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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 23, 1996
COMMUNITY CARE OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-26502 52-1823411
State or other (Commission (IRS Employer
jurisdiction of file number) Identification No.)
incorporation)
3050 North Horseshoe Drive, Suite 260, Naples, Florida 34104
(Address of principal executive offices)
Registrant's telephone number including area code: (941) 435-0085
Not Applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events
On December 27, 1996 the Company obtained a $15,000,000 secured line of credit
with Daiwa Securities of America, Inc. to replace the existing secured line of
credit with NationsBank. The $15,000,000 secured line of credit is for a three
year term and is secured through the assignment of certain Company receivables
to the lender.
The Company engaged Integrated Health Services, Inc. ("IHS") under a management
agreement to assist in the provision of certain financial, accounting, MIS,
reimbursement and ancillary services for a term of five years commencing on
January 1, 1997. The Company believes that this will provide access to more
sophisticated and responsive systems at a lower cost enabling the Company to
reduce its overhead. Additionally, the Company entered into a subordinated
revolving credit agreement with IHS Financial Holdings, Inc., a subsidiary of
IHS, pursuant to which, as of January 13, 1997, the Company may borrow up to
$5,000,000 for additional working capital. The Company issued to IHS warrants to
purchase an aggregate of 9.9% of its outstanding common stock in connection with
the $5 million credit line. The exercise price of half the warrants will be at
current fair market value and will expire in two years. The exercise price of
the rest of the warrants will be at double the current fair market value and
will expire in five years. The current fair market value will be determined
based upon the average of the high and low trading price of the Company's common
stock for the next two full trading days. The Company has granted IHS
registration rights relating to the warrants. Two of the Company's directors are
also directors of IHS and one is IHS's Chairman, chief executive officer and
largest stockholder.
The Company expects a loss in its fourth quarter, as a result of write-offs,
non-recurring charges, and adjustments, which the Company estimates could
aggregate between $8 and $14 million, before giving effect to income tax
benefits. The Company is evaluating the potential write off of the deferred
offering costs related to its stock offering which was not completed in 1996,
alternative courses of action with respect to the previously announced Memorial
transaction which could result in a write-off, as well as non- recurring
charges and adjustments. Finalization of these matters is pending a review with
the Audit Committee of the Board of Directors and the Company's independent
auditors.
The Board of Directors has appointed a search committee to seek two qualified
replacements to fill the vacancies created by the December 1996 resignations of
Rohit Desai and Damon Ball, both of Desai Capital Management, Inc., neither of
whom resigned due to any expressed disagreement with the Company relating to
operations, policies or practices.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of business acquired: Not applicable.
(b) Pro Forma financial information: Not applicable.
(c) Exhibits:
Regulation S-K
Exhibit Number Description
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4.1 Healthcare Receivables Purchase And Transfer Agreement
dated December 23, 1996 among Community Care of America,
Inc. and Each Of The Providers Named In The Agreement and
CCA Funding, LLC.
4.2 Loan And Security Agreement dated December 23, 1996 between
CCA Funding, LLC and Daiwa Healthco-2, LLC.
4.3 Assignment Of Healthcare Receivables Purchase And
Transfer Agreement As Collateral Security.
4.4 Amended and Restated Revolving Credit Agreement dated as
of December 27, 1996 between Community Care of America, Inc.
and Integrated Health Services, Inc.
4.5 Subordinated Note dated December 27, 1996 between
Community Care of America, Inc. and Integrated Health
Services, Inc. in the principal sum of $5,000,000.
4.6 Warrant Acquisition Agreement dated as of January 13,
1997 between Community Care of America, Inc. and Integrated
Health Services, Inc., including Form of Series A Warrants,
Form of Series B Warrant and Registration Rights Agreement.
99.0 Management Agreement dated as of December 27, 1996 between
Community Care of America, Inc. and Integrated Health
Services, Inc.
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SIGNATURE
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
COMMUNITY CARE OF AMERICA, INC.
Date: January 13, 1997 By: /s/ David H. Fater
David H. Fater
Executive Vice President and
Chief Financial Officer
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HEALTHCARE RECEIVABLES
PURCHASE AND TRANSFER
AGREEMENT
Dated as of December 23, 1996
Among
COMMUNITY CARE OF AMERICA, INC.
as Primary Servicer
and
EACH OF THE PROVIDERS NAMED HEREIN
as Providers
and
CCA FUNDING LLC,
as Purchaser
ALL THE RIGHT, TITLE AND INTEREST OF THE PURCHASER IN AND TO, ALL
BENEFITS OF THE PURCHASER UNDER AND ALL MONIES DUE OR TO BECOME DUE TO
THE PURCHASER UNDER OR IN CONNECTION WITH, THIS AGREEMENT HAVE BEEN
ASSIGNED TO DAIWA HEALTHCO-2 LLC, AS COLLATERAL SECURITY FOR ANY AND
ALL THE OBLIGATIONS OF THE PURCHASER PURSUANT TO A LOAN AND SECURITY
AGREEMENT DATED AS OF DECEMBER 23, 1996 BETWEEN THE PURCHASER AND
DAIWA HEALTHCO-2 LLC
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<TABLE>
<C> <S>
TABLE OF CONTENTS
Page
ARTICLE I
COMMITMENTS; AMOUNTS AND TERMS
OF THE PURCHASES AND CONTRIBUTIONS
SECTION 1.01. Sale, Contribution and Purchase of Receivables............................................1
SECTION 1.02. Receivable Information and Transferred Batch Determination................................1
SECTION 1.03. The Transfers.............................................................................2
SECTION 1.04. Collection and Payment Procedures.........................................................2
SECTION 1.05. Allocation of Servicer Responsibilities...................................................2
ARTICLE II
GENERAL PAYMENT MECHANICS;
GOVERNMENTAL ENTITIES PAYMENT MECHANICS;
EOB'S; MISDIRECTED PAYMENTS
SECTION 2.01. General Payment Mechanics.................................................................4
SECTION 2.02. Governmental Entities Payment Mechanics...................................................4
SECTION 2.03. Misdirected Payments; EOB's...............................................................5
SECTION 2.04. Unidentified Payments; Purchaser's Right of Presumption...................................5
SECTION 2.05. No Rights of Withdrawal...................................................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES; COVENANTS;
EVENTS OF TERMINATION
SECTION 3.01. Representations and Warranties; Covenants.................................................6
SECTION 3.02. Group-Wide Events of Termination; Events of Termination...................................6
ARTICLE IV
INDEMNIFICATION;
GRANT OF SECURITY INTEREST
SECTION 4.01. Indemnification and Set-Off Rights for Denied Receivables.................................7
SECTION 4.02. Indemnities by the Providers..............................................................7
SECTION 4.03. Right of Set-Off..........................................................................9
SECTION 4.04. Grant of Security Interest................................................................9
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Page
ARTICLE V
MISCELLANEOUS
SECTION 5.01. Amendments, etc...........................................................................9
SECTION 5.02. Notices, etc.............................................................................10
SECTION 5.03. Assignability............................................................................10
SECTION 5.04. Further Assurances.......................................................................10
SECTION 5.05. Costs, Expenses and Termination Fee......................................................10
SECTION 5.06. Confidentiality..........................................................................11
SECTION 5.07. Term and Termination.....................................................................12
SECTION 5.08. Sale Treatment...........................................................................12
SECTION 5.09. Grant of Security Interest...............................................................12
SECTION 5.10. No Liability of the Purchaser............................................................13
SECTION 5.11. Attorney-in-Fact.........................................................................13
SECTION 5.12. Entire Agreement; Severability...........................................................13
SECTION 5.13. GOVERNING LAW............................................................................13
SECTION 5.14. WAIVER OF JURY TRIAL, JURISDICTION AND VENUE.............................................13
SECTION 5.15. Execution in Counterparts................................................................14
SECTION 5.16. No Proceedings...........................................................................14
SECTION 5.17. Joint and Several Liability; Providers...................................................14
SECTION 5.18. Survival of Termination..................................................................14
SECTION 5.19. Addition, Removal and Suspension of Providers............................................14
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EXHIBITS
Exhibit IDefinitions
Exhibit II Conditions of Purchases
Exhibit III Representations and Warranties
Exhibit IV Covenants
Exhibit V Events of Termination
Exhibit VI Receivable Information
Exhibit VII-A Form of Notice to Governmental Entities
Exhibit VII-B Form of Notice to Insurers
Exhibit VIII Primary Servicer Responsibilities
Exhibit IX Servicer Termination Events
Exhibit X Interface Between Providers and Master Servicer
Exhibit XI-A Form of Opinion of Providers' Counsel
with Respect to the Patient Consent Form
Exhibit XI-B Form of Opinion of Providers' Counsel
with Respect to Certain Corporate Matters
Exhibit XII Form of Depositary Agreement
SCHEDULES
Schedule I Addresses for Notices
Schedule II Credit and Collection Policy
Schedule III License Revocations
Schedule IV Lockbox Information
Schedule V List of the Providers
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Healthcare Receivables Purchase and transfer Agreement
Dated as of December __, 1996
COMMUNITY CARE OF AMERICA, INC., a Delaware corporation (together with its
corporate successors and assigns, the "Primary Servicer"), each of the parties
named on Schedule V hereto and as such Schedule V may be amended from time to
time pursuant to Section 5.19 herein (each a "Provider" and collectively the
"Providers"), and CCA FUNDING LLC, a Delaware limited liability company
(together with its successors and assigns, the "Purchaser"), agree as follows:
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I to this Agreement. References
herein and in the Exhibits and Schedules hereto to the "Agreement" refer to this
Agreement, as amended, restated, modified or supplemented from time to time in
accordance with its terms (the "Agreement").
Each Provider wishes to sell or contribute to the Purchaser on a continuing
basis all of its healthcare receivables. The Purchaser is prepared to purchase
or to accept the contribution of such healthcare receivables on the terms and
subject to the conditions set forth herein. Accordingly, the parties agree as
follows:
ARTICLE I
COMMITMENTS; AMOUNTS AND TERMS
OF THE PURCHASES AND CONTRIBUTIONS
SECTION 1.01. Sale, Contribution and Purchase of Receivables. On each
Transfer Date until the Facility Termination Date and on the terms and
conditions set forth herein, each Provider agrees to sell, without recourse
except to the extent expressly provided herein, or contribute to the Purchaser,
and the Purchaser agrees to purchase or accept such contribution of, all of such
Provider's Accounts.
SECTION 1.02. Receivable Information and Transferred Batch Determination.
(a) On each Batching Day after the Initial Transfer Date, the Servicer, on
behalf of the Providers, shall provide the Master Servicer by Transmission the
information listed on Exhibit VI hereto (as such Exhibit may be modified by the
Purchaser from time to time, the "Receivable Information") with respect to new
Accounts that it has determined constitute Eligible Receivables (the "Proposed
Eligible Receivables") and with respect to new Accounts that it has determined
do not constitute Eligible Receivables. Each Transmission of Receivable
Information shall constitute an offer by each Provider to sell, or, at such
Provider's option, contribute, the Proposed Eligible Receivables set forth in
the Transmission.
(b) All Proposed Eligible Receivables for which Receivable Information has
been received by the Master Servicer between the prior Batching Time and the
current Batching Time
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shall be reviewed by the Daiwa Group. On or prior to each Transfer Date, the
Purchaser or the Program Manager shall prepare a list of those Proposed Eligible
Receivables that the Purchaser will purchase on the Transfer Date (a "Purchased
Batch", and together with the remaining Proposed Eligible Receivables that will
not be purchased and instead will be contributed to the Purchaser, the
"Transferred Batch"), together with an explanation stating that the identified
Proposed Eligible Receivables not included in the Purchased Batch are not
Eligible Receivables and the basis thereof.
SECTION 1.03. The Transfers. (a) On each Transfer Date, subject to
satisfaction of the applicable conditions set forth in Exhibit II hereto, the
Purchaser shall pay to the Providers in same day funds, at the Primary Servicer
Account, an amount equal to the Purchase Price of the Purchased Batch.
(b) Effective on each Transfer Date, in consideration of the Purchase Price
and other good and valuable consideration, each Provider hereby sells,
contributes and assigns to the Purchaser and the Purchaser hereby purchases and
accepts, as absolute owner, the Transferred Batch purchased and/or contributed
on such Transfer Date.
SECTION 1.04. Collection and Payment Procedures.
(a) Collections on the Transferred Batch. The Purchaser shall be entitled
with respect to each Transferred Batch, (i) to receive all Collections on such
Transferred Batch, and (ii) to have and to exercise any and all rights (x) to
collect, record, track and take all actions to obtain Collections with respect
to each Batch Receivable payable by Persons other than Governmental Entities,
and (y) to the extent permitted by law and in a manner consistent with all
applicable laws and regulations, to collect, record, track and take all actions
to obtain Collections with respect to each Batch Receivable payable by
Governmental Entities.
