal
intermediary. or, during an Event of Default, any private payor as well, to pay
proceeds of the Collateral to Borrower by directing payment to the Lockbox
Account.
17
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants to Lender, and shall be deemed to
represent and warrant on each day on which any Obligations shall be outstanding
under this Agreement, that:
SECTION 4.1. SUBSIDIARIES. Except as set forth in Schedule 4.1, Borrower
------------- ------------
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 under this Agreement, 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 under the Loan Documents.
SECTION 4.4. BINDING AGREEMENT. This Agreement and all other Loan
------------------
Documents constitute, and the Note, when issued and delivered pursuant to this
Agreement 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 interest of Borrower, could have a Material Adverse Effect. Borrower is 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 under the Loan Documents will not, violate, conflict with,
constitute a default or an event that, with the giving of notice or lapse of
18
<PAGE>
time, or both, could become an Event of Default, or result in the creation of a
lien or encumbrance upon the property of Borrower (other than for the benefit of
Lender) under (a) any provision of Borrower's articles of incorporation or
bylaws, (b) any provision of any law, rule, or regulation applicable to
Borrower, (c) any indenture or other agreement or instrument to which Borrower
is a party or by which Borrower or its property is bound, or (d) 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 and for the year ended December 31, 1999 audited by M.R. Weiser &
Co. LLP and the unaudited financial statements of Borrower as of and for the
period ending September 30, 2000, certified by the chief financial officer of
Borrower, 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 in such
financial statements or in the notes to such financial statements. There has
been no adverse change in the business, properties, condition (financial or
otherwise) or operations (current or prospective) of Borrower since September
30, 2000. Borrower's fiscal year ends on December 31. The federal tax
identification numbers of each entity comprising Borrower are as 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 that 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 that, 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, and none
of such properties or assets is subject to any 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 of this Agreement. All tax
liabilities of Borrower were, as of September 30, 2000 and are now, adequately
provided for 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.
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<PAGE>
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 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 of "margin stock" within the meaning of those
regulations. No part of the proceeds of the Loan under this Agreement 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 to ERISA that is maintained by Borrower or under which Borrower could
have any material liability under ERISA (a) has failed to meet minimum funding
standards established in Section 302 of ERISA, (b) has failed to substantially
comply with all applicable requirements of ERISA and of the Internal Revenue
Code, including all applicable rulings and regulations thereunder, or (c) has
engaged in or been involved in a prohibited transaction (as defined in ERISA)
under ERISA or under the Internal Revenue Code. Neither Borrower nor any
member of a Controlled Group that includes Borrower has assumed, or received
notice of a claim asserted against Borrower or another member of the Controlled
Group 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. 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 material 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.
20
<PAGE>
SECTION 4.14. INTENTIONALLY LEFT BLANK.
SECTION 4.15. PLACES OF BUSINESS. As of the Closing Date, 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 or
-----------------------
possesses all the patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, franchises, licenses, and
rights with respect to the foregoing necessary for the current and planned
future conduct of its business, without any conflict with the rights of others.
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. Borrower is not in default of any
-------------
obligation or undertaking with respect to such intellectual property or rights.
Borrower is not infringing on any patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, franchises,
licenses, any rights with respect to the foregoing, or any other intellectual
property rights of others and the Borrower is not aware of any infringement by
others of any such rights owned by Borrower.
SECTION 4.17. STOCK OWNERSHIP. The identity of the stockholders of record
---------------
owning more than five percent (5%) of each class of the outstanding stock of
Borrower, together with their respective ownership percentages, 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 by this Agreement contains any untrue statement of
material fact or omits to state a material fact necessary to make the statements
contained in this Agreement or other Loan Document 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 would have a Material Adverse Effect.
SECTION 4.20. BUSINESS INTERRUPTIONS. Within five years before the date
-----------------------
of this Agreement, 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.
21
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SECTION 4.21. NAMES. Within five years before the date of this Agreement,
-----
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 Qualified Account, Borrower represents that:
(a) The Account is genuine and in all respects what it purports to
be, and is not evidenced by a judgment;
(b) The Account arises out of a completed, bona fide sale and
---- ----
delivery of goods or rendition of Medical 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) The Account is for a liquidated amount maturing as stated in a
duplicate claim or invoice covering such sale or rendition of Medical Services,
a copy of which has been furnished or is available to Lender;
(d) The Account, and Lender's security interest in the Account, 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 that 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;
(f) To the best of Borrower's knowledge, (i) the Account Debtor
under the Account 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;
22
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(g) To the best of Borrower's knowledge, there are no proceedings
or actions threatened or pending against any Account Debtor under the Account
that might result in any material adverse change in such Account Debtor's
financial condition or the collectability of such Account;
(h) The Account has been billed and forwarded 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 that are necessary in the generation of such Accounts.
