SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter Ended September 30, 1997
or
[ ]TRANSITION REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-12992
NuMED HOME HEALTH CARE, INC.
(Exact name of small business issuer as specified in its charter)
STATE OF NEVADA 34-1711764
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
5770 Roosevelt Blvd., Suite, 700, Clearwater, FL 34620
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (813) 524-3227
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [ ] Yes [X ]
No
The number of shares outstanding of the Issuer's common stock at $.001 par
value as of November 13, 1997 was 4,943,144 (exclusive of Treasury
Shares).
<PAGE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30, March 31,
1997 1997
ASSETS
Current assets:
Cash and cash equivalents $804,346 $797,440
Cash deposits securing
contractual arrangements 1,050,000 1,875,000
--------- ---------
1,854,346 2,672,440
Accounts receivable, net of
allowance of $314,911 and
$364,911, respectively 4,189,920 3,545,782
Inventories 22,519 25,126
Prepaids and other current
assets 275,777 256,967
--------- ---------
Total current assets 6,342,562 6,500,315
Property and equipment, net of
accumulated depreciation
of $292,726 and $248,579,
respectively 455,307 389,017
Goodwill, net of amortization
of $926,242 and $753,571,
respectively 4,253,893 4,426,563
Other intangibles assets, net
of accumulated amortization
of $1,886,989 and
$1,796,412, respectively 288,291 348,958
Other 617,116 551,447
---------- ----------
Total assets $11,957,169 $12,216,300
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Trade accounts payable $118,769 $289,844
Accrued salaries and payroll
related 1,272,385 1,421,538
Accrued expenses 115,780 412,517
Estimated amount due third
parties 358,829 158,282
Current portion of notes
payable 198,137 614,331
--------- ---------
Total current liabilities 2,063,900 2,896,512
Long term obligations:
Other
Notes payable-acquisitions,
less current portion 1,755,654 1,112,807
--------- ---------
Total long term obligations 1,755,654 1,112,807
--------- ---------
Total liabilities 3,819,554 4,009,319
Stockholders' equity:
Preferred stock, authorized
2,000,000, no shares
issued or outstanding 0 0
Common stock, $.001 par
value, authorized
48,000,000 shares,
5,010,219 shares issued 5,010 5,010
Additional paid-in capital 10,679,113 10,679,113
Treasury stock, 67,075 at
cost (134,821) (134,821)
Accumulated deficit (2,411,687) (2,342,321)
---------- ----------
Total stockholders' equity 8,137,615 8,206,981
---------- ----------
Total liabilities and
stockholders' equity $11,957,169 $12,216,300
========== ==========
Note: The balance sheet at March 31, 1997 has been derived
from the audited financial statements at that date but does
not include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements.
See notes to consolidated financial statements.
<PAGE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Operations
Six Months Ended September 30,
1997 1996
Net revenues $11,346,079 $12,565,513
Direct expenses 8,421,177 9,736,908
----------- ----------
Gross profit 2,924,902 2,828,605
General and administrative expenses:
Salaries and benefits 1,785,057 1,731,912
Operating expenses 361,848 384,755
Professional fees 73,074 144,775
Legal fees 20,745 114,162
Occupancy expenses 332,291 390,771
Insurance 129,292 170,918
Amortization and depreciation 307,441 302,611
Bad debt expense 382 32,548
Other contractual adjustments 0 765,000
---------- ----------
Total general and administrative 3,010,130 4,037,452
---------- ----------
Operating income (loss) (85,228) (1,208,847)
Other revenues (expenses):
Interest income 46,312 59,683
Interest expense (84,953) (38,786)
Other 0 6,874
---------- ----------
Total other revenues, net (38,641) 27,771
---------- ----------
Income (loss) before income taxes (123,869) (1,181,076)
Income tax (benefit) expense (54,503) 11,761
---------- ----------
Net income (loss) after income taxes ($69,366) ($1,192,837)
========== ==========
Per share:
Net income (loss) after income taxes ($0.01) ($0.24)
========== ==========
Shares used in computing per share
information 4,943,144 4,950,130
See notes to consolidated financial statements
<PAGE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended September 30,
1997 1996
Net revenues $5,712,386 $6,140,838
Direct expenses 4,177,546 4,868,902
---------- ----------
Gross profit 1,534,840 1,271,936
General and administrative expenses:
Salaries and benefits 939,228 839,030
Operating expenses 223,385 195,348
Professional fees 39,149 41,757
Legal fees 15,335 10,191
Occupancy expenses 188,063 196,017
Insurance 65,509 94,494
Amortization and depreciation 163,275 149,942
Bad debt expense 381 18,150
Other contractual adjustments 0 765,000
---------- ----------
Total general and administrative 1,634,325 2,309,929
---------- ----------
Operating income (loss) (99,485) (1,037,993)
Other revenues (expenses):
Interest income 14,654 26,841
Interest expense (54,329) (26,147)
Other 0 7,142
--------- ---------
Total other revenues, net (39,675) 7,836
--------- ---------
Income (loss) before income taxes (139,160) (1,030,157)
Income tax (benefit) expense (61,232) 8,452
--------- ----------
Net income (loss) after income taxes ($77,928) ($1,038,609)
========= ==========
Per share:
Net income (loss) after income taxes ($0.02) ($0.21)
========= ==========
Shares used in computing per share
information 4,943,144 4,933,336
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Six Months Ended September 30, 1997 and Year Ended March 31, 1997
Additional
Common Stock Paid-in Accumulated Treasury Stock
Shares Dollars Capital (Deficit) Shares Dollars Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996 $5,010,219 $5,010 $10,708,176 ($464,269) ($46,023) ($68,138) $10,180,779
Net (loss) (1,878,052) (1,878,052)
Exercise of options (1,684) 20,000 30,885 29,201
Purchase of treasury shares (100,000) (201,000) (201,000)
Shares issued under
employee stock purchase plan (27,379) 58,948 103,432 76,053
--------- ----- ---------- --------- ------- -------- ---------
Balance at March 31, 1997 5,010,219 5,010 10,679,113 (2,342,321) (67,075) (134,821) 8,206,981
Net (loss) (69,366) (69,366)
--------- ----- ---------- --------- ------- -------- ---------
Balance at September 30, 1997 $5,010,219 $5,010 $10,679,113 ($2,411,687) ($67,075) ($134,821) $8,137,615
========= ===== ========== ========= ======= ======== =========
</TABLE>
<PAGE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Cash Flow
Six Months Ended September 30,
1997 1996
Cash flows from operating activities
Net Income (loss) ($69,366) ($1,192,837)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 307,441 302,610
Loss on sale or disposal of
property, plant and equipment 0 268
(Decrease) increase in cash due
to net changes in
operating assets and
liabilities:
Accounts receivable -
trade (644,138) (440,657)
Prepaid expenses and other
assets (16,206) (22,529)
Deferred charges or other
long term assets (65,668) (125)
Accounts payable and
accrued expenses (416,463) 500,637
-------- --------
Net cash provided by (used in)
operating activities (904,400) (852,633)
Cash flows from investing activities
(Purchase) of property and
equipment, net (110,438) (14,187)
--------- ---------
Net cash (used in) investing
activities (110,438) (14,187)
Cash flows from financing activities
Proceeds from borrowings 2,182,025 1,662,388
Payments on borrowings (1,955,372) (822,079)
Capitalized loan costs (29,909) 0
Cash deposits securing contractual
arrangements 825,000 (500,000)
Proceeds from issuance of stock 0 44,998
Purchase of treasury stock 0 (201,000)
Proceeds from exercise of options 0 12,201
Collection of note receivable 0 106,966
--------- ---------
Net cash (used in) provided by
financing activities 1,021,744 303,474
--------- ---------
Increase (Decrease) in cash and
cash equivalents 6,906 (563,346)
Cash and cash equivalents at
beginning of year 797,440 1,494,860
---------- ---------
Cash and cash equivalents at end of
period $804,346 $931,514
========== =========
See notes to consolidated financial statements
<PAGE>
NuMED Home Health Care Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 1997
NOTE A-BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six
month periods ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the year ending March 31, 1998. For
further information, refer to the consolidated financial statements and
footnotes included in the Company's and Subsidiaries' Form 10-KSB for the
year ended March 31, 1997.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net Revenues for the three and six months ended September 30, 1997
decreased by 7% or $428,000 and 10% or $1,219,000, respectively over the
same periods one year ago. The revenues in the rehabilitation division,
NuMED Rehabilitation, Inc. ("NuMED Rehab"), experienced a 36% decline or
$2.0 million for the six months ended September 30, 1997. The revenue
declines is attributed to the major client who elected to develop their
in-house therapy programs. NuMED Rehab has signed 12 new contracts to
offset this decline. Meanwhile, the Home Health division revenue
continues to grow, increasing 14% or $462,000 for the quarter ending
September 30 1997 and 12% or $824,000 the six-months ending September 30,
1997. With this shift in revenue, the Home Health division now comprises
68% of the total revenues compared to 55% for the six-month period last
year.
With the revenue declines, direct expenses also decreased. For the
three-month period ending September 30, 1997, the direct expenses
decreased $691,000 or 14% compared to the same period last year. As a
percentage of net revenues, the direct expenses improved 6% to 73%
compared to 79%. For the six months ending September 30, 1997, direct
expenses decreased $1.3 million or 14% compared to the same period last
year. As a percentage of net revenues direct revenues have improved 3% to
74% compared to 77% last year.
NuMED Rehab's direct expenses as a percentage of net revenues has
remained consistent at 84% and 83% for the three-month and six-months
ending September 30, 1997. This compares favorably to the to 87% and 84%,
respectively, for the same periods last year. The therapy revenues are
now on an upward trend that should reflect improvement in the direct
expenses percentages during the remainder of the fiscal year as fixed
labor costs increases their productivity. The Home Health division
continues to grow and improve efficiencies as the percentage of direct
expenses decreased to 68% for the three months ending September 30, 1997
compared to 73% for the three month period ending last year. For the six
months ending September 30, 1997, direct expenses were 70% comparing
favorably to 72% for the same period last year.
Gross profit margins has improved to 27% and 26% for the quarter and
six month periods ending September 30, 1997, respectively, compared to
last year with margins of 21% and 23%.
General and administrative expenses increased by 6% or $89,000 for
the three months ending September 30, 1997 but decreased by 8% or $262,000
for the six months ending September 20, 1997. [For comparison purposes,
1996 expenses were adjusted by the $765,000 estimated settlement of a
major NuMED Rehab client.] The company continues to seeks ways to reduced
expenses and improve efficiencies through centralization, standardization,
and consolidation.
As a result of the foregoing, the Company experienced a net loss for
the six months ending September 30, 1997 of $69,000 compared to the net
loss of $1.2 million last year for the same period. A loss of $435,000
would have been incurred through September 30, 1996 without taking into
consideration the NuMED Rehab adjustment of $765,000.
Liquidity and Capital Resources
The Company's working capital and current ratio were $4.3 million and
3:0, respectively as of September 30, 1997 as compared to $3.6 million or
2.2 as of March 31, 1997. The accounts receivable days have increased in
addition to the outstanding receivables during the quarter ending
September 30, 1997. As a result the company is experiencing a short-term
cash need which was met by additional short-term borrowings under the
lines of credit and liquidation of unrestricted certificates of deposit.
In an effort to increase the liquidity and simplify the cash
management, the Company signed the new $5.0 million credit facility. This
credit facility is secured by 120 days account receivables and accrues
interest at the prime rate plus 2%. The prime rate is currently 8.5%. The
line matures on August 14, 1999. As of September 30, 1997, $1.1 million
was outstanding under this line.
The Company renegotiated the existing line of credit of $1.5 million
on July 28, 1997. Interest on this line accrues at a rate equal to the
lender's certificate of deposit rate plus 1.75%. As of September 30, 1997
a total of $645,000 was outstanding under this arrangement secured by
$900,000 in certificates of deposit. Advances are limited to the
certificates of deposit pledged. $255,000 is available under this line.
After all the lines were paid off, $825,000 in certificates of
deposit securing those lines were released.
The Company's net income has been and will continue to be impacted
significantly by the non-cash charge of amortization expense of goodwill
and intangible assets of the Company. Loan fees of $30,000 related to the
new line of credit were deferred and being amortized over the life of the
loan. At September 30, 1997, net goodwill and intangible assets of the
Company were approximately $4.5 million.
With its current financing in place, cash reserves, and the projected
cash flow, the Company believes it can meet all it working capital needs
for the next 12 months provided provided Medicare and Medicaid pays in a
reasonable amount of time.
The Company is currently undergoing a routine Medicare audit of the
home office and one of the Florida subsidiaries for the fiscal year ended
March 31, 1996. The audit is still in progress and any cost report
adjustments and their financial impact are unknown at this time. A
liability of $359,000 is currently on the balance sheet for any net
estimated repayments to the Medicare program for prior years.
Part II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On January 31, 1996, Robin Fernhoff, individually and on behalf of
all others similarly situated filed a class action in the United States
District Court for the Middle District of Florida, Tampa Division against
NuMED Home Health Care, Inc., Jugal K. Taneja and A.T. Brod & Co., Inc.
(Case No. 96-200-CIV-T-21C). The plaintiff alleged that failure to
disclose the net capital position of A.T. Brod & Co., Inc. caused the
disclosure in the Company's prospectus dated February 8, 1995, to be
materially misleading. The plaintiff also alleged violations of Section
11 and 12 (2) of the Securities Act of 1933, 15 U.S.C. Sections 77k and
77l respectively, and sought damages on behalf of the class.
In response to the complaint, the Company filed its answer and a
corresponding motion to dismiss. On July 25, 1996, the United States
District Court for the Middle District of Florida, Tampa Division, granted
the Company's motion dismissing the complaint in its entirety. While the
Court granted Plaintiff leave to amend the complaint, the Court indicated
its concern for Plaintiff's ability to overcome the complaint's
substantial deficiencies. Management believes that the action is
frivolous and without merit and intends to vigorously contest any restated
allegations.
Items 2 through 5. - Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
24(a) Loan and Security Agreement dated August 14, 1997 between NuMED
Home Health Care, Inc., Whole Person Home Health Care of Florida, Inc.,
Whole Person Home Health Care, Inc. and HCFP Funding, Inc.
24(b) Loan and Security Agreement dated August 14, 1997 between NuMED
Home Health Care, Inc., NuMED Rehabilitation, Inc., Silver Moves, Inc.,
Countryside Health Services, Inc., Whole Person Home Health Care of Ohio,
Inc., Pennsylvania Medical Concepts, Inc., Parke Home Health Care, Inc.
and HCFP Funding, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K
during the quarter ended September 30, 1997.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NuMED Home Health Care, Inc.
Date: November 13,1997 By: /s/Jugal K. Taneja
Jugal K. Taneja
Chairman of the Board,
Chief Executive Officer
Date: November 13,1997 By: /s/Wayne T. Mori
Corporate Controller
Principal Accounting Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
24(a) Loan and Security Agreement dated August 14, 1997 between NuMED
Home Health Care, Inc., Whole Person Home Health Care of
Florida, Inc., Whole Person Home Health Care, Inc. and HCFP
Funding, Inc.
24(b) Loan and Security Agreement dated August 14, 1997 between NuMED
Home Health Care, Inc., NuMED Rehabilitation, Inc., Silver
Moves, Inc., Countryside Health Services, Inc., Whole Person
Home Health Care of Ohio, Inc., Pennsylvania Medical Concepts,
Inc., Parke Home Health Care, Inc. and HCFP Funding, Inc.
27 Financial Data Schedule
$2,000,000.00
LOAN AND SECURITY AGREEMENT
by and between
NUMED HOME HEALTH CARE, INC.
WHOLE PERSON HOME HEALTH CARE OF FLORIDA, INC.
WHOLE PERSON HOME HEALTH CARE, INC.
("Borrower")
and
HCFP FUNDING, INC.
("Lender")
August 14, 1997
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made as of this
14th day of August, 1997, by and among NUMED HOME HEALTH CARE, INC., a
Nevada corporation, WHOLE PERSON HOME HEALTH CARE OF FLORIDA, INC., a
Florida corporation d/b/a TOTAL PROFESSIONAL HEALTH CARE, and WHOLE PERSON
HOME HEALTH CARE, INC., a Pennsylvania corporation ("collectively,
"Borrower"), and HCFP FUNDING, INC., a Delaware corporation ("Lender").
RECITALS
A. Borrower desires to establish certain financing arrangements
with and borrow funds from Lender, and Lender is willing to establish such
arrangements for and make loans and extensions of credit to Borrower, on
the terms and conditions set forth below.
B. The parties desire to define the terms and conditions of their
relationship and to reduce their agreements to writing.
NOW, THEREFORE, in consideration of the promises and covenants
contained in this Agreement, and for other consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
Section 1.1. Account. "Account" means any right to payment for
goods sold or leased or services rendered, whether or not evidenced by an
instrument or chattel paper, and whether or not earned by performance.
Section 1.2. Account Debtor. "Account Debtor" means any Person
obligated on any Account of Borrower, including without limitation, any
Insurer and any Medicaid/Medicare Account Debtor.
Section 1.3. Affiliate. "Affiliate" means, with respect to a
specified Person, any Person directly or indirectly controlling,
controlled by, or under common control with the specified Person,
including without limitation their stockholders and any Affiliates
thereof. A Person shall be deemed to control a corporation or other
entity if the Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and business of the
corporation or other entity, whether through the ownership of voting
securities, by contract, or otherwise.
Section 1.4. Agreement. "Agreement" means this Loan and Security
Agreement, as it may be amended or supplemented from time to time.
Section 1.5. Base Rate. "Base Rate" means a rate of interest equal
to two percent (2.0%) above the "Prime Rate of Interest".
Section 1.6. Borrowed Money. "Borrowed Money" means any obligation
to repay money, any indebtedness evidenced by notes, bonds, debentures or
similar obligations, any obligation under a conditional sale or other
title retention agreement and the net aggregate rentals under any lease
which under GAAP would be capitalized on the books of Borrower or which is
the substantial equivalent of the financing of the property so leased.
Section 1.7. Borrower. "Borrower" has the meaning set forth in the
Preamble.
Section 1.8. Borrowing Base. "Borrowing Base" has the meaning set
forth in Section 2.1(d).
Section 1.9. Business Day. "Business Day" means any day on which
financial institutions are open for business in the State of Maryland,
excluding Saturdays and Sundays.
Section 1.10. Closing; Closing Date. "Closing" and "Closing Date"
have the meanings set forth in Section 5.3.
Section 1.11. Collateral. "Collateral" has the meaning set forth in
Section 3.1.
Section 1.12. Commitment Fee. "Commitment Fee" has the meaning set
forth in Section 2.4(a).
Section 1.13. Concentration Account. "Concentration Account" has
the meaning set forth in Section 2.3(a).
Section 1.14. Controlled Group. "Controlled Group" means a
"controlled group" within the meaning of Section 4001(b) of ERISA.
Section 1.15. Cost Report Settlement Account. "Cost Report
Settlement Account" means an "Account" owed to Borrower by a
Medicaid/Medicare Account Debtor pursuant to any cost report, either
interim, filed or audited, as the context may require.
Section 1.16. Default Rate. "Default Rate" means a rate per annum
equal to five percent (5%) above the then applicable Base Rate.
Section 1.17. ERISA. "ERISA" has the meaning set forth in Section
4.12.
Section 1.18. Event of Default. "Event of Default" and "Events of
Default" have the meanings set forth in Section 8.1.
Section 1.19. GAAP. "GAAP" means generally accepted accounting
principles applied in a matter consistent with the financial statements
referred to in Section 4.7.
Section 1.20. Governmental Authority. "Governmental Authority"
means and includes any federal, state, District of Columbia, county,
municipal, or other government and any department, commission, board,
bureau, agency or instrumentality thereof, whether domestic or foreign.
Section 1.21. Hazardous Material. "Hazardous Material" means any
substances defined or designated as hazardous or toxic waste, hazardous or
toxic material, hazardous or toxic substance, or similar term, by any
environmental statute, rule or regulation or any Governmental Authority.
Section 1.22. Highest Lawful Rate. "Highest Lawful Rate" means the
maximum lawful rate of interest referred to in Section 2.7 that may accrue
pursuant to this Agreement.
Section 1.23. Insurer. "Insurer" means a Person that insures a
Patient against certain of the costs incurred in the receipt by such
Patient of Medical Services, or that has an agreement with Borrower to
compensate Borrower for providing services to a Patient.
Section 1.24. Lender. "Lender" has the meaning set forth in the
Preamble.
Section 1.25. Loan. "Loan" has the meaning set forth in Section
2.1(a).
Section 1.26. Loan Documents. "Loan Documents" means and includes
this Agreement, the Note, and each and every other document now or
hereafter delivered in connection therewith, as any of them may be
amended, modified, or supplemented from time to time.
Section 1.27. Intentionally Deleted.
Section 1.28. Lockbox. "Lockbox" has the meaning set forth in
Section 2.3.
Section 1.29. Lockbox Bank. "Lockbox Bank" has the meaning set
forth in Section 2.3.
Section 1.30. Maximum Loan Amount. "Maximum Loan Amount" has the
meaning set forth in Section 2.1(a).
Section 1.31. Medicaid/Medicare Account Debtor. "Medicaid/ Medicare
Account Debtor" means any Account Debtor which is (i) the United States of
America acting under the Medicaid/Medicare program established pursuant to
the Social Security Act, (ii) any state or the District of Columbia acting
pursuant to a health plan adopted pursuant to Title XIX of the Social
Security Act or (iii) any agent, carrier, administrator or intermediary
for any of the foregoing.
Section 1.32. Medical Services. Medical and health care services
provided to a Patient, including, but not limited to, medical and health
care services provided to a Patient and performed by Borrower which are
covered by a policy of insurance issued by an Insurer, and includes
physician services, nurse and therapist services, dental services,
hospital services, skilled nursing facility services, comprehensive outpa-
tient rehabilitation services, home health care services, residential and
out-patient behavioral healthcare services, and medicine or health care
equipment provided by Borrower to a Patient for a necessary or
specifically requested valid and proper medical or health purpose.
Section 1.33. Note. "Note" has the meaning set forth in Section
2.1(c).
Section 1.34. Obligations. "Obligations" has the meaning set forth
in Section 3.1.
Section 1.35. Patient. "Patient" means any Person receiving Medical
Services from Borrower and all Persons legally liable to pay Borrower for
such Medical Services other than Insurers.