(b) Collections Not Part of Transferred Batch. On each Settlement Date, and
provided that the Providers shall have (i) paid all amounts then due and owing
to the Purchaser under this Agreement, and (ii) successfully sent by
Transmission to the Master Servicer all information required with respect to the
Batch Receivables for the immediately preceding Settlement Period, the Purchaser
shall pay or turn over, as the case may be, to the Primary Servicer any and all
cash collections or other cash or non-cash proceeds received by the Purchaser
during the immediately preceding Settlement Period with respect to Accounts that
are not part of any Transferred Batch.
(c) Distributions on each Settlement Date. On each Settlement Date and with
respect to each Transferred Batch, Total Collections shall be distributed to the
Purchaser.
SECTION 1.05. Allocation of Servicer Responsibilities. (a) Tracking of
purchases, Collections and other transactions pertaining to each Transferred
Batch shall be administered by the Master Servicer in a manner consistent with
the terms of this Agreement. The responsibilities of the Providers to the Master
Servicer have been set forth in Exhibit X attached hereto. The Providers shall
cooperate fully with the Master Servicer in establishing and maintaining the
Transmission of the Receivable Information, including, without limitation, the
matters described in Exhibit X, and
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shall provide promptly to the Master Servicer such other information necessary
or desirable for the administration of Collections on the Batch Receivables as
may be requested from time to time.
(b) The Purchaser hereby appoints each Provider as its agent for the
administration and servicing obligations set forth in Exhibit VIII hereto with
respect to the Accounts sold or transferred by each such Provider to the
Purchaser hereunder (the "Primary Servicer Responsibilities"), and each Provider
hereby accepts such appointment and agrees to perform the Primary Servicer
Responsibilities. Each of the Providers hereby contracts its Primary Servicer
Responsibilities to the Primary Servicer and appoints the Primary Servicer to
act as Servicer hereunder, provided, however, that such contracting and
appointment shall not relieve any Provider from any of its duties,
responsibilities, liabilities and obligations resulting or arising hereunder.
The Primary Servicer hereby accepts such appointment as Servicer and agrees to
perform the Primary Servicer Responsibilities on behalf of the Providers. Each
of the Providers, the Servicer and the Purchaser hereby acknowledge that the
Servicer's appointment is subject to and limited by DH-2's appointment of the
Purchaser as its agent for performance of the Primary Servicer Responsibilities
under the Loan Agreement and DH-2's rights thereunder to replace the Purchaser
(which replacement may be effectuated through the outplacement to a qualified
and experienced third-party of all back office duties, including billing,
collection and processing responsibilities, and access to all personnel,
hardware and software utilized in connection with such responsibilities). The
Purchaser may, at any time following the occurrence of a Servicer Termination
Event (and shall, without requirement of notice to any party, upon a Servicer
Termination Event resulting from the events described in clauses (g) or (j) of
Exhibit V hereto) appoint another Person to succeed the Servicer as its agent
for performance of the Primary Servicer Responsibilities (which appointment may
be effectuated through the outplacement to a qualified and experienced
third-party of all back office duties, including billing, collection and
processing responsibilities, and access to all personnel, hardware and software
utilized in connection with such responsibilities). The Purchaser may, at any
time following the occurrence of one or more Servicer Termination Events (and
may, without requirement of notice to any party, upon one or more Servicer
Termination Events resulting from the events described in clauses (g) or (j) of
Exhibit V hereto) affecting the Providers that have sold or contributed to the
Purchaser more than 25% of the Batch Receivables (whether or not purchased) in
the prior ninety days (or the number of days from the date of this Agreement to
such date, if less than ninety days) (in each case, a "Group-Wide Servicer
Termination Event"), designate the Master Servicer or any other Person to
succeed the Servicer as its agent for performance of the Primary Servicer
Responsibilities.
(c) As compensation for the performance of the Primary Servicer
Responsibilities, the Primary Servicer (or the successor Servicer who performs
such Primary Servicer Responsibilities) shall be entitled to a Primary Servicing
Fee with respect to each Purchased Batch; provided, that the Primary Servicing
Fee shall be payable solely, to the extent received, from a similar fee payable
by DH-2 to the Purchaser, and, to the extent not received, the Servicer hereby
waives its right to receive it.
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ARTICLE II
GENERAL PAYMENT MECHANICS;
GOVERNMENTAL ENTITIES PAYMENT MECHANICS;
EOB'S; MISDIRECTED PAYMENTS
SECTION 2.01. General Payment Mechanics. (a) On or prior to the Initial
Transfer Date each of the Primary Servicer, the Providers, the Purchaser, and
DH-2 shall have entered into the Depositary Agreement and shall have caused the
Lockbox Bank to establish the Purchaser Lockbox, the Purchaser Lockbox Account,
the Provider Ancillary Lockbox, and the Provider Ancillary Lockbox Account.
(b) Each Provider shall prepare, execute and deliver to each Insurer, with
copies to the Purchaser, on or prior to the Initial Transfer Date, a Notice to
Insurers addressed to each Insurer who is proposed to be a payor of Receivables,
which Notice to Insurers shall provide that, effective the Initial Transfer
Date, all checks and EOB's from Insurers on account of Receivables shall be sent
to the Purchaser Lockbox and all wire transfers on account of Receivables shall
be wired directly into the Purchaser Lockbox Account.
(c) Each Provider covenants and agrees that, on and after the Initial
Transfer Date, all invoices (and, if provided by such Provider, return
envelopes) shall, (i) if to be sent to Insurers, set forth only the address of
the Purchaser Lockbox as a return address for payment of Receivables and
delivery of EOB's, and only the Purchaser Lockbox Account with respect to wire
transfers for payment of Receivables, and (ii) if to be sent to private payors,
set forth only the address of the Provider Ancillary Lockbox as a return address
for payment of such Receivables and delivery of EOB's, and only the Provider
Ancillary Lockbox Account with respect to wire transfers for payment of such
Receivables. Each Provider hereby further covenants and agrees to instruct and
notify each of the members of its accounting and collections staff to provide
identical information in communications with Persons other than Governmental
Entities with respect to Collections, wire transfers and EOB's.
SECTION 2.02. Governmental Entities Payment Mechanics. (a) On or prior to
the Initial Transfer Date, each of the Primary Servicer, the Providers, the
Purchaser, and DH-2 shall have entered into the Depositary Agreement, and the
Providers shall have caused the Lockbox Bank to establish the Provider
Government Lockbox and the Provider Government Lockbox Account. Each Provider
shall prepare, execute and deliver to the Purchaser on or prior to the Initial
Transfer Date, Notices to Governmental Entities addressed to each Governmental
Entity or its fiscal intermediary who is proposed to be a payor of Receivables,
which Notices to Governmental Entities shall provide that all checks and EOB's
from Governmental Entities on account of Receivables shall be sent to the
Provider Government Lockbox and all wire transfers on account of Receivables
shall be wired directly into the Provider Government Lockbox Account.
(b) Each Provider covenants and agrees that, on and after the Initial
Transfer Date, all invoices to be sent to Governmental Entities (and, if
provided by such Provider, return envelopes)
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shall set forth only the address of the Provider Government Lockbox as a return
address for payment of Receivables and delivery of EOB's, and only the Provider
Government Lockbox Account with respect to wire transfers for payment of
Receivables. Each Provider further covenants and agrees to instruct and notify
each of the members of its accounting and collections staff to provide identical
information in communications with Governmental Entities with respect to
Collections, wire transfers and EOB's.
SECTION 2.03. Misdirected Payments; EOB's. (a) In the event that a Provider
receives an EOB or a Misdirected Payment in the form of a check, such Provider
shall immediately send such Misdirected Payment by overnight delivery service to
the appropriate Purchaser Lockbox or Provider Lockbox, as the case may be,
together with the EOB and the envelope in which such payment was received. In
the event a Provider receives a Misdirected Payment in the form of cash or wire
transfer, such Provider shall immediately wire transfer the amount of such
Misdirected Payment directly into the Purchaser Lockbox Account. All Misdirected
Payments and EOB's shall be sent promptly upon receipt thereof, and in no event
later than the close of business, on the first Business Day after receipt
thereof.
(b) If a Misdirected Payment in the form of a check is received by the
Purchaser more than six days after the postmark date on the envelope enclosing a
check from the Obligor (or, if no such envelope is sent to the Purchaser Lockbox
Account by a Provider, more than six days after the date of such check or wire
transfer with respect thereto), then the Providers shall pay interest on such
Misdirected Payment to the Purchaser from such sixth subsequent day to and
including the date such check is received in the Purchaser Lockbox Account, at a
rate equal to the LIBO Rate then in effect under the Loan Agreement (or the
maximum rate legally permitted if less than such rate).
(c) Each Provider hereby agrees and consents to the Purchaser taking such
actions as are reasonably necessary to ensure that future payments from the
Obligor of a Misdirected Payment shall be made in accordance with the Notice
previously delivered to such Obligor, including, without limitation, to the
maximum extent permitted by law, (i) any member of the Daiwa Group executing on
a Provider's behalf and delivering to such Obligor a new Notice, and (ii) any
member of the Daiwa Group contacting such Obligor by telephone to confirm the
instructions previously set forth in the Notice to such Obligor. Upon the
Purchaser's request, a Provider shall promptly (and in any event, within two
Business Days from such request) take such similar actions as the Purchaser may
request.
SECTION 2.04. Unidentified Payments; Purchaser's Right of Presumption. Each
of the Providers and the Purchaser agrees and consents that the Daiwa Group may
apply any payment it receives from an Obligor or any other payor against a
Purchased Batch if the Daiwa Group is unable in good faith (after making
reasonable attempts to contact the applicable Provider) to determine from the
information in the EOB whether such payment relates to a Purchased Batch.
SECTION 2.05. No Rights of Withdrawal. None of the Providers nor the
Purchaser shall have any rights of direction or withdrawal with respect to
amounts held in the Purchaser Lockbox Account.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES; COVENANTS;
EVENTS OF TERMINATION
SECTION 3.01. Representations and Warranties; Covenants. Each Provider
makes, on the Initial Transfer Date and on each subsequent Transfer Date, the
representations and warranties on and as of such dates, and hereby agrees to
perform and observe the covenants, set forth in Exhibits III and IV,
respectively, hereto.
SECTION 3.02. Group-Wide Events of Termination; Events of Termination. (a)
If any Group-Wide Event of Termination shall occur and be continuing, the
Purchaser may, by notice to the Primary Servicer on behalf of each of the
Providers (which notice shall be deemed to have been given to each Provider),
take either or both of the following actions: (x) declare the Facility
Termination Date to have occurred (except with respect to the Group-Wide Event
of Termination in clause (g) of Exhibit V, in which case the Facility
Termination Date shall be deemed to have occurred automatically and without
notice), and (y) without limiting any rights hereunder, terminate the
appointment of the Servicer to perform any or all of the Primary Servicer
Responsibilities and replace the Servicer in the manner set forth in Section
1.05(b). Upon any such declaration or designation, the Purchaser shall have, in
addition to the rights and remedies which it may have under this Agreement, all
other rights and remedies provided after default under the UCC and under other
applicable law, which rights and remedies shall be cumulative.
(b) If an Event of Termination shall occur and be continuing, the Purchaser
may terminate the appointment of the Primary Servicer to perform any or all of
the Primary Servicer Responsibilities in the manner set forth in Section
1.05(b), and, with respect to an individual Provider that does not constitute a
Group-Wide Event of Termination, the Purchaser, in its sole discretion, may
require the immediate removal of such Provider from the program and, on or prior
to the effective date of such removal, (x) all Receivables contributed by such
Provider to the Purchaser shall be re-purchased by such Provider as if such
Receivables were Denied Receivables and payment in full shall have been received
by the Purchaser, or (y) all rights and obligations in respect of Receivables
contributed by such Provider to the Purchaser shall be transferred to another
Provider. Such Provider shall also withdraw as a member of the Purchaser;
provided, however, that such Provider's capital account as a member of the
Purchaser shall not be paid out until the date of termination of this Agreement
as set forth in Section 5.07 herein.
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ARTICLE IV
INDEMNIFICATION;
GRANT OF SECURITY INTEREST
SECTION 4.01. Indemnification and Set-Off Rights for Denied Receivables.
(a) If a breach of any of the representations or warranties contained herein
relating to a Purchased Receivable shall be discovered at any time (each, a
"Denied Receivable"), the Provider that sold or contributed such Denied
Receivable shall, on the next Settlement Date, repurchase such Denied Receivable
from the Purchaser at the Repurchase Price.
(b) For ease of administration, the Purchaser shall be entitled to presume
that the failure of any Purchased Receivable (or portion thereof) to be paid in
full on or after the 180th day following the Last Service Date thereof is the
result of a breach of a representation or warranty contained herein with respect
to such Purchased Receivable, unless the Purchaser shall have actual knowledge
to the contrary (such as, by way of example, actual knowledge of the financial
inability of an Obligor to pay its obligations represented by a Receivable). In
the event the Purchaser receives the Repurchase Price for any such Purchased
Receivable and it is thereafter determined that the failure of such Purchased
Receivable to be paid in full was not the result of a breach of representation
or warranty contained herein, the parties hereto shall make an appropriate
adjustment by increasing the Purchase Price of any Purchased Batch to be
purchased on or after such date.