Notwithstanding the representations set forth in this Section 4.23, Lender
acknowledges that (x) from time to time, Borrower has knowledge that certain of
its Accounts may not comply with the foregoing representations (a "Non-Compliant
Account"); provided, that Borrower agrees that promptly on its becoming aware
that any of its Accounts is a Non-Complaint Account, it shall provide Lender
with written notice of same; and (y) Borrower believes that, at any time and
from time to time in the ordinary course of its business, certain of its
Accounts may be Non-Complaint Accounts, and that Borrower may be unable to
identify such Non-Compliant Accounts to Lender specifically as required under
clause (x) above. Notwithstanding the foregoing, or anything in this Agreement,
to the contrary, Borrower represents that the aggregate value of all
Non-Compliant Accounts described in clauses (x) and (y) above shall not, in any
event, exceed two percent (2%) of the aggregate outstanding value of all of
Borrower's Qualified Accounts at any time.
SECTION 4.24. SOLVENCY. Both before and after giving effect to the
--------
transactions contemplated by the terms and provisions of this Agreement,
Borrower (taken as a whole) (a) owns assets whose fair saleable value is greater
than the amount required to pay all of Borrower's Indebtedness (including
contingent debts), (b) was and is able to pay all of its Indebtedness as such
Indebtedness matures, and (c) 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 of this Agreement, the term "Indebtedness" means, without
duplication (x) 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, (y)
all obligations of any other person or entity which such Borrower has
guaranteed, and (z) the Obligations.
SECTION 4.25. INTENTIONALLY LEFT BLANK.
23
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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, the Certificate of Validity, and all other Loan Documents required to
be executed and delivered at or before Closing (other than the Note, as to which
Lender shall receive only one (1) 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 and be continuing no Event of
Default and no event which, with the giving of notice or the lapse of time or
both, could constitute 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 action taken by Borrower to authorize the
execution, delivery and performance of the Loan Documents and the borrowing of
the Loan under the Loan Documents, as well as the names and signatures of the
officers of Borrower authorized to execute documents on its behalf in connection
with the Loan, all as also certified as of the date of this Agreement by
Borrower's chief financial officer, or equivalent, 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 Borrower, of the articles of
incorporation of 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 of this Agreement, substantially in the form of Exhibit
-------
C attached hereto.
-
24
<PAGE>
(i) Lender shall have received such financial statements, reports,
certifications, and other operational information required to be delivered under
this Agreement, including without limitation an initial borrowing base
certificate calculating the Borrowing Base.
(j) Lender shall have received the Commitment Fee pursuant to
Section 2.4(a)(i)-(iii).
(k) The Lockbox, Lockbox Account and the Concentration Account
shall have been established, or, with respect to the initial Revolving Credit
Loan made hereunder only, Borrower shall have agreed in writing that the Lockbox
and the Lockbox Account shall be established, and an agreement executed with the
Lockbox Bank, within thirty (30) days of the date of execution of this
Agreement; provided that, in such event, during such 30-day period or prior to
the Lockbox and the Lockbox Account having been established hereunder, whichever
is later (provided that the foregoing language shall not constitute a waiver by
Lender of the covenant set forth in this Section 5.1(k)), all collections of
Accounts or proceeds of other Collateral, except Private Pay Accounts, received
by Borrower during such period shall be held in trust for the benefit of Lender
and immediately remitted, in the form received, to the bank designated by
Lender.
(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.
(m) Lender shall have received an executed Payoff Letter and
Release from the Bank of New York, substantially in the form of Exhibit D
---------
attached hereto.
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 under this
Agreement unless the following conditions have been satisfied or waived
immediately before 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).
(b) No Event of Default or event which, with the giving of notice
of 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.
25
<PAGE>
(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 of this Agreement.
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 of this Agreement (the "Closing") at such place as may be
requested by Lender.