Section 1.36. Permitted Liens. "Permitted Liens" means: (a) liens
for taxes not delinquent, or which are being contested in good faith and
by appropriate proceedings which suspend the collection thereof and in
respect of which adequate reserves have been made (provided that such
proceedings do not, in Lender's sole discretion, involve any substantial
danger of the sale, loss or forfeiture of such property or assets or any
interest therein); (b) deposits or pledges to secure obligations under
workmen's compensation, social security or similar laws, or under
unemployment insurance; (c) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of business; (d) mechanic's,
workmen's, materialmen's or other like liens arising in the ordinary
course of business with respect to obligations which are not due, or which
are being contested in good faith by appropriate proceedings which suspend
the collection thereof and in respect of which adequate reserves have been
made (provided that such proceedings do not, in Lender's sole discretion,
involve any substantial danger of the sale, loss or forfeiture of such
property or assets or any interest therein); (e) liens and encumbrances in
favor of Lender; (f) liens granted in connection with the lease or
purchase of property or assets financed by borrowings permitted by Section
7.1 (provided, however, that no such borrowings permitted by Section 7.1
may be secured by liens on any of the Collateral); and (g) liens set forth
on Schedule 1.36.
Section 1.37. Person. "Person" means an individual, partnership,
corporation, trust, joint venture, joint stock company, limited liability
company, association, unincorporated organization, Governmental Authority,
or any other entity.
Section 1.38. Plan. "Plan" has the meaning set forth in Section
4.12.
Section 1.39. Premises. "Premises" has the meaning set forth in
Section 4.15.
Section 1.40. Prime Rate of Interest. "Prime Rate of Interest"
means that rate of interest designated as such by Fleet National Bank of
Connecticut, N.A., or any successor thereto, as the same may from time to
time fluctuate.
Section 1.41. Prohibited Transaction. "Prohibited Transaction"
means a "prohibited transaction" within the meaning of Section 406 of
ERISA or Section 4975(c)(1) of the Internal Revenue Code.
Section 1.42. Qualified Account. "Qualified Account" means an
Account of Borrower generated in the ordinary course of Borrower's
business from the sale of goods or rendition of medical services which
Lender, in its sole credit judgment, deems to be a Qualified Account.
Without limiting the generality of the foregoing, no Account shall be a
Qualified Account if: (a) the Account or any portion thereof is payable
by an individual beneficiary, recipient or subscriber individually and not
directly to Borrower by a Medicaid/Medicare Account Debtor or commercial
medical insurance carrier acceptable to Lender in its sole discretion; (b)
the Account remains unpaid more than one hundred twenty (120) days past
the claim or invoice date, provided, however, that no more than fifteen
percent (15%) of Qualified Accounts at any time shall be between ninety-
one (91) and one hundred twenty (120) days past the claim or invoice
date); (c) the Account is subject to any defense, set-off, counterclaim,
deduction, discount, credit, chargeback, freight claim, allowance, or
adjustment of any kind; (d) any part of any goods the sale of which has
given rise to the Account has been returned, rejected, lost, or damaged;
(e) if the Account arises from the sale of goods by Borrower, such sale
was not an absolute sale or on consignment or on approval or on a sale-or-
return basis or subject to any other repurchase or return agreement, or
such goods have not been shipped to the Account Debtor or its designee;
(f) if the Account arises from the performance of services, such services
have not been actually been performed or were undertaken in violation of
any law; (g) the Account is subject to a lien other than a Permitted Lien;
(h) Borrower knows or should have known of the bankruptcy, receivership,
reorganization, or insolvency of the Account Debtor; (i) the Account is
evidenced by chattel paper or an instrument of any kind, or has been
reduced to judgment; (j) the Account is an Account of an Account Debtor
having its principal place of business or executive office outside the
United States; (k) the Account Debtor is an Affiliate or Subsidiary of
Borrower; (l) more than ten percent (10%) of the aggregate balance of all
Accounts owing from the Account Debtor obligated on the Account are
outstanding more than one hundred twenty (120) days past their invoice
date; (m) fifty percent (50%) or more of the aggregate unpaid Accounts
from any individual Account Debtor are not deemed Qualified Accounts
hereunder; (n) the total unpaid Accounts of the Account Debtor, except for
a Medicaid/Medicare Account Debtor, exceed twenty percent (20%) of the net
amount of all Qualified Accounts (including Medicaid/Medicare
Account Debtors); (o) any covenant, representation or warranty contained
in the Loan Documents with respect to such Account has been breached; or
(p) the Account fails to meet such other specifications and requirements
that may from time to time be established by Lender, and that, upon
request of Borrower, may be communicated by Lender in writing to Borrower.
Section 1.43. Reportable Event. "Reportable Event" means a
"reportable event" as defined in Section 4043(b) of ERISA.
Section 1.44. Revolving Credit Loan. "Revolving Credit Loan" has
the meaning set forth in Section 2.1(b).
Section 1.45. Term. "Term" has the meaning set forth in Section
2.8.
ARTICLE II
LOAN
Section 2.1. Terms.
(a) The maximum aggregate principal amount of credit extended
by Lender to Borrower hereunder (the "Loan") that will be outstanding at
any time is Two Million and No/100 Dollars ($2,000,000.00) (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 below, and on
such other basis as Lender may reasonably determine. The outstanding
principal balance of the Loan may fluctuate from time to time, to be
reduced by repayments made by Borrower (which may be made without penalty
or premium), and to be increased by future Revolving Credit Loans,
advances and other extensions of credit to or for the benefit of Borrower,
and shall be due and payable in full upon the expiration of the Term. For
purposes of this Agreement, any determination as to whether there is
ability within the Borrowing Base for advances or extensions of credit
shall be made by Lender in its sole discretion and is final and binding
upon Borrower.
(c) At Closing, Borrower shall execute and deliver to Lender a
promissory note evidencing Borrower's unconditional obligation to repay
Lender for Revolving Credit Loans, advances, and other extensions of
credit made under the Loan, in the form of Exhibit A to this Agreement
(the "Note"), dated the date hereof, payable to the order of Lender in
accordance with the terms thereof. The Note shall bear interest from the
date thereof until repaid, with interest payable monthly in arrears on the
first Business Day of each month, at a rate per annum (on the basis of the
actual number of days elapsed over a year of 360 days) equal to the Base
Rate, provided that after an Event of Default such rate shall be equal to
the Default Rate. Each Revolving Credit Loan, advance and other extension
of credit shall be deemed evidenced by the Note, which is deemed
incorporated by reference herein and made a part hereof.
(d) Subject to the terms and conditions of this Agreement,
advances under the Loan shall be made against a borrowing base equal to
eighty percent (80%) of Qualified Accounts due and owing from any
Medicaid/Medicare, Insurer or other Account Debtor (the "Borrowing Base").
Section 2.2. Loan Administration. Borrowings under the Loan shall
be as follows:
(a) A request for a Revolving Credit Loan shall be made, or
shall be deemed to be made, in the following manner: (i) Borrower may
give Lender notice of its intention to borrow, in which notice Borrower
shall specify the amount of the proposed borrowing and the proposed
borrowing date, not later than 2:00 p.m. Eastern time two (2) Business Day
prior to the proposed borrowing date; provided, however, that no such
request may be made at a time when there exists an Event of Default; and
(ii) the becoming due of any amount required to be paid under this
Agreement, whether as interest or for any other Obligation, shall be
deemed irrevocably to be a request for a Revolving Credit Loan on the due
date in the amount required to pay such interest or other Obligation.
(b) Borrower hereby irrevocably authorizes Lender to disburse
the proceeds of each Revolving Credit Loan requested, or deemed to be
requested, as follows: (i) the proceeds of each Revolving Credit Loan
requested under subsection 2.2(a)(i) shall be disbursed by Lender by wire
transfer to such bank account as may be agreed upon by Borrower or Lender
from time to time or elsewhere if pursuant to written direction from
Borrower; and (ii) the proceeds of each Revolving Credit Loan requested
under subsection 2.2(a)(ii) shall be disbursed by Lender by way of direct
payment of the relevant interest or other Obligation.
(c) All Revolving Credit Loans, advances and other extensions
of credit to or for the benefit of Borrower shall constitute one general
Obligation of Borrower, and shall be secured by Lender's lien upon all of
the Collateral.
(d) Lender shall enter all Revolving Credit Loans as debits to
a loan account in the name of Borrower and shall also record in said loan
account all payments made by Borrower on any Obligations and all proceeds
of Collateral which are indefeasibly paid to Lender, and may record
therein, in accordance with customary accounting practice, other debits
and credits, including interest and all charges and expenses properly
chargeable to Borrower.
(e) Lender will account to Borrower monthly with a statement of
Revolving Credit Loans, charges and payments made pursuant to this
Agreement, and such account rendered by Lender shall be deemed final,
binding and conclusive upon Borrower unless Lender
is notified by Borrower in writing to the contrary within thirty (30) days
of the date each accounting is mailed to Borrower. Such notice shall be
deemed an objection to those items specifically objected to therein.
Section 2.3. Collections, Disbursements, Borrowing Availability, and
Lockbox Account. Borrower shall maintain a lockbox account (the
"Lockbox") with First Union National Bank of Florida.(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 thereto as Lender may require. Borrower
shall ensure that all collections of Accounts are paid directly from
Account Debtors into the Lockbox, and that all funds paid into the Lockbox
are immediately transferred into a depository account maintained by Lender
at Bank One Arizona, N.A. or First Bank, N.A., as determined by Lender in
its sole discretion and communicated to Borrower (the "Concentration
Account"). Lender shall apply, on a daily basis, all funds transferred
into the Concentration Account pursuant to this Section 2.3 to reduce the
outstanding indebtedness under the Loan with future Revolving Credit
Loans, advances and other extensions of credit to be made by Lender under
the conditions set forth in this Article II. To the extent that any
collections of Accounts or proceeds of other Collateral are not sent
directly to the Lockbox but are received by Borrower, such collections
shall be held in trust for the benefit of Lender and immediately remitted,
in the form received, to the Lockbox Bank for transfer to the
Concentration Account immediately upon receipt by Borrower. Borrower
acknowledges and agrees that its compliance with the terms of this Section
2.3 is essential, and that upon its failure to comply with any such terms
Lender shall be entitled to assess a non-compliance fee which shall
operate to increase the Base Rate by two percent (2%) per annum during any
period of non-compliance. 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 exists.
Section 2.4. Fees.
(a) At Closing, Borrower shall unconditionally pay to Lender a
commitment fee equal to four-tenths of one percent (0.4%) of the Maximum
Loan Amount (the "Commitment Fee").
(b) Borrower shall pay to Lender all out-of-pocket audit and
appraisal fees in connection with audits and appraisals of Borrower's
books and records and such other matters as Lender shall deem appropriate,
which amounts shall be limited to $8,000 in any calendar year so long as
no Event of Default has occurred, and shall include amounts under Section
2.4(b) of the Loan and Security Agreement between Lender and Affiliated
Borrower (as defined in Section 7.1 below) and which amounts 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.
(c) Borrower shall pay to Lender, on demand, any and all fees,
costs or expenses which Lender or any participant pays to a bank or other
similar institution (including, without limitation, any fees paid by
Lender to any participant) arising out of or in connection with (i) the
forwarding to Borrower or any other Person on behalf of Borrower, by
Lender, of proceeds of Revolving Credit Loans made by Lender to Borrower
pursuant to this Agreement, and (ii) the depositing for collection, by
Lender or any participant, of any check or item of payment received or
delivered to Lender or any participant on account of Obligations.
Section 2.5. Payments. Principal payable on account of Revolving
Credit Loans shall be payable by Borrower to Lender immediately upon the
earliest of (i) the receipt by Borrower of any proceeds of any of the
Collateral, to the extent of such proceeds, (ii) the occurrence of an
Event of Default in consequence of which the Loan and the maturity of the
payment of the Obligations are accelerated, or (iii) the termination of
this Agreement pursuant to Section 2.8 hereof; provided, however, that if
any advance made by Lender in excess of the Borrowing Base shall exist at
any time, Borrower shall, immediately upon demand, repay such overadvance.
Notwithstanding the foregoing, overadvances aggregating less than $200,000
in any calendar year, may be converted to a term loan (at an interest rate
equal to the Base Rate), payable in twelve equal monthly payments of
principal and interest. Interest accrued on the Revolving Credit Loans
shall be due on the earliest of (i) the first Business Day of each month
(for the immediately preceding month), computed on the last calendar day
of the preceding month, (ii) the occurrence of an Event of Default in
consequence of which the Loan and the maturity of the payment of the
Obligations are accelerated, or (iii) the termination of this Agreement
pursuant to Section 2.8 hereof. Except to the extent otherwise set forth
in this Agreement, all payments of principal and of interest on the Loan,
all other charges and any other obligations of Borrower hereunder, shall
be made to Lender to the Concentration Account, in immediately available
funds.
Section 2.6. Use of Proceeds. The proceeds of Lender's advances
under the Loan shall be used solely for working capital and for other
costs of Borrower arising in the ordinary course of Borrower's business.
Section 2.7. Interest Rate Limitation. The parties intend to
conform strictly to the applicable usury laws in effect from time to time
during the term of the Loan. Accordingly, if any transaction contemplated
hereby would be usurious under such laws, then notwithstanding any other
provision hereof: (i) the aggregate of all interest that is contracted
for, charged, or received under this Agreement or under any other Loan
Document shall not exceed the maximum amount of interest allowed by
applicable law (the "Highest Lawful Rate"), and any excess shall be
promptly credited to Borrower by Lender (or, to the extent that such
consideration shall have been paid, such excess shall be promptly refunded
to Borrower by Lender); (ii) neither Borrower nor any other Person now or
hereafter liable hereunder shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Highest Lawful Rate;
and (iii) the effective rate of interest shall be reduced to the Highest
Lawful Rate. All sums paid, or agreed to be paid, to Lender for the use,
forbearance, and detention of the debt of Borrower to Lender shall, to the
extent permitted by applicable law, be allocated throughout the full term
of the Note until payment is made in full so that the actual rate of
interest does not exceed the Highest Lawful Rate in effect at any
particular time during the full term thereof. If at any time the rate of
interest under the Note exceeds the Highest Lawful Rate, the rate of
interest to accrue pursuant to this Agreement shall be limited,
notwithstanding anything to the contrary herein, to the Highest Lawful
Rate, but any subsequent reductions in the Base Rate shall not reduce the
interest to accrue pursuant to this Agreement below the Highest Lawful
Rate until the total amount of interest accrued equals the amount of
interest that would have accrued if a varying rate per annum equal to the
interest rate under the Note had at all times been in effect. If the
total amount of interest paid or accrued pursuant to this Agreement under
the foregoing provisions is less than the total amount of interest that
would have accrued if a varying rate per annum equal to the interest rate
under the Note had been in effect, then Borrower agrees to pay to Lender
an amount equal to the difference between (i) the lesser of (x) the amount
of interest that would have accrued if the Highest Lawful Rate had at all
times been in effect, or (y) the amount of interest that would have
accrued if a varying rate per annum equal to the interest rate under the
Note had at all times been in effect, and (ii) the amount of interest
accrued in accordance with the other provisions of this Agreement.
Section 2.8. Term.
(a) Subject to Lender's right to cease making Revolving Credit
Loans to Borrower upon or after any Event of Default, this Agreement shall
be in effect for a period of two (2) years from the Closing Date, unless
terminated as provided in this Section 2.8 (the "Term"), and this
Agreement shall be renewed for one-year periods thereafter upon the mutual
written agreement of the parties.
(b) Notwithstanding anything herein to the contrary, Lender may
terminate this Agreement without notice upon or after the occurrence of an
Event of Default.
(c) Upon at least thirty (30) days prior written notice to
Lender, Borrower may terminate this Agreement prior to the second annual
anniversary of the Closing Date, provided that, at the effective date of
such termination, Borrower shall pay to Lender (in addition to the then
outstanding principal, accrued interest and other Obligations owing under
the terms of this Agreement and any other Loan Documents) as liquidated
damages for the loss of bargain and not as a penalty, an amount equal to
(i) eight-tenths of one percent (0.8%) of the Maximum Loan Amount if the
effective date of such termination by Borrower is on or prior to the first
annual anniversary of the Closing Date, and (ii) four-tenths of one
percent (0.4%) of the Maximum Loan Amount if the effective date of such
termination by Borrower is after the first annual anniversary of the
Closing Date and prior to the second annual anniversary of the Closing
Date.
(d) All of the Obligations shall be immediately due and payable
upon the termination date stated in any notice of termination of this
Agreement. All undertakings, agreements, covenants, warranties, and
representations of Borrower contained in the Loan Documents shall survive
any such termination and Lender shall retain its liens in the Collateral
and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrower has paid the Obligations
to Lender, in full, in immediately available funds.
Section 2.9. Joint and Several Liability; Binding Obligations.
Each entity comprising Borrower and executing this Agreement on behalf of
Borrower shall be jointly and severally liable for all of the Obligations.
In addition, each entity comprising Borrower hereby acknowledges and
agrees that all of the representations, warranties, covenants,
obligations, conditions, agreements and other terms contained in this
Agreement shall be applicable to and shall be binding upon each individual
entity comprising Borrower, and shall be binding upon all such entities
when taken together.
ARTICLE III
COLLATERAL
Section 3.1. Generally. As security for the payment of all
liabilities of Borrower to Lender, including without limitation: (i)
indebtedness evidenced under the Note, repayment of Revolving Credit
Loans, advances and other extensions of credit, all fees and charges owing
by Borrower, and all other liabilities and obligations of every kind or
nature whatsoever of Borrower to Lender, whether now existing or hereafter
incurred, joint or several, matured or unmatured, direct or indirect,
primary or secondary, related or unrelated, due or to become due,
including but not limited to any extensions, modifications, substitutions,
increases and renewals thereof, (ii) the payment of all amounts advanced
by Lender to preserve, protect, defend, and enforce its rights hereunder
and in the following property in accordance with the terms of this
Agreement, and (iii) the payment of all expenses incurred by Lender in
connection therewith (collectively, the "Obligations"). Borrower hereby
assigns and grants to Lender a continuing first priority lien on and
security interest in, upon, and to the following property (the
"Collateral"):
(a) All of Borrower's now-owned and hereafter acquired or
arising Accounts, accounts receivable and rights to payment of every kind
and description, and any contract rights, chattel paper, documents and
instruments with respect thereto;
(b) All of Borrower's now owned and hereafter acquired or
arising general intangibles of every kind and description pertaining to
its Accounts, accounts receivable and other rights to payment, including,
but not limited to, all existing and future customer lists, choses in
action, claims, books, records, contracts, licenses, formulae, tax and
other types of refunds, returned and unearned insurance premiums, rights
and claims under insurance policies, and computer information, software,
records, and data;
(c) All of Borrower's now or hereafter acquired deposit
accounts into which Accounts are deposited, including the Concentration
Account;
(d) All of Borrower's monies and other property of every kind
and nature now or at any time or times hereafter in the possession of or
under the control of Lender or a bailee or Affiliate of Lender; and
(e) 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
to Lender, or have executed and delivered (all in form and substance
satisfactory to Lender in its sole discretion):
(a) UCC-1 Financing statements pursuant to the Uniform
Commercial Code in effect in the jurisdiction(s) in which Borrower
operates, which Lender may file in any jurisdiction where any Collateral
is or may be located and in any other jurisdiction that Lender deems
appropriate; provided that a carbon, photographic, or other reproduction
or other copy of this Agreement or of a financing statement is sufficient
as and may be filed in lieu of a financing statement; and
(b) Any other agreements, documents, instruments, and writings
deemed necessary by Lender or as Lender may otherwise request from time to
time in its sole discretion to evidence, perfect, or protect Lender's lien
and security interest in the Collateral required hereunder.
Section 3.3. Collateral Administration.
(a) All Collateral (except deposit accounts) will at all times
be kept by Borrower at its principal office(s) as set forth on Exhibit C
hereto and shall not, without the prior written approval of Lender, be
moved therefrom.
(b) Borrower shall keep accurate and complete records of its
Accounts and all payments and collections thereon and shall submit to
Lender on such periodic basis as Lender shall request a sales and
collections report for the preceding period, in form satisfactory to
Lender. In addition, if Accounts in an aggregate face amount in excess of
$50,000.00 that were previously included in the Borrowing Base become
ineligible because they fall within one of the specified categories of
ineligibility set forth in the definition of Qualified Accounts or
otherwise, Borrower shall notify Lender of such occurrence on the first
Business Day following such occurrence and the Borrowing Base shall
thereupon be adjusted to reflect such occurrence. If requested by Lender,
Borrower shall execute and deliver to Lender formal written assignments of
all of its Accounts weekly or daily, which shall include all Accounts that
have been created since the date of the last assignment, together with
copies of claims, invoices or other information related thereto.
(c) Whether or not an Event of Default has occurred, any of
Lender's officers, employees or agents shall have the right, at any time
or times hereafter, in the name of Lender, any designee of Lender or
Borrower, to verify the validity, amount or any other matter relating to
any Accounts by mail, telephone, telegraph or otherwise. Borrower shall
cooperate fully with Lender in an effort to facilitate and promptly
conclude such verification process.
(d) To expedite collection, Borrower shall endeavor in the
first instance to make collection of its Accounts for Lender. Lender
retains the right at all times after the occurrence of an Event of
Default, subject to applicable law regarding Medicaid/Medicare 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 reasonable attorneys' fees, to
Borrower.
Section 3.4. Other Actions. In addition to the foregoing, Borrower
(i) shall provide prompt written notice to each private indemnity, managed
care or other Insurer who either is currently an Account Debtor or becomes
an Account Debtor at any time following the date hereof that Lender has
been granted a first priority lien and security interest in, upon and to
all Accounts applicable to such Insurer, and hereby authorizes Lender to
send any and all similar notices to such Insurers by Lender, and (ii)
shall do anything further that may be lawfully required by Lender to
secure Lender and effectuate the intentions and objects of this Agreement,
including but not limited to the execution and delivery of lockbox
agreements, continuation statements, amendments to financing statements,
and any other documents required hereunder. At Lender's request, Borrower
shall also immediately deliver to Lender all items for which Lender must
receive possession to obtain a perfected security interest. Borrower
shall, on Lender's demand, deliver to Lender all notes, certificates, and
documents of title, chattel paper, warehouse receipts, instruments, and
any other similar instruments constituting Collateral.
Section 3.5. Searches. Prior to Closing, and thereafter (as and
when requested by Lender in its sole discretion), Borrower shall obtain
and deliver to Lender the following searches against Borrower (the results
of which are to be consistent with Borrower's representations and
warranties under this Agreement), all at its own expense:
(a) Uniform Commercial Code searches with the Secretary of
State and local filing offices of each jurisdiction where Borrower
maintains its executive offices, a place of business, or assets;
(b) Judgment, federal tax lien and corporate and partnership
tax lien searches, in each jurisdiction searched under clause (a) above;
and
(c) Good standing certificates showing Borrower to be in good
standing in its state of formation and in each other state in which it is
doing and presently intends to do business for which qualification is
required.