(c) Upon receipt by (or on behalf of) the Purchaser of the Repurchase Price
with respect to any Denied Receivable, the Purchaser shall be deemed to have
reassigned and resold to the applicable Provider such Denied Receivable without
any representation, warranty or recourse whatsoever, and thereafter neither the
Purchaser nor any member of the Daiwa Group shall have any further servicing or
other obligation to such Provider with respect to such Denied Receivable.
(d) From time to time at the request of a Provider, the Purchaser shall
deliver to such Provider (at such Provider's sole cost and expense) such
documents, assignments, releases and instruments of termination as such Provider
may reasonably request to evidence the reconveyance by the Purchaser of a Denied
Receivable pursuant to the terms of Section 4.01(c).
SECTION 4.02. Indemnities by the Providers. Without limiting any other
rights that the Purchaser, the Program Manager, the Master Servicer or any of
their respective Affiliates (together with their respective officers, directors,
shareholders and lenders, each, an "Indemnified Party") may have hereunder or
under applicable law, each Provider hereby agrees jointly and severally to
indemnify each Indemnified Party from and against any and all claims, losses and
liabilities (including, without limitation, reasonable attorneys' fees) (all of
the foregoing being collectively referred to as "Indemnified Amounts") arising
out of or resulting from any of the following:
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(a) the sale of any Receivable which purports to be part of a Purchased
Batch but which is not, at the date of such sale, the type of Receivable
described in subsection (j) of Exhibit III to this Agreement;
(b) any representation or warranty made or deemed made by any Provider (or
any of its officers) under or in connection with this Agreement and not relating
to a Purchased Receivable which shall have been incorrect in any material
respect when made;
(c) the failure by any Provider or any Batch Receivable to comply with any
applicable law, rule or regulation with respect to any Batch Receivable;
(d) the failure to vest in the Purchaser a perfected ownership interest in
each Receivable included in a Transferred Batch and the Collections in respect
thereof, free and clear of any Liens;
(e) any dispute, claim, set-off or defense to the payment, in whole or in
part, of any Receivable (including, without limitation, a defense based on such
Receivable not being a legal, valid and binding obligation) or any other claim
resulting from the services or merchandise related to such Receivable or the
furnishing or failure to furnish such services or merchandise or relating to
collection activities with respect to such Receivable (if such collection
activities were performed by any Provider or any of its Affiliates acting as
Servicer), provided, however, this clause (e) shall not be deemed to include any
dispute, claim, set-off or defense to the payment of any Receivable (i) arising
out of the financial inability of an Obligor to pay its obligations represented
by such Receivable including, without limitation, a discharge in bankruptcy, or
(ii) arising after the sale of such Receivable to the Purchaser hereunder and
arising solely as a result of actions taken by any member of the Daiwa Group;
(f) a failure of any Provider, including, without limitation, the Primary
Servicer's actions on behalf of the Providers under Section 1.05(b) of this
Agreement with respect to Primary Servicer Responsibilities, to perform its
duties or obligations in accordance with the provisions hereof or to perform its
duties or obligations hereunder; or
(g) the commingling by any Provider of Collections at any time with other
funds of such Provider, provided, however, that in all events there shall be
excluded from the foregoing indemnification any claims, losses or liabilities
resulting solely from the gross negligence or willful misconduct of an
Indemnified Person or which constitutes recourse for an uncollectible Purchased
Receivable.
Such Indemnified Person shall notify the Primary Servicer, on behalf of the
Providers, of such claim, provided that the failure to so notify shall not
affect or invalidate the indemnity granted pursuant to this Section 4.02.
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SECTION 4.03. Right of Set-Off. Unless a Provider notifies the Purchaser in
writing that it desires to pay on the date when due the Repurchase Price under
Section 4.01 or any Indemnified Amounts under Section 4.02 and such Provider
makes such payment to the Purchaser in immediately available funds on such date,
each such Provider hereby irrevocably instructs the Purchaser to set-off the
full amount of the Repurchase Price or the Indemnified Amounts, as the case may
be, against the Purchase Price of any Purchased Batch to be purchased on or
after such date. No further notification, act or consent of any nature
whatsoever is required prior to the right of the Purchaser to exercise such
right of set-off, provided, however, the Purchaser or a member of the Daiwa
Group shall notify the Primary Servicer on behalf of such Provider that a
set-off pursuant to this Section 4.03 occurred, the amount of such set-off and a
description of the Denied Receivable or Indemnified Amounts, as the case may be.
The Purchaser shall exercise its right to set-off hereunder to the extent funds
are available prior to making a demand for indemnification under Section 4.02
SECTION 4.04. Grant of Security Interest. (a) As collateral security for
each Provider's existing and future (i) obligations to repurchase Denied
Receivables under Section 4.01 hereof, (ii) indemnification obligations to the
Purchaser under Section 4.02 hereof, and (iii) obligations to pay costs and
expenses under Section 5.05 hereof, each Provider hereby grants to the Purchaser
a first priority lien on and security interest in and right of set-off against,
all of the Accounts owned or held by the Providers.
(b) Each Provider agrees to execute, and hereby authorizes the Purchaser to
file, one or more financing statements or continuation statements or amendments
thereto or assignments thereof in respect of the lien created pursuant to this
Section 4.04 which may at any time be required or, in the opinion of the
Purchaser, be desirable, and to do so without the signature of such Provider
where permitted by law.
ARTICLE V
MISCELLANEOUS
SECTION 5.01. Amendments, etc. (a) No amendment or waiver of any provision
of this Agreement or consent to any departure therefrom by a party hereto shall
be effective unless in writing signed by the Primary Servicer, the Providers,
the Purchaser, and DH-2 as assignee of all of the Purchaser's rights and
remedies hereunder, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No failure on the part of the Purchaser, the Primary Servicer or a
Provider to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right.
(b) The parties hereto agree to make any change, modification or amendment
to this Agreement as may be requested by Duff & Phelps Credit Rating Co. or any
other rating agency
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then rating the healthcare finance program of DH-2, so long as any such
change, modification or amendment does not materially adversely affect the
parties hereto.
SECTION 5.02. Notices, etc. All notices and other communications hereunder
shall, unless otherwise stated herein, be in writing (which may include
facsimile communication) and shall be faxed or delivered, (i) to each party
hereto, at its address set forth under its name on the signature pages hereto or
at such other address as shall be designated by such party in a written notice
to the other parties hereto (each Provider hereby acknowledges and agrees that
notices to or for the benefit of a Provider may be delivered to the Primary
Servicer and such delivery to the Primary Servicer shall be deemed to be
received by each such Provider), and (ii) to the Program Manager and the Master
Servicer at the addresses set forth on Schedule I attached hereto. Notices and
communications by facsimile shall be effective when sent (and shall be followed
by hard copy sent by regular mail), and notices and communications sent by other
means shall be effective when received.
SECTION 5.03. Assignability. (a) This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective permitted
successors and assigns.
(b) Subject to Section 5.03(b) of the Loan Agreement, this Agreement and
the Purchaser's rights and obligations herein (including without limitation,
ownership of the Purchased Receivables in each Purchased Batch, the Purchaser
Lockbox and Purchaser Lockbox Account and rights in relation to the Provider
Lockboxes and the Provider Lockbox Accounts) shall be assignable by the
Purchaser and its successors and assigns. Each Provider hereby acknowledges that
the Purchaser is granting to DH-2, which is further granting to its lenders, a
security interest in this Agreement and all of the Purchaser's rights, title and
interests hereunder (including, without limitation, the Purchased Receivables,
each Provider's obligations hereunder, the Purchaser Lockbox and Purchaser
Lockbox Account, and rights in relation to the Provider Lockboxes and the
Provider Lockbox Accounts).
(c) No Provider may assign its rights or obligations hereunder or any
interest herein without the prior written consent of the Purchaser and DH-2.
SECTION 5.04. Further Assurances. The Providers shall, at their cost and
expense, upon the request of the Purchaser, duly execute and deliver, or cause
to be duly executed and delivered, to the Purchaser such further instruments and
do and cause to be done such further acts as may be necessary or proper in the
reasonable opinion of the Purchaser to carry out more effectively the provisions
and purposes of this Agreement.
SECTION 5.05. Costs, Expenses and Termination Fee. In addition to the
rights of indemnification granted under Section 4.02 hereof, the Providers agree
to pay on demand all reasonable costs and expenses in connection with the
preparation, execution and delivery of this Agreement and any waiver,
modification, supplement or amendment hereto, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Purchaser and the
members of the Daiwa Group, and all costs and expenses, if any (including
reasonable counsel fees
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and expenses), of the Purchaser, its Affiliates and the members of the Daiwa
Group in connection with the enforcement of this Agreement. The Providers
further agree to pay on the Initial Transfer Date (and with respect to costs and
expenses incurred following the Initial Transfer Date, within seven days of
demand therefor) (a) all reasonable costs and expenses incurred by the Purchaser
or its agent in connection with periodic audits of the Receivables, (b) all
reasonable costs and expenses incurred by the Master Servicer or the Program
Manager to accommodate any significant coding or data system changes made by a
Provider that would affect the transmission or interpretation of data received
through the interface, and (c) all reasonable costs and expenses incurred by the
Purchaser for additional time (calculated at a rate of $100 per hour) and
material expenses of the Master Servicer resulting from a lack of cooperation or
responsiveness of any Provider or the Primary Servicer to agreed-upon protocol
and schedules with the Master Servicer; provided, that such Provider or the
Primary Servicer has been informed of the alleged lack of cooperation or
responsiveness and has been provided an opportunity to correct such problems.
In the event that any Facility Termination Date is declared (or is deemed
to have occurred) pursuant to Section 3.02 of this Agreement, the Providers
shall pay to the Purchaser an early termination fee in an amount equal to 1.25%
of the Revolving Commitment (as defined in the Loan Agreement) then in effect
pursuant to the Loan Agreement.
SECTION 5.06. Confidentiality. (a) Each Provider, the Primary Servicer and
the Purchaser hereby acknowledge that this Agreement, the Loan Agreement and the
documents delivered hereunder, thereunder or in connection with, including,
without limitation, any information relating to any member of the Daiwa Group,
contains confidential and proprietary information. Unless otherwise required by
applicable law, each of the Providers, the Primary Servicer and the Purchaser
hereby agrees to maintain the confidentiality of this Agreement (and all drafts
and other documents delivered in connection therewith including, without
limitation, any information relating to any member of the Daiwa Group delivered
hereunder or under the Loan Agreement) in communications with third parties and
otherwise and to take all reasonable action to prevent the unauthorized use or
disclosure of and to protect the confidentiality of such confidential
information; provided, that, such confidential information may be disclosed to
(i) the Providers' and Purchaser's legal counsel and auditors, (ii) the Program
Manager, DH-2, the Primary Servicer, each member of the Daiwa Group, investors
in and creditors of DH-2, appropriate rating agencies with respect to DH- 2, and
each of their respective legal counsel and auditors, (iii) any Person, if such
information otherwise becomes available to such Person or publicly available
through no fault of any party governed by this Section 5.06, (iv) any
Governmental Entity requesting such information, and (v) to any other Person
with the written consent of the applicable party, which consent shall not be
unreasonably withheld, and provided further that the Providers shall not
disclose such confidential information to any financial adviser not a party to
this Agreement except with the consent of the Program Manager. Notwithstanding
the foregoing, it is understood that the Primary Servicer is a publicly traded
company and, as such, may be required to disclose this transaction and the terms
thereof by a filing with the Securities and Exchange Commission or by the
issuance of a press release.
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(b) Each of the Providers, the Primary Servicer and the Purchaser
understands and agrees that the other or the Daiwa Group may suffer irreparable
harm if the obligations under this Section 5.06 are breached and that monetary
damages shall be inadequate to compensate the injured party for such breach.
Accordingly, each of the Providers, the Primary Servicer and the Purchaser
agrees that, in the event of their respective breach of Section 5.06(a), the
injured party, in addition and not in limitation of its rights and remedies
under law, shall be entitled to a temporary restraining order, preliminary
injunction and permanent injunction to prevent or restrain any such breach.
(c) All parties hereto agree to comply with all applicable state or federal
statutes or regulations relating to patient medical record confidentiality.
SECTION 5.07. Term and Termination. This Agreement shall continue in full
force and effect from the date hereof until the Final Payment Date; provided,
however, that while the occurrence of the Final Payment Date shall terminate any
security interest of the Purchaser hereunder, it shall not relieve or discharge
any of the Providers, the Primary Servicer or the Purchaser of their respective
duties, obligations or covenants hereunder with respect to any Transferred
Batches transferred prior to the Final Payment Date and not repurchased pursuant
to Section 4.01, and all the terms, provisions and conditions of this Agreement
shall remain in effect for such purpose until such obligations have been
satisfied and performed in full. The Purchaser shall deliver all assignments,
certificates, releases, notices and other documents at the Providers' expense,
as the Providers may reasonably request to effect such termination.