SECTION 5.4. WAIVER OF RIGHTS. By completing the Closing under this
------------------
Agreement, or by making advances under the Loan, Lender does not waive a breach
of any representation or warranty of Borrower under this Agreement 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
---------------------
Borrower covenants and agrees that for so long as Borrower may borrow under
this Agreement 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 shall
-------------------------------------------
furnish to Lender (a) a sales and collections report and accounts receivable
aging schedule on Borrower's form as it exists as of the date of execution of
this Agreement unless otherwise agreed to in writing by Lender within
twenty-five (25) days after the end of each calendar month, which shall include,
but not be limited to, a report of sales, credits issued, and collections
received; (b) payables aging schedules within twenty-five (25) days after the
end of each calendar month; (c) internally prepared monthly financial statements
for Borrower, certified by the chief financial officer of Borrower, within
forty-five (45) days of the end of each calendar month; (d) 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; (e) internally prepared annual financial statements for Borrower within
ninety (90) days after the end of each of Borrower's fiscal years; (f) annual
audited financial statements for Borrower prepared by M.R. Weiser & Co. LLP, or
another firm of independent public accountants satisfactory to Lender, within
one hundred (100) days after the end of each of Borrower's fiscal years; (g)
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; (h) as soon as available, copies of all financial
statements and notices provided by Borrower to all of its stockholders; and (i)
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.
26
<PAGE>
SECTION 6.2. PAYMENTS UNDER THIS AGREEMENT. Borrower will make all
--------------------------------
payments of principal, interest, fees, and all other payments required under
this Agreement and 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 own its property or conduct its business,
and comply with all applicable current 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.
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.
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 shall 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 before 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.
27
<PAGE>
SECTION 6.7. INSURANCE. Borrower shall carry adequate public liability
---------
and professional liability insurance with responsible companies reasonably
satisfactory to Lender in such amounts and against such risks as are customarily
maintained by similar businesses and by owners of similar property in the same
general area.
SECTION 6.8. INFORMATION; VISITS AND INSPECTIONS. Borrower shall furnish
------------------------------------
to Lender such information as Lender may, from time to time, request with
respect to the business or financial affairs of Borrower. Borrower shall also
permit any officer, employee, agent or representative of Lender, during normal
business hours and on no less than five (5) Business Days notice to Borrower, to
visit and inspect any of the properties of Borrower, to inspect, audit and make
copies of or prepare extracts from Borrower's minute books, books of account and
other records, including management letters prepared by Borrower's auditors, and
to discuss the business affairs, finances and accounts of Borrower with, and be
advised as to the same by, the officers, employees and independent accountants
of Borrower.
SECTION 6.9. MAINTENANCE OF PROPERTY. Borrower shall maintain, keep and
-------------------------
preserve all of its properties in good repair, working order and condition and
from time to time make all necessary repairs, renewals, replacements,
betterments and improvements thereto, so that the business carried on in
connection therewith may be properly conducted at all times.
SECTION 6.10. NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE DEVELOPMENTS.
-----------------------------------------------------------
Borrower shall notify Lender promptly upon the occurrence of: (a) any Event of
Default; (b) any event which, with the giving of notice or lapse of time or
both, could constitute an Event of Default; (c) 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; (d) 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 (current or prospective) or which may expose
Borrower to uninsured liability of $75,000.00 or more; (e) any default claimed
by any other creditor for Borrowed Money of Borrower other than Lender; and (f)
any other development in the business or affairs of Borrower which may be
adverse; in each case describing the nature of the event or development. In the
case of notification under clauses (a) and (b)), Borrower shall set forth the
action Borrower proposes to take with respect to such event.
28
<PAGE>
SECTION 6.11. EMPLOYEE BENEFIT PLANS. Borrower shall (a) 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; (b) 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 (c) 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: (x) upon its receipt of
notice of the assertion against Borrower of a claim for withdrawal liability;
(y) upon the occurrence of any event which could trigger the assertion of a
claim for withdrawal liability against Borrower; and (z) 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 Lender with
----------------------
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 by this Agreement) 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 shall be made of
all of its business transactions, and shall 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.
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 places of business.
SECTION 6.16. BUSINESS CONDUCTED. Borrower shall continue in the business
-------------------
currently 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
before the Closing Date, or engage in business or lines of business that 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 $75,000.00.
29
<PAGE>
SECTION 6.18. BANK ACCOUNTS. On the occurrence and during the
---------------
continuance of an Event of Default under this Agreement or any of the other Loan
Documents, Borrower shall assign to Lender all of its depository and
disbursement accounts into which collections of Accounts are deposited;
provided, that, on the occurrence of such an Event of Default, and pursuant to
the terms of Section 3.6 hereof (and without in any way limiting the effect of
Section 3.6 hereof), Borrower shall be deemed, without any action by or notice
from Lender, to have irrevocably made, constituted and appointed each of the
officers of Lender as the true and lawful attorney for Borrower with full power
of substitution to execute, among other things, any and all documents necessary
to affect such assignment hereunder.