Section 3.6. Power of Attorney. Each of the officers of Lender is
hereby irrevocably made, constituted and appointed the true and lawful
attorney for Borrower (without requiring any of them to act as such) with
full power of substitution to do the following: (i) endorse the name of
Borrower upon any and all checks, drafts, money orders, and other
instruments for the payment of money that are payable to Borrower and
constitute collections on Borrower's Accounts; (ii) execute in the name of
Borrower any financing statements, schedules, assignments, instruments,
documents, and statements that Borrower is obligated to give Lender
hereunder; and (iii) do such other and further acts and deeds in the name
of Borrower that Lender may deem necessary or desirable to enforce any
Account or other Collateral or perfect Lender's security interest or lien
in any Collateral.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each entity comprising Borrower represents and warrants to
Lender, and shall be deemed to represent and warrant on each day on which
any Obligations shall be outstanding hereunder, that:
Section 4.1. Subsidiaries. Each entity comprising Borrower (other
than NuMed Home Health Care, Inc.) is a direct or indirect subsidiary of
NuMed Home Health Care, Inc. The organizational structure is as set forth
on Schedule 4.1.
Section 4.2. Organization and Good Standing. Borrower is a
corporation duly organized, validly existing, and in good standing under
the laws of its state of formation, is in good standing as a foreign
corporation in each jurisdiction in which the character of the properties
owned or leased by it therein or the nature of its business makes such
qualification necessary, has the corporate power and authority to own its
assets and transact the business in which it is engaged, and has obtained
all certificates, licenses and qualifications required under all laws,
regulations, ordinances, or orders of public authorities necessary for the
ownership and operation of all of its properties and transaction of all of
its business.
Section 4.3. Authority. Borrower has full corporate power and
authority to enter into, execute, and deliver this Agreement and to
perform its obligations hereunder, to borrow the Loan, to execute and
deliver the Note, and to incur and perform the obligations provided for in
the Loan Documents, all of which have been duly authorized by all
necessary corporate action. No consent or approval of shareholders of, or
lenders to, Borrower and no consent, approval, filing or registration with
any Governmental Authority is required as a condition to the validity of the
Loan Documents or the performance by Borrower of its obligations thereunder.
Section 4.4. Binding Agreement. This Agreement and all other Loan
Documents constitute, and the Note, when issued and delivered pursuant
hereto for value received, will constitute, the valid and legally binding
obligations of Borrower, enforceable against Borrower in accordance with
their respective terms.
Section 4.5. Litigation. Except as disclosed in Schedule 4.5, there
are no actions, suits, proceedings or investigations pending or threatened
against Borrower before any court or arbitrator or before or by any
Governmental Authority which, in any one case or in the aggregate, if
determined adversely to the interests of Borrower, could have a material
adverse effect on the business, properties, condition (financial or
otherwise) or operations, present or prospective, of Borrower, or upon its
ability to perform its obligations under the Loan Documents. Borrower is
not in default with respect to any order of any court, arbitrator, or
Governmental Authority applicable to Borrower or its properties.
Section 4.6. No Conflicts. The execution and delivery by Borrower
of this Agreement and the other Loan Documents do not, and the performance
of its obligations thereunder will not, violate, conflict with, constitute
a default under, or result in the creation of a lien or encumbrance upon
the property of Borrower under: (i) any provision of Borrower's articles
of incorporation or bylaws, (ii) any provision of any law, rule, or
regulation applicable to Borrower, or (iii) any of the following: (A) any
indenture or other agreement or instrument to which Borrower is a party or
by which Borrower or its property is bound; or (B) any judgment, order or
decree of any court, arbitration tribunal, or Governmental Authority
having jurisdiction over Borrower which is applicable to Borrower.
Section 4.7. Financial Condition. The annual financial statements
of Borrower as of March 31, 1997 audited by Ernst & Young, LLC and the
unaudited financial statements of Borrower as of June 30, 1997, 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 therein or in the notes
thereto. There has been no adverse change in the business, properties,
condition (financial or otherwise) or operations (present or prospective)
of Borrower since June 30, 1997. Borrower's fiscal year ends on March 31.
The federal tax identification number of each entity comprising Borrower
is as shown on Schedule 4.7.
Section 4.8. No Default. Borrower is not in default under or with
respect to any obligation in any respect which could be adverse to its
business, operations, property or financial condition, or which could
adversely affect the ability of Borrower to perform its obligations
under the Loan Documents. No Event of Default or event which, with the
giving of notice or lapse of time, or both, could become an Event of
Default, has occurred and is continuing.
Section 4.9. Title to Properties. Borrower has good and marketable
title to its properties and assets, including the Collateral and the
properties and assets reflected in the financial statements described in
Section 4.7, subject to no lien, mortgage, pledge, encumbrance or charge
of any kind, other than Permitted Liens. Borrower has not agreed or
consented to cause any of its properties or assets whether owned now or
hereafter acquired to be subject in the future (upon the happening of a
contingency or otherwise) to any lien, mortgage, pledge, encumbrance or
charge of any kind other than Permitted Liens.
Section 4.10. Taxes. Borrower has filed, or has obtained extensions
for the filing of, all federal, state and other tax returns which are
required to be filed, and has paid all taxes shown as due on those returns
and all assessments, fees and other amounts due as of the date hereof.
All tax liabilities of Borrower were, as of June 30, 1997 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.
Section 4.11. Securities and Banking Laws and Regulations.
(a) The use of the proceeds of the Loan and Borrower's issuance
of the Note will not directly or indirectly violate or result in a
violation of the Securities Act of 1933 or the Securities Exchange Act of
1934, as amended, or any regulations issued pursuant thereto, including
without limitation Regulations U, T, G, or X of the Board of Governors of
the Federal Reserve System. Borrower is not engaged in the business of
extending credit for the purpose of the purchasing or carrying "margin
stock" within the meaning of those regulations. No part of the proceeds
of the Loan hereunder will be used to purchase or carry any margin stock
or to extend credit to others for such purpose.
(b) Borrower is not an investment company within the meaning of
the Investment Company Act of 1940, as amended, nor is it, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company within the meaning of that Act.
Section 4.12. ERISA. No employee benefit plan (a "Plan") subject to
the Employee Retirement Income Security Act of 1974 ("ERISA") and
regulations issued pursuant thereto that is maintained by Borrower or
under which Borrower could have any liability under ERISA (a) has failed
to meet minimum funding standards established in Section 302 of ERISA, (b)
has failed to comply with all applicable requirements of ERISA and of the
Internal Revenue Code, including all applicable rulings and regulations
thereunder, (c) has engaged in or been involved in a prohibited
transaction (as defined in ERISA) under ERISA or under the Internal
Revenue Code, or (d) has been terminated. Borrower has not assumed, or
received notice of a claim asserted against Borrower for, withdrawal
liability (as defined in the Multi-Employer Pension Plan Amendments Act of
1980, as amended) with respect to any multi-employer pension plan and is
not a member of any Controlled Group (as defined in ERISA). Borrower has
timely made when due all contributions with respect to any multi-employer
pension plan in which it participates and no event has occurred triggering
a claim against Borrower for withdrawal liability with respect to any
multi-employer pension plan in which Borrower participates.
Section 4.13. Compliance with Law. Except as described in Schedule
4.13, Borrower is not in violation of any statute, rule or regulation of
any Governmental Authority (including, without limitation, any statute,
rule or regulation relating to employment practices or to environmental,
occupational and health standards and controls). Borrower has obtained
all licenses, permits, franchises, and other governmental authorizations
necessary for the ownership of its properties and the conduct of its
business. Borrower is current with all reports and documents required to
be filed with any state or federal securities commission or similar
Governmental Authority and is in full compliance with all applicable rules
and regulations of such commissions.
Section 4.14. Environmental Matters. No use, exposure, release,
generation, manufacture, storage, treatment, transportation or disposal of
Hazardous Material has occurred or is occurring on or from any real
property on which the Collateral is located or which is owned, leased or
otherwise occupied by Borrower (the "Premises"), or off the Premises as a
result of any action of Borrower, except as described in Schedule 4.14.
All Hazardous Material used, treated, stored, transported to or from,
generated or handled on the Premises, or off the Premises by Borrower, has
been disposed of on or off the Premises by or on behalf of Borrower in a
lawful manner. There are no underground storage tanks present on or under
the Premises owned or leased by Borrower. No other environmental, public
health or safety hazards exist with respect to the Premises.
Section 4.15. Places of Business. The only places of business of
Borrower, and the places where it keeps and intends to keep the Collateral
and records concerning the Collateral, are at the addresses set forth in
Schedule 4.15. Schedule 4.15 also lists the owner of record of each such
property.
Section 4.16. Intellectual Property. Borrower exclusively owns 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
present 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.
Section 4.17. Stock Ownership. NuMed Home Health Care, Inc. is a
public company. Each other entity constituting Borrower is a direct or
indirect subsidiary, as shown on Schedule 4.1.
Section 4.18. Material Facts. Neither this Agreement nor any other
Loan Document nor any other agreement, document, certificate, or statement
furnished to Lender by or on behalf of Borrower in connection with the
transactions contemplated hereby contains any untrue statement of material
fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact
known to Borrower that adversely affects or in the future may adversely
affect the business, operations, affairs or financial condition of
Borrower, or any of its properties or assets.
Section 4.19. Investments, Guarantees, and Certain Contracts.
Borrower does not own or hold any equity or long-term debt investments in,
have any outstanding advances to, have any outstanding guarantees for the
obligations of, or have any outstanding borrowings from, any Person,
except as described on Schedule 4.19. Borrower is not a party to any
contract or agreement, or subject to any corporate restriction, which
adversely affects its business.
Section 4.20. Business Interruptions. Within five years prior to
the date hereof, neither the business, property or assets, or operations
of Borrower has been adversely affected in any way by any casualty,
strike, lockout, combination of workers, or order of the United States of
America or other Governmental Authority, directed against Borrower. There
are no pending or threatened labor disputes, strikes, lockouts, or similar
occurrences or grievances against Borrower or its business.
Section 4.21. Names. Within five years prior to the date hereof,
Borrower has not conducted business under or used any other name (whether
corporate, partnership or assumed) other than as shown on Schedule 4.21.
Borrower is the sole owner of all names listed on that Schedule and any
and all business done and invoices issued in such names are Borrower's
sales, business, and invoices. Each trade name of Borrower represents a
division or trading style of Borrower and not a separate Person or
independent Affiliate.
Section 4.22 Joint Ventures. Borrower is not engaged in any joint
venture or partnership with any other Person, except as set forth on
Schedule 4.22.
Section 4.23 Accounts. Lender may rely, in determining which
Accounts are Qualified Accounts, on all statements and representations
made by Borrower with respect to any Account or Accounts. Unless
otherwise indicated in writing to Lender, with respect to each Account:
(a) It is genuine and in all respects what it purports to be,
and is not evidenced by a judgment;
(b) It arises out of a completed, bona fide sale and delivery
of goods or rendition of services by Borrower in the ordinary course of
its business and in accordance with the terms and conditions of all
purchase orders, contracts, certification, participation, certificate of
need, or other documents relating thereto and forming a part of the
contract between Borrower and the Account Debtor;
(c) It is for a liquidated amount maturing as stated in a
duplicate claim or invoice covering such sale or rendition of services, a
copy of which has been furnished or is available to Lender;
(d) Such Account, and Lender's security interest therein, is
not, and will not (by voluntary act or omission by Borrower), be in the
future, subject to any offset, lien, deduction, defense, dispute,
counterclaim or any other adverse condition, and each such Account is
absolutely owing to Borrower and is not contingent in any respect or for
any reason;
(e) There are no facts, events or occurrences which in any way
impair the validity or enforceability of any Accounts or tend to reduce
the amount payable thereunder from the face amount of the claim or invoice
and statements delivered to Lender with respect thereto;
(f) To the best of Borrower's knowledge, (i) the Account Debtor
thereunder had the capacity to contract at the time any contract or other
document giving rise to the Account was executed and (ii) such Account
Debtor is solvent;
(g) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any Account
Debtor thereunder which might result in any material adverse change in
such Account Debtor's financial condition or the collectibility of such
Account;
(h) It has been billed and forwarded to the Account Debtor for
payment in accordance with applicable laws and compliance and conformance
with any and requisite procedures, requirements and regulations governing
payment by such Account Debtor with respect to such Account, and such
Account if due from a Medicaid/Medicare Account Debtor is properly payable
directly to Borrower; and
(i) Borrower has obtained and currently has all certificates of
need, Medicaid and Medicare provider numbers, licenses, permits and
authorizations as necessary in the generation of such Accounts.
ARTICLE V
CLOSING AND CONDITIONS OF LENDING
Section 5.1. Conditions Precedent to Agreement. The obligation of
Lender to enter into and perform this Agreement and to make Revolving
Credit Loans is subject to the following conditions precedent:
(a) Lender shall have received two (2) originals of this
Agreement and all other Loan Documents required to be executed and
delivered at or prior to Closing (other than the Note, as to which Lender
shall receive only one original), executed by Borrower and any other
required Persons, as applicable.
(b) Lender shall have received all searches and good standing
certificates required by Section 3.5.
(c) Borrower shall have complied and shall then be in
compliance with all the terms, covenants and conditions of the Loan
Documents.
(d) There shall have occurred no Event of Default and no event
which, with the giving of notice or the lapse of time, or both, could
constitute such an Event of Default.
(e) The representations and warranties contained in Article IV
shall be true and correct.
(f) Lender shall have received copies of all board of directors
resolutions of Borrower, and other corporate action taken by Borrower to
authorize the execution, delivery and performance of the Loan Documents
and the borrowing of the Loan thereunder, as well as the names and
signatures of the officers of Borrower authorized to execute documents on
its behalf in connection herewith, all as also certified as of the date
hereof by Borrower's chief financial officer, and such other papers as
Lender may require.
(g) Lender shall have received copies, certified as true,
correct and complete by a corporate officer of each Borrower, of the
articles of incorporation of each Borrower, with any amendments to any of
the foregoing, and all other documents necessary for performance of the
obligations of Borrower under this Agreement and the other Loan Documents.
(h) Lender shall have received a written opinion of counsel for
Borrower, dated the date hereof, in the form of Exhibit D.
(i) Lender shall have received such financial statements,
reports, certifications, and other operational information required to be
delivered hereunder, including without limitation an initial borrowing
base certificate calculating the Borrowing Base.
(j) Lender shall have received the Commitment Fee.
(k) The Lockbox and the Concentration Account shall have been
established.
(l) Lender shall have received a certificate of Borrower's
chief financial officer, dated the Closing Date, certifying that all of
the conditions specified in this Section have been fulfilled.
Section 5.2. Conditions Precedent to Advances. Notwithstanding any
other provision of this Agreement, no Loan proceeds, Revolving Credit
Loans, advances or other extensions of credit under the Loan shall be
disbursed hereunder unless the following conditions have been satisfied or
waived immediately prior to such disbursement:
(a) The representations and warranties on the part of Borrower
contained in Article IV of this Agreement shall be true and correct in all
respects at and as of the date of disbursement or advance, as though made
on and as of such date (except to the extent that such representations and
warranties expressly relate solely to an earlier date and except that the
references in Section 4.7 to financial statements shall be deemed to be a
reference to the then most recent annual and interim financial statements
of Borrower furnished to Lender pursuant to Section 6.1 hereof).
(b) No Event of Default or event which, with the giving of
notice 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.
(c) No adverse change in the condition (financial or
otherwise), properties, business, or operations of Borrower shall have
occurred and be continuing with respect to Borrower since the date hereof.
Section 5.3. Closing. Subject to the conditions of this Article V,
the Loan shall be made available on the date as is mutually agreed by the
parties (the "Closing Date") at such time as may be mutually agreeable to
the parties upon the execution hereof (the "Closing") at such place as may
be requested by Lender.
Section 5.4. Waiver of Rights. By completing the Closing hereunder,
or by making advances under the Loan, Lender does not waive a breach of
any representation or warranty of Borrower hereunder or under any other
Loan Document, and all of Lender's claims and rights resulting from any
breach or misrepresentation by Borrower are specifically reserved by
Lender.
ARTICLE VI
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that for so long as Borrower may borrow
hereunder and until payment in full of the Note and performance of all
other obligations of Borrower under the Loan Documents:
Section 6.1. Financial Statements and Collateral Reports. Borrower
will furnish to Lender (i) a sales and collections report and accounts
receivable aging schedule on a form acceptable to Lender within fifteen
(15) days after the end of each calendar month, which shall include, but
not be limited to, a report of sales, credits issued, and collections
received; (ii) payable aging schedules within fifteen (15) days after the
end of each calendar month; (iii) internally prepared 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,
accompanied by management analysis and actual vs. budget variance reports;
(iv) to the extent prepared by Borrower, annual projections, profit and
loss statements, balance sheets, and cash flow reports (prepared on a
monthly basis) for the succeeding fiscal year within thirty (30) days
before the end of each of Borrower's fiscal years; (v) internally prepared
annual financial statements for Borrower within sixty (60) days after the
end of each of Borrower's fiscal years; (vi) annual audited financial
statements for Borrower prepared by Ernst & Young, LLP, or a firm of
independent public accountants satisfactory to Lender, within one hundred
thirty-five (135) days after the end of each of Borrower's fiscal years;
(vii) promptly upon receipt thereof, copies of any reports submitted to
Borrower by the independent accountants in connection with any interim
audit of the books of Borrower and copies of each management control
letter provided to Borrower by independent accountants; (viii) as soon as
available, copies of all financial statements and notices provided by
Borrower to all of its stockholders; and (ix) such additional information,
reports or statements as Lender may from time to time request. Annual
financial statements shall set forth in comparative form figures for the
corresponding periods in the prior fiscal year. All financial statements
shall include a balance sheet and statement of earnings and shall be
prepared in accordance with GAAP.
Section 6.2. Payments Hereunder. Borrower will make all payments of
principal, interest, fees, and all other payments required hereunder,
under the Loan, and under any other agreements with Lender to which
Borrower is a party, as and when due.
Section 6.3. Existence, Good Standing, and Compliance with Laws.
Borrower will do or cause to be done all things necessary (a) to obtain
and keep in full force and effect all corporate existence, rights,
licenses, privileges, and franchises of Borrower necessary to the
ownership of its property or the conduct of its business, and comply with
all applicable present and future laws, ordinances, rules, regulations,
orders and decrees of any Governmental Authority having or claiming
jurisdiction over Borrower; and (b) to maintain and protect the
properties used or useful in the conduct of the operations of Borrower,
in a prudent manner, including without limitation the maintenance at all
times of such insurance upon its insurable property and operations as
required by law or by Section 6.7 hereof.
Section 6.4. Legality. The making of the Loan and each disbursement
or advance under the Loan shall not be subject to any penalty or special
tax, shall not be prohibited by any governmental order or regulation
applicable to Borrower, and shall not violate any rule or regulation of
any Governmental Authority, and necessary consents, approvals and
authorizations of any Governmental Authority to or of any such
disbursement or advance shall have been obtained.
Section 6.5. Lender's Satisfaction. All instruments and legal
documents and proceedings in connection with the transactions contemplated
by this Agreement shall be satisfactory in form and substance to Lender
and its counsel, and Lender shall have received all documents, including
records of corporate proceedings and opinions of counsel, which Lender may
have requested in connection therewith.
Section 6.6. Taxes and Charges. Borrower will timely file all tax
reports and pay and discharge all taxes, assessments and governmental
charges or levies imposed upon Borrower, or its income or profits or upon
its properties or any part thereof, before the same shall be in default
and prior to the date on which penalties attach thereto, as well as all
lawful claims for labor, material, supplies or otherwise which, if unpaid,
might become a lien or charge upon the properties or any part thereof of
Borrower; provided, however, that Borrower shall not be required to pay
and discharge or cause to be paid and discharged any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith and by appropriate proceedings by Borrower, and
Borrower shall have set aside on their books adequate reserve therefor;
and provided further, that such deferment of payment is permissible only
so long as Borrower's title to, and its right to use, the Collateral is
not adversely affected thereby and Lender's lien and priority on the
Collateral are not adversely affected, altered or impaired thereby.
Section 6.7. Insurance. Borrower will carry adequate public
liability and professional liability insurance with responsible companies
satisfactory to Lender in such amounts and against such risks as is
customarily maintained by similar businesses and by owners of similar
property in the same general area.
Section 6.8. General Information. Borrower will furnish to Lender
such information as Lender may, from time to time, request with respect to
the business or financial affairs of Borrower, and permit any officer,
employee or agent of Lender to visit and inspect any of the properties, to
examine the minute books, books of account and other records, including
management letters prepared by Borrower's auditors, of Borrower, and make
copies thereof or extracts therefrom, and to discuss its and their business
affairs, finances and accounts with, and be advised as to the same by, the
accountants and officers of Borrower, all at such times and as often as
Lender may require. Lender shall maintain in confidence all financial and
related information of Borrower. In particular, and not in limitation of
the foregoing, Lender acknowledges that financial reports of Borrower that
have not been filed with the SEC or otherwise publicly disclosed may
constitute material, nonpublic information.
Section 6.9. Maintenance of Property. Borrower will maintain, keep
and preserve all of its properties in good repair, working order and
condition and from time to time make all needful and proper repairs,
renewals, replacements, betterments and improvements thereto, so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times.
Section 6.10. Notification of Events of Default and Adverse
Developments. Borrower promptly will notify Lender upon the occurrence
of: (i) any Event of Default; (ii) any event which, with the giving of
notice or lapse of time, or both, could constitute an Event of Default;
(iii) any event, development or circumstance whereby the financial
statements previously furnished to Lender fail in any material respect to
present fairly, in accordance with GAAP, the financial condition and
operational results of Borrower; (iv) any judicial, administrative or
arbitration proceeding pending against Borrower, and any judicial or
administrative proceeding known by Borrower to be threatened against it
which, if adversely decided, could adversely affect its condition
(financial or otherwise) or operations (present or prospective) or which
may expose Borrower to uninsured liability of $25,000.00 or more; (v) any
default claimed by any other creditor for Borrowed Money of Borrower other
than Lender; and (vi) any other development in the business or affairs of
Borrower which may be adverse; in each case describing the nature thereof
and (in the case of notification under clauses (i) and (ii)) the action
Borrower proposes to take with respect thereto.