SECTION 5.08. Sale Treatment. The Providers and the Purchaser have
structured the transactions contemplated by this Agreement with respect to each
Purchased Batch as a sale and intend that such transactions constitute a sale,
and each of the Providers and the Purchaser agree to treat each such transaction
as a sale for all purposes, including, without limitation, in their respective
books, records, computer files, tax returns (federal, state and local),
regulatory and governmental filings (and shall reflect such sale in their
respective financial statements). Each Provider will advise all persons
inquiring about the ownership of the Batch Receivables that all Batch
Receivables have been sold or contributed to the Purchaser. The Providers will
pay all taxes (excluding income or franchise taxes), if any, relating to the
transactions contemplated under this Agreement, including, without limitation,
the sale, transfer and contribution of each Transferred Batch to the Purchaser.
SECTION 5.09. Grant of Security Interest. In the event that, contrary to
the mutual intent of the Providers and the Purchaser, any purchase of a
Purchased Batch is not characterized as a sale, each Provider shall, effective
as of the date hereof, be deemed to have granted (and each Provider hereby does
grant) to the Purchaser a first priority security interest in and to any and all
Batch Receivables and the proceeds thereof to secure the repayment of all
amounts paid to the Providers hereunder with accrued interest thereon, and this
Agreement shall be deemed to be a security agreement. With respect to such grant
of a security interest, the Purchaser may at its option exercise from time to
time any and all rights and remedies available to it under the UCC or otherwise.
Each Provider agrees that five days shall be reasonable prior notice to the
applicable Provider or to the Primary Servicer on behalf of such Provider of the
date of any public or private sale or other disposition of all or any of the
Batch Receivables.
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SECTION 5.10. No Liability of the Purchaser. Neither this Agreement nor any
document executed in connection herewith shall constitute an assumption by the
Purchaser of any obligation to an Obligor or a patient of any Provider.
SECTION 5.11. Attorney-in-Fact. Each Provider hereby
irrevocably designates and appoints the Purchaser, the Primary Servicer, the
Master Servicer and each Person in the Daiwa Group, to the extent permitted by
applicable law and regulation, as such Provider's attorneys-in-fact, which
irrevocable power of attorney is coupled with an interest, with authority to
endorse or sign such Provider's name to financing statements and checks (other
than payments from Governmental Entities), and, during the continuance of an
Event of Termination, to (i) endorse or sign such Provider's name to financing
statements, remittances, invoices, assignments, checks (other than payments from
Governmental Entities), drafts or other instruments or documents in respect of
the Batch Receivables, (ii) notify Insurers to make payments on the Batch
Receivables directly to the Purchaser, and (iii) bring suit in such Provider's
name and settle or compromise such Batch Receivables as the Purchaser, the
Primary Servicer, the Master Servicer or each Person in the Daiwa Group may, in
its discretion, deem appropriate.
SECTION 5.12. Entire Agreement; Severability. (a) This Agreement embodies
the entire agreement and understanding of the parties concerning the subject
matter contained herein. This Agreement supersedes any and all prior agreements
and understandings between the parties, whether written or oral.
(b) If any provision of this Agreement shall be declared invalid or
unenforceable, the parties hereto agree that the remaining provisions of this
Agreement shall continue in full force and effect.
SECTION 5.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
SECTION 5.14. WAIVER OF JURY TRIAL, JURISDICTION AND VENUE. THE PARTIES
HERETO HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY IN THE EVENT OF ANY LITIGATION
WITH RESPECT TO ANY MATTER RELATED TO THIS AGREEMENT, AND HEREBY IRREVOCABLY
CONSENT TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK
COUNTY, NEW YORK CITY, NEW YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT. IN ANY SUCH LITIGATION, THE
PARTIES HERETO WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS
AND AGREES THAT SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL
DIRECTED TO EACH PROVIDER AT ITS ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF.
THE PARTIES HERETO SHALL APPEAR IN ANSWER TO SUCH SUMMONS, COMPLAINT OR OTHER
PROCESS WITHIN THE TIME PRESCRIBED BY
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LAW, FAILING WHICH THE PARTIES FAILING TO SO APPEAR SHALL BE DEEMED IN DEFAULT
AND JUDGMENT MAY BE ENTERED BY THE PARTY PROSECUTING THE CLAIM FOR THE AMOUNT OF
THE CLAIM AND OTHER RELIEF REQUESTED THEREIN.
SECTION 5.15. Execution in Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
SECTION 5.16. No Proceedings. Each of the Providers hereby agrees that it
will not institute against the Purchaser or DH-2 any proceeding of the type
referred to in paragraph (g) of Exhibit V so long as any senior indebtedness
issued by the Purchaser or DH-2 shall be outstanding or there shall not have
elapsed one year plus one day since the last day on which any such senior
indebtedness shall have been outstanding.
SECTION 5.17. Joint and Several Liability; Providers. Each Provider agrees
that each reference to "the Providers" in this Agreement shall be deemed to
refer to each such Provider jointly and severally. Each Provider (i) shall be
jointly and severally liable for the obligations, duties and covenants under
this Agreement and the acts and omissions of each other such Provider including,
without limitation, under Article IV hereof, and (ii) jointly and severally
makes each representation and warranty under this Agreement; provided however
that the breach of an obligation, duty, covenant, representation or warranty by
one Provider shall not result in an Event of Termination with respect to any
other Provider unless such breach constitutes a Group-Wide Event of Termination.
SECTION 5.18. Survival of Termination. The provisions of Article IV (and
the representations and warranties with respect thereto) (other than Section
4.04) and Sections 5.05, 5.06 and 5.16 shall survive any termination of this
Agreement.
SECTION 5.19. Addition, Removal and Suspension of Providers. (a) Subject to
the conditions set forth below, upon 30-days' prior written request from time to
time of the Primary Servicer, the Purchaser hereby agrees to the adding of other
Persons designated by the Primary Servicer as additional Providers hereunder
(each such event, an "Addition"); provided, that, in the reasonable commercial
judgment of the Purchaser and its designees and assignees):
(i) no Group-Wide Event of Termination is existing and the proposed
Addition shall not cause, or not reasonably be expected to cause, a Group-Wide
Event of Termination;
(ii) as of the effective date of such Addition, such applicable conditions
precedent set forth in Exhibit II hereto shall have been fulfilled with respect
to such Person;
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(iii) as of the effective date of such Addition, each applicable
representation and warranty set forth in Exhibit III hereto shall be true and
correct in all material respects with respect to such Person;
(iv) if such Person is not an Affiliate of the Primary Servicer, the
Purchaser shall have determined that such Person will be able to perform the
Primary Servicer Responsibilities, or have waived such requirement in writing;
(v) the Purchaser shall have received a certificate from the Master
Servicer stating that all computer linkups and interfaces necessary or
desirable, in the sole discretion of the Master Servicer, to effectuate the
transactions and information transfers under this Agreement with respect to the
Addition are fully operational to the satisfaction of the Master Servicer and
the Master Servicer shall have received an interface fee for each additional
computer interface;
(vi) such Person shall execute such agreements, instruments and documents
as the Purchaser may reasonably request, in form and substance satisfactory to
the Purchaser to effectuate the Addition, including without limitation (x) an
amendment to this Agreement whereby such Person agrees to be bound by the terms
of this Agreement, and (y) financing statements covering Receivables that such
Person may contribute to the Purchaser;
(vii) the Purchaser and its assigns shall have been provided with such
information (whether financial or otherwise) and time necessary and desirable
(in the sole discretion of the Purchaser and its assigns) to make the
assessments under clauses (i), (ii) and (iii); and
(viii) such Person shall become a member of the Purchaser.
(b) Subject to the conditions set forth below, upon 30-days' prior written
request from time to time of the Primary Servicer, the Purchaser hereby agrees
to the removal of any Provider designated by the Primary Servicer from time to
time (each such event, a "Removal"); provided, that, in the reasonable
commercial judgment of the Purchaser (and DH-2 as its assignee):
(i) no Group-Wide Event of Termination is existing and the proposed Removal
shall not cause, or not reasonably be expected to cause, a Group-Wide Event of
Termination;
(ii) on or prior to the effective date of such Removal (x) all Receivables
contributed by such Provider to the Purchaser shall be repurchased by such
Provider as if such Receivables were Denied Receivables and payment in full
shall have been received by the Purchaser, or (y) all rights and obligations in
respect of Receivables contributed by such Provider to the Purchaser shall be
transferred to another Provider;
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(iii) after giving effect to such Removal, the aggregate minimum Tangible
Net Worth of the remaining Providers hereunder shall (x) equal at least
$5,000,000, and (y) not have decreased as a result of the Removal (combined with
all other Removals) by greater than 10%;
(iv) such Person shall execute such agreements, instruments and documents
as the Purchaser may reasonably request, in form and substance satisfactory to
the Purchaser to effectuate the Removal, including without limitation an
amendment to this Agreement effectuating such Removal;
(v) the Purchaser and DH-2, as its assignee, have been provided with such
information (whether financial or otherwise) and time necessary and desirable
(in the sole discretion of the Purchaser and DH-2, as its assignee) to make the
assessments under clauses (i), (ii), (iii) and (iv) above; and
(vi) such Person shall withdraw as a member of the Purchaser; provided,
however, that such Provider's capital account as a member of the Purchaser shall
not be paid out until the date of termination of this Agreement as set forth in
Section 5.07 herein.
(c) The Purchaser hereby agrees to the suspension of any Provider
designated by the Primary Servicer from time to time (each such event a
"Suspension"); provided, that in the reasonable commercial judgment of the
Purchaser (and DH-2 as its assignee), no Group-Wide Event of Termination is
existing and the proposed Suspension shall not cause, or not reasonably be
expected to cause, a Group-Wide Event of Termination. For the period of the
Suspension, such suspended Provider shall be deemed not to be a Provider for the
purpose hereof or for the purposes of the Loan Agreement. Such Suspension shall
cure any breach of a covenant, representation or warranty by such suspended
Provider, provided, that such cure shall not be deemed, in and of itself, to
cure a Group-Wide Event of Termination and not reasonably be expected to cure a
Group-Wide Event of Termination.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
PRIMARY SERVICER: COMMUNITY CARE OF AMERICA, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
PROVIDERS: ECA HOLDINGS, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
COMMUNITY CARE OF NEBRASKA, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
17
<PAGE>
COMMUNITY CARE OF GEORGIA, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
COMMUNITY CARE OF AMERICA OF ALABAMA, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
CCA OF MIDWEST, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
18
<PAGE>
ECA PROPERTIES, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
LULING/SCC, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
DUBLIN/SCC, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
19
<PAGE>
MARIETTA/SCC, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
MACON/SCC, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
COLLEGE PARK/SCC, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
20
<PAGE>
GLENWOOD/SCC, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
QUALITY CARE OF COLUMBUS, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
QUALITY CARE OF LYONS, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
21
<PAGE>
W.S.T. CARE, INC.
By:
Name:
Title:
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
Trade names: See Schedule V attached hereto
PURCHASER: CCA FUNDING LLC
By:
Name:
Title: Manager
Address: 3050 North Horseshoe Drive, Suite 260
Naples, Florida 34104
Facsimile Number: (941) 435-0408
22
<PAGE>
EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits and Schedules), the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Accounts" means all accounts (including, without limitation, all
Receivables), general intangibles and other obligations for the payment of money
arising out of a Provider's sale of merchandise or rendition of services in the
ordinary course of business, whether now existing or hereafter arising,
including all rights to reimbursement under any agreements with and payments
from Obligors, patients, residents and other Persons, and all proceeds of any of
the foregoing.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person or is a director or officer of such Person. For the purposes of this
definition, "control", when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" has the meaning set forth in the preliminary statements hereto.
"Batch Receivable" means a Receivable that is included in a Transferred
Batch, but excludes a Denied Receivable for which the Repurchase Price has been
received by the Purchaser.
"Batching Day" means each Monday of each week, or if such day is not a
Business Day, the next preceding Business Day.
"Batching Time" means 11:00 a.m. New York City time, on each Batching Day.
"Business Day" means any day on which banks are not authorized or required
to close in New York City or Naples, Florida.
"Capital Lease" means, as applied to any Person, any lease of any Property
(whether real, personal or mixed) by that Person as lessee, the obligations of
which are required, in accordance with GAAP, to be capitalized on the balance
sheet of that Person.
"CHAMPUS" means the Civilian Health and Medical Program of the Uniformed
Service, a program of medical benefits covering former and active members of the
uniformed services and certain of their dependents, financed and administered by
the United States Departments of Defense, Health and Human Services and
Transportation and established pursuant to 10 USC ss.ss. 1071-1106, and all
regulations promulgated thereunder including without limitation (a) all federal
statutes (whether set forth in 10 USC ss.ss. 1071-1106 or elsewhere) affecting
CHAMPUS; and (b) all rules, regulations (including 32 CFR 199), manuals, orders
and administrative, reimbursement and
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other guidelines of all Governmental Authorities (including, without limitation,
the Department of Health and Human Services, the Department of Defense, the
Department of Transportation, the Assistant Secretary of Defense (Health
Affairs), and the Office of CHAMPUS, or any Person or entity succeeding to the
functions of any of the foregoing) promulgated pursuant to or in connection with
any of the foregoing (whether or not having the force of law) in each case as
may be amended, supplemented or otherwise modified from time to time.