SECTION 6.19. SUBMISSION OF COLLATERAL DOCUMENTS. Borrower shall, 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, shall promptly deliver any such
instrument or chattel paper to Lender.
SECTION 6.20. LICENSURE; MEDICAID/MEDICARE COST REPORTS. Borrower shall
-------------------------------------------
maintain all certificates of need, provider numbers and licenses necessary to
conduct its business as currently 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 Medical Services. If required, all
Medicaid/Medicare cost reports will be properly filed.
SECTION 6.21. OFFICER'S CERTIFICATES. Together with the monthly financial
-----------------------
statements delivered pursuant to clause (iii) of Section 6.1, and together with
the audited annual financial statements delivered pursuant to clause (vi)
Section 6.1, 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
(b) Stating that such officer has reviewed the relevant terms of
this Agreement, and has made (or caused to be made under such officer's
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.
30
<PAGE>
SECTION 6.22. NET WORTH. Borrower will not at any time allow its tangible
----------
net worth, as computed in accordance with GAAP, to fall below $500,000.00.
ARTICLE VII
NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that so long as Borrower may borrow under
this Agreement 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 shall not create, incur, assume or
---------
suffer to exist any liability for Borrowed Money except: (a) indebtedness to
Lender; (b) indebtedness of Borrower secured by mortgages, encumbrances or liens
expressly permitted by Section 7.3; (c) accounts payable to trade creditors and
current operating expenses (other than for borrowed money) which are not aged
more than one hundred eighty (180) days from the billing date or more than
ninety (90) 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; and (d)
borrowings incurred in the ordinary course of its business and not exceeding
$100,000.00 in the aggregate outstanding at any one time. Borrower shall 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), unless (x) Borrower shall
have notified Lender in writing of Borrower's desire to make any such
prepayment, which notice shall be received by Lender at least ten (10) Business
Days before the proposed date of such prepayment and (y) Lender shall have
consented in writing to Borrower making such prepayment.
SECTION 7.2. JOINT VENTURES. Borrower shall not invest directly or
---------------
indirectly in any joint venture for any purpose without the prior written notice
to, and the prior written consent of, Lender, which consent shall not be
unreasonably withheld.
SECTION 7.3. LIENS AND ENCUMBRANCES. Borrower shall 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.
31
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SECTION 7.4. RESTRICTION ON FUNDAMENTAL CHANGES. Borrower shall not: (a)
-----------------------------------
enter into any transaction of merger or consolidation; (b) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution); (c) convey, sell,
lease, sublease, transfer or otherwise dispose of, in one transaction or a
series of transactions, any of its assets, or the capital stock of any
subsidiary of Borrower, whether now owned or hereafter acquired; or (d) acquire
by purchase or otherwise all or any substantial part of the business or assets
of, or stock or other evidence of beneficial ownership of, any Person. Borrower
agrees that compliance with this Section 7.4 is a material inducement to
Lender's advancing credit under this Agreement and Borrower further agrees that
any breach of the terms of this Section 7.4 shall constitute fraud. Borrower
further agrees that in addition to all other remedies available to Lender,
Lender shall be entitled to specific enforcement of the covenants in this
Section 7.4, including injunctive relief.
SECTION 7.5. SALE AND LEASEBACK. Borrower shall 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 prior written notice to and the
prior written consent of Lender, which consent shall not be unreasonably
withheld.
SECTION 7.6. DIVIDENDS, DISTRIBUTIONS AND MANAGEMENT FEES. Upon notice
-----------------------------------------------
from Lender to Borrower of the existence of an Event of Default under this
Agreement, Borrower shall 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. Except for loans or advances to any Person that do
------
not exceed (a) $10,000.00 individually or (b) $100,000.00 in the aggregate,
Borrower shall not make loans or advances to any Person, other than (x) trade
credit extended in the ordinary course of its business, and (y) advances for
business travel and similar temporary advances made in the ordinary course of
business to officers, stockholders, directors, and employees.
SECTION 7.8. CONTINGENT LIABILITIES. Borrower shall 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 shall not form any subsidiary, or
-------------
make any investment in or any loan in the nature of an investment to, any other
Person.
SECTION 7.10. COMPLIANCE WITH ERISA. Borrower shall not permit with
------------------------
respect to any Plan covered by Title IV of ERISA any Prohibited Transaction or
any Reportable Event.