Section 6.11. Employee Benefit Plans. Borrower will (i) comply with
the funding requirements of ERISA with respect to the Plans for its
employees, or will promptly satisfy any accumulated funding deficiency
that arises under Section 302 of ERISA; (ii) furnish Lender, promptly
after filing the same, with copies of all reports or other statements
filed with the United States Department of Labor, the Pension Benefit
Guaranty Corporation, or the Internal Revenue Service with respect to all
Plans, or which Borrower, or any member of a Controlled Group, may receive
from such Governmental Authority with respect to any such Plans, and (iii)
promptly advise Lender of the occurrence of any Reportable Event or
Prohibited Transaction with respect to any such Plan and the action which
Borrower proposes to take with respect thereto. Borrower will make all
contributions when due with respect to any multi-employer pension plan in
which it participates and will promptly advise Lender: (i) upon its
receipt of notice of the assertion against Borrower of a claim for
withdrawal liability; (ii) upon the occurrence of any event which could
trigger the assertion of a claim for withdrawal liability against
Borrower; and (iii) upon the occurrence of any event which would place
Borrower in a Controlled Group as a result of which any member (including
Borrower) thereof may be subject to a claim for withdrawal liability,
whether liquidated or contingent.
Section 6.12. Financing Statements. Borrower shall provide to
Lender evidence satisfactory to Lender as to the due recording of
termination statements, releases of collateral, and Forms UCC-3, and shall
cause to be recorded financing statements on Form UCC-1, duly executed by
Borrower and Lender, in all places necessary to release all existing
security interests and other liens in the Collateral (other than as
permitted hereby) and to perfect and protect Lender's first priority lien
and security interest in the Collateral, as Lender may request.
Section 6.13. Financial Records. Borrower shall keep current and
accurate books of records and accounts in which full and correct entries
will be made of all of its business transactions, and will reflect in its
financial statements adequate accruals and appropriations to reserves, all
in accordance with GAAP.
Section 6.14. Collection of Accounts. Borrower shall continue to
collect its Accounts in the ordinary course of business.
Section 6.15. Places of Business. Borrower shall give thirty (30)
days' prior written notice to Lender of any change in the location of any
of its places of business, of the places where its records concerning its
Accounts are kept, of the places where the Collateral is kept, or of the
establishment of any new, or the discontinuance of any existing, places of
business.
Section 6.16. Business Conducted. Borrower shall continue in the
business presently conducted by it using its best efforts to maintain its
customers and goodwill. Borrower shall not engage, directly or
indirectly, in any line of business substantially different from the
business conducted by it immediately prior to the Closing Date, or engage
in business or lines of business which are not reasonably related thereto.
Section 6.17. Litigation and Other Proceedings. Borrower shall give
prompt notice to Lender of any litigation, arbitration, or other
proceeding before any Governmental Authority against or affecting Borrower
if the amount claimed is more than $25,000.00
Section 6.18. Bank Accounts. Borrower shall assign all of its
depository and disbursement accounts to Lender.
Section 6.19. Submission of Collateral Documents. Subject to
applicable federal and state laws and regulation concerning the
confidentiality of patient and medical records, Borrower will, on demand
of Lender, make available to Lender copies of shipping and delivery
receipts evidencing the shipment of goods that gave rise to an Account,
medical records, insurance verification forms, assignment of benefits, in-
take forms or other proof of the satisfactory performance of services that
gave rise to an Account, a copy of the claim or invoice for each Account
and copies of any written contract or order from which the Account arose.
Borrower shall promptly notify Lender if an Account becomes evidenced or
secured by an instrument or chattel paper and upon request of Lender, will
promptly deliver any such instrument or chattel paper to Lender.
Section 6.20. Licensure; Medicaid/Medicare Cost Reports. Borrower
will maintain all certificates of need, provider numbers and licenses
necessary to conduct its business as presently conducted, and take any
steps required to comply with any such new or additional requirements that
may be imposed on providers of medical products and services. If
required, all Medicaid/Medicare cost reports will be properly filed.
Section 6.21. Officer's Certificates. Together with the 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) of that Section, Borrower shall deliver to Lender
a certificate of its chief financial officer, in form and substance
satisfactory to Lender:
(a) Setting forth the information (including detailed
calculations) required to establish whether Borrower is in compliance with
the requirements of Articles VI and VII as of the end of the period
covered by the financial statements then being furnished; and
(b) Stating that the signer has reviewed the relevant terms of
this Agreement, and has made (or caused to be made under his supervision)
a review of the transactions and conditions of Borrower from the beginning
of the accounting period covered by the income statements being delivered
to the date of the certificate, and that such review has not disclosed the
existence during such period of any condition or event which constitutes
an Event of Default or which is then, or with the passage of time or
giving of notice or both, could become an Event of Default, and if any
such condition or event existed during such period or now exists,
specifying the nature and period of existence thereof and what action
Borrower has taken or proposes to take with respect thereto.
Section 6.22. Visits and Inspections. Borrower agrees to permit
representatives of Lender, from time to time, as often as may be
reasonably requested, but only during normal business hours, to visit and
inspect the properties of Borrower, and to inspect, audit and make
extracts from its books and records, and discuss with its officers, its
employees and its independent accountants, Borrower's business, assets,
liabilities, financial condition, business prospects and results of
operations.
Section 6.23. Net Worth. Borrower will not at any time allow its
net worth, as computed in accordance with GAAP, to fall below
$4,000,000.00.
ARTICLE VII
NEGATIVE COVENANTS
Borrower covenants and agrees that so long as Borrower may borrow
hereunder and until payment in full of the Note and performance of all
other obligations of Borrower under the Loan Documents:
Section 7.1. Borrowing. Borrower will not create, incur, assume or
suffer to exist any liability for Borrowed Money except: (i) indebtedness
to Lender; (ii) indebtedness of Borrower secured by mortgages,
encumbrances or liens expressly permitted by Section 7.3 hereof; (iii)
accounts payable to trade creditors and current operating expenses (other
than for borrowed money) which are not aged more than one hundred twenty
(120) days from the billing date or more than thirty (30) days from the
due date, in each case incurred in the ordinary course of business and
paid within such time period, unless the same are being contested in good
faith and by appropriate and lawful proceedings, and Borrower shall have
set aside such reserves, if any, with respect thereto as are required by
GAAP and deemed adequate by Borrower and its independent accountants; and
(iv) borrowings incurred in the ordinary course of its business and not
exceeding $50,000.00, or $250,000.00 in the aggregate (including such
borrowings made by NuMed Rehabilitation, Inc., Silver Moves, Inc.,
Pennsylvania Medical Concepts, Inc., Countryside Health Services, Inc.,
Total Person Home Health Care of Ohio, Inc. and Parke Home Health Care,
Inc. ("Affiliated Borrower"), outstanding at any one time. Borrower will
not make prepayments on any existing or future indebtedness for Borrowed
Money to any Person (other than Lender, to the extent permitted by this
Agreement or any subsequent agreement between Borrower and Lender).
Section 7.2. Joint Ventures. Borrower will not invest directly or
indirectly in any joint venture for any purpose without the prior written
notice to, and the express written consent of, Lender, which consent may
be withheld in Lender's sole discretion.
Section 7.3. Liens and Encumbrances. Borrower will not create,
incur, assume or suffer to exist any mortgage, pledge, lien or other
encumbrance of any kind (including the charge upon property purchased
under a conditional sale or other title retention agreement) upon, or any
security interest in, any of its Collateral, whether now owned or
hereafter acquired, except for Permitted Liens.
Section 7.4. Merger, Acquisition, or Sale of Assets. Borrower will
not enter into any merger or consolidation with or acquire all or
substantially all of the assets of any Person, and will not sell, lease,
or otherwise dispose of any of its assets except in the ordinary course of
its business, without the prior written consent of Lender, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing,
Borrower shall not be required to obtain Lender's consent to any sale,
lease or other disposition where the cost of the transaction to Borrower
is less than $250,000.00.
Section 7.5. Sale and Leaseback. Borrower will not, directly or
indirectly, enter into any arrangement whereby Borrower sells or transfers
all or any part of its assets and thereupon and within one year thereafter
rents or leases the assets so sold or transferred without the prior
written consent of Lender, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, Borrower shall not be required
to obtain Lender's consent to any such arrangement where the cost of the
arrangement to Borrower is less than $250,000.00.
Section 7.6. Dividends, Distributions and Management Fees. Upon
notice from Lender to Borrower of the existence of an Event of Default
hereunder, Borrower will not declare or pay any dividends or other
distributions with respect to, purchase, redeem or otherwise acquire for
value any of its outstanding stock now or hereafter outstanding, or return
any capital of its stockholders, nor shall Borrower pay management fees or
fees of a similar nature to any Person.
Section 7.7. Loans. Borrower will not make loans or advances to any
Person, other than (i) trade credit extended in the ordinary course of its
business, and (ii) advances for business travel and similar temporary
advances in the ordinary course of business to officers, stockholders,
directors, and employees.
Section 7.8. Contingent Liabilities. Borrower will not assume,
guarantee, endorse, contingently agree to purchase or otherwise become
liable upon the obligation of any Person, except by the endorsement of
negotiable instruments for deposit or collection or similar transactions
in the ordinary course of business.
Section 7.9. Subsidiaries. Borrower will not form any subsidiary,
or make any investment in or any loan in the nature of an investment to,
any other Person.
Section 7.10. Compliance with ERISA. Borrower will not permit with
respect to any Plan covered by Title IV of ERISA any Prohibited
Transaction or any Reportable Event.
Section 7.11. Certificates of Need. Borrower will not amend, alter
or suspend or terminate or make provisional in any material way, any
certificate of need or provider number without the prior written consent
of Lender, which consent shall not be unreasonably withheld.
Section 7.12. Transactions with Affiliates. Borrower will not enter
into any transaction, including without limitation the purchase, sale, or
exchange of property, or the loaning or giving of funds to any Affiliate
or subsidiary, except in the ordinary course of business and pursuant to
the reasonable requirements of Borrower's business and upon terms
substantially the same and no less favorable to Borrower as it would
obtain in a comparable arm's length transaction with any Person not an
Affiliate or subsidiary, and so long as the transaction is not otherwise
prohibited hereunder. For purposes of the foregoing, Lender consents to
the transactions described on Schedule 7.12 and transactions solely
between or among parties to this Agreement and/or Affiliated Borrower.
Section 7.13. Use of Lender's Name. Borrower will not use Lender's
name (or the name of any of Lender's affiliates) in connection with any of
its business operations. Borrower may disclose to third parties that
Borrower has a borrowing relationship with Lender. Nothing herein
contained is intended to permit or authorize Borrower to make any contract
on behalf of Lender.
Section 7.14. Change in Status. NuMed Home Health Care, Inc. shall
not cease filing required reports under the Securities Exchange Act of
1934 (the "Exchange Act").
Section 7.15. Contracts and Agreements. Borrower will not become or
be a party to any contract or agreement which would breach this Agreement,
or breach any other instrument, agreement, or document to which Borrower
is a party or by which it is or may be bound.
Section 7.16. Margin Stock. Borrower will not carry or purchase any
"margin security" within the meaning of Regulations U, G, T or X of the
Board of Governors of the Federal Reserve System.
Section 7.17. Truth of Statements and Certificates. Borrower will
not furnish to Lender any certificate or other document that contains any
untrue statement of a material fact or that omits to state a material fact
necessary to make it not misleading in light of the circumstances under
which it was furnished.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1. Events of Default. Each of the following
(individually, an "Event of Default" and collectively, the "Events of
Default") shall constitute an event of default hereunder:
(a) A default in the payment of any installment of principal
of, or interest upon, the Note when due and payable, whether at maturity
or otherwise, or any breach of Section 2.3 of this Agreement, which
default or breach, as applicable, shall have continued unremedied for a
period of ten (10) days after written notice thereof from Lender to
Borrower;
(b) A default in the payment of any other charges, fees, or
other monetary obligations owing to Lender arising out of or incurred in
connection with this Agreement when such payment is due and payable, which
default shall have continued unremedied for a period of ten (10) days
after written notice from Lender;
(c) A default in the due observance or performance by Borrower
of any other term, covenant or agreement contained in any of the Loan
Documents, which default shall have continued unremedied for a period of
fifteen (15) days after written notice from Lender;
(d) If any representation or warranty made by Borrower herein
or in any of the other Loan Documents, any financial statement, or any
statement or representation made in any other certificate, report or
opinion delivered in connection herewith or therewith proves to have been
incorrect or misleading in any material respect when made, which default
shall have continued unremedied for a period of fifteen (15) days after
written notice from Lender;
(e) If any obligation of Borrower (other than its Obligations
hereunder) for the payment of Borrowed Money is not paid when due or
within any applicable grace period, or such obligation becomes or is
declared to be due and payable prior to the expressed maturity thereof, or
there shall have occurred an event which, with the giving of notice or
lapse of time, or both, would cause any such obligation to become, or
allow any such obligation to be declared to be, due and payable;
(f) If Borrower makes an assignment for the benefit of
creditors, offers a composition or extension to creditors, or makes or
sends notice of an intended bulk sale of any business or assets now or
hereafter conducted by Borrower;
(g) If Borrower files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal for any
receiver of or any trustee for itself or any substantial part of its
property, commences any proceeding relating to itself under any
reorganization, arrangement, readjustment or debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter
in effect, or there is commenced against Borrower any such proceeding
which remains undismissed for a period of sixty (60) days, or any Borrower
by any act indicates its consent to, approval of, or acquiescence in, any
such proceeding or the appointment of any receiver of or any trustee for a
Borrower or any substantial part of its property, or suffers any such
receivership or trusteeship to continue undischarged for a period of sixty
(60) days;
(h) If one or more final judgments against Borrower or
attachments against its property not fully and unconditionally covered by
insurance shall be rendered by a court of record and shall remain unpaid,
unstayed on appeal, undischarged, unbonded and undismissed for a period of
ten (10) days;
(i) A Reportable Event which might constitute grounds for
termination of any Plan covered by Title IV of ERISA or for the
appointment by the appropriate United States District Court of a trustee
to administer any such Plan or for the entry of a lien or encumbrance to
secure any deficiency, has occurred and is continuing thirty (30) days
after its occurrence, or any such Plan is terminated, or a trustee is
appointed by an appropriate United States District Court to administer any
such Plan, or the Pension Benefit Guaranty Corporation institutes
proceedings to terminate any such Plan or to appoint a trustee to
administer any such Plan, or a lien or encumbrance is entered to secure
any deficiency or claim;
(j) If there should occur a change in control of NuMed Home
Health Care, Inc.;
(k) If there shall occur any uninsured damage to or loss, theft
or destruction of any portion of the Collateral;
(l) If Borrower breaches of violates the terms of, or if a
default or an event which could, whether with notice or the passage of
time, or both, constitute a default, occurs under any other existing or
future agreement (related or unrelated) between Borrower and Lender;
(m) Upon the issuance of any execution or distraint process
against Borrower or any of its property or assets;
(n) If Borrower ceases any material portion of its business
operations as presently conducted without the prior written consent of
Lender;
(o) If any indication or evidence is received by Lender that
Borrower may have directly or indirectly been engaged in any type of
activity which, in Lender's discretion, might result in the forfeiture of
any property of Borrower to any Governmental Authority, which default
shall have continued unremedied for a period of ten (10) days after
written notice from Lender;
(p) Borrower or any Affiliate of Borrower, shall challenge or
contest, in any action, suit or proceeding, the validity or enforceability
of this Agreement, or any of the other Loan Documents, the legality or the
enforceability of any of the Obligations or the perfection or priority of
any Lien granted to Lender;
(q) Borrower shall be criminally indicted or convicted under
any law that could lead to a forfeiture of any Collateral.
(r) There shall occur a material adverse change in the
financial condition or business prospects of Borrower, or if Lender in
good faith deems itself insecure as a result of acts or events bearing
upon the financial condition of Borrower or the repayment of the Note,
which default shall have continued unremedied for a period of ten (10)
days after written notice from Lender.
Section 8.2. Acceleration. Upon the occurrence of any of the
foregoing Events of Default, the Note shall become and be immediately due
and payable upon declaration to that effect delivered by Lender to
Borrower; provided that, upon the happening of any event specified in
Section 8.1(g) hereof, the Note shall be immediately due and payable
without declaration or other notice to Borrower.
Section 8.3. Remedies.
(a) In addition to all other rights, options, and remedies
granted to Lender under this Agreement, upon the occurrence of an Event of
Default Lender may (i) terminate the Loan, whereupon all outstanding
Obligations shall be immediately due and payable, (ii) exercise all other
rights granted to it hereunder and all rights under the Uniform Commercial
Code in effect in the applicable jurisdiction(s) and under any other
applicable law, and (iii) exercise all rights and remedies under all Loan
Documents now or hereafter in effect, including the following rights and
remedies (which list is given by way of example and is not intended to be
an exhaustive list of all such rights and remedies):
(i) The right to take possession of, send notices
regarding, and collect directly the Collateral, with or without judicial
process, and to exercise all rights and remedies available to Lender with
respect to the Collateral under the Uniform Commercial Code in effect in
the jurisdiction(s) in which such Collateral is located;
(ii) The right to (by its own means or with judicial
assistance) enter any of Borrower's premises and take possession of the
Collateral, or render it unusable, or dispose of the Collateral on such
premises in compliance with subsection (b), without any liability for
rent, storage, utilities, or other sums, and Borrower shall not resist or
interfere with such action;
(iii) The right to require Borrower at Borrower's
expense to assemble all or any part of the Collateral and make it
available to Lender at any place designated by Lender;
(iv) The right to reduce the Maximum Loan Amount or to use
the Collateral and/or funds in the Concentration Account in amounts up to
the Maximum Loan Amount for any reason; and
(v) The right to relinquish or abandon any Collateral or
any security interest therein.
(b) Borrower agrees that a notice received by it at least five
(5) days before the time of any intended public sale, or the time after
which any private sale or other disposition of the Collateral is to be
made, shall be deemed to be reasonable notice of such sale or other
disposition. If permitted by applicable law, any perishable Collateral
which threatens to speedily decline in value or which is sold on a
recognized marked may be sold immediately by Lender without prior notice
to Borrower. At any sale or disposition of Collateral, Lender may (to the
extent permitted by applicable law) purchase all or any part of the
Collateral, free from any right of redemption by Borrower, which right is
hereby waived and released. Borrower covenants and agrees not to
interfere with or impose any obstacle to Lender's exercise of its rights
and remedies with respect to the Collateral.
Section 8.4. Nature of Remedies. Lender shall have the right to
proceed against all or any portion of the Collateral to satisfy the
liabilities and Obligations of Borrower to Lender in any order. All
rights and remedies granted Lender hereunder and under any agreement
referred to herein, or otherwise available at law or in equity, shall be
deemed concurrent and cumulative, and not alternative remedies, and Lender
may proceed with any number of remedies at the same time until the Loans,
and all other existing and future liabilities and obligations of Borrower
to Lender, are satisfied in full. The exercise of any one right or remedy
shall not be deemed a waiver or release of any other right or remedy, and
Lender, upon the occurrence of an Event of Default, may proceed against
Borrower, and/or the Collateral, at any time, under any agreement, with
any available remedy and in any order.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Expenses and Taxes.
(a) Borrower agrees to pay, whether or not the Closing occurs,
a reasonable documentation preparation fee, together with actual audit and
appraisal fees and all other out-of-pocket charges and expenses incurred
by Lender in connection with the negotiation, preparation and execution of
each of the Loan Documents, any amendments to the Loan Documents following
Closing, and preparation for Closing, reimbursement for which fees and
expenses shall not exceed $10,000.00. Borrower also agrees to pay all
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 and the
collection of any amounts due under the Loan Documents.
(b) Borrower shall pay all taxes (other than taxes based upon
or measured by Lender's income or revenues or any personal property tax),
if any, in connection with the issuance of the Note and the recording of
the security documents therefor. The obligations of Borrower under this
clause (b) shall survive the payment of Borrower's indebtedness hereunder
and the termination of this Agreement.
Section 9.2. Entire Agreement; Amendments. This Agreement and the
other Loan Documents constitute the full and entire understanding and
agreement among the parties with regard to their subject matter and
supersede all prior written or oral agreements, understandings,
representations and warranties made with respect thereto. No amendment,
supplement or modification of this Agreement nor any waiver of any
provision thereof shall be made except in writing executed by the party
against whom enforcement is sought.
Section 9.3. No Waiver; Cumulative Rights. No waiver by any party
hereto of any one or more defaults by the other party in the performance
of any of the provisions of this Agreement shall operate or be construed
as a waiver of any future default or defaults, whether of a like or
different nature. No failure or delay on the part of any party in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power
or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to
any party hereto at law, in equity or otherwise.
Section 9.4. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and personally delivered, mailed
by registered or certified mail (return receipt requested and postage
prepaid), sent by telecopier (with a confirming copy sent by regular
mail), or sent by prepaid overnight courier service, and addressed to the
relevant party at its address set forth below, or at such other address as
such party may, by written notice, designate as its address for purposes
of notice hereunder:
(a) If to Lender, at:
HCFP Funding, Inc.
2 Wisconsin Circle, Suite 320
Chevy Chase, Maryland 20815
Attention: Ethan D. Leder, President
Telephone: (301) 961-1640
Telecopier: (301) 664-9860
(b) If to Borrower, at:
NuMed Home Health Care, Inc.
5770 Roosevelt Boulevard, Suite 700
Clearwater, Florida 34620
Attention: Jugal Teneja, Chief Executive Officer
Telephone: (813) 524-3227
Telecopier: (813) 524-3349
If mailed, notice shall be deemed to be given five (5) days after being
sent, if sent by personal delivery or telecopier, notice shall be deemed
to be given when delivered, and if sent by prepaid courier, notice shall
be deemed to be given on the next Business Day following deposit with the
courier.
Section 9.5. Severability. If any term, covenant or condition of
this Agreement, or the application of such term, covenant or condition to
any party or circumstance shall be found by a court of competent
jurisdiction to be, to any extent, invalid or unenforceable, the remainder
of this Agreement and the application of such term, covenant, or condition
to parties or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term,
covenant or condition shall be valid and enforced to the fullest extent
permitted by law. Upon determination that any such term is invalid,
illegal or unenforceable, the parties hereto shall amend this Agreement so
as to effect the original intent of the parties as closely as possible in
an acceptable manner.
Section 9.6. Successors and Assigns. This Agreement, the Note, and
the other Loan Documents shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns.
Notwithstanding the foregoing, Borrower may not assign any of its rights
or delegate any of its obligations hereunder without the prior written
consent of Lender, which may be withheld in its sole discretion. Lender
may sell, assign, transfer, or participate any or all of its rights or
obligations hereunder without notice to or consent of Borrower.