"Collections" means, with respect to any Batch Receivable or Transferred
Batch, all cash collections, wire transfers, electronic funds transfers and
other cash proceeds of such Batch Receivable or Transferred Batch, as the case
may be, deposited in the Purchaser Lockbox Account, including, without
limitation, all cash proceeds of any related security with respect to such Batch
Receivable.
"Credit and Collection Policy" means those receivables credit and
collection policies and practices of the Providers in effect on the date of the
Agreement and described in Schedule II hereto, as modified from time to time
with the consent of the Purchaser.
"Daiwa Group" means (i) DH-2, the Program Manager and the Master Servicer
and (ii) DH-2's agents and delegates identified from time to time to effectuate
this Agreement.
"Debt" means as to any Person (without duplication): (i) all obligations of
such party for borrowed money, (ii) all obligations of such party evidenced by
bonds, notes, debentures, or other similar instruments, (iii) all obligations of
such party to pay the deferred purchase price of property of services (other
than trade payables in the ordinary course of business), (iv) all Capital Leases
of such party, (v) all Debt of others directly or indirectly Guaranteed (which
term shall not include endorsements in the ordinary course of business) by such
party, (vi) all obligations secured by a Lien existing on property owned by such
party, whether or not the obligations secured thereby have been assumed by such
party or are non-recourse to the credit of such party (but only to the extent of
the value of such property), and (vii) all reimbursement obligations of such
party (whether contingent or otherwise) in respect of letters of credit,
bankers' acceptance and similar instruments.
"Defaulted Receivable" means a Batch Receivable (i) as to which the Obligor
thereof or any other Person obligated thereon has taken any action, or suffered
any event to occur, of the type described in paragraph (g) of Exhibit V or (ii)
which, consistent with the Credit and Collection Policy, would be written off
the appropriate Provider's books as uncollectible.
"Delinquency Ratio" means, as of the last Business Day of each month, a
percentage equal to:
DR / OPP
where:
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DR= The Expected Net Value of all Purchased Receivables
which became Delinquent Receivables in the four week
period immediately prior to the date of calculation.
OPP= The average Outstanding Purchase Price (calculated as
the arithmetic average of all daily balances) of all
Purchased Receivables in the four week period
immediately prior to the date of calculation.
"Delinquent Receivable" means a Batch Receivable (a) that has not been paid
in full on or following the 180th day following the Last Service Date thereof,
or (b) that is a Denied Receivable.
"Denied Receivable" has the meaning set forth in Section 4.01 hereto.
"Depositary Agreement" means that certain Depositary Account Agreement,
dated the date hereof, among each of the Providers, the Purchaser, DH-2 and the
Lockbox Bank, in substantially the form attached hereto as Exhibit XII, as such
agreement may be amended, modified or supplemented from time to time in
accordance with its terms.
"DH-2" means Daiwa Healthco-2 LLC, a Delaware limited liability company.
"Eligibility Criteria" has the meaning specified in the Loan Agreement as
such Eligibility Criteria may be modified from time to time by DH-2 upon written
notice to the Provider.
"Eligible Receivables" has the meaning specified in the Loan Agreement.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of ss. 3(3) of ERISA maintained by any Provider or any ERISA Affiliate, or with
respect to which any of them have any liability.
"EOB" means the explanation of benefit from an Obligor that identifies the
services rendered on account of the Batch Receivable specified therein.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity which is under common control with any
Provider within the meaning of ERISA or which is treated as a single employer
with any Provider under the Internal Revenue Code of 1986, as amended.
"Event of Termination" means any of the events specified in Exhibit V
hereto.
"Expected Net Value" means, with respect to any Batch Receivable, the gross
unpaid amount of such Receivable on the Transfer Date therefor, times the Net
Value Factor.
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"Facility Termination Date" means the earlier of (a) 36 months after the
Initial Transfer Date (subject to an automatic extension of such date to equal
the "Facility Termination Date" under the Loan Agreement) and (b) the occurrence
of a Group-Wide Event of Termination and the delivery of notice with respect
thereto, if required pursuant to Section 3.02 hereof, unless such event is
waived by the Purchaser in writing.
"Final Payment Date" means the first Settlement Date following the
Settlement Period in which final collection has been received for all Purchased
Receivables or such Purchased Receivables have become Denied Receivables or
Defaulted Receivables.
"GAAP" means generally accepted accounting principles in the United States
of America, applied on a consistent basis, as set forth in Opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards Board
and/or the rules and regulations of the Securities and Exchange Commission
and/or their respective successors and which are applicable in the circumstances
as of the date in question.
"Governmental Entity" means the United States of America, any state, any
political subdivision of a state and any agency or instrumentality of the United
States of America or any state or political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government. Payments from Governmental Entities
shall be deemed to include payments governed under the Social Security Act (42
U.S.C. 1395, et seq.), including payments under Medicare, Medicaid, and
CHAMPUS/Champva, and payments administered or regulated by HCFA.
"Group-Wide Event of Termination" has the meaning set forth in Exhibit V.
"Group-Wide Providers" has the meaning set forth in Exhibit V.
"Group-Wide Servicer Termination Event" has the meaning set forth in
Section 1.05(b).
"Guaranty" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay), or (ii) entered into for the purpose of assuring in any other
manner the obligee of such Debt or other obligation of the payment thereof or to
protect the obligee of such Debt or other obligation of the payment thereof or
to protect the obligee against loss in respect thereof (in whole or in part),
provided that the term Guaranty shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee" used as a verb
has a corresponding meaning.
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"HCFA" means the Health Care Financing Administration of the United States
Department of Health and Human Services.
"Indemnified Amounts" has the meaning set forth in Section 4.02 hereto.
"Indemnified Party" has the meaning set forth in Section 4.02 hereto.
"Initial Transfer Date" means the date of the initial purchase of
Receivables hereunder.
"Insurer" means any Person which in the ordinary course of its business or
activities agrees to pay for healthcare goods and services received by
individuals, including commercial insurance companies, nonprofit insurance
companies (such as Blue Cross, Blue Shield entities), employers or unions which
self-insure for employee or member health insurance, prepaid health care
organizations, preferred provider organizations and health maintenance
organizations. "Insurer" includes insurance companies issuing health, personal
injury, workers' compensation or other types of insurance but does not include
any individual guarantors.
"Last Service Date" means, with respect to any Receivable, the date set
forth on the related invoice or statement as the most recent date on which
services or merchandise were provided by the applicable Provider to the related
patient.
"LIBO Rate" has the meaning specified in the Loan Agreement.
"Lien" means any lien, mortgage, security interest, tax lien, pledge,
hypothecation, assignment, preference, priority, other charge or encumbrance, or
any other type of preferential arrangement of any kind or nature whatsoever by
or with any Person (including, without limitation, any conditional sale or title
retention agreement), whether arising by contract, operation of law, or
otherwise.
"Loan Agreement" means the Loan and Security Agreement dated as of the date
hereof between the Purchaser as borrower and DH-2 as Lender, as such agreement
may be modified, supplemented or amended from time to time in accordance with
its terms.
"Lockbox Bank" means KeyBank as lockbox bank under the Depositary
Agreement.
"Loss-to-Liquidation Ratio" means, as of the last Business Day
of each month, a percentage equal to:
DR /C
where:
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DR= The Expected Net Value of all Purchased Receivables
which became Defaulted Receivables in the four week
period immediately prior to the date of calculation.
C= Collections in the four week period immediately prior
to the date of calculation.
"Master Servicer" means RJE Data Processing, Inc., and any other Person
then identified by the Program Manager to the Providers, or the Primary Servicer
on behalf of the Providers, as being authorized to administer and service
Receivables.
"Material Adverse Effect" means any event, condition, change or effect that
(a) has a materially adverse effect on the business, Properties, capitalization,
liabilities, operations, prospects or financial condition of (i) the Group-Wide
Providers, (ii) the Primary Servicer on a consolidated basis, or (iii) the
Purchaser, (b) materially impairs the ability of the Primary Servicer, the
Group- Wide Providers or the Purchaser to perform its obligations under this
Agreement, (c) materially impairs the validity or enforceability of, or
materially impairs the rights, remedies or benefits available to the Purchaser
under this Agreement, or (d) changes, or could reasonably be expected to change,
the characterization and treatment of the sales of Receivables under this
Agreement as something other than a true sale.
"Misdirected Payment" means any form of payment in respect of a Batch
Receivable made in a manner other than to the Purchaser Lockbox, the Purchaser
Lockbox Account, the Provider Lockboxes or the Provider Lockbox Accounts.
"Multiemployer Plan" means a plan, within the meaning of ss. 3(37) of
ERISA, as to which any Provider or any ERISA Affiliate contributed or was
required to contribute within the preceding five (5) years.
"Net Value Factor" means, initially, 0.85, and thereafter (i) the
historical actual final collections received on the Provider's Receivables
within 180 days of the Last Service Date of such Receivables, divided by (ii)
the gross value of such Receivables.
"New Patient Consent Form" has the meaning set forth in clause (i) of
Exhibit II hereto.
"Notice" means a Notice to Governmental Entities or Notice to Insurers, as
applicable.
"Notice to Governmental Entities" means a notice letter on a Provider's
corporate letterhead in substantially the form attached hereto as Exhibit VII-A.
"Notice to Insurers" means a notice letter on a Provider's corporate
letterhead in substantially the form attached hereto as Exhibit VII-B.
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"Obligor" means the Insurer or Governmental Entity, as applicable, who is
responsible for the payment of all or any portion of a Receivable.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.
"Primary Servicer" means Community Care of America, Inc., a Delaware
corporation.
"Primary Servicer Account" means account #2090001393229 of the Primary
Servicer on behalf of the Providers at First Union National Bank of Florida, ABA
#063 0000 21, 125 North Airport Road, Naples, FL 34104, or such other bank
account designated by the Primary Servicer by written notice to the Providers,
the Master Servicer, the Purchaser and the Program Manager from time to time, as
the account for receipt of proceeds on behalf of the Providers.
"Primary Servicer Responsibilities" has the meaning set forth in Section
1.05(b) hereto.
"Primary Servicing Fee" means, with respect to any Purchased Batch, an
amount equal to $8 multiplied by the number of Receivables in such Purchased
Batch.
"Program Manager" means (i) Daiwa Securities America Inc., or (ii) any
other Person then identified by DH-2 to the Primary Servicer as being authorized
to provide administrative services with respect to the Purchaser and the
Purchaser's purchase, funding and collection of healthcare receivables.
"Property" means property of all kinds, real, personal or mixed, tangible
or intangible (including, without limitation, all rights relating thereto),
whether owned or acquired on or after the date of this Agreement.
"Proposed Eligible Receivables" has the meaning set forth in Section 1.02
hereto.
"Provider" or "Providers" has the meaning set forth in the preliminary
statements hereto.
"Provider Ancillary Lockbox" means the lockbox set forth on Schedule IV
hereto to receive checks and EOB's with respect to Receivables payable by
private payors.
"Provider Ancillary Lockbox Account" means the account set forth on
Schedule IV hereto in the name of the Providers and associated with the Provider
Ancillary Lockbox established
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and controlled by the Providers to deposit Collections, including Collections
received in the Provider Ancillary Lockbox and Collections received by wire
transfer, all as more fully set forth in the Depositary Agreement.
"Provider Government Lockbox" means the lockbox set forth on Schedule IV
hereto to receive checks and EOB's with respect to Receivables payable by
Governmental Entities.
"Provider Government Lockbox Account" means the account set forth on
Schedule IV hereto in the name of the Providers and associated with the Provider
Government Lockbox established and controlled by the Providers to deposit
Collections, including Collections received in the Provider Government Lockbox
and Collections received by wire transfer directly from Governmental Entities,
all as more fully set forth in the Depositary Agreement.
"Provider Lockboxes" means, collectively, the Provider Ancillary Lockbox
and the Provider Government Lockbox, or, as the context requires, either such
lockbox.
"Provider Lockbox Account" means, collectively, the Provider Ancillary
Lockbox Account and the Provider Government Lockbox Account, or, as the context
requires, either such lockbox account.
"Purchase Price" means, with respect to Receivables in each Purchased
Batch, (i) the aggregate Expected Net Value of the Receivables, minus (ii) 5%.
"Purchased Batch" has the meaning set forth in Section 1.02(b) hereto.
"Purchased Receivable" means a Receivable that has been purchased by the
Purchaser.
"Purchaser" has the meaning set forth in the preliminary statements hereto.
"Purchaser Lockbox" means the lockbox set forth on Schedule IV hereto to
receive checks and EOB's with respect to Receivables payable by Insurers.
"Purchaser Lockbox Account" means the lockbox account set forth on Schedule
IV hereto associated with the Purchaser Lockbox established by the Purchaser to
deposit Collections, including Collections received in the Purchaser Lockbox and
Collections received by wire transfer directly from Insurers, all as more fully
set forth in the Depositary Agreement.
"Receivable Information" has the meaning set forth in Section 1.02 hereto.