32
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SECTION 7.11. CERTIFICATES OF NEED. Borrower shall 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, which
consent shall not be unreasonably withheld.
SECTION 7.12. TRANSACTIONS WITH AFFILIATES. Borrower shall 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 under this Agreement. For purposes of
the foregoing, Lender consents to the transactions described on Schedule 7.12.
-------------
SECTION 7.13. USE OF LENDER'S NAME. Borrower shall 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 contained in this Agreement 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
----------------------------
the ownership of Borrower's capital stock or in Borrower's capital structure as
set forth in Schedule 4.17, except (a) as described in Schedule 7.14 and (b) to
------------- -------------
the extent such change does not constitute a Change in Control.
SECTION 7.15. CONTRACTS AND AGREEMENTS. Borrower shall 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 shall not carry or purchase any
--------------
"margin security" within the meaning of Regulations U, T or X of the Board of
Governors of the Federal Reserve System.
SECTION 7.17. TRUTH OF STATEMENTS AND CERTIFICATES. Borrower shall 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.
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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 under this Agreement:
(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, which default or breach, as applicable,
shall have continued unremedied for a period of five (5) days after written
notice of the default or breach 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 of
the default from Lender to Borrower;
(c) A default in the due observance or performance by Borrower or
any guarantor of the Obligations of any other term, covenant or agreement
contained in any of the Loan Documents, which default shall have continued
unremedied for a period of fifteen (15) days after written notice of the default
from Lender to Borrower;
(d) Any representation or warranty made by Borrower in this
Agreement 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 with this Agreement or the other Loan Documents proves
to have been incorrect or misleading in any material respect when made, which
default shall have continued unremedied for a period of fifteen (15) days after
written notice of the default from Lender to Borrower;
(e) Any obligation of Borrower (other than its Obligations under
this Agreement) 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 before the expressed maturity of the obligation, 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) 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;
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(g) (i) Borrower files a petition in bankruptcy, (ii) Borrower 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,
(iii) Borrower 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, (iv) any
such proceeding is commenced against Borrower and such proceeding remains
undismissed for a period of sixty (60) days, (v) 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;
(h) 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;
provided that final judgments or attachments against Borrower or its property
described in this Section 8.1(h) of up to (i) $25,000.00 individually, or (ii)
$100,000.00 in the aggregate, shall not constitute an Event of Default;
(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) A Change in Control occurs;
(k) There shall occur any uninsured damage to or loss, theft or
destruction of any portion of the Collateral that exceeds $75,000.00 in the
aggregate;
(l) Borrower breaches or violates the terms of, or 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; provided that any
garnishments or attachments levied or imposed by any governmental authority on
or against any wages, salaries, commissions or other amounts earned by any
employee of and properly payable by Borrower in the ordinary course of business
shall not constitute an Event of Default;
(n) Borrower ceases any portion of its business operations as
currently conducted, which cessation has a Material Adverse Effect;
35
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(o) 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, may result in the forfeiture of any property of Borrower to
any Governmental Authority, which default shall have continued unremedied for a
period of twenty (20) 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;
(q) Borrower shall be criminally indicted or convicted under any
law that could lead to a forfeiture of any Collateral;
(r) A Material Adverse Effect shall occur, 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) Business Days after the
date of written notice thereof by Lender; provided, that no such default
--------
hereunder shall be deemed to be an Event of Default if such default, by its
nature, is incapable of being remedied within such period identified above, and
Borrower shall within such period commence a remedy and diligently, continuously
and in good faith pursue such remedy, and such default is cured within thirty
(30) days of the date of the original notice of default by Lender referred to
above, or
(s) A default or event of default occurs under any other note,
instrument, deed of trust, mortgage, loan agreement, security agreement, letter
agreement or other document executed and delivered by Borrower, or any Affiliate
of Borrower, in connection with any financing provided by Lender or any of
Lender's Affiliates to Borrower.
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), the Note shall be
immediately due and payable without declaration or other notice to Borrower.
SECTION 8.3. REMEDIES.