Section 9.7. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute but one instrument.
Section 9.8. Interpretation. No provision of this Agreement or any
other Loan Document shall be interpreted or construed against any party
because that party or its legal representative drafted that provision.
The titles of the paragraphs of this Agreement are for convenience of
reference only and are not to be considered in construing this Agreement.
Any pronoun used in this Agreement shall be deemed to include singular and
plural and masculine, feminine and neuter gender as the case may be. The
words "herein," "hereof," and "hereunder" shall be deemed to refer to this
entire Agreement, except as the context otherwise requires.
Section 9.9. Survival of Terms. All covenants, agreements,
representations and warranties made in this Agreement, any other Loan
Document, and in any certificates and other instruments delivered in
connection therewith shall be considered to have been relied upon by
Lender and shall survive the making by Lender of the Loans herein
contemplated and the execution and delivery to Lender of the Note, and
shall continue in full force and effect until all liabilities and
obligations of Borrower to Lender are satisfied in full.
Section 9.10. Release of Lender. Borrower releases Lender, its
officers, employees, and agents, of and from any claims for loss or damage
resulting from acts or conduct of any or all of them, unless caused by
Lender's recklessness, gross negligence, or willful misconduct.
Section 9.11. Time. Whenever Borrower is required to make any
payment or perform any act on a Saturday, Sunday, or a legal holiday under
the laws of the State of Maryland (or other jurisdiction where Borrower is
required to make the payment or perform the act), the payment may be made
or the act performed on the next Business Day. Time is of the essence in
Borrower's performance under this Agreement and all other Loan Documents.
Section 9.12. Commissions. The transaction contemplated by this
Agreement was brought about by Lender and Borrower acting as principals
and without any brokers, agents, or finders being the effective procuring
cause. Borrower represents that it has not committed Lender to the
payment of any brokerage fee, commission, or charge in connection with
this transaction. If any such claim is made on Lender by any broker,
finder, or agent or other person, Borrower will indemnify, defend, and
hold Lender harmless from and against the claim and will defend any action
to recover on that claim, at Borrower's cost and expense, including
Lender's counsel fees. Borrower further agrees that until any such claim
or demand is adjudicated in Lender's favor, the amount demanded will be
deemed a liability of Borrower under this Agreement, secured by the
Collateral.
Section 9.13. Third Parties. No rights are intended to be created
hereunder or under any other Loan Document for the benefit of any third
party donee, creditor, or incidental beneficiary of Borrower. Nothing
contained in this Agreement shall be construed as a delegation to Lender
of Borrower's duty of performance, including without limitation Borrower's
duties under any account or contract in which Lender has a security
interest.
Section 9.14. Discharge of Borrower's Obligations. Lender, in its
sole discretion, shall have the right at any time, and from time to time,
without prior notice to Borrower if Borrower fails to do so, to: (i)
obtain insurance covering any of the Collateral as required hereunder;
(ii) pay for the performance of any of Borrower's obligations hereunder;
(iii) discharge taxes, liens, security interests, or other encumbrances at
any time levied or placed on any of the Collateral in violation of this
Agreement unless Borrower is in good faith with due diligence by
appropriate proceedings contesting those items; and (iv) pay for the
maintenance and preservation of any of the Collateral. Expenses and
advances shall be added to the Loan, until reimbursed to Lender and shall
be secured by the Collateral. Any such payments and advances by Lender
shall not be construed as a waiver by Lender of an Event of Default.
Section 9.15. Information to Participants. Lender may divulge to
any participant it may obtain in the Loan, or any portion thereof, all
information, and furnish to such participant copies of reports, financial
statements, certificates, and documents obtained under any provision of
this Agreement or any other Loan Document. Notwithstanding the foregoing,
any such participant shall be bound by the restrictions on dissemination
of confidential information contained in Section 6.8 above.
Section 9.16. Indemnity. Borrower hereby agrees to indemnify and
hold harmless Lender, its partners, officers, agents and employees
(collectively, "Indemnitee") from and against any liability, loss, cost,
expense, claim, damage, suit, action or proceeding ever suffered or
incurred by Lender (including reasonable attorneys' fees and expenses)
arising from Borrower's failure to observe, perform or discharge any of
its covenants, obligations, agreements or duties hereunder, or from the
breach of any of the representations or warranties contained in Article IV
hereof. In addition, Borrower shall defend Indemnitee against and save it
harmless from all claims of any Person with respect to the Collateral.
Notwithstanding any contrary provision in this Agreement, the obligation
of Borrower under this Section 9.16 shall survive the payment in full of
the Obligations and the termination of this Agreement.
Section 9.17. Choice of Law; Consent to Jurisdiction. THIS
AGREEMENT AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF
THIS AGREEMENT OR THE NOTE IS COMMENCED BY LENDER IN THE STATE COURTS OF
THE STATE OF MARYLAND OR IN THE U.S. DISTRICT COURT FOR THE DISTRICT OF
MARYLAND, BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY SUCH COURT
IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN THE STATE OF MARYLAND.
ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF MAILED BY
REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS DESCRIBED IN
SECTION 9.4 HEREOF.
Section 9.18. Waiver of Trial by Jury. BORROWER HEREBY (A)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE
EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY
BORROWER, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD
OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT
THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER
AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF
BORROWER'S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, BORROWER HEREBY
CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING LENDER'S
COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER
WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
Section 9.19. Confession of Judgment. 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 REASONABLE ATTORNEYS' FEES, 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 WHICH 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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
LENDER:
HCFP FUNDING, INC.
a Delaware corporation
By:____/s/_________________________
Name: Howard Widra
Title: Vice President
BORROWER:
NUMED HOME HEALTH CARE, INC.
a Nevada corporation
By:____/s/__________________________
Name: Jugal K. Taneja
Title: Chief Executive Officer
WHOLE PERSON HOME HEALTH CARE OF FLORIDA,
INC.
a Florida corporation d/b/a
TOTAL PROFESSIONAL HEALTH CARE
By:______/s/________________________
Name: Jugal K. Taneja
Title: Chief Executive Officer
WHOLE PERSON HOME HEALTH CARE, INC.
a Pennsylvania corporation
By:______/s/________________________
Name: Jugal K. Taneja
Title: Chief Executive Officer
LIST OF EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Lockbox Agreement
Exhibit C - Locations of Collateral
Exhibit D - Form of Legal Opinion
LIST OF SCHEDULES
Schedule 1.36 - Permitted Liens
Schedule 4.1 - Subsidiaries
Schedule 4.5 - Litigation
Schedule 4.7 - Tax Identification Numbers
Schedule 4.13 - Non-Compliance with Law
Schedule 4.14 - Environmental Matters
Schedule 4.15 - Places of Business
Schedule 4.16 - Licenses
Schedule 4.19 - Borrowings and Guarantees
Schedule 4.21 - Trade Names
Schedule 4.22 - Joint Ventures
Schedule 7.12 - Transactions with Affiliates
$3,000,000.00
LOAN AND SECURITY AGREEMENT
by and between
NUMED HOME HEALTH CARE, INC.
NUMED REHABILITATION, INC.
SILVER MOVES, INC.
COUNTRYSIDE HEALTH SERVICES, INC.
WHOLE PERSON HOME HEALTH CARE OF OHIO, INC.
PENNSYLVANIA MEDICAL CONCEPTS, INC.
PARKE HOME HEALTH CARE, INC.
("Borrower")
and
HCFP FUNDING, INC.
("Lender")
August 14, 1997
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made as of this
14th day of August, 1997, by and among NUMED HOME HEALTH CARE, INC., a
Nevada corporation, NUMED REHABILITATION, INC., a Florida corporation,
SILVER MOVES, INC., a Florida corporation D/B/A FLORIDA NURSING SERVICES,
COUNTRYSIDE HEALTH SERVICES, INC., a Florida corporation, WHOLE PERSON
HOME HEALTH CARE OF OHIO, INC., an Ohio corporation, PENNSYLVANIA MEDICAL
CONCEPTS, INC., a Pennsylvania corporation, and PARKE HOME HEALTH CARE,
INC., an Ohio corporation ("collectively, "Borrower"), and HCFP FUNDING,
INC., a Delaware corporation ("Lender").
RECITALS
A. Borrower desires to establish certain financing arrangements
with and borrow funds from Lender, and Lender is willing to establish such
arrangements for and make loans and extensions of credit to Borrower, on
the terms and conditions set forth below.
B. The parties desire to define the terms and conditions of their
relationship and to reduce their agreements to writing.
NOW, THEREFORE, in consideration of the promises and covenants
contained in this Agreement, and for other consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
Section 1.1. Account. "Account" means any right to payment for
goods sold or leased or services rendered, whether or not evidenced by an
instrument or chattel paper, and whether or not earned by performance.
Section 1.2. Account Debtor. "Account Debtor" means any Person
obligated on any Account of Borrower, including without limitation, any
Insurer and any Medicaid/Medicare Account Debtor.
Section 1.3. Affiliate. "Affiliate" means, with respect to a
specified Person, any Person directly or indirectly controlling,
controlled by, or under common control with the specified Person,
including without limitation their stockholders and any Affiliates
thereof. A Person shall be deemed to control a corporation or other
entity if the Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and business of the
corporation or other entity, whether through the ownership of voting
securities, by contract, or otherwise.
Section 1.4. Agreement. "Agreement" means this Loan and Security
Agreement, as it may be amended or supplemented from time to time.
Section 1.5. Base Rate. "Base Rate" means a rate of interest equal
to two percent (2.0%) above the "Prime Rate of Interest".
Section 1.6. Borrowed Money. "Borrowed Money" means any obligation
to repay money, any indebtedness evidenced by notes, bonds, debentures or
similar obligations, any obligation under a conditional sale or other
title retention agreement and the net aggregate rentals under any lease
which under GAAP would be capitalized on the books of Borrower or which is
the substantial equivalent of the financing of the property so leased.
Section 1.7. Borrower. "Borrower" has the meaning set forth in the
Preamble.
Section 1.8. Borrowing Base. "Borrowing Base" has the meaning set
forth in Section 2.1(d).
Section 1.9. Business Day. "Business Day" means any day on which
financial institutions are open for business in the State of Maryland,
excluding Saturdays and Sundays.
Section 1.10. Closing; Closing Date. "Closing" and "Closing Date"
have the meanings set forth in Section 5.3.
Section 1.11. Collateral. "Collateral" has the meaning set forth in
Section 3.1.
Section 1.12. Commitment Fee. "Commitment Fee" has the meaning set
forth in Section 2.4(a).
Section 1.13. Concentration Account. "Concentration Account" has
the meaning set forth in Section 2.3(a).
Section 1.14. Controlled Group. "Controlled Group" means a
"controlled group" within the meaning of Section 4001(b) of ERISA.
Section 1.15. Cost Report Settlement Account. "Cost Report
Settlement Account" means an "Account" owed to Borrower by a
Medicaid/Medicare Account Debtor pursuant to any cost report, either
interim, filed or audited, as the context may require.
Section 1.16. Default Rate. "Default Rate" means a rate per annum
equal to five percent (5%) above the then applicable Base Rate.
Section 1.17. ERISA. "ERISA" has the meaning set forth in Section
4.12.
Section 1.18. Event of Default. "Event of Default" and "Events of
Default" have the meanings set forth in Section 8.1.
Section 1.19. GAAP. "GAAP" means generally accepted accounting
principles applied in a matter consistent with the financial statements
referred to in Section 4.7.
Section 1.20. Governmental Authority. "Governmental Authority"
means and includes any federal, state, District of Columbia, county,
municipal, or other government and any department, commission, board,
bureau, agency or instrumentality thereof, whether domestic or foreign.
Section 1.21. Hazardous Material. "Hazardous Material" means any
substances defined or designated as hazardous or toxic waste, hazardous or
toxic material, hazardous or toxic substance, or similar term, by any
environmental statute, rule or regulation or any Governmental Authority.
Section 1.22. Highest Lawful Rate. "Highest Lawful Rate" means the
maximum lawful rate of interest referred to in Section 2.7 that may accrue
pursuant to this Agreement.
Section 1.23. Insurer. "Insurer" means a Person that insures a
Patient against certain of the costs incurred in the receipt by such
Patient of Medical Services, or that has an agreement with Borrower to
compensate Borrower for providing services to a Patient.
Section 1.24. Lender. "Lender" has the meaning set forth in the
Preamble.
Section 1.25. Loan. "Loan" has the meaning set forth in Section
2.1(a).
Section 1.26. Loan Documents. "Loan Documents" means and includes
this Agreement, the Note, and each and every other document now or
hereafter delivered in connection therewith, as any of them may be
amended, modified, or supplemented from time to time.
Section 1.27. Intentionally Deleted.
Section 1.28. Lockbox. "Lockbox" has the meaning set forth in
Section 2.3.
Section 1.29. Lockbox Bank. "Lockbox Bank" has the meaning set
forth in Section 2.3.
Section 1.30. Maximum Loan Amount. "Maximum Loan Amount" has the
meaning set forth in Section 2.1(a).
Section 1.31. Medicaid/Medicare Account Debtor. "Medicaid/ Medicare
Account Debtor" means any Account Debtor which is (i) the United States of
America acting under the Medicaid/Medicare program established pursuant to
the Social Security Act, (ii) any state or the District of Columbia acting
pursuant to a health plan adopted pursuant to Title XIX of the Social
Security Act or (iii) any agent, carrier, administrator or intermediary
for any of the foregoing.
Section 1.32. Medical Services. Medical and health care services
provided to a Patient, including, but not limited to, medical and health
care services provided to a Patient and performed by Borrower which are
covered by a policy of insurance issued by an Insurer, and includes
physician services, nurse and therapist services, dental services,
hospital services, skilled nursing facility services, comprehensive outpa-
tient rehabilitation services, home health care services, residential and
out-patient behavioral healthcare services, and medicine or health care
equipment provided by Borrower to a Patient for a necessary or
specifically requested valid and proper medical or health purpose.
Section 1.33. Note. "Note" has the meaning set forth in Section
2.1(c).
Section 1.34. Obligations. "Obligations" has the meaning set forth
in Section 3.1.
Section 1.35. Patient. "Patient" means any Person receiving Medical
Services from Borrower and all Persons legally liable to pay Borrower for
such Medical Services other than Insurers.
Section 1.36. Permitted Liens. "Permitted Liens" means: (a) liens
for taxes not delinquent, or which are being contested in good faith and
by appropriate proceedings which suspend the collection thereof and in
respect of which adequate reserves have been made (provided that such
proceedings do not, in Lender's sole discretion, involve any substantial
danger of the sale, loss or forfeiture of such property or assets or any
interest therein); (b) deposits or pledges to secure obligations under
workmen's compensation, social security or similar laws, or under
unemployment insurance; (c) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of business; (d) mechanic's,
workmen's, materialmen's or other like liens arising in the ordinary
course of business with respect to obligations which are not due, or which
are being contested in good faith by appropriate proceedings which suspend
the collection thereof and in respect of which adequate reserves have been
made (provided that such proceedings do not, in Lender's sole discretion,
involve any substantial danger of the sale, loss or forfeiture of such
property or assets or any interest therein); (e) liens and encumbrances in
favor of Lender; (f) liens granted in connection with the lease or
purchase of property or assets financed by borrowings permitted by Section
7.1 (provided, however, that no such borrowings permitted by Section 7.1
may be secured by liens on any of the Collateral); and (g) liens set forth
on Schedule 1.36.
Section 1.37. Person. "Person" means an individual, partnership,
corporation, trust, joint venture, joint stock company, limited liability
company, association, unincorporated organization, Governmental Authority,
or any other entity.
Section 1.38. Plan. "Plan" has the meaning set forth in Section
4.12.
Section 1.39. Premises. "Premises" has the meaning set forth in
Section 4.15.
Section 1.40. Prime Rate of Interest. "Prime Rate of Interest"
means that rate of interest designated as such by Fleet National Bank of
Connecticut, N.A., or any successor thereto, as the same may from time to
time fluctuate.
Section 1.41. Prohibited Transaction. "Prohibited Transaction"
means a "prohibited transaction" within the meaning of Section 406 of
ERISA or Section 4975(c)(1) of the Internal Revenue Code.
Section 1.42. Qualified Account. "Qualified Account" means an
Account of Borrower generated in the ordinary course of Borrower's
business from the sale of goods or rendition of medical services which
Lender, in its sole credit judgment, deems to be a Qualified Account.
Without limiting the generality of the foregoing, no Account shall be a
Qualified Account if: (a) the Account or any portion thereof is payable
by an individual beneficiary, recipient or subscriber individually and not
directly to Borrower by a Medicaid/Medicare Account Debtor or commercial
medical insurance carrier acceptable to Lender in its sole discretion; (b)
the Account remains unpaid more than one hundred twenty (120) days past
the claim or invoice date, provided, however, that no more than fifteen
percent (15%) of Qualified Accounts at any time shall be between ninety-
one (91) and one hundred twenty (120) days past the claim or invoice
date); (c) the Account is subject to any defense, set-off, counterclaim,
deduction, discount, credit, chargeback, freight claim, allowance, or
adjustment of any kind; (d) any part of any goods the sale of which has
given rise to the Account has been returned, rejected, lost, or damaged;
(e) if the Account arises from the sale of goods by Borrower, such sale
was not an absolute sale or on consignment or on approval or on a sale-or-
return basis or subject to any other repurchase or return agreement, or
such goods have not been shipped to the Account Debtor or its designee;
(f) if the Account arises from the performance of services, such services
have not been actually been performed or were undertaken in violation of
any law; (g) the Account is subject to a lien other than a Permitted Lien;
(h) Borrower knows or should have known of the bankruptcy, receivership,
reorganization, or insolvency of the Account Debtor; (i) the Account is
evidenced by chattel paper or an instrument of any kind, or has been
reduced to judgment; (j) the Account is an Account of an Account Debtor
having its principal place of business or executive office outside the
United States; (k) the Account Debtor is an Affiliate or Subsidiary of
Borrower; (l) more than ten percent (10%) of the aggregate balance of all
Accounts owing from the Account Debtor obligated on the Account are
outstanding more than ninety (90) days past their invoice date; (m) fifty
percent (50%) or more of the aggregate unpaid Accounts from any individual
Account Debtor are not deemed Qualified Accounts hereunder; (n) the total
unpaid Accounts of the Account Debtor, except for a Medicaid/Medicare
Account Debtor, exceed twenty percent (20%) of the net amount of all
Qualified Accounts (including Medicaid/Medicare Account Debtors); (o) any
covenant, representation or warranty contained in the Loan Documents with
respect to such Account has been breached; or (p) the Account fails to
meet such other specifications and requirements that may from time to time
be established by Lender, and that, upon request of Borrower, may be
communicated by Lender in writing to Borrower.
Section 1.43. Reportable Event. "Reportable Event" means a
"reportable event" as defined in Section 4043(b) of ERISA.
Section 1.44. Revolving Credit Loan. "Revolving Credit Loan" has
the meaning set forth in Section 2.1(b).
Section 1.45. Term. "Term" has the meaning set forth in Section
2.8.
ARTICLE II
LOAN
Section 2.1. Terms.
(a) The maximum aggregate principal amount of credit extended
by Lender to Borrower hereunder (the "Loan") that will be outstanding at
any time is Three Million and No/100 Dollars ($3,000,000.00) (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 below, and on
such other basis as Lender may reasonably determine. The outstanding
principal balance of the Loan may fluctuate from time to time, to be
reduced by repayments made by Borrower (which may be made without penalty
or premium), and to be increased by future Revolving Credit Loans,
advances and other extensions of credit to or for the benefit of Borrower,
and shall be due and payable in full upon the expiration of the Term. For
purposes of this Agreement, any determination as to whether there is
ability within the Borrowing Base for advances or extensions of credit
shall be made by Lender in its sole discretion and is final and binding
upon Borrower.
(c) At Closing, Borrower shall execute and deliver to Lender a
promissory note evidencing Borrower's unconditional obligation to repay
Lender for Revolving Credit Loans, advances, and other extensions of
credit made under the Loan, in the form of Exhibit A to this Agreement
(the "Note"), dated the date hereof, payable to the order of Lender in
accordance with the terms thereof. The Note shall bear interest from the
date thereof until repaid, with interest payable monthly in arrears on the
first Business Day of each month, at a rate per annum (on the basis of the
actual number of days elapsed over a year of 360 days) equal to the Base
Rate, provided that after an Event of Default such rate shall be equal to
the Default Rate. Each Revolving Credit Loan, advance and other extension
of credit shall be deemed evidenced by the Note, which is deemed
incorporated by reference herein and made a part hereof.
(d) Subject to the terms and conditions of this Agreement,
advances under the Loan shall be made against a borrowing base equal to
eighty percent (80%) of Qualified Accounts due and owing from any
Medicaid/Medicare, Insurer or other Account Debtor (the "Borrowing Base").
Section 2.2. Loan Administration. Borrowings under the Loan shall
be as follows:
(a) A request for a Revolving Credit Loan shall be made, or
shall be deemed to be made, in the following manner: (i) Borrower may
give Lender notice of its intention to borrow, in which notice Borrower
shall specify the amount of the proposed borrowing and the proposed
borrowing date, not later than 2:00 p.m. Eastern time two (2) Business Day
prior to the proposed borrowing date; provided, however, that no such
request may be made at a time when there exists an Event of Default; and
(ii) the becoming due of any amount required to be paid under this
Agreement, whether as interest or for any other Obligation, shall be
deemed irrevocably to be a request for a Revolving Credit Loan on the due
date in the amount required to pay such interest or other Obligation.
(b) Borrower hereby irrevocably authorizes Lender to disburse
the proceeds of each Revolving Credit Loan requested, or deemed to be
requested, as follows: (i) the proceeds of each Revolving Credit Loan
requested under subsection 2.2(a)(i) shall be disbursed by Lender by wire
transfer to such bank account as may be agreed upon by Borrower or Lender
from time to time or elsewhere if pursuant to written direction from
Borrower; and (ii) the proceeds of each Revolving Credit Loan requested
under subsection 2.2(a)(ii) shall be disbursed by Lender by way of direct
payment of the relevant interest or other Obligation.
(c) All Revolving Credit Loans, advances and other extensions
of credit to or for the benefit of Borrower shall constitute one general
Obligation of Borrower, and shall be secured by Lender's lien upon all of
the Collateral.
(d) Lender shall enter all Revolving Credit Loans as debits to
a loan account in the name of Borrower and shall also record in said loan
account all payments made by Borrower on any Obligations and all proceeds
of Collateral which are indefeasibly paid to Lender, and may record
therein, in accordance with customary accounting practice, other debits
and credits, including interest and all charges and expenses properly
chargeable to Borrower.