"Receivables" means all third-party reimbursable portions or third-party
directly payable portions of healthcare accounts receivable, owing to a Provider
(or in the case of Unbilled Receivables, to be owing), arising out of the
rendition of medical, surgical, diagnostic or other professional medical
services or nursing home services or the sale of medical products by a Provider,
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including all rights to reimbursement under any agreements with and payments
from Obligors, together with, to the maximum extent permitted by law, all
accounts and general intangibles related thereto, all rights, remedies,
guaranties, security interests and Liens in respect of the foregoing, all books,
records and other Property evidencing or related to the foregoing and all
proceeds of any of the foregoing,
"Repurchase Price" means an amount equal to (x) the Purchase Price of such
Denied Receivable, minus (y) any cash received from the Obligor in the Purchaser
Lockbox Account with respect to such Denied Receivable, plus (z) interest on
such amount calculated at the interest rate then in effect under the Loan
Agreement (or the maximum rate legally permitted if less than such rate) on the
average outstanding difference between clauses (x) and (y) from and including
the Business Day following the Transfer Date of such Denied Receivable to the
date the Repurchase Price is received by the Purchaser.
"Servicer" means the Primary Servicer, if it is then authorized to perform
the Primary Servicer Responsibilities pursuant to Section 1.05(b), or the Master
Servicer, or any other Person then authorized hereunder to perform the Primary
Servicer Responsibilities.
"Servicer Termination Event" means any of the events specified in Exhibit
IX hereto.
"Settlement Date" means Tuesday of each week; or if such day is not a
Business Day, the next succeeding Business Day; provided, that, if, following
the occurrence of an Event of Termination, the Purchaser shall have selected a
period shorter than one week as the Settlement Period, the Settlement Date shall
mean the 5th Business Day following the end of each such Settlement Period.
"Settlement Period" means the period beginning on Friday of each week and
ending on the Friday of the following week; provided, that notwithstanding the
foregoing, the first Settlement Period shall be the period from and including
the Initial Transfer Date through December 20, 1996; and provided, further, that
following the occurrence of an Event of Termination, the Purchaser may from time
to time, by notice to the Provider, select a shorter period as the Settlement
Period.
"Subsidiary" means, with respect to any Provider, any corporation or entity
of which at least a majority of the outstanding shares of stock or other
ownership interests having by the terms thereof ordinary voting power to elect a
majority of the board of directors (or Persons performing similar functions) of
such corporation or entity (irrespective of whether or not at the time, in the
case of a corporation, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled by such
Provider.
"Tangible Net Worth" means, with respect to any Person at any time, the sum
of (i) such Person's capital stock, capital in excess of par or stated value of
shares of its capital stock,
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retained earnings and any other account which, in accordance with GAAP,
constitutes stockholders' equity, less (ii) treasury stock, minus (iii) the book
value of all assets classified as intangible under GAAP, including, without
limitation, goodwill, deferred taxes, deferred financing costs, trademarks,
trade names, patents, copyrights and licenses.
"Total Collections" means, as to each Transferred Batch, the sum of all
Collections, Repurchase Prices and Indemnified Amounts, but only to the extent
that such Indemnified Amounts are received in lieu of Collections, distributed
to and received by the Purchaser with respect thereto.
"Transfer Date" means Tuesday of each week after the Initial Transfer Date,
or if such day is not a Business Day, the next succeeding Business Day provided
that there shall not be more than one Transfer Date in any single week, and,
provided further that, each Transfer Date shall occur simultaneously with each
Funding Date as defined in the Loan Agreement.
"Transferred Batch" has the meaning set forth in Section 1.02 hereto.
"Transmission" means, upon establishment of computer interface between the
Provider and the Master Servicer in accordance with the specifications
established by the Master Servicer, the transmission of Receivable Information
through computer interface to the Master Servicer in a manner satisfactory to
the Master Servicer.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the specified jurisdiction.
"Unbilled Receivable" means a Receivable in respect of which the goods have
been shipped, or the services rendered, to the relevant patient, and rights to
payment therefor have accrued, but the invoice has not been rendered to the
applicable Obligor.
Other Terms. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.
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EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent on Initial Transfer Date. The purchase of a
Purchased Batch under the Agreement on the Initial Transfer Date is subject to
the conditions precedent that the Purchaser shall have received on or before the
Initial Transfer Date the following, each (unless otherwise indicated) dated
such date, in form and substance satisfactory to the Purchaser:
(a) For each Provider and the Primary Servicer, a certificate issued by the
Secretary of State of the state of such entity's (i) organization as to the
legal existence and good standing of such entity and (ii) locale of operation,
if different from its state of organization, as to the foreign qualification,
authorization and good standing of such entity in such locale (all of which
certificates shall be dated not more than 20 days prior to the Initial Transfer
Date) or an opinion of counsel for such entity to such effect.
(b) For each Provider and the Primary Servicer, certified copies of the
charter and by-laws of such entity, certified copies of resolutions of the Board
of Directors of such entity approving the Agreement, certified copies of all
documents filed to register any assumed names of such entity, and certified
copies of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to the Agreement.
(c) For each Provider and the Primary Servicer, a certificate of the
Secretary or Assistant Secretary of such entity certifying the names and true
signatures of the incumbent officers of such entity authorized to sign the
Agreement and the other documents to be delivered by it hereunder.
(d) (i) Certified copies of the balance sheets of the Primary Servicer and
its Subsidiaries as at December 31, 1995, and for the prior 3 fiscal years and
the related statements of income and expense and retained earnings of the
Primary Servicer and its Subsidiaries for the fiscal year then ended, certified
in a manner acceptable to the Purchaser by independent public accountants
acceptable to the Purchaser and demonstrating that there has been no Material
Adverse Effect and (ii) unaudited balance sheets of the Primary Servicer and its
Subsidiaries for the fiscal quarter ended September 30, 1996 and the related
statements of income and expense and retained earnings of the Primary Servicer
and its Subsidiaries for such fiscal quarter then ended.
(e) Acknowledgment or time stamped receipt copies of proper financing
statements (showing each Provider as debtor/seller, the Purchaser as secured
party/purchaser and DH-2 as assignee, and stating that the financing statements
are being filed because UCC Section 9-102 does not distinguish between a sale
and a secured loan for filing purposes) duly filed on or before the Initial
Transfer Date under the UCC of all jurisdictions that the Purchaser may deem
necessary or desirable in order to perfect the ownership interests contemplated
by the Agreement.
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(f) Acknowledgment or time stamped receipt copies of proper financing
statements (showing each Provider as debtor and the Purchaser as secured party
and DH-2 as assignee with respect to the grant by the Providers of a first
priority security interest to the Purchaser in the Providers' Accounts, as
contemplated by Section 4.04 of the Agreement) duly filed on or before the
Initial Transfer Date under the UCC of all jurisdictions that the Purchaser may
deem necessary or desirable in order to perfect such security interest.
(g) Completed requests for information, dated on or before the Initial
Transfer Date, listing all effective financing statements filed in the
jurisdictions referred to in subsections (e) and (f) above that name each
Provider as debtor, together with copies of such other financing statements
(none of which shall cover any Receivables).
(h) Releases of, and acknowledgment copies of proper termination statements
(Form UCC-3), if any, necessary to evidence the release of all security
interests, ownership and other rights of any Person previously granted by any
Provider in its Accounts.
(i) Favorable opinions of such local counsels for the Providers as the
Daiwa Group requests, substantially in the form attached hereto as Exhibit XI-A,
and including a new form of patient consent form to be used by the Providers in
such locales (the "New Patient Consent Forms"), and as to such other matters as
the Daiwa Group requests.
(j) A favorable opinion of Blass & Driggs, counsel for the Primary Servicer
and the Providers, substantially in the form attached hereto as Exhibit XI-B.
(k) Payment of $150,000 which sum is equal to the advisory fee payable by
the Purchaser to Daiwa Securities America Inc.
(l) Payment of all reasonable attorneys' fees and disbursements incurred by
the Purchaser and the Daiwa Group.
(m) A duly executed Depositary Agreement, together with evidence
satisfactory to the Purchaser that the Purchaser Lockbox, the Provider
Lockboxes, the Purchaser Lockbox Account and the Provider Lockbox Accounts have
been established.
(n) Copies of all Notices required pursuant to Article II of the Agreement,
together with evidence satisfactory to the Purchaser that such Notices have been
or will be delivered to the addressees thereof.
(o) A copy of each new form of invoice from each Provider showing the
proper Provider Lockbox or Purchaser Lockbox as the remittance address.
(p) A copy of all of the Providers' existing forms of patient consents
which were signed by each patient for which the currently existing Receivables
were created, as well as a copy of each New Patient Consent Form to be signed by
each patient for which a Receivable will be
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created on or after the Initial Funding Date, which consents authorize certain
demographic and medical information with respect to such patient to be disclosed
by each Provider to its servicing agents and by such servicing agents to any
third party obligors thereon, certified by an officer of each Provider, or the
Primary Servicer on behalf of the Providers, as being true, complete, correct
and the only consent forms presently in effect.
2. Conditions Precedent on All Transfer Dates. Each purchase of a Purchased
Batch on a Transfer Date (including the Initial Transfer Date) shall be subject
to the further conditions precedent that the Provider and the Purchaser shall
have agreed upon the terms of such purchase and also that:
(a) Each Provider shall have delivered to the Purchaser or the Master
Servicer, as the case may be, on or prior to such Transfer Date, in form and
substance satisfactory to the Purchaser:
(i) completed Receivable Information with respect to each Proposed Eligible
Receivable (such Receivable Information having been delivered on or prior to the
most recent Batching Time preceding such Transfer Date), together with such
additional information as may reasonably be requested by the Purchaser or the
Master Servicer; and
(ii) to the extent not previously provided, executed Notices to each
Obligor responsible for the payment of any of the Batch Receivables to be
purchased on such Transfer Date, directing such Obligors to make payment to the
address and account designated in the Notices, as set forth in Article II
hereof, together with evidence that such Notices have been delivered to such
Obligors.
(b) On each such Transfer Date the following statements shall be true (and
acceptance of the proceeds of such purchase by the Primary Servicer on behalf of
the Providers shall be deemed a representation and warranty by each Provider
that such statements are then true):
(i) the representations and warranties contained in Exhibit III are correct
on and as of the date of such purchase as though made on and as of such date
except to the extent made with respect to an earlier date, and
(ii) no event has occurred and is continuing, or would result from such
purchase, that constitutes a Group-Wide Event of Termination or that would
constitute a Group-Wide Event of Termination but for the requirement that notice
be given or time elapse or both.
(c) The Purchaser shall have received such other approvals, opinions or
documents as it may reasonably request.
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EXHIBIT III
REPRESENTATIONS AND WARRANTIES
Each of the Providers and the Primary Servicer represents and warrants as
follows:
(a) It is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of its incorporation as set forth on
Schedule V hereto, and is duly qualified to do business, and is in good
standing, in every jurisdiction where the nature of its business requires it to
be so qualified.
(b) The execution, delivery and performance by it of the Agreement and the
other documents to be delivered by it thereunder, (i) are within its corporate
powers, (ii) have been duly authorized by all necessary corporate action, (iii)
do not contravene (1) its charter or by-laws, (2) any law, rule or regulation
applicable to it, (3) any contractual restriction binding on or affecting it or
its Property, or (4) any order, writ, judgment, award, injunction or decree
binding on or affecting it or its Property, and (iv) do not result in or require
the creation of any Lien upon or with respect to any of its Properties, other
than the interest created by the Agreement. The Agreement has been duly executed
and delivered by it. It has furnished to the Purchaser a correct and complete
copy of its certificate of incorporation and by-laws, including all amendments
thereto.
(c) No authorization or approval or other action by, and no notice to or
filing with, any Governmental Entity is required for the due execution, delivery
and performance by it of the Agreement or any other document to be delivered
thereunder.
(d) The Agreement constitutes the legal, valid and binding obligation of
it, enforceable against it in accordance with its terms, except as limited by
bankruptcy, insolvency, moratorium, fraudulent conveyance or other laws relating
to the enforcement of creditors' rights generally and general principles of
equity (regardless of whether enforcement is sought at equity or law).
(e) It has all power and authority, and has all permits, licenses,
accreditations, certifications, authorizations, approvals, consents and
agreements of all Insurers, Governmental Entities, accreditation agencies and
any other Person (including without limitation, accreditation by the appropriate
Governmental Entities and industry accreditation agencies and accreditation and
certifications as a provider of healthcare services eligible to receive payment
and compensation and to participate under Medicare, Medicaid, CHAMPUS/Champva,
Blue Cross/Blue Shield and other equivalent programs), necessary or required for
it (i) to own the assets (including Receivables) that it now owns, (ii) to carry
on its business as now conducted, except where failure to have such permits,
licenses, agreements with third-party payors, accreditation and certifications
(including, without limitation, accreditation by the appropriate Governmental
Entities and industry accreditation agencies and accreditation and
certifications as a provider of healthcare services eligible to receive payment
and compensation and to participate under Medicare, Medicaid, CHAMPUS/Champva,
Blue Cross/Blue Shield and other equivalent programs) would not have a Material
Adverse Effect.