---------
(a) Upon the occurrence of and during the continuance of an Event
of Default under this Agreement or the other Loan Documents, Lender, in addition
to all other rights, options, and remedies granted to Lender under this
Agreement or at law or in equity, may take any of the following steps (which
list is given by way of example and is not intended to be an exhaustive list of
all such rights and remedies):
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(i) Terminate the Loan, whereupon all outstanding Obligations
(including without limitation the Termination Fee which fee shall also be due
and payable upon acceleration hereunder) shall be immediately due and payable;
(ii) Exercise all other rights granted to it under this
Agreement and all rights under the UCC 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 but not limited to:
(A) The right to take possession of, send notices
regarding, and collect directly the Collateral, with or without judicial
process;
(B) 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 (C) below, without any liability for rent,
storage, utilities, or other sums, and Borrower shall not resist or interfere
with such action;
(C) 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; and
(D) 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.
(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 market 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.
37
<PAGE>
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 under this Agreement and under any agreement referred to in this
Agreement, 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, legal review and
execution of each of the Loan Documents, including but not limited to UCC and
judgment lien searches and UCC filings and fees for post-Closing UCC and
judgment lien searches. In addition, Borrower shall pay all such fees associated
with any amendments to the Loan Documents following Closing.
(b) Borrower also agrees to pay all reasonable out-of-pocket
charges and expenses incurred by Lender (including the fees and expenses of
Lender's counsel) in connection with the enforcement, protection or preservation
of any right or claim of Lender, the termination of this Agreement, the
termination of any liens of Lender on the Collateral, and the collection of any
amounts due under the Loan Documents. If Lender uses in-house counsel for any of
these purposes (i.e., for any task in connection with the enforcement,
protection or preservation of any right or claim of Lender and the collection of
any amounts due under its Loan Documents), Borrower further agrees that its
Obligations under the Loan Documents include reasonable charges for such work
commensurate with the fees that would otherwise be charged by outside legal
counsel selected by Lender for the work performed.
(c) 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 (c) shall
survive the payment of Borrower's indebtedness under this Agreement 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.
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<PAGE>
SECTION 9.3. NO WAIVER; CUMULATIVE RIGHTS. No waiver by any party to this
-----------------------------
Agreement 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 under this Agreement shall operate as a waiver of such right, power or
remedy nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise of such right, power or remedy or
the exercise of any other right, power or remedy. The remedies provided for in
this Agreement are cumulative and are not exclusive of any remedies that may be
available to any party to this Agreement at law, in equity or otherwise.
SECTION 9.4. NOTICES. Any notice or other communication required or
--------
permitted under this Agreement 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 under this
Agreement:
(a) If to Lender, at:
Heller Healthcare Finance, Inc.
2 Wisconsin Circle, 4th Floor
Chevy Chase, Maryland 20815
Attention: Steven M. Curwin, Deputy General Counsel
Telephone: (301) 961-1640
Telecopier: (301) 664-9866
(b) If to Borrower, at:
New York Health Care, Inc.
1850 McDonald Avenue
Brooklyn, New York 11223
Attention: Jerry Braun, Chief Executive Officer
Telephone: (718) 375-6700
Telecopier: (718) 375-4007
If mailed, notice shall be deemed to be given five (5) days after being sent,
and if sent by personal delivery, telecopier or prepaid courier, notice shall be
deemed to be given when delivered.
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<PAGE>
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, Lender may, but is not obligated
to, advance funds to Borrower under this Agreement until the parties to this
Agreement amend this Agreement so as to effect the original intent of the
parties as closely as possible in a valid and enforceable 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 under this Agreement 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 under this
Agreement 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.
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 with this
Agreement shall be considered to have been relied upon by Lender and shall
survive the making by Lender of the Loans contemplated by this Agreement 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 in immediately available funds.
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<PAGE>
SECTION 9.10. RELEASE OF LENDER. For and in consideration of the Loan,
--------------------
Borrower voluntarily, knowingly, unconditionally, and irrevocably, with specific
and express intent, for and on behalf of itself and its agents, attorneys,
heirs, successors, and assigns (collectively the "Releasing Parties") does
hereby fully and completely release, acquit and forever discharge Lender and its
successors, assigns, heirs, affiliates, subsidiaries, parent companies,
principals, directors, officers, employees, shareholders and agents (hereinafter
called the "Lender Parties"), and any other person, firm, business, corporation,
insurer, or association which may be responsible or liable for the acts or
omissions of the Lender Parties, or who may be liable for the injury or damage
resulting therefrom (collectively the "Released Parties"), of and from any and
all actions, causes of action, suits, debts, disputes, damages, claims,
obligations, liabilities, costs, expenses and demands of any kind whatsoever, at
law or in equity, whether matured or unmatured, liquidated or unliquidated,
vested or contingent, choate or inchoate, known or unknown that the Releasing
Parties (or any of them) have, whether now or in the future, (whether directly
or indirectly) against the Released Parties or any of them. The Borrower
acknowledges that the provision by it of the foregoing release is a material
inducement to Lender's decision to extend to Borrower the financial
accommodations hereunder and has been relied upon by Lender in agreeing to make
the Loan.