(e) Lender will account to Borrower monthly with a statement of
Revolving Credit Loans, charges and payments made pursuant to this
Agreement, and such account rendered by Lender shall be deemed final,
binding and conclusive upon Borrower unless Lender is notified by Borrower
in writing to the contrary within thirty (30) days of the date each
accounting is mailed to Borrower. Such notice shall be deemed an
objection to those items specifically objected to therein.
Section 2.3. Collections, Disbursements, Borrowing Availability, and
Lockbox Account. Borrower shall maintain a lockbox account (the
"Lockbox") with First Union National Bank of Florida.(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 thereto as Lender may require. Borrower
shall ensure that all collections of Accounts are paid directly from
Account Debtors into the Lockbox, and that all funds paid into the Lockbox
are immediately transferred into a depository account maintained by Lender
at Bank One Arizona, N.A. or First Bank, N.A., as determined by Lender in
its sole discretion and communicated to Borrower (the "Concentration
Account"). Lender shall apply, on a daily basis, all funds transferred
into the Concentration Account pursuant to this Section 2.3 to reduce the
outstanding indebtedness under the Loan with future Revolving Credit
Loans, advances and other extensions of credit to be made by Lender under
the conditions set forth in this Article II. To the extent that any
collections of Accounts or proceeds of other Collateral are not sent
directly to the Lockbox but are received by Borrower, such collections
shall be held in trust for the benefit of Lender and immediately remitted,
in the form received, to the Lockbox Bank for transfer to the
Concentration Account immediately upon receipt by Borrower. Borrower
acknowledges and agrees that its compliance with the terms of this Section
2.3 is essential, and that upon its failure to comply with any such terms
Lender shall be entitled to assess a non-compliance fee which shall
operate to increase the Base Rate by two percent (2%) per annum during any
period of non-compliance. 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 exists.
Section 2.4. Fees.
(a) At Closing, Borrower shall unconditionally pay to Lender a
commitment fee equal to four-tenths of one percent (0.4%) of the Maximum
Loan Amount (the "Commitment Fee").
(b) Borrower shall pay to Lender all out-of-pocket audit and
appraisal fees in connection with audits and appraisals of Borrower's
books and records and such other matters as Lender shall deem appropriate,
which amounts shall be limited to $8,000 in any calendar year so long as
no Event of Default has occurred, and shall include amounts under Section
2.4(b) of the Loan and Security Agreement between Lender and Affiliated
Borrower (as defined in Section 7.1 below), and which amounts 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.
(c) Borrower shall pay to Lender, on demand, any and all fees,
costs or expenses which Lender or any participant pays to a bank or other
similar institution (including, without limitation, any fees paid by
Lender to any participant) arising out of or in connection with (i) the
forwarding to Borrower or any other Person on behalf of Borrower, by
Lender, of proceeds of Revolving Credit Loans made by Lender to Borrower
pursuant to this Agreement, and (ii) the depositing for collection, by
Lender or any participant, of any check or item of payment received or
delivered to Lender or any participant on account of Obligations.
Section 2.5. Payments. Principal payable on account of Revolving
Credit Loans shall be payable by Borrower to Lender immediately upon the
earliest of (i) the receipt by Borrower of any proceeds of any of the
Collateral, to the extent of such proceeds, (ii) the occurrence of an
Event of Default in consequence of which the Loan and the maturity of the
payment of the Obligations are accelerated, or (iii) the termination of
this Agreement pursuant to Section 2.8 hereof; provided, however, that if
any advance made by Lender in excess of the Borrowing Base shall exist at
any time, Borrower shall, immediately upon demand, repay such overadvance.
Notwithstanding the foregoing, overadvances aggregating less than $200,000
in any calendar year, may be converted to a term loan (at an interest rate
equal to the Base Rate), payable in twelve equal monthly payments of
principal and interest. Interest accrued on the Revolving Credit Loans
shall be due on the earliest of (i) the first Business Day of each month
(for the immediately preceding month), computed on the last calendar day
of the preceding month, (ii) the occurrence of an Event of Default in
consequence of which the Loan and the maturity of the payment of the
Obligations are accelerated, or (iii) the termination of this Agreement
pursuant to Section 2.8 hereof. Except to the extent otherwise set forth
in this Agreement, all payments of principal and of interest on the Loan,
all other charges and any other obligations of Borrower hereunder, shall
be made to Lender to the Concentration Account, in immediately available
funds.
Section 2.6. Use of Proceeds. The proceeds of Lender's advances
under the Loan shall be used solely for working capital and for other
costs of Borrower arising in the ordinary course of Borrower's business.
Section 2.7. Interest Rate Limitation. The parties intend to
conform strictly to the applicable usury laws in effect from time to time
during the term of the Loan. Accordingly, if any transaction contemplated
hereby would be usurious under such laws, then notwithstanding any other
provision hereof: (i) the aggregate of all interest that is contracted
for, charged, or received under this Agreement or under any other Loan
Document shall not exceed the maximum amount of interest allowed by
applicable law (the "Highest Lawful Rate"), and any excess shall be
promptly credited to Borrower by Lender (or, to the extent that such
consideration shall have been paid, such excess shall be promptly refunded
to Borrower by Lender); (ii) neither Borrower nor any other Person now or
hereafter liable hereunder shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Highest Lawful Rate;
and (iii) the effective rate of interest shall be reduced to the Highest
Lawful Rate. All sums paid, or agreed to be paid, to Lender for the use,
forbearance, and detention of the debt of Borrower to Lender shall, to the
extent permitted by applicable law, be allocated throughout the full term
of the Note until payment is made in full so that the actual rate of
interest does not exceed the Highest Lawful Rate in effect at any
particular time during the full term thereof. If at any time the rate of
interest under the Note exceeds the Highest Lawful Rate, the rate of
interest to accrue pursuant to this Agreement shall be limited,
notwithstanding anything to the contrary herein, to the Highest Lawful
Rate, but any subsequent reductions in the Base Rate shall not reduce the
interest to accrue pursuant to this Agreement below the Highest Lawful
Rate until the total amount of interest accrued equals the amount of
interest that would have accrued if a varying rate per annum equal to the
interest rate under the Note had at all times been in effect. If the
total amount of interest paid or accrued pursuant to this Agreement under
the foregoing provisions is less than the total amount of interest that
would have accrued if a varying rate per annum equal to the interest rate
under the Note had been in effect, then Borrower agrees to pay to Lender
an amount equal to the difference between (i) the lesser of (x) the amount
of interest that would have accrued if the Highest Lawful Rate had at all
times been in effect, or (y) the amount of interest that would have
accrued if a varying rate per annum equal to the interest rate under the
Note had at all times been in effect, and (ii) the amount of interest
accrued in accordance with the other provisions of this Agreement.
Section 2.8. Term.
(a) Subject to Lender's right to cease making Revolving Credit
Loans to Borrower upon or after any Event of Default, this Agreement shall
be in effect for a period of two (2) years from the Closing Date, unless
terminated as provided in this Section 2.8 (the "Term"), and this
Agreement shall be renewed for one-year periods thereafter upon the mutual
written agreement of the parties.
(b) Notwithstanding anything herein to the contrary, Lender may
terminate this Agreement without notice upon or after the occurrence of an
Event of Default.
(c) Upon at least thirty (30) days prior written notice to
Lender, Borrower may terminate this Agreement prior to the second annual
anniversary of the Closing Date, provided that, at the effective date of
such termination, Borrower shall pay to Lender (in addition to the then
outstanding principal, accrued interest and other Obligations owing under
the terms of this Agreement and any other Loan Documents) as liquidated
damages for the loss of bargain and not as a penalty, an amount equal to
(i) eight-tenths of one percent (0.8%) of the Maximum Loan Amount if the
effective date of such termination by Borrower is on or prior to the first
annual anniversary of the Closing Date, and (ii) four-tenths of one
percent (0.4%) of the Maximum Loan Amount if the effective date of such
termination by Borrower is after the first annual anniversary of the
Closing Date and prior to the second annual anniversary of the Closing
Date.
(d) All of the Obligations shall be immediately due and payable
upon the termination date stated in any notice of termination of this
Agreement. All undertakings, agreements, covenants, warranties, and
representations of Borrower contained in the Loan Documents shall survive
any such termination and Lender shall retain its liens in the Collateral
and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrower has paid the Obligations
to Lender, in full, in immediately available funds.
Section 2.9. Joint and Several Liability; Binding Obligations.
Each entity comprising Borrower and executing this Agreement on behalf of
Borrower shall be jointly and severally liable for all of the Obligations.
In addition, each entity comprising Borrower hereby acknowledges and
agrees that all of the representations, warranties, covenants,
obligations, conditions, agreements and other terms contained in this
Agreement shall be applicable to and shall be binding upon each individual
entity comprising Borrower, and shall be binding upon all such entities
when taken together.
ARTICLE III
COLLATERAL
Section 3.1. Generally. As security for the payment of all
liabilities of Borrower to Lender, including without limitation: (i)
indebtedness evidenced under the Note, repayment of Revolving Credit
Loans, advances and other extensions of credit, all fees and charges owing
by Borrower, and all other liabilities and obligations of every kind or
nature whatsoever of Borrower to Lender, whether now existing or hereafter
incurred, joint or several, matured or unmatured, direct or indirect,
primary or secondary, related or unrelated, due or to become due,
including but not limited to any extensions, modifications, substitutions,
increases and renewals thereof, (ii) the payment of all amounts advanced
by Lender to preserve, protect, defend, and enforce its rights hereunder
and in the following property in accordance with the terms of this
Agreement, and (iii) the payment of all expenses incurred by Lender in
connection therewith (collectively, the "Obligations"). Borrower hereby
assigns and grants to Lender a continuing first priority lien on and
security interest in, upon, and to the following property (the
"Collateral"):
(a) All of Borrower's now-owned and hereafter acquired or
arising Accounts, accounts receivable and rights to payment of every kind
and description, and any contract rights, chattel paper, documents and
instruments with respect thereto;
(b) All of Borrower's now owned and hereafter acquired or
arising general intangibles of every kind and description pertaining to
its Accounts, accounts receivable and other rights to payment, including,
but not limited to, all existing and future customer lists, choses in
action, claims, books, records, contracts, licenses, formulae, tax and
other types of refunds, returned and unearned insurance premiums, rights
and claims under insurance policies, and computer information, software,
records, and data;
(c) All of Borrower's now or hereafter acquired deposit
accounts into which Accounts are deposited, including the Concentration
Account;
(d) All of Borrower's monies and other property of every kind
and nature now or at any time or times hereafter in the possession of or
under the control of Lender or a bailee or Affiliate of Lender; and
(e) 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
to Lender, or have executed and delivered (all in form and substance
satisfactory to Lender in its sole discretion):
(a) UCC-1 Financing statements pursuant to the Uniform
Commercial Code in effect in the jurisdiction(s) in which Borrower
operates, which Lender may file in any jurisdiction where any Collateral
is or may be located and in any other jurisdiction that Lender deems
appropriate; provided that a carbon, photographic, or other reproduction
or other copy of this Agreement or of a financing statement is sufficient
as and may be filed in lieu of a financing statement; and
(b) Any other agreements, documents, instruments, and writings
deemed necessary by Lender or as Lender may otherwise request from time to
time in its sole discretion to evidence, perfect, or protect Lender's lien
and security interest in the Collateral required hereunder.
Section 3.3. Collateral Administration.
(a) All Collateral (except deposit accounts) will at all times
be kept by Borrower at its principal office(s) as set forth on Exhibit C
hereto and shall not, without the prior written approval of Lender, be
moved therefrom.
(b) Borrower shall keep accurate and complete records of its
Accounts and all payments and collections thereon and shall submit to
Lender on such periodic basis as Lender shall request a sales and
collections report for the preceding period, in form satisfactory to
Lender. In addition, if Accounts in an aggregate face amount in excess of
$50,000.00 that were previously included in the Borrowing Base become
ineligible because they fall within one of the specified categories of
ineligibility set forth in the definition of Qualified Accounts or
otherwise, Borrower shall notify Lender of such occurrence on the first
Business Day following such occurrence and the Borrowing Base shall
thereupon be adjusted to reflect such occurrence. If requested by Lender,
Borrower shall execute and deliver to Lender formal written assignments of
all of its Accounts weekly or daily, which shall include all Accounts that
have been created since the date of the last assignment, together with
copies of claims, invoices or other information related thereto.
(c) Whether or not an Event of Default has occurred, any of
Lender's officers, employees or agents shall have the right, at any time
or times hereafter, in the name of Lender, any designee of Lender or
Borrower, to verify the validity, amount or any other matter relating to
any Accounts by mail, telephone, telegraph or otherwise. Borrower shall
cooperate fully with Lender in an effort to facilitate and promptly
conclude such verification process.
(d) To expedite collection, Borrower shall endeavor in the
first instance to make collection of its Accounts for Lender. Lender
retains the right at all times after the occurrence of an Event of
Default, subject to applicable law regarding Medicaid/Medicare 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 reasonable attorneys' fees, to
Borrower.
Section 3.4. Other Actions. In addition to the foregoing, Borrower
(i) shall provide prompt written notice to each private indemnity, managed
care or other Insurer who either is currently an Account Debtor or becomes
an Account Debtor at any time following the date hereof that Lender has
been granted a first priority lien and security interest in, upon and to
all Accounts applicable to such Insurer, and hereby authorizes Lender to
send any and all similar notices to such Insurers by Lender, and (ii)
shall do anything further that may be lawfully required by Lender to
secure Lender and effectuate the intentions and objects of this Agreement,
including but not limited to the execution and delivery of lockbox
agreements, continuation statements, amendments to financing statements,
and any other documents required hereunder. At Lender's request, Borrower
shall also immediately deliver to Lender all items for which Lender must
receive possession to obtain a perfected security interest. Borrower
shall, on Lender's demand, deliver to Lender all notes, certificates, and
documents of title, chattel paper, warehouse receipts, instruments, and
any other similar instruments constituting Collateral.
Section 3.5. Searches. Prior to Closing, and thereafter (as and
when requested by Lender in its sole discretion), Borrower shall obtain
and deliver to Lender the following searches against Borrower (the results
of which are to be consistent with Borrower's representations and
warranties under this Agreement), all at its own expense:
(a) Uniform Commercial Code searches with the Secretary of
State and local filing offices of each jurisdiction where Borrower
maintains its executive offices, a place of business, or assets;
(b) Judgment, federal tax lien and corporate and partnership
tax lien searches, in each jurisdiction searched under clause (a) above;
and
(c) Good standing certificates showing Borrower to be in good
standing in its state of formation and in each other state in which it is
doing and presently intends to do business for which qualification is
required.
Section 3.6. Power of Attorney. Each of the officers of Lender is
hereby irrevocably made, constituted and appointed the true and lawful
attorney for Borrower (without requiring any of them to act as such) with
full power of substitution to do the following: (i) endorse the name of
Borrower upon any and all checks, drafts, money orders, and other
instruments for the payment of money that are payable to Borrower and
constitute collections on Borrower's Accounts; (ii) execute in the name of
Borrower any financing statements, schedules, assignments, instruments,
documents, and statements that Borrower is obligated to give Lender
hereunder; and (iii) do such other and further acts and deeds in the name
of Borrower that Lender may deem necessary or desirable to enforce any
Account or other Collateral or perfect Lender's security interest or lien
in any Collateral.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each entity comprising Borrower represents and warrants to
Lender, and shall be deemed to represent and warrant on each day on which
any Obligations shall be outstanding hereunder, that:
Section 4.1. Subsidiaries. Each entity (other than NuMed Home
Health Care, Inc.) comprising Borrower is a direct or indirect subsidiary
of NuMed Home Health Care, Inc. The organizational structure is as set
forth on Schedule 4.1.
Section 4.2. Organization and Good Standing. Borrower is a
corporation duly organized, validly existing, and in good standing under
the laws of its state of formation, is in good standing as a foreign
corporation in each jurisdiction in which the character of the properties
owned or leased by it therein or the nature of its business makes such
qualification necessary, has the corporate power and authority to own its
assets and transact the business in which it is engaged, and has obtained
all certificates, licenses and qualifications required under all laws,
regulations, ordinances, or orders of public authorities necessary for the
ownership and operation of all of its properties and transaction of all of
its business.
Section 4.3. Authority. Borrower has full corporate power and
authority to enter into, execute, and deliver this Agreement and to
perform its obligations hereunder, to borrow the Loan, to execute and
deliver the Note, and to incur and perform the obligations provided for in
the Loan Documents, all of which have been duly authorized by all
necessary corporate action.
No consent or approval of shareholders of, or lenders to, Borrower and no
consent, approval, filing or registration with any Governmental Authority
is required as a condition to the validity of the Loan Documents or the
performance by Borrower of its obligations thereunder.
Section 4.4. Binding Agreement. This Agreement and all other Loan
Documents constitute, and the Note, when issued and delivered pursuant
hereto for value received, will constitute, the valid and legally binding
obligations of Borrower, enforceable against Borrower in accordance with
their respective terms.
Section 4.5. Litigation. Except as disclosed in Schedule 4.5, there
are no actions, suits, proceedings or investigations pending or threatened
against Borrower before any court or arbitrator or before or by any
Governmental Authority which, in any one case or in the aggregate, if
determined adversely to the interests of Borrower, could have a material
adverse effect on the business, properties, condition (financial or
otherwise) or operations, present or prospective, of Borrower, or upon its
ability to perform its obligations under the Loan Documents. Borrower is
not in default with respect to any order of any court, arbitrator, or
Governmental Authority applicable to Borrower or its properties.
Section 4.6. No Conflicts. The execution and delivery by Borrower
of this Agreement and the other Loan Documents do not, and the performance
of its obligations thereunder will not, violate, conflict with, constitute
a default under, or result in the creation of a lien or encumbrance upon
the property of Borrower under: (i) any provision of Borrower's articles
of incorporation or bylaws, (ii) any provision of any law, rule, or
regulation applicable to Borrower, or (iii) any of the following: (A) any
indenture or other agreement or instrument to which Borrower is a party or
by which Borrower or its property is bound; or (B) any judgment, order or
decree of any court, arbitration tribunal, or Governmental Authority
having jurisdiction over Borrower which is applicable to Borrower.
Section 4.7. Financial Condition. The annual financial statements
of Borrower as of March 31, 1997 audited by Ernst & Young, LLC and the
unaudited financial statements of Borrower as of June 30, 1997, 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 therein or in the notes
thereto. There has been no adverse change in the business, properties,
condition (financial or otherwise) or operations (present or prospective)
of Borrower since June 30, 1997. Borrower's fiscal year ends on March 31.
The federal tax identification number of each entity comprising Borrower
is as shown on Schedule 4.7.
Section 4.8. No Default. Borrower is not in default under or with
respect to any obligation in any respect which could be adverse to its
business, operations, property or financial condition, or which could
adversely affect the ability of Borrower to perform its obligations
under the Loan Documents. No Event of Default or event which, with the
giving of notice or lapse of time, or both, could become an Event of
Default, has occurred and is continuing.
Section 4.9. Title to Properties. Borrower has good and marketable
title to its properties and assets, including the Collateral and the
properties and assets reflected in the financial statements described in
Section 4.7, subject to no lien, mortgage, pledge, encumbrance or charge
of any kind, other than Permitted Liens. Borrower has not agreed or
consented to cause any of its properties or assets whether owned now or
hereafter acquired to be subject in the future (upon the happening of a
contingency or otherwise) to any lien, mortgage, pledge, encumbrance or
charge of any kind other than Permitted Liens.
Section 4.10. Taxes. Borrower has filed, or has obtained extensions
for the filing of, all federal, state and other tax returns which are
required to be filed, and has paid all taxes shown as due on those returns
and all assessments, fees and other amounts due as of the date hereof.
All tax liabilities of Borrower were, as of June 30, 1997 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.
Section 4.11. Securities and Banking Laws and Regulations.
(a) The use of the proceeds of the Loan and Borrower's issuance
of the Note will not directly or indirectly violate or result in a
violation of the Securities Act of 1933 or the Securities Exchange Act of
1934, as amended, or any regulations issued pursuant thereto, including
without limitation Regulations U, T, G, or X of the Board of Governors of
the Federal Reserve System. Borrower is not engaged in the business of
extending credit for the purpose of the purchasing or carrying "margin
stock" within the meaning of those regulations. No part of the proceeds
of the Loan hereunder will be used to purchase or carry any margin stock
or to extend credit to others for such purpose.
(b) Borrower is not an investment company within the meaning of
the Investment Company Act of 1940, as amended, nor is it, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company within the meaning of that Act.
Section 4.12. ERISA. No employee benefit plan (a "Plan") subject to
the Employee Retirement Income Security Act of 1974 ("ERISA") and
regulations issued pursuant thereto that is maintained by Borrower or
under which Borrower could have any liability under ERISA (a) has failed
to meet minimum funding standards established in Section 302 of ERISA, (b)
has failed to comply with all applicable requirements of ERISA and of the
Internal Revenue Code, including all applicable rulings and regulations
thereunder, (c) has engaged in or been involved in a prohibited
transaction (as defined in ERISA) under ERISA or under the Internal
Revenue Code, or (d) has been terminated. Borrower has not assumed, or
received notice of a claim asserted against Borrower for, withdrawal
liability (as defined in the Multi-Employer Pension Plan Amendments Act of
1980, as amended) with respect to any multi-employer pension plan and is
not a member of any Controlled Group (as defined in ERISA). Borrower has
timely made when due all contributions with respect to any multi-employer
pension plan in which it participates and no event has occurred triggering
a claim against Borrower for withdrawal liability with respect to any
multi-employer pension plan in which Borrower participates.
Section 4.13. Compliance with Law. Except as described in Schedule
4.13, Borrower is not in violation of any statute, rule or regulation of
any Governmental Authority (including, without limitation, any statute,
rule or regulation relating to employment practices or to environmental,
occupational and health standards and controls). Borrower has obtained
all licenses, permits, franchises, and other governmental authorizations
necessary for the ownership of its properties and the conduct of its
business. Borrower is current with all reports and documents required to
be filed with any state or federal securities commission or similar
Governmental Authority and is in full compliance with all applicable rules
and regulations of such commissions.
Section 4.14. Environmental Matters. No use, exposure, release,
generation, manufacture, storage, treatment, transportation or disposal of
Hazardous Material has occurred or is occurring on or from any real
property on which the Collateral is located or which is owned, leased or
otherwise occupied by Borrower (the "Premises"), or off the Premises as a
result of any action of Borrower, except as described in Schedule 4.14.