III-1
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(f) It has not been notified by any Insurer, Governmental Entity or
instrumentality, accreditation agency or any other Person, during the
immediately preceding 24 month period, that such party has rescinded or not
renewed, or is reasonably likely to rescind or not renew, any such permit,
license, accreditation, certification, authorization, approval, consent or
agreement granted to it or to which it is a party except as disclosed in
Schedule III hereto.
(g) As of the Initial Transfer Date, all conditions precedent set forth in
Exhibit II have been fulfilled or waived in writing by the Purchaser, and as of
each Transfer Date, the conditions precedent set forth in paragraph 2 of such
Exhibit II shall have been fulfilled or waived in writing by the Purchaser.
(h) The balance sheets of the Primary Servicer and its Subsidiaries as at
December 31, 1995, and as at September 30, 1996 and the related statements of
income and expense, cash flows and retained earnings of the Primary Servicer and
its Subsidiaries for the fiscal periods then ended, copies of which have been
furnished to the Purchaser, fairly present the financial condition of the
Primary Servicer and its Subsidiaries as at such date and the results of the
operations of the Primary Servicer and its Subsidiaries for the period ended on
such date, all in accordance with GAAP, and since December 31, 1995 there has
been no change resulting in a Material Adverse Effect.
(i) There is no pending or, to the Primary Servicer's knowledge, threatened
action or proceeding or injunction, writ or restraining order affecting the
Primary Servicer or any of its Subsidiaries before any court, Governmental
Entity or arbitrator which could reasonably be expected to result in a Material
Adverse Effect, and the Primary Servicer or any Subsidiary is not currently the
subject of, and has no present intention of commencing, an insolvency proceeding
or petition in bankruptcy.
(j) Each Provider is the legal and beneficial owner of the Receivables in
each Transferred Batch free and clear of any Lien (other than any Lien on
Accounts that is expressly subordinated in writing to the Lien created hereunder
in a manner acceptable to the Purchaser, in its sole discretion); upon each
purchase or contribution of a Transferred Batch, the Purchaser shall acquire
valid ownership of each Receivable in such Transferred Batch and in the
Collections with respect thereto prior to all other Liens thereon. No effective
financing statement or other instrument similar in effect covering any
Receivable or the Collections with respect thereto is on file in any recording
office, except those filed in favor of the Purchaser, DH-2 or any permitted
assignee of DH-2 relating to the Agreement, and no competing notice or notice
inconsistent with the transactions contemplated in the Agreement remains in
effect with respect to any Obligor.
(k) All Receivable Information, information provided in the application for
the program effectuated by the Agreement, and each other document, report and
Transmission provided by the Primary Servicer or any Provider to the Daiwa Group
is or shall be accurate in all material respects as of its date and as of the
date so furnished, and no such document contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.
III-2
<PAGE>
(l) The principal place of business and chief executive office of each
Provider and the office where such Provider keeps its records concerning the
Receivables are located at the respective address referred to on the signature
pages of the Agreement and there have been no other such locations for the four
immediately prior months.
(m) Each purchase of a Purchased Batch will constitute a purchase or other
acquisition of notes, drafts, acceptances, open accounts receivable or other
obligations representing part or all of the sales price of merchandise,
insurance or services within the meaning of Section 3(c)(5) of the Investment
Company Act of 1940, as amended.
(n) Each Receivable included in a Purchased Batch is, as of the Transfer
Date of such Purchased Batch, an Eligible Receivable.
(o) The provisions of the Agreement create, on the Initial Transfer Date,
legal and valid liens in all of the Accounts owned or held by the Providers
(other than the Batch Receivables that have been sold to the Purchaser pursuant
to the provisions of the Agreement) in the Purchaser's favor, and when all
proper filings and other actions necessary to perfect such liens have been
completed, will constitute a perfected and continuing lien on all of the
Accounts owned or held by the Providers (other than the Batch Receivables that
have been sold to the Purchaser pursuant to the provisions of the Agreement),
having priority over all other liens on such Accounts of the Providers,
enforceable against each Provider and all third parties.
(p) All required Notices have been prepared and delivered to each
applicable Governmental Entity and Insurer, and all invoices now bear only the
appropriate remittance instructions for payment direction to the Purchaser
Lockbox, the Purchaser Lockbox Account, the appropriate Provider Lockbox or the
appropriate Provider Lockbox Account, as the case may be.
(q) No Provider has changed its principal place of business or chief
executive office in the last five years.
(r) The exact name of each Provider is as set forth on the signature pages
of the Agreement and, except as set forth on such signature page, such Provider
has not changed its name in the last five years and, except as set forth
opposite such Provider's name on Schedule V hereto, during such period such
Provider has not used, nor does such Provider now use, any other fictitious,
assumed or trade name.
(s) The Provider Lockbox Accounts are the only lockbox accounts maintained
by the Providers with respect to Eligible Receivables.
(t) With respect to itself or any of its Subsidiaries, since the Transfer
Date prior to the making of this representation, there exists no event which has
or is reasonably likely to have a Material Adverse Effect.
III-3
<PAGE>
(u) It is not in violation under any applicable statute, rule, order,
decree or regulation of any court, arbitrator or governmental body or agency
having jurisdiction over any Provider which could have a Material Adverse
Effect.
(v) It has filed on a timely basis all tax returns (federal, state and
local) required to be filed and has paid, or made adequate provision for payment
of, all taxes, assessments and other governmental charges due from it, unless
contested in good faith by appropriate proceedings. No tax lien has been filed
and is now effective against it or any of its Properties, except any Lien in
respect of taxes and other charges not yet due or contested in good faith by
appropriate proceedings. To its knowledge, there are no pending investigations
of it by any taxing authority or any pending but unassessed tax liability of it.
It does not have any obligation under any tax sharing agreement.
(w) It is solvent and will not become insolvent after giving effect to the
transactions contemplated by this Agreement; it has not incurred debts or
liabilities beyond its ability to pay; it will, after giving effect to the
transaction contemplated by this Agreement, have an adequate amount of capital
to conduct its business in the foreseeable future; the sales of Receivables
hereunder are made in good faith and without intent to hinder, delay or defraud
its present or future creditors.
(x) The Provider Government Lockbox is the only post office box and the
Provider Government Lockbox Account is the only lockbox account maintained by
the Providers for Receivables, the Obligors of which are Governmental Entities;
and no direction of any Provider is in effect directing Obligors to remit
payments on Proposed Eligible Receivables or Batch Receivables other than to the
applicable Purchaser Lockbox, Purchaser Lockbox Account, Provider Lockbox, or
Provider Lockbox Account.
(y) Each pension plan or profit sharing plan to which it is a party has
been fully funded in accordance with its obligations as set forth in such plan.
(z) To its knowledge, there are no pending civil or criminal investigations
by any Governmental Entity involving it or its officers or directors and neither
it nor any of its officers or directors has been involved in, or the subject of,
any civil or criminal investigation by any Governmental Entity.
(aa) The primary business of each Provider is the provision of healthcare
services, merchandise and/or equipment.
(bb) The assets of each Provider are free and clear of any liens in favor
of the Internal Revenue Service, any Employee Benefit Plan or the PBGC other
than inchoate tax liens resulting from an assessment of such Provider.
(cc) With respect to each Employee Benefit Plan of it, including to its
knowledge as to any Multiemployer Plan, such Employee Benefit Plan has complied
and been administered in accordance with its terms and in substantial compliance
with all applicable provisions of ERISA and the Internal Revenue Code of 1986,
as amended; neither it nor any ERISA Affiliate has been notified
III-4
<PAGE>
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of Title IV of ERISA;
and it has no material unpaid liability for any Employee Benefit Plan.
(dd) None of the Proposed Eligible Receivables or Batch Receivables
constitutes or has constituted an obligation of any Subsidiary, parent or other
Person which is its Affiliate.
(ee) The Obligor of each Proposed Eligible Receivable and each Batch
Receivable has not been the Obligor of any Defaulted Receivables in the past 12
months (other than, for the purpose of this clause, as a result of good faith
disputes).
(ff) No transaction contemplated under this Agreement requires compliance
with any bulk sales act or similar law.
(gg) It has, or has the right to use, valid provider identification numbers
and licenses to generate the Receivables.
(hh) It shall treat each sale of Receivables hereunder as a sale for
federal and state income tax, reporting and accounting purposes and shall treat
each contribution of Receivables hereunder as a contribution for federal and
state income tax, reporting and accounting purposes.
(ii) It is not engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation G, T, U, or X of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
extension of credit under this Agreement will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of purchasing or
carrying margin stock.
(jj) With respect to each Transferred Batch, each Provider shall receive,
for its own capital account, its proportional share (based on such Provider's
portion of the Receivables contributed to the Purchaser) of the aggregate
Expected Net Value of the Transferred Batch.
(kk) Each Receivable that is an Unbilled Receivable will be, or has been,
billed to the Obligor of such Receivable within 45 days of the Last Service
Date.
(ll) Commencing January 1, 1997, only the New Patient Consent Forms are
being obtained from each patient and resident receiving services from the
Providers.
III-5
<PAGE>
EXHIBIT IV
COVENANTS
Until the later of the Facility Termination Date and the Final Payment
Date, each Provider agrees as follows:
(a) Compliance with Laws, etc. It will comply in all material respects with
all applicable laws, rules, regulations and orders and preserve and maintain its
corporate existence, rights, franchises, qualifications, and privileges except
to the extent that the failure so to comply with such laws, rules and
regulations or the failure so to preserve and maintain such existence, rights,
franchises, qualifications, and privileges would not result in a Material
Adverse Effect.
(b) Offices, Records and Books of Account. It will keep its principal place
of business and chief executive office and the office where it keeps its records
concerning the Receivables at the address set forth under its name on the
signature pages to the Agreement or, upon 30 days' prior written notice to the
Purchaser, at any other locations in jurisdictions where all actions reasonably
requested by the Purchaser or otherwise necessary to protect and perfect the
Purchaser's interest in the Receivables have been taken and completed. It shall
keep its books and accounts in accordance with generally accepted accounting
principles and shall make a notation on its books and records, including any
computer files, to indicate which Receivables have been sold to the Purchaser
and the security interest of the Purchaser in its Accounts not sold to the
Purchaser. It shall maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate records
evidencing Receivables and related contracts in the event of the destruction of
the originals thereof), and keep and maintain all documents, books, records and
other information reasonably necessary or advisable for collecting all Batch
Receivables (including, without limitation, records adequate to permit the daily
identification of each Batch Receivable and all Collections of and adjustments
to each existing Batch Receivable) and for providing the Receivable Information.
(c) Performance and Compliance with Contracts and Credit and Collection
Policy. It will, at its expense, timely and fully perform and comply with all
material provisions, covenants and other promises required to be observed by it
under the contracts related to the Batch Receivables, and timely and fully
comply in all material respects with the Credit and Collection Policy in regard
to each Batch Receivable and the related contract, and it shall maintain, at its
expense, in full operation each of the bank accounts and lockboxes required to
be maintained under the Agreement. It shall not do anything to impede or
interfere with the collection by the Purchaser or the Master Servicer, on behalf
of the Purchaser, of the Batch Receivables.
(d) Notice of Breach of Representations and Warranties. It shall promptly
(and in no event later than one Business Day following actual knowledge thereof)
inform the Purchaser and the Master Servicer of any breach of covenants or
representations and warranties hereunder, including, without limitation, upon
discovery that a Receivable ceases to be an Eligible Receivable.
IV-1
<PAGE>
(e) Sales, Liens, etc. It will not sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any Liens upon
or with respect to, its Accounts, or upon or with respect to any account to
which any Collections of any Batch Receivable are sent, or assign any right to
receive income in respect thereof except (i) it may grant a Lien on Accounts
that is expressly subordinated in writing to the Lien created hereunder in a
manner acceptable to DH-2, in its sole discretion and (ii) those Liens in favor
of the Purchaser, DH-2 or any assignee of DH-2 relating to the Agreement.
(f) Extension or Amendment of Batch Receivables. It shall not amend, waive
or otherwise permit or agree to any deviation from the terms or conditions of
any Batch Receivable except in accordance with the Credit and Collection Policy.
(g) Change in Business or Credit and Collection Policy. It will not make
any change in the Credit and Collection Policy or make any change in the
character of its business that, in either event, could result in a Material
Adverse Effect. It will not make any other material changes in the Credit and
Collection Policy without the prior written consent of the Purchaser.
(h) Audits and Visits. It will, at any time and from time to time during
regular business hours as requested by the Purchaser, permit the Purchaser, or
its agents or representatives (including the Master Servicer), (i) to examine
and make copies of and abstracts from all books, records and documents
(including, without limitation, computer tapes and disks) in its possession or
under its control relating to Batch Receivables including, without limitation,
the related contracts, and (ii) to visit its offices and properties for the
purpose of examining such materials described in clause (i) above, and to
discuss matters relating to Batch Receivables or its performance hereunder or
under the contracts with any of its officers or employees having knowledge of
such matters. It shall permit the Master Servicer to have at least one agent or
representative physically present in its administrative office during normal
business hours to assist it in performing its obligations under the Agreement,
including its obligations with respect to the collection of Batch Receivables
pursuant to Article I of the Agreement.