SECTION 9.11. TIME. Whenever Borrower is required to make any payment or
-----
perform any act on any day other than a Business Day, or on any day during which
the financial institutions in any jurisdiction where Borrower is required to
make such payment or perform such act are not open, 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 transactions contemplated by this
------------
Agreement were 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 under
---------------
this Agreement or under any other Loan Document for the benefit of any third
party donee, creditor or incidental beneficiary of Borrower.
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: (a) obtain insurance
covering any of the Collateral as required under this Agreement; (b) pay for the
performance of any of Borrower's obligations under this Agreement; (c) discharge
taxes, liens, security interests, or other encumbrances at any time levied or
placed on any of the Collateral in violation of this Agreement unless Borrower
41
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is in good faith with due diligence by appropriate proceedings contesting those
items; and (d) pay for the maintenance and preservation of any of the
Collateral. All expenses and advances incurred under this Section 9.14 during
any Event of Default under this Agreement or any of the other Loan Documents
shall be added to the Loan, until reimbursed to Lender, and shall be secured by
the Collateral; provided that Borrower shall not be required to reimburse Lender
for any expenses or advances incurred under this Section 9.14 that are not
incurred during any Event of Default under this Agreement or any other Loan
Document. Any such payments and advances by Lender shall not be construed as a
waiver by Lender of any Event of Default under this Agreement or any other Loan
Document. Nothing contained in this Section 9.14 or 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 9.15. INFORMATION TO PARTICIPANTS. Lender may divulge to any
------------------------------
participant it may obtain in the Loan, or any portion of the Loan, 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; provided that Lender shall notify Borrower
in writing if Lender divulges or furnishes information to any participant or
prospective participant in the Loan pursuant to this Section 9.15.
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 under this Agreement, or from the breach of any of the
representations or warranties contained in Article IV of this Agreement. 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. LENDER APPROVALS. Unless expressly provided herein to
------------------
the contrary, any approval, consent, waiver or satisfaction of Lender with
respect to any matter that is the subject of this Agreement, the other Loan
Documents may be granted or withheld by Lender in its sole and absolute
discretion.
SECTION 9.18. CHOICE OF LAW; CONSENT TO JURISDICTION. THIS AGREEMENT,
-------------------------------------------
INCLUDING THE INTERPRETATION AND PERFORMANCE THEREOF, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT REGARD TO
ANY OTHERWISE APPLICABLE CONFLICTS OF LAWS PRINCIPLES. THE PARTIES HERETO
EXPRESSLY CONSENT AND AGREE TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF
THE STATE OF MARYLAND AND THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
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MARYLAND AND TO THE LAYING OF VENUE IN THE STATE OF MARYLAND, WAIVING ALL CLAIMS
OR DEFENSES BASED ON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE, INCONVENIENT
FORUM OR THE LIKE. BORROWER HEREBY CONSENTS TO SERVICE OF PROCESS BY THE
MAILING A COPY OF THE SUMMONS TO BORROWER, BY CERTIFIED OR REGISTERED MAIL,
POSTAGE PREPAID, TO BORROWER'S ADDRESS SET FORTH IN SECTION 9.4 OF THE LOAN
AGREEMENT. BORROWER FURTHER WAIVES ANY CLAIM FOR CONSEQUENTIAL DAMAGES IN
RESPECT OF ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY LENDER IN GOOD FAITH.
SECTION 9.19. COOPERATION IN DISCOVERY AND LITIGATION. IN ANY LITIGATION,
----------------------------------------
TRIAL, ARBITRATION OR OTHER DISPUTE RESOLUTION PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, ALL DIRECTORS, OFFICERS, EMPLOYEES
AND AGENTS OF BORROWER OR OF ITS AFFILIATES SHALL BE DEEMED TO BE EMPLOYEES OR
MANAGING AGENTS OF BORROWER FOR PURPOSES OF ALL APPLICABLE LAW OR COURT RULES
REGARDING THE PRODUCTION OF WITNESSES BY NOTICE FOR TESTIMONY (WHETHER IN A
DEPOSITION, AT TRIAL OR OTHERWISE). BORROWER AGREES THAT LENDER'S COUNSEL IN
ANY SUCH DISPUTE RESOLUTION PROCEEDING MAY EXAMINE ANY OF THESE INDIVIDUALS AS
IF UNDER CROSS-EXAMINATION AND THAT ANY DISCOVERY DEPOSITION OF ANY OF THEM MAY
BE USED IN THAT PROCEEDING AS IF IT WERE AN EVIDENCE DEPOSITION. BORROWER IN
ANY EVENT SHALL USE ALL COMMERCIALLY REASONABLE EFFORTS TO PRODUCE IN ANY SUCH
DISPUTE RESOLUTION PROCEEDING, AT THE TIME AND IN THE MANNER REQUESTED BY
LENDER, ALL PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC OR OTHER FORM)
OR OTHER THINGS UNDER ITS CONTROL AND RELATING TO THE DISPUTE IN ANY
JURISDICTION THAT RECOGNIZES THAT (OR ANY SIMILAR) DISTINCTION.