All Hazardous Material used, treated, stored, transported to or from,
generated or handled on the Premises, or off the Premises by Borrower, has
been disposed of on or off the Premises by or on behalf of Borrower in a
lawful manner. There are no underground storage tanks present on or under
the Premises owned or leased by Borrower. No other environmental, public
health or safety hazards exist with respect to the Premises.
Section 4.15. Places of Business. The only places of business of
Borrower, and the places where it keeps and intends to keep the Collateral
and records concerning the Collateral, are at the addresses set forth in
Schedule 4.15. Schedule 4.15 also lists the owner of record of each such
property.
Section 4.16. Intellectual Property. Borrower exclusively owns 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
present 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.
Section 4.17. Stock Ownership. NuMed Home Health Care, Inc. is a
public company. Each other entity constituting Borrower is a direct or
indirect subsidiary, as shown on Schedule 4.1.
Section 4.18. Material Facts. Neither this Agreement nor any other
Loan Document nor any other agreement, document, certificate, or statement
furnished to Lender by or on behalf of Borrower in connection with the
transactions contemplated hereby contains any untrue statement of material
fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact
known to Borrower that adversely affects or in the future may adversely
affect the business, operations, affairs or financial condition of
Borrower, or any of its properties or assets.
Section 4.19. Investments, Guarantees, and Certain Contracts.
Borrower does not own or hold any equity or long-term debt investments in,
have any outstanding advances to, have any outstanding guarantees for the
obligations of, or have any outstanding borrowings from, any Person,
except as described on Schedule 4.19. Borrower is not a party to any
contract or agreement, or subject to any corporate restriction, which
adversely affects its business.
Section 4.20. Business Interruptions. Within five years prior to
the date hereof, neither the business, property or assets, or operations
of Borrower has been adversely affected in any way by any casualty,
strike, lockout, combination of workers, or order of the United States of
America or other Governmental Authority, directed against Borrower. There
are no pending or threatened labor disputes, strikes, lockouts, or similar
occurrences or grievances against Borrower or its business.
Section 4.21. Names. Within five years prior to the date hereof,
Borrower has not conducted business under or used any other name (whether
corporate, partnership or assumed) other than as shown on Schedule 4.21.
Borrower is the sole owner of all names listed on that Schedule and any
and all business done and invoices issued in such names are Borrower's
sales, business, and invoices. Each trade name of Borrower represents a
division or trading style of Borrower and not a separate Person or
independent Affiliate.
Section 4.22 Joint Ventures. Borrower is not engaged in any joint
venture or partnership with any other Person, except as set forth on
Schedule 4.22.
Section 4.23 Accounts. Lender may rely, in determining which
Accounts are Qualified Accounts, on all statements and representations
made by Borrower with respect to any Account or Accounts. Unless
otherwise indicated in writing to Lender, with respect to each Account:
(a) It is genuine and in all respects what it purports to be,
and is not evidenced by a judgment;
(b) It arises out of a completed, bona fide sale and delivery
of goods or rendition of services by Borrower in the ordinary course of
its business and in accordance with the terms and conditions of all
purchase orders, contracts, certification, participation, certificate of
need, or other documents relating thereto and forming a part of the
contract between Borrower and the Account Debtor;
(c) It is for a liquidated amount maturing as stated in a
duplicate claim or invoice covering such sale or rendition of services, a
copy of which has been furnished or is available to Lender;
(d) Such Account, and Lender's security interest therein, is
not, and will not (by voluntary act or omission by Borrower), be in the
future, subject to any offset, lien, deduction, defense, dispute,
counterclaim or any other adverse condition, and each such Account is
absolutely owing to Borrower and is not contingent in any respect or for
any reason;
(e) There are no facts, events or occurrences which in any way
impair the validity or enforceability of any Accounts or tend to reduce
the amount payable thereunder from the face amount of the claim or invoice
and statements delivered to Lender with respect thereto;
(f) To the best of Borrower's knowledge, (i) the Account Debtor
thereunder had the capacity to contract at the time any contract or other
document giving rise to the Account was executed and (ii) such Account
Debtor is solvent;
(g) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any Account
Debtor thereunder which might result in any material adverse change in
such Account Debtor's financial condition or the collectibility of such
Account;
(h) It has been billed and forwarded to the Account Debtor for
payment in accordance with applicable laws and compliance and conformance
with any and requisite procedures, requirements and regulations governing
payment by such Account Debtor with respect to such Account, and such
Account if due from a Medicaid/Medicare Account Debtor is properly payable
directly to Borrower; and
(i) Borrower has obtained and currently has all certificates of
need, Medicaid and Medicare provider numbers, licenses, permits and
authorizations as necessary in the generation of such Accounts.
ARTICLE V
CLOSING AND CONDITIONS OF LENDING
Section 5.1. Conditions Precedent to Agreement. The obligation of
Lender to enter into and perform this Agreement and to make Revolving
Credit Loans is subject to the following conditions precedent:
(a) Lender shall have received two (2) originals of this
Agreement and all other Loan Documents required to be executed and
delivered at or prior to Closing (other than the Note, as to which Lender
shall receive only one original), executed by Borrower and any other
required Persons, as applicable.
(b) Lender shall have received all searches and good standing
certificates required by Section 3.5.
(c) Borrower shall have complied and shall then be in
compliance with all the terms, covenants and conditions of the Loan
Documents.
(d) There shall have occurred no Event of Default and no event
which, with the giving of notice or the lapse of time, or both, could
constitute such an Event of Default.
(e) The representations and warranties contained in Article IV
shall be true and correct.
(f) Lender shall have received copies of all board of directors
resolutions of Borrower, and other corporate action taken by Borrower to
authorize the execution, delivery and performance of the Loan Documents
and the borrowing of the Loan thereunder, as well as the names and
signatures of the officers of Borrower authorized to execute documents on
its behalf in connection herewith, all as also certified as of the date
hereof by Borrower's chief financial officer, and such other papers as
Lender may require.
(g) Lender shall have received copies, certified as true,
correct and complete by a corporate officer of each Borrower, of the
articles of incorporation of each Borrower, with any amendments to any of
the foregoing, and all other documents necessary for performance of the
obligations of Borrower under this Agreement and the other Loan Documents.
(h) Lender shall have received a written opinion of counsel for
Borrower, dated the date hereof, in the form of Exhibit D.
(i) Lender shall have received such financial statements,
reports, certifications, and other operational information required to be
delivered hereunder, including without limitation an initial borrowing
base certificate calculating the Borrowing Base.
(j) Lender shall have received the Commitment Fee.
(k) The Lockbox and the Concentration Account shall have been
established.
(l) Lender shall have received a certificate of Borrower's
chief financial officer, dated the Closing Date, certifying that all of
the conditions specified in this Section have been fulfilled.
Section 5.2. Conditions Precedent to Advances. Notwithstanding any
other provision of this Agreement, no Loan proceeds, Revolving Credit
Loans, advances or other extensions of credit under the Loan shall be
disbursed hereunder unless the following conditions have been satisfied or
waived immediately prior to such disbursement:
(a) The representations and warranties on the part of Borrower
contained in Article IV of this Agreement shall be true and correct in all
respects at and as of the date of disbursement or advance, as though made
on and as of such date (except to the extent that such representations and
warranties expressly relate solely to an earlier date and except that the
references in Section 4.7 to financial statements shall be deemed to be a
reference to the then most recent annual and interim financial statements
of Borrower furnished to Lender pursuant to Section 6.1 hereof).
(b) No Event of Default or event which, with the giving of
notice 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.
(c) No adverse change in the condition (financial or
otherwise), properties, business, or operations of Borrower shall have
occurred and be continuing with respect to Borrower since the date hereof.
Section 5.3. Closing. Subject to the conditions of this Article V,
the Loan shall be made available on the date as is mutually agreed by the
parties (the "Closing Date") at such time as may be mutually agreeable to
the parties upon the execution hereof (the "Closing") at such place as may
be requested by Lender.
Section 5.4. Waiver of Rights. By completing the Closing hereunder,
or by making advances under the Loan, Lender does not waive a breach of
any representation or warranty of Borrower hereunder or under any other
Loan Document, and all of Lender's claims and rights resulting from any
breach or misrepresentation by Borrower are specifically reserved by
Lender.
ARTICLE VI
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that for so long as Borrower may borrow
hereunder and until payment in full of the Note and performance of all
other obligations of Borrower under the Loan Documents:
Section 6.1. Financial Statements and Collateral Reports. Borrower
will furnish to Lender (i) a sales and collections report and accounts
receivable aging schedule on a form acceptable to Lender within fifteen
(15) days after the end of each calendar month, which shall include, but
not be limited to, a report of sales, credits issued, and collections
received; (ii) payable aging schedules within fifteen (15) days after the
end of each calendar month; (iii) internally prepared 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,
accompanied by management analysis and actual vs. budget variance reports;
(iv) to the extent prepared by Borrower, annual projections, profit and
loss statements, balance sheets, and cash flow reports (prepared on a
monthly basis) for the succeeding fiscal year within thirty (30) days
before the end of each of Borrower's fiscal years; (v) internally prepared
annual financial statements for Borrower within sixty (60) days after the
end of each of Borrower's fiscal years; (vi) annual audited financial
statements for Borrower prepared by Ernst & Young, LLP, or a firm of
independent public accountants satisfactory to Lender, within one hundred
thirty-five (135) days after the end of each of Borrower's fiscal years;
(vii) promptly upon receipt thereof, copies of any reports submitted to
Borrower by the independent accountants in connection with any interim
audit of the books of Borrower and copies of each management control
letter provided to Borrower by independent accountants; (viii) as soon as
available, copies of all financial statements and notices provided by
Borrower to all of its stockholders; and (ix) such additional information,
reports or statements as Lender may from time to time request. Annual
financial statements shall set forth in comparative form figures for the
corresponding periods in the prior fiscal year. All financial statements
shall include a balance sheet and statement of earnings and shall be
prepared in accordance with GAAP.
Section 6.2. Payments Hereunder. Borrower will make all payments of
principal, interest, fees, and all other payments required hereunder,
under the Loan, and under any other agreements with Lender to which
Borrower is a party, as and when due.
Section 6.3. Existence, Good Standing, and Compliance with Laws.
Borrower will do or cause to be done all things necessary (a) to obtain
and keep in full force and effect all corporate existence, rights,
licenses, privileges, and franchises of Borrower necessary to the
ownership of its property or the conduct of its business, and comply with
all applicable present and future laws, ordinances, rules, regulations,
orders and decrees of any Governmental Authority having or claiming
jurisdiction over Borrower; and (b) to maintain and protect the
properties used or useful in the conduct of the operations of Borrower,
in a prudent manner, including without limitation the maintenance at all
times of such insurance upon its insurable property and operations as
required by law or by Section 6.7 hereof.
Section 6.4. Legality. The making of the Loan and each disbursement
or advance under the Loan shall not be subject to any penalty or special
tax, shall not be prohibited by any governmental order or regulation
applicable to Borrower, and shall not violate any rule or regulation of
any Governmental Authority, and necessary consents, approvals and
authorizations of any Governmental Authority to or of any such
disbursement or advance shall have been obtained.
Section 6.5. Lender's Satisfaction. All instruments and legal
documents and proceedings in connection with the transactions contemplated
by this Agreement shall be satisfactory in form and substance to Lender
and its counsel, and Lender shall have received all documents, including
records of corporate proceedings and opinions of counsel, which Lender may
have requested in connection therewith.
Section 6.6. Taxes and Charges. Borrower will timely file all tax
reports and pay and discharge all taxes, assessments and governmental
charges or levies imposed upon Borrower, or its income or profits or upon
its properties or any part thereof, before the same shall be in default
and prior to the date on which penalties attach thereto, as well as all
lawful claims for labor, material, supplies or otherwise which, if unpaid,
might become a lien or charge upon the properties or any part thereof of
Borrower; provided, however, that Borrower shall not be required to pay
and discharge or cause to be paid and discharged any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith and by appropriate proceedings by Borrower, and
Borrower shall have set aside on their books adequate reserve therefor;
and provided further, that such deferment of payment is permissible only
so long as Borrower's title to, and its right to use, the Collateral is
not adversely affected thereby and Lender's lien and priority on the
Collateral are not adversely affected, altered or impaired thereby.
Section 6.7. Insurance. Borrower will carry adequate public
liability and professional liability insurance with responsible companies
satisfactory to Lender in such amounts and against such risks as is
customarily maintained by similar businesses and by owners of similar
property in the same general area.
Section 6.8. General Information. Borrower will furnish to Lender
such information as Lender may, from time to time, request with respect to
the business or financial affairs of Borrower, and permit any officer,
employee or agent of Lender to visit and inspect any of the properties, to
examine the minute books, books of account and other records, including
management letters prepared by Borrower's auditors, of Borrower, and make
copies thereof or extracts therefrom, and to discuss its and their business
affairs, finances and accounts with, and be advised as to the same by, the
accountants and officers of Borrower, all at such times and as often as
Lender may require. Lender shall maintain in confidence all financial and
related information of Borrower. In particular, and not in limitation of
the foregoing, Lender acknowledges that financial reports of Borrower that
have not been filed with the SEC or otherwise publicly disclosed may
constitute material, nonpublic information.
Section 6.9. Maintenance of Property. Borrower will maintain, keep
and preserve all of its properties in good repair, working order and
condition and from time to time make all needful and proper repairs,
renewals, replacements, betterments and improvements thereto, so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times.
Section 6.10. Notification of Events of Default and Adverse
Developments. Borrower promptly will notify Lender upon the occurrence
of: (i) any Event of Default; (ii) any event which, with the giving of
notice or lapse of time, or both, could constitute an Event of Default;
(iii) any event, development or circumstance whereby the financial
statements previously furnished to Lender fail in any material respect to
present fairly, in accordance with GAAP, the financial condition and
operational results of Borrower; (iv) any judicial, administrative or
arbitration proceeding pending against Borrower, and any judicial or
administrative proceeding known by Borrower to be threatened against it
which, if adversely decided, could adversely affect its condition
(financial or otherwise) or operations (present or prospective) or which
may expose Borrower to uninsured liability of $25,000.00 or more; (v) any
default claimed by any other creditor for Borrowed Money of Borrower other
than Lender; and (vi) any other development in the business or affairs of
Borrower which may be adverse; in each case describing the nature thereof
and (in the case of notification under clauses (i) and (ii)) the action
Borrower proposes to take with respect thereto.
Section 6.11. Employee Benefit Plans. Borrower will (i) comply with
the funding requirements of ERISA with respect to the Plans for its
employees, or will promptly satisfy any accumulated funding deficiency
that arises under Section 302 of ERISA; (ii) furnish Lender, promptly
after filing the same, with copies of all reports or other statements
filed with the United States Department of Labor, the Pension Benefit
Guaranty Corporation, or the Internal Revenue Service with respect to all
Plans, or which Borrower, or any member of a Controlled Group, may receive
from such Governmental Authority with respect to any such Plans, and (iii)
promptly advise Lender of the occurrence of any Reportable Event or
Prohibited Transaction with respect to any such Plan and the action which
Borrower proposes to take with respect thereto. Borrower will make all
contributions when due with respect to any multi-employer pension plan in
which it participates and will promptly advise Lender: (i) upon its
receipt of notice of the assertion against Borrower of a claim for
withdrawal liability; (ii) upon the occurrence of any event which could
trigger the assertion of a claim for withdrawal liability against
Borrower; and (iii) upon the occurrence of any event which would place
Borrower in a Controlled Group as a result of which any member (including
Borrower) thereof may be subject to a claim for withdrawal liability,
whether liquidated or contingent.
Section 6.12. Financing Statements. Borrower shall provide to
Lender evidence satisfactory to Lender as to the due recording of
termination statements, releases of collateral, and Forms UCC-3, and shall
cause to be recorded financing statements on Form UCC-1, duly executed by
Borrower and Lender, in all places necessary to release all existing
security interests and other liens in the Collateral (other than as
permitted hereby) and to perfect and protect Lender's first priority lien
and security interest in the Collateral, as Lender may request.
Section 6.13. Financial Records. Borrower shall keep current and
accurate books of records and accounts in which full and correct entries
will be made of all of its business transactions, and will reflect in its
financial statements adequate accruals and appropriations to reserves, all
in accordance with GAAP.
Section 6.14. Collection of Accounts. Borrower shall continue to
collect its Accounts in the ordinary course of business.
Section 6.15. Places of Business. Borrower shall give thirty (30)
days' prior written notice to Lender of any change in the location of any
of its places of business, of the places where its records concerning its
Accounts are kept, of the places where the Collateral is kept, or of the
establishment of any new, or the discontinuance of any existing, places of
business.
Section 6.16. Business Conducted. Borrower shall continue in the
business presently conducted by it using its best efforts to maintain its
customers and goodwill. Borrower shall not engage, directly or
indirectly, in any line of business substantially different from the
business conducted by it immediately prior to the Closing Date, or engage
in business or lines of business which are not reasonably related thereto.
Section 6.17. Litigation and Other Proceedings. Borrower shall give
prompt notice to Lender of any litigation, arbitration, or other
proceeding before any Governmental Authority against or affecting Borrower
if the amount claimed is more than $25,000.00
Section 6.18. Bank Accounts. Borrower shall assign all of its
depository and disbursement accounts to Lender.
Section 6.19. Submission of Collateral Documents. Subject to
applicable federal and state laws and regulation concerning the
confidentiality of patient and medical records, Borrower will, on demand
of Lender, make available to Lender copies of shipping and delivery
receipts evidencing the shipment of goods that gave rise to an Account,
medical records, insurance verification forms, assignment of benefits, in-
take forms or other proof of the satisfactory performance of services that
gave rise to an Account, a copy of the claim or invoice for each Account
and copies of any written contract or order from which the Account arose.
Borrower shall promptly notify Lender if an Account becomes evidenced or
secured by an instrument or chattel paper and upon request of Lender, will
promptly deliver any such instrument or chattel paper to Lender.
Section 6.20. Licensure; Medicaid/Medicare Cost Reports. Borrower
will maintain all certificates of need, provider numbers and licenses
necessary to conduct its business as presently conducted, and take any
steps required to comply with any such new or additional requirements that
may be imposed on providers of medical products and services. If
required, all Medicaid/Medicare cost reports will be properly filed.
Section 6.21. Officer's Certificates. Together with the 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) of that Section, Borrower shall deliver to Lender
a certificate of its chief financial officer, in form and substance
satisfactory to Lender:
(a) Setting forth the information (including detailed
calculations) required to establish whether Borrower is in compliance with
the requirements of Articles VI and VII as of the end of the period
covered by the financial statements then being furnished; and
(b) Stating that the signer has reviewed the relevant terms of
this Agreement, and has made (or caused to be made under his supervision)
a review of the transactions and conditions of Borrower from the beginning
of the accounting period covered by the income statements being delivered
to the date of the certificate, and that such review has not disclosed the
existence during such period of any condition or event which constitutes
an Event of Default or which is then, or with the passage of time or
giving of notice or both, could become an Event of Default, and if any
such condition or event existed during such period or now exists,
specifying the nature and period of existence thereof and what action
Borrower has taken or proposes to take with respect thereto.
Section 6.22. Visits and Inspections. Borrower agrees to permit
representatives of Lender, from time to time, as often as may be
reasonably requested, but only during normal business hours, to visit and
inspect the properties of Borrower, and to inspect, audit and make
extracts from its books and records, and discuss with its officers, its
employees and its independent accountants, Borrower's business, assets,
liabilities, financial condition, business prospects and results of
operations.
Section 6.23. Net Worth. Borrower will not at any time allow its
net worth, as computed in accordance with GAAP, to fall below
$4,000,000.00.
ARTICLE VII
NEGATIVE COVENANTS
Borrower covenants and agrees that so long as Borrower may borrow
hereunder and until payment in full of the Note and performance of all
other obligations of Borrower under the Loan Documents:
Section 7.1. Borrowing. Borrower will not create, incur, assume or
suffer to exist any liability for Borrowed Money except: (i) indebtedness
to Lender; (ii) indebtedness of Borrower secured by mortgages,
encumbrances or liens expressly permitted by Section 7.3 hereof; (iii)
accounts payable to trade creditors and current operating expenses (other
than for borrowed money) which are not aged more than one hundred twenty
(120) days from the billing date or more than thirty (30) days from the
due date, in each case incurred in the ordinary course of business and
paid within such time period, unless the same are being contested in good
faith and by appropriate and lawful proceedings, and Borrower shall have
set aside such reserves, if any, with respect thereto as are required by
GAAP and deemed adequate by Borrower and its independent accountants; and
(iv) borrowings incurred in the ordinary course of its business and not
exceeding $50,000.00, or $250,000.00 in the aggregate (including such
borrowings made by Whole Person Home Health Care of Florida, Inc. and
Whole Person Home Health Care, Inc. ("Affiliated Borrower"), outstanding
at any one time. Borrower will not make prepayments on any existing or
future indebtedness for Borrowed Money to any Person (other than Lender,
to the extent permitted by this Agreement or any subsequent agreement
between Borrower and Lender).
Section 7.2. Joint Ventures. Borrower will not invest directly or
indirectly in any joint venture for any purpose without the prior written
notice to, and the express written consent of, Lender, which consent may
be withheld in Lender's sole discretion.
Section 7.3. Liens and Encumbrances. Borrower will not create,
incur, assume or suffer to exist any mortgage, pledge, lien or other
encumbrance of any kind (including the charge upon property purchased
under a conditional sale or other title retention agreement) upon, or any
security interest in, any of its Collateral, whether now owned or
hereafter acquired, except for Permitted Liens.
Section 7.4. Merger, Acquisition, or Sale of Assets. Borrower will
not enter into any merger or consolidation with or acquire all or
substantially all of the assets of any Person, and will not sell, lease,
or otherwise dispose of any of its assets except in the ordinary course of
its business, without the prior written consent of Lender, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing,
Borrower shall not be required to obtain Lender's consent to any sale,
lease or other disposition where the cost of the transaction to Borrower
is less than $250,000.00.
Section 7.5. Sale and Leaseback. Borrower will not, directly or
indirectly, enter into any arrangement whereby Borrower sells or transfers
all or any part of its assets and thereupon and within one year thereafter
rents or leases the assets so sold or transferred without the prior
written consent of Lender, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, Borrower shall not be required
to obtain Lender's consent to any such arrangement where the cost of the
arrangement to Borrower is less than $250,000.00.
Section 7.6. Dividends, Distributions and Management Fees. Upon
notice from Lender to Borrower of the existence of an Event of Default
hereunder, Borrower will not declare or pay any dividends or other
distributions with respect to, purchase, redeem or otherwise acquire for
value any of its outstanding stock now or hereafter outstanding, or return
any capital of its stockholders, nor shall Borrower pay management fees or
fees of a similar nature to any Person.
Section 7.7. Loans. Borrower will not make loans or advances to any
Person, other than (i) trade credit extended in the ordinary course of its
business, and (ii) advances for business travel and similar temporary
advances in the ordinary course of business to officers, stockholders,
directors, and employees.
Section 7.8. Contingent Liabilities. Borrower will not assume,
guarantee, endorse, contingently agree to purchase or otherwise become
liable upon the obligation of any Person, except by the endorsement of
negotiable instruments for deposit or collection or similar transactions
in the ordinary course of business.
Section 7.9. Subsidiaries. Borrower will not form any subsidiary,
or make any investment in or any loan in the nature of an investment to,
any other Person.
Section 7.10. Compliance with ERISA. Borrower will not permit with
respect to any Plan covered by Title IV of ERISA any Prohibited
Transaction or any Reportable Event.
Section 7.11. Certificates of Need. Borrower will not amend, alter
or suspend or terminate or make provisional in any material way, any
certificate of need or provider number without the prior written consent
of Lender, which consent shall not be unreasonably withheld.
Section 7.12. Transactions with Affiliates. Borrower will not enter
into any transaction, including without limitation the purchase, sale, or
exchange of property, or the loaning or giving of funds to any Affiliate
or subsidiary, except in the ordinary course of business and pursuant to
the reasonable requirements of Borrower's business and upon terms
substantially the same and no less favorable to Borrower as it would
obtain in a comparable arm's length transaction with any Person not an
Affiliate or subsidiary, and so long as the transaction is not otherwise
prohibited hereunder. For purposes of the foregoing, Lender consents to
the transactions described on Schedule 7.12 and transactions solely
between or among parties to this Agreement and/or Affiliated Borrower.
Section 7.13. Use of Lender's Name. Borrower will not use Lender's
name (or the name of any of Lender's affiliates) in connection with any of
its business operations. Borrower may disclose to third parties that
Borrower has a borrowing relationship with Lender. Nothing herein
contained is intended to permit or authorize Borrower to make any contract
on behalf of Lender.
Section 7.14. Change in Status. NuMed Home Health Care, Inc. shall
not cease filing required reports under the Securities Exchange Act of
1934 (the "Exchange Act").
Section 7.15. Contracts and Agreements. Borrower will not become or
be a party to any contract or agreement which would breach this Agreement,
or breach any other instrument, agreement, or document to which Borrower
is a party or by which it is or may be bound.
Section 7.16. Margin Stock. Borrower will not carry or purchase any
"margin security" within the meaning of Regulations U, G, T or X of the
Board of Governors of the Federal Reserve System.
Section 7.17. Truth of Statements and Certificates. Borrower will
not furnish to Lender any certificate or other document that contains any
untrue statement of a material fact or that omits to state a material fact
necessary to make it not misleading in light of the circumstances under
which it was furnished.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1. Events of Default. Each of the following
(individually, an "Event of Default" and collectively, the "Events of
Default") shall constitute an event of default hereunder:
(a) A default in the payment of any installment of principal
of, or interest upon, the Note when due and payable, whether at maturity
or otherwise, or any breach of Section 2.3 of this Agreement, which
default or breach, as applicable, shall have continued unremedied for a
period of ten (10) days after written notice thereof from Lender to
Borrower;
(b) A default in the payment of any other charges, fees, or
other monetary obligations owing to Lender arising out of or incurred in
connection with this Agreement when such payment is due and payable, which
default shall have continued unremedied for a period of ten (10) days
after written notice from Lender;
(c) A default in the due observance or performance by Borrower
of any other term, covenant or agreement contained in any of the Loan
Documents, which default shall have continued unremedied for a period of
fifteen (15) days after written notice from Lender;
(d) If any representation or warranty made by Borrower herein
or in any of the other Loan Documents, any financial statement, or any
statement or representation made in any other certificate, report or
opinion delivered in connection herewith or therewith proves to have been
incorrect or misleading in any material respect when made, which default
shall have continued unremedied for a period of fifteen (15) days after
written notice from Lender;
(e) If any obligation of Borrower (other than its Obligations
hereunder) for the payment of Borrowed Money is not paid when due or
within any applicable grace period, or such obligation becomes or is
declared to be due and payable prior to the expressed maturity thereof, or
there shall have occurred an event which, with the giving of notice or
lapse of time, or both, would cause any such obligation to become, or
allow any such obligation to be declared to be, due and payable;
(f) If Borrower makes an assignment for the benefit of
creditors, offers a composition or extension to creditors, or makes or
sends notice of an intended bulk sale of any business or assets now or
hereafter conducted by Borrower;
(g) If Borrower files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal for any
receiver of or any trustee for itself or any substantial part of its
property, commences any proceeding relating to itself under any
reorganization, arrangement, readjustment or debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter
in effect, or there is commenced against Borrower any such proceeding
which remains undismissed for a period of sixty (60) days, or any Borrower
by any act indicates its consent to, approval of, or acquiescence in, any
such proceeding or the appointment of any receiver of or any trustee for a
Borrower or any substantial part of its property, or suffers any such
receivership or trusteeship to continue undischarged for a period of sixty
(60) days;
(h) If one or more final judgments against Borrower or
attachments against its property not fully and unconditionally covered by
insurance shall be rendered by a court of record and shall remain unpaid,
unstayed on appeal, undischarged, unbonded and undismissed for a period of
ten (10) days;
(i) A Reportable Event which might constitute grounds for
termination of any Plan covered by Title IV of ERISA or for the
appointment by the appropriate United States District Court of a trustee
to administer any such Plan or for the entry of a lien or encumbrance to
secure any deficiency, has occurred and is continuing thirty (30) days
after its occurrence, or any such Plan is terminated, or a trustee is
appointed by an appropriate United States District Court to administer any
such Plan, or the Pension Benefit Guaranty Corporation institutes
proceedings to terminate any such Plan or to appoint a trustee to
administer any such Plan, or a lien or encumbrance is entered to secure
any deficiency or claim;
(j) If there should occur a change in control of NuMed Home
Health Care, Inc.;
(k) If there shall occur any uninsured damage to or loss, theft
or destruction of any portion of the Collateral;
(l) If Borrower breaches of violates the terms of, or if a
default or an event which could, whether with notice or the passage of
time, or both, constitute a default, occurs under any other existing or
future agreement (related or unrelated) between Borrower and Lender;
(m) Upon the issuance of any execution or distraint process
against Borrower or any of its property or assets;
(n) If Borrower ceases any material portion of its business
operations as presently conducted without the prior written consent of
Lender;
(o) If any indication or evidence is received by Lender that
Borrower may have directly or indirectly been engaged in any type of
activity which, in Lender's discretion, might result in the forfeiture of
any property of Borrower to any Governmental Authority, which default
shall have continued unremedied for a period of ten (10) days after
written notice from Lender;
(p) Borrower or any Affiliate of Borrower, shall challenge or
contest, in any action, suit or proceeding, the validity or enforceability
of this Agreement, or any of the other Loan Documents, the legality or the
enforceability of any of the Obligations or the perfection or priority of
any Lien granted to Lender;
(q) Borrower shall be criminally indicted or convicted under
any law that could lead to a forfeiture of any Collateral.
(r) There shall occur a material adverse change in the
financial condition or business prospects of Borrower, or if Lender in
good faith deems itself insecure as a result of acts or events bearing
upon the financial condition of Borrower or the repayment of the Note,
which default shall have continued unremedied for a period of ten (10)
days after written notice from Lender.
Section 8.2. Acceleration. Upon the occurrence of any of the
foregoing Events of Default, the Note shall become and be immediately due
and payable upon declaration to that effect delivered by Lender to
Borrower; provided that, upon the happening of any event specified in
Section 8.1(g) hereof, the Note shall be immediately due and payable
without declaration or other notice to Borrower.
Section 8.3. Remedies.
(a) In addition to all other rights, options, and remedies
granted to Lender under this Agreement, upon the occurrence of an Event of
Default Lender may (i) terminate the Loan, whereupon all outstanding
Obligations shall be immediately due and payable, (ii) exercise all other
rights granted to it hereunder and all rights under the Uniform Commercial
Code in effect in the applicable jurisdiction(s) and under any other
applicable law, and (iii) exercise all rights and remedies under all Loan
Documents now or hereafter in effect, including the following rights and
remedies (which list is given by way of example and is not intended to be
an exhaustive list of all such rights and remedies):
(i) The right to take possession of, send notices
regarding, and collect directly the Collateral, with or without judicial
process, and to exercise all rights and remedies available to Lender with
respect to the Collateral under the Uniform Commercial Code in effect in
the jurisdiction(s) in which such Collateral is located;
(ii) The right to (by its own means or with judicial
assistance) enter any of Borrower's premises and take possession of the
Collateral, or render it unusable, or dispose of the Collateral on such
premises in compliance with subsection (b), without any liability for
rent, storage, utilities, or other sums, and Borrower shall not resist or
interfere with such action;
(iii) The right to require Borrower at Borrower's
expense to assemble all or any part of the Collateral and make it
available to Lender at any place designated by Lender;
(iv) The right to reduce the Maximum Loan Amount or to use
the Collateral and/or funds in the Concentration Account in amounts up to
the Maximum Loan Amount for any reason; and
(v) The right to relinquish or abandon any Collateral or
any security interest therein.
(b) Borrower agrees that a notice received by it at least five
(5) days before the time of any intended public sale, or the time after
which any private sale or other disposition of the Collateral is to be
made, shall be deemed to be reasonable notice of such sale or other
disposition. If permitted by applicable law, any perishable Collateral
which threatens to speedily decline in value or which is sold on a
recognized marked may be sold immediately by Lender without prior notice
to Borrower. At any sale or disposition of Collateral, Lender may (to the
extent permitted by applicable law) purchase all or any part of the
Collateral, free from any right of redemption by Borrower, which right is
hereby waived and released. Borrower covenants and agrees not to
interfere with or impose any obstacle to Lender's exercise of its rights
and remedies with respect to the Collateral.
Section 8.4. Nature of Remedies. Lender shall have the right to
proceed against all or any portion of the Collateral to satisfy the
liabilities and Obligations of Borrower to Lender in any order. All
rights and remedies granted Lender hereunder and under any agreement
referred to herein, or otherwise available at law or in equity, shall be
deemed concurrent and cumulative, and not alternative remedies, and Lender
may proceed with any number of remedies at the same time until the Loans,
and all other existing and future liabilities and obligations of Borrower
to Lender, are satisfied in full. The exercise of any one right or remedy
shall not be deemed a waiver or release of any other right or remedy, and
Lender, upon the occurrence of an Event of Default, may proceed against
Borrower, and/or the Collateral, at any time, under any agreement, with
any available remedy and in any order.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Expenses and Taxes.
(a) Borrower agrees to pay, whether or not the Closing occurs,
a reasonable documentation preparation fee, together with actual audit and
appraisal fees and all other out-of-pocket charges and expenses incurred
by Lender in connection with the negotiation, preparation and execution of
each of the Loan Documents, any amendments to the Loan Documents following
Closing, and preparation for Closing, reimbursement for which fees and
expenses shall not exceed $10,000.00. Borrower also agrees to pay all
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 and the
collection of any amounts due under the Loan Documents.
(b) Borrower shall pay all taxes (other than taxes based upon
or measured by Lender's income or revenues or any personal property tax),
if any, in connection with the issuance of the Note and the recording of
the security documents therefor. The obligations of Borrower under this
clause (b) shall survive the payment of Borrower's indebtedness hereunder
and the termination of this Agreement.
Section 9.2. Entire Agreement; Amendments. This Agreement and the
other Loan Documents constitute the full and entire understanding and
agreement among the parties with regard to their subject matter and
supersede all prior written or oral agreements, understandings,
representations and warranties made with respect thereto. No amendment,
supplement or modification of this Agreement nor any waiver of any
provision thereof shall be made except in writing executed by the party
against whom enforcement is sought.
Section 9.3. No Waiver; Cumulative Rights. No waiver by any party
hereto of any one or more defaults by the other party in the performance
of any of the provisions of this Agreement shall operate or be construed
as a waiver of any future default or defaults, whether of a like or
different nature. No failure or delay on the part of any party in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power
or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to
any party hereto at law, in equity or otherwise.
Section 9.4. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and personally delivered, mailed
by registered or certified mail (return receipt requested and postage
prepaid), sent by telecopier (with a confirming copy sent by regular
mail), or sent by prepaid overnight courier service, and addressed to the
relevant party at its address set forth below, or at such other address as
such party may, by written notice, designate as its address for purposes
of notice hereunder:
(a) If to Lender, at:
HCFP Funding, Inc.
2 Wisconsin Circle, Suite 320
Chevy Chase, Maryland 20815
Attention: Ethan D. Leder, President
Telephone: (301) 961-1640
Telecopier: (301) 664-9860
(b) If to Borrower, at:
NuMed Home Health Care, Inc.
5770 Roosevelt Boulevard, Suite 700
Clearwater, Florida 34620
Attention: Jugal Teneja, Chief Executive Officer
Telephone: (813)524-3227
Telecopier: (813)524-3349
If mailed, notice shall be deemed to be given five (5) days after being
sent, if sent by personal delivery or telecopier, notice shall be deemed
to be given when delivered, and if sent by prepaid courier, notice shall
be deemed to be given on the next Business Day following deposit with the
courier.
Section 9.5. Severability. If any term, covenant or condition of
this Agreement, or the application of such term, covenant or condition to
any party or circumstance shall be found by a court of competent
jurisdiction to be, to any extent, invalid or unenforceable, the remainder
of this Agreement and the application of such term, covenant, or condition
to parties or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term,
covenant or condition shall be valid and enforced to the fullest extent
permitted by law. Upon determination that any such term is invalid,
illegal or unenforceable, the parties hereto shall amend this Agreement so
as to effect the original intent of the parties as closely as possible in
an acceptable manner.
Section 9.6. Successors and Assigns. This Agreement, the Note, and
the other Loan Documents shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns.
Notwithstanding the foregoing, Borrower may not assign any of its rights
or delegate any of its obligations hereunder without the prior written
consent of Lender, which may be withheld in its sole discretion. Lender
may sell, assign, transfer, or participate any or all of its rights or
obligations hereunder without notice to or consent of Borrower.
Section 9.7. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute but one instrument.
Section 9.8. Interpretation. No provision of this Agreement or any
other Loan Document shall be interpreted or construed against any party
because that party or its legal representative drafted that provision.
The titles of the paragraphs of this Agreement are for convenience of
reference only and are not to be considered in construing this Agreement.
Any pronoun used in this Agreement shall be deemed to include singular and
plural and masculine, feminine and neuter gender as the case may be. The
words "herein," "hereof," and "hereunder" shall be deemed to refer to this
entire Agreement, except as the context otherwise requires.
Section 9.9. Survival of Terms. All covenants, agreements,
representations and warranties made in this Agreement, any other Loan
Document, and in any certificates and other instruments delivered in
connection therewith shall be considered to have been relied upon by
Lender and shall survive the making by Lender of the Loans herein
contemplated and the execution and delivery to Lender of the Note, and
shall continue in full force and effect until all liabilities and
obligations of Borrower to Lender are satisfied in full.
Section 9.10. Release of Lender. Borrower releases Lender, its
officers, employees, and agents, of and from any claims for loss or damage
resulting from acts or conduct of any or all of them, unless caused by
Lender's recklessness, gross negligence, or willful misconduct.
Section 9.11. Time. Whenever Borrower is required to make any
payment or perform any act on a Saturday, Sunday, or a legal holiday under
the laws of the State of Maryland (or other jurisdiction where Borrower is
required to make the payment or perform the act), the payment may be made
or the act performed on the next Business Day. Time is of the essence in
Borrower's performance under this Agreement and all other Loan Documents.
Section 9.12. Commissions. The transaction contemplated by this
Agreement was brought about by Lender and Borrower acting as principals
and without any brokers, agents, or finders being the effective procuring
cause. Borrower represents that it has not committed Lender to the
payment of any brokerage fee, commission, or charge in connection with
this transaction. If any such claim is made on Lender by any broker,
finder, or agent or other person, Borrower will indemnify, defend, and
hold Lender harmless from and against the claim and will defend any action
to recover on that claim, at Borrower's cost and expense, including
Lender's counsel fees. Borrower further agrees that until any such claim
or demand is adjudicated in Lender's favor, the amount demanded will be
deemed a liability of Borrower under this Agreement, secured by the
Collateral.
Section 9.13. Third Parties. No rights are intended to be created
hereunder or under any other Loan Document for the benefit of any third
party donee, creditor, or incidental beneficiary of Borrower. Nothing
contained in this Agreement shall be construed as a delegation to Lender
of Borrower's duty of performance, including without limitation Borrower's
duties under any account or contract in which Lender has a security
interest.
Section 9.14. Discharge of Borrower's Obligations. Lender, in its
sole discretion, shall have the right at any time, and from time to time,
without prior notice to Borrower if Borrower fails to do so, to: (i)
obtain insurance covering any of the Collateral as required hereunder;
(ii) pay for the performance of any of Borrower's obligations hereunder;
(iii) discharge taxes, liens, security interests, or other encumbrances at
any time levied or placed on any of the Collateral in violation of this
Agreement unless Borrower is in good faith with due diligence by
appropriate proceedings contesting those items; and (iv) pay for the
maintenance and preservation of any of the Collateral. Expenses and
advances shall be added to the Loan, until reimbursed to Lender and shall
be secured by the Collateral. Any such payments and advances by Lender
shall not be construed as a waiver by Lender of an Event of Default.
Section 9.15. Information to Participants. Lender may divulge to
any participant it may obtain in the Loan, or any portion thereof, all
information, and furnish to such participant copies of reports, financial
statements, certificates, and documents obtained under any provision of
this Agreement or any other Loan Document. Notwithstanding the foregoing,
any such participant shall be bound by the restrictions on dissemination
of confidential information contained in Section 6.8 above.
Section 9.16. Indemnity. Borrower hereby agrees to indemnify and
hold harmless Lender, its partners, officers, agents and employees
(collectively, "Indemnitee") from and against any liability, loss, cost,
expense, claim, damage, suit, action or proceeding ever suffered or
incurred by Lender (including reasonable attorneys' fees and expenses)
arising from Borrower's failure to observe, perform or discharge any of
its covenants, obligations, agreements or duties hereunder, or from the
breach of any of the representations or warranties contained in Article IV
hereof. In addition, Borrower shall defend Indemnitee against and save it
harmless from all claims of any Person with respect to the Collateral.
Notwithstanding any contrary provision in this Agreement, the obligation
of Borrower under this Section 9.16 shall survive the payment in full of
the Obligations and the termination of this Agreement.
Section 9.17. Choice of Law; Consent to Jurisdiction. THIS
AGREEMENT AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF
THIS AGREEMENT OR THE NOTE IS COMMENCED BY LENDER IN THE STATE COURTS OF
THE STATE OF MARYLAND OR IN THE U.S. DISTRICT COURT FOR THE DISTRICT OF
MARYLAND, BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY SUCH COURT
IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN THE STATE OF MARYLAND.
ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF MAILED BY
REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS DESCRIBED IN
SECTION 9.4 HEREOF.
Section 9.18. Waiver of Trial by Jury. BORROWER HEREBY (A)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE
EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY
BORROWER, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD
OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT
THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER
AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF
BORROWER'S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, BORROWER HEREBY
CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING LENDER'S
COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER
WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
Section 9.19. Confession of Judgment. 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 REASONABLE ATTORNEYS' FEES, 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 WHICH 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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
LENDER:
HCFP FUNDING, INC.
a Delaware corporation
By:______/s/_______________________
Name: Howard Widra
Title: Vice President
BORROWER:
NUMED HOME HEALTH CARE, INC.
a Nevada corporation
By:______/s/________________________
Name: Jugal K. Taneja
Title: Chief Executive Officer
NUMED REHABILITATION, INC.
a Florida corporation
By:______/s/________________________
Name: Jugal K. Taneja
Title: Chief Executive Officer
[SIGNATURES CONTINUED]
SILVER MOVES, INC.
a Florida corporation D/B/A
FLORIDA NURSING SERVICES
By:______/s/________________________
Name: Jugal K. Taneja
Title: Chief Executive Officer
COUNTRYSIDE HEALTH SERVICES, INC.
a Florida corporation
By:______/s/________________________
Name: Jugal K. Taneja
Title: Chief Executive Officer
WHOLE PERSON HOME HEALTH CARE OF OHIO, INC.
an Ohio corporation
By:______/s/________________________
Name: Jugal K. Taneja
Title: Chief Executive Officer
PENNSYLVANIA MEDICAL CONCEPTS, INC.
a Pennsylvania corporation
By:______/s/________________________
Name: Jugal K. Taneja
Title: Chief Executive Officer
PARKE HOME HEALTH CARE, INC.
an Ohio corporation
By:______/s/________________________
Name: Jugal K. Taneja
Title: Chief Executive Officer
LIST OF EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Lockbox Agreement
Exhibit C - Locations of Collateral
Exhibit D - Form of Legal Opinion
LIST OF SCHEDULES
Schedule 1.36 - Permitted Liens
Schedule 4.1 - Subsidiaries
Schedule 4.5 - Litigation
Schedule 4.7 - Tax Identification Numbers
Schedule 4.13 - Non-Compliance with Law
Schedule 4.14 - Environmental Matters
Schedule 4.15 - Places of Business
Schedule 4.16 - Licenses
Schedule 4.19 - Borrowings and Guarantees
Schedule 4.21 - Trade Names
Schedule 4.22 - Joint Ventures
Schedule 7.12 - Transactions with Affiliates
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF NUMED HOME HEALTH CARE, INC. AS OF AND FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1854
<SECURITIES> 0
<RECEIVABLES> 4515
<ALLOWANCES> 315
<INVENTORY> 23
<CURRENT-ASSETS> 6343
<PP&E> 747
<DEPRECIATION> 292
<TOTAL-ASSETS> 11957
<CURRENT-LIABILITIES> 2063
<BONDS> 1756
0
0
<COMMON> 5
<OTHER-SE> 8132
<TOTAL-LIABILITY-AND-EQUITY> 11957
<SALES> 0
<TOTAL-REVENUES> 11346
<CGS> 0
<TOTAL-COSTS> 8421
<OTHER-EXPENSES> 3010
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> (85)
<INCOME-TAX> (54)
<INCOME-CONTINUING> (124)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