SECTION 9.20. 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 TO THIS AGREEMENT, SO AS TO SERVE AS CONCLUSIVE
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.
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SECTION 9.21. CONFESSION OF JUDGMENT. UPON THE OCCURRENCE AND DURING
-----------------------
THE CONTINUANCE OF ANY EVENT OF DEFAULT UNDER THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS, BORROWER AUTHORIZES ANY ATTORNEY ADMITTED TO PRACTICE BEFORE ANY
COURT OF RECORD IN THE UNITED STATES OR THE CLERK OF SUCH COURT TO APPEAR ON
BEHALF OF BORROWER IN ANY COURT IN ONE OR MORE PROCEEDINGS, OR BEFORE ANY CLERK
THEREOF OF PROTHONOTARY OR OTHER COURT OFFICIAL, AND TO CONFESS JUDGMENT AGAINST
BORROWER IN FAVOR OF LENDER IN THE FULL AMOUNT DUE ON THIS AGREEMENT (INCLUDING
PRINCIPAL, ACCRUED INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS
ATTORNEYS' FEES EQUAL TO FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, PLUS COURT
COSTS, ALL WITHOUT PRIOR NOTICE OR OPPORTUNITY OF BORROWER FOR PRIOR HEARING.
BORROWER AGREES AND CONSENTS THAT VENUE AND JURISDICTION SHALL BE PROPER IN THE
CIRCUIT COURT OF ANY COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE CITY,
MARYLAND, OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND.
BORROWER WAIVES THE BENEFIT OF ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF
COURT THAT MAY BE LAWFULLY WAIVED CONFERRING UPON BORROWER ANY RIGHT OR
PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF EXECUTION, OR SUPPLEMENTARY
PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR IMMEDIATE ENFORCEMENT OF A
JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. THE AUTHORITY AND POWER TO
APPEAR FOR AND ENTER JUDGMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY ONE OR
MORE EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE
EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO; SUCH AUTHORITY AND POWER
MAY BE EXERCISED ON ONE OR MORE OCCASIONS FROM TIME TO TIME, IN THE SAME OR
DIFFERENT JURISDICTIONS, AS OFTEN AS LENDER SHALL DEEM NECESSARY, CONVENIENT, OR
PROPER.
[SIGNATURES FOLLOW]
44
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
LENDER:
HELLER HEALTHCARE FINANCE, INC.,
a Delaware corporation
By:/s/________________________________
Name:
Title:
BORROWER:
NEW YORK HEALTH CARE, INC.,
a New York corporation
By:/s/_________________________________
Name:
Title:
NYHC NEWCO PAXXON, INC.,
a New York corporation
By:/s/_________________________________
Name:
Title:
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LIST OF EXHIBITS
------------------
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Lockbox Agreement
Exhibit C - Form of Legal Opinion
Exhibit D - Form of Payoff Letter and Release
46
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LIST OF SCHEDULES
-----------------
Schedule 1.38 - Permitted Liens
Schedule 4.1 - Subsidiaries
Schedule 4.5 - Litigation
Schedule 4.7 - Federal Tax Identification Numbers
Schedule 4.13 - Non-Compliance with Laws
Schedule 4.14 - Environmental Matters
Schedule 4.15 - Places of Business; Ownership
Schedule 4.16 - Intellectual Property; Franchises; Licenses
Schedule 4.17 - Stock Ownership
Schedule 4.19 - Borrowings and Guarantees
Schedule 4.21 - Trade Names
Schedule 4.22 - Joint Ventures and Partnerships
Schedule 7.12 - Transactions with Affiliates
Schedule 7.14 - Change in Capital Structure
47
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