(i) Change in Payment Instructions. It will not terminate the Provider
Lockboxes, the Provider Lockbox Accounts, the Purchaser Lockbox or the Purchaser
Lockbox Account, or make any change or replacement in the instructions contained
in any invoice, Notice or otherwise, or regarding payments with respect to
Receivables to be made to it, the Purchaser or the Master Servicer, except upon
the prior and express direction of the Program Manager or the Purchaser.
(j) Reporting Requirements. It will provide to the Purchaser (in multiple
copies, if requested by the Purchaser) the following:
(i) as soon as available and in any event within 45 days after the end of
each of the first three quarters of each fiscal year of the Primary Servicer,
consolidated balance sheets of the Primary Servicer and its Subsidiaries as of
the end of such quarter and consolidated statements of income, cash flows and
retained earnings of the Primary Servicer and its Subsidiaries for the period
commencing at the beginning of the current fiscal year and
IV-2
<PAGE>
ending with the end of such quarter, certified by the chief financial officer of
the Primary Servicer;
(ii) as soon as available and in any event within 90 days after the end of
each fiscal year of the Primary Servicer, a copy of the audited consolidated
financial statements (together with explanatory notes thereon) and the auditor's
report letter for such year for the Primary Servicer and its Subsidiaries,
containing financial statements for such year audited by KPMG Peat Marwick LLP
or other independent public accountants acceptable to the Purchaser;
(iii) as soon as available and in any event within 45 days after the end of
each fiscal quarter of the Primary Servicer, an officer's certificate as to its
performance under and compliance with this Agreement during the preceding
quarter;
(iv) on or before the 15th of each month, monthly and year-to-date
statistical and financial reports, including volume and time business reports
(to be requested by the Purchaser) and unaudited consolidated profit and loss
reports, from the chief financial officer of the Primary Servicer;
(v) promptly and in any event within ten days after the occurrence of each
Event of Termination or event which, with the giving of notice or lapse of time,
or both, would constitute an Event of Termination, a statement of the chief
financial officer of the Primary Servicer setting forth details of such Event of
Termination or event, and the action that it or such applicable Provider has
taken and proposes to take with respect thereto;
(vi) promptly after the sending or filing thereof, copies of all reports
and registration statements that the Primary Servicer or any Subsidiary files
with the Securities and Exchange Commission or any national securities exchange
and official statements that the Primary Servicer or any Subsidiary files with
respect to the issuance of tax-exempt indebtedness and after an Event of
Termination or Servicer Termination Event, copies of all reports (if any) that
the Primary Servicer or any Subsidiary sends to any of its security holders;
(vii) promptly after the filing or receiving thereof, copies of all reports
and notices that the Primary Servicer or any Affiliate files under ERISA with
the Internal Revenue Service or the PBGC or the U.S. Department of Labor or that
the Primary Servicer or any Affiliate receives from any of the foregoing or from
any Multiemployer Plan to which the Primary Servicer or Affiliate is or was,
within the preceding five years, a contributing employer, in each case in
respect of the assessment of withdrawal liability or an event or condition which
could, in the aggregate, result in the imposition of liability on the Primary
Servicer and/or any such Affiliate in excess of $10,000;
(viii) at least ten Business Days prior to any change in any Provider's
name, a notice setting forth the new name and the proposed effective date
thereof;
IV-3
<PAGE>
(ix) promptly (and in no event later than one Business Day following actual
knowledge or receipt thereof), written notice in reasonable detail, of (w) any
Lien asserted or claim made against a Batch Receivable, (x) the occurrence of a
Servicer Termination Event, (y) the occurrence of any other event which could
have a Material Adverse Effect on the value of a Batch Receivable or on the
interest of the Purchaser in a Batch Receivable or (z) the results of any cost
report or similar audits being conducted by any federal, state or county
Governmental Entity or its agents or designees;
(x) at least 30 days prior to the commencement of each fiscal year, a
consolidated and consolidating operating plan (together with a complete
statement of the assumptions on which such plan is based) of the Primary
Servicer and its Subsidiaries approved by its Board of Directors, which shall
include monthly budgets for the prospective year in reasonable detail acceptable
to the Purchaser and will integrate operating profit and cash flow projections
and personnel, capital expenditures, and facilities plans;
(xi) promptly upon receipt thereof, a copy of any management letter or
written report submitted to the Primary Servicer by independent certified public
accountants with respect to the Subsidiaries, business, condition (financial or
otherwise), operations, prospects, or Properties of the Primary Servicer;
(xii) no later than five (5) days after the commencement thereof, written
notice of all actions, suits, and proceedings before any Governmental Authority
or arbitrator affecting any Provider which, if determined adversely to such
Provider, could have a Material Adverse Effect;
(xiii) promptly after the furnishing thereof, copies of any statement or
report furnished by a Provider to any other party pursuant to the terms of any
indenture, loan, or credit or similar agreement and not otherwise required to be
furnished to the Purchaser pursuant to this Agreement;
(xiv) as soon as possible and in any event within five (5) days after
becoming aware of the occurrence thereof, written notice of any matter that
could reasonably be expected to result in a Material Adverse Effect;
(xv) as soon as available, (A) one copy of each financial statement,
report, notice or proxy statement sent by the Primary Servicer or any of its
Subsidiaries to its stockholders generally, (B) and one copy of each regular,
periodic or special report, registration statement, or prospectus filed by the
Primary Servicer or any Subsidiary with any securities exchange or the
Securities and Exchange Commission or any successor agency or the Bankruptcy
Court, and (C) all press releases and other statements made available by the
Primary Servicer to the public concerning developments in the business of the
Primary Servicer or any Subsidiary;
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<PAGE>
(xvi) within the sixty (60) day period prior to the end of each fiscal year
of the Primary Servicer, a report satisfactory in form to the Purchaser, listing
all material insurance coverage maintained as of the date of such report by the
Primary Servicer and its Subsidiaries and all material insurance planned to be
maintained by the Primary Servicer and its Subsidiaries in the subsequent fiscal
year; and
(xvii) such other information respecting the Receivables or the condition
or operations, financial or otherwise, of the Primary Servicer or any Subsidiary
as the Purchaser may from time to time reasonably request.
(k) Notice of Proceedings; Overpayments. The Primary Servicer shall
promptly notify the Master Servicer in the event of any action, suit,
proceeding, dispute, set-off, deduction, defense or counterclaim that is or may
be asserted by an Obligor with respect to any Batch Receivable. The Primary
Servicer shall cause each Provider to make any and all payments to the Obligors
necessary to prevent the Obligors from offsetting any earlier overpayment to any
Provider against any amounts the Obligors owe on any Batch Receivables.
(l) Officer's Certificate. On the date the financial statements referred to
in clause (ii) above are to be delivered in each fiscal year after the Initial
Transfer Date, the chief financial officer of each Provider shall deliver a
certificate to the Purchaser, stating that, as of such date, (i) all
representations and warranties are true and correct, (ii) the conditions
precedent set forth in paragraph 2 of Exhibit II have been fulfilled or waived
in writing by the Purchaser, and (iii) no Group-Wide Event of Termination exists
and is continuing.
(m) Further Instruments, Continuation Statements. Each
Provider shall, at its expense, promptly execute and deliver all further
instruments and documents, and take all further action that the Program Manager
or the Purchaser may reasonably request, from time to time, in order to perfect,
protect or more fully evidence the full and complete transfer of ownership of
the Batch Receivables, or to enable the Purchaser or the Program Manager to
exercise or enforce the rights of the Purchaser hereunder or under the Batch
Receivables. Without limiting the generality of the foregoing, each Provider
will upon the request of the Program Manager execute and file such UCC financing
or continuation statements, or amendments thereto or assignments thereof, and
such other instruments or notices, as may be, in the opinion of the Program
Manager, necessary or appropriate. Each Provider hereby authorizes the Program
Manager or its designees, upon two Business Days' notice, to file one or more
financing or continuation statements and amendments thereto and assignments
thereof, relative to all or any of the Batch Receivables now existing or
hereafter arising without the signature of such Provider where permitted by law.
If a Provider fails to perform any of its agreements or obligations under the
Agreement, the Program Manager may (but shall not be required to) itself
perform, or cause performance of, such agreement or obligation, and the expenses
of the Program Manager incurred in connection therewith shall be payable by the
Providers.
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<PAGE>
(n) Taxes. The Providers shall pay any and all taxes relating to the
transactions contemplated under this Agreement, including but not limited to the
sale, transfer and assignment of each Batch Receivable.
(o) Deviation from Terms of Batch Receivable, etc. No Provider shall,
without the prior written consent of the Purchaser:
(i) other than in connection with the repurchase of a Denied Receivable,
compromise, adjust, extend, satisfy, subordinate, rescind, set off, waive,
amend, or otherwise modify, or permit or agree to any deviation from, the terms
and conditions of any Batch Receivable, or materially or adversely amend, modify
or waive any term or condition of any contract related thereto;
(ii) (x) amend, modify, supplement or delete in any way or to any extent
any provision for uncollectible accounts and free care applicable to any Batch
Receivable or (y) amend, modify or supplement in any way or to any extent any
financial category or change in any way or to any extent the manner in which any
financial category is treated or reflected in a Provider's records;
(iii) materially or adversely alter or modify (x) its claims processing
system, or (y) its third party billing system, as applicable; or
(iv) change, modify or rescind any direction contained in any invoice or
previously delivered Notice.
(p) Purchaser's Ownership of Batch Receivables. It shall not prepare or
permit to be prepared any financial statements which shall account for the
transactions contemplated hereby in a manner which is, or in any other respect
account for the transactions contemplated hereby in a manner which is,
inconsistent with the Purchaser's ownership of the Batch Receivables.
(q) Merger, Consolidation. It shall not merge with or into or consolidate
with or into, another Person, or convey, transfer, lease or otherwise dispose of
all or substantially all of its assets (whether now owned or hereafter
acquired).
(r) No "Instruments". It shall not take any action which would allow,
result in or cause any Transferred Batch or Batch Receivable to be evidenced by
an "instrument" within the meaning of the UCC of the applicable jurisdiction.
(s) Master Servicer Certificate. On or before the thirtieth calendar day
after the Initial Transfer Date, the Purchaser shall receive a certificate from
the Master Servicer stating that all computer linkups and interfaces necessary
or desirable, in the judgment of the Master Servicer, to effectuate the
transactions and information transfers contemplated hereunder, are fully
operational to the satisfaction of the Master Servicer.
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<PAGE>
(t) Implementation of New Patient Consent Forms. As soon as possible after
the Initial Transfer Date and in any event no later than December 31, 1996, the
Purchaser shall receive a certificate from an officer of each Provider stating
that the New Patient Consent Forms are the only forms being used by such
Provider and that all reasonable steps have been and are being taken to obtain
New Patient Consent Forms from patients and residents currently being provided
services by such Provider.
(u) Deviation from New Patient Consent Form. No Provider shall, without the
prior written consent of the Purchaser, substitute, alter, modify or change in
any way the New Patient Consent Form applicable to it.
(v) Implementation of New Invoices. Each Provider shall take all reasonable
steps to ensure that all invoices rendered or dispatched on or after the Initial
Transfer Date contain only the remittance instructions required under Article II
of this Agreement.
(w) Assumed Name Certificates. On or before December 31, 1996, the
Purchaser shall receive copies of all certificates filed by the Providers in
each applicable jurisdiction regarding the use of each of the trade names set
forth opposite each Provider's name on Schedule V attached hereto.
IV-7
<PAGE>
EXHIBIT V
EVENTS OF TERMINATION
Each of the following shall be an "Event of Termination" with respect to
each individual Provider and, if any Event of Termination relates either (in
each case, a "Group-Wide Event of Termination") to the Primary Servicer or to
Providers responsible in the aggregate for the sale or contribution to the
Purchaser of more than 25% of the Batch Receivables (whether or not purchased)
in the prior 90 days (or the number of days from the date of the Agreement to
the date of such Event of Termination, if less than 90 days) ("Group-Wide
Providers"), such Event of Termination shall relate to each Provider:
(a) The Servicer, in its capacity as agent for the Purchaser pursuant to
Section 1.05(b), shall fail to perform or observe any term, covenant or
agreement included in the Primary Servicer Responsibilities (other than a
Servicer Termination Event resulting from the events described in paragraph (g)
of this Exhibit) and such failure shall remain unremedied for fifteen (15) days,
or the Servicer or any Provider shall fail to make when due any payment or
deposit to be made by it under the Agreement.
(b) Any Provider or the Servicer (i) fails to transfer any servicing rights
and obligations with respect to the Batch Receivables to any successor
designated pursuant to Section 1.05(b) of the Agreement, (ii) fails to make any
payment required under the Agreement (unless such payment obligation has been
fulfilled in full pursuant to the Purchaser's set-off rights under Section 4.03
of the Agreement) or (iii) sends a "Revocation Order" (as defined in the
Depositary Agreement) or makes any change or replacement in the "Standing
Revocable Instruction" (as defined in the Depositary Agreement).
(c) Any representation or warranty (other than those
representations and warranties (i) with respect to the purchase of Receivables
that are covered by paragraph (f) of this Exhibit and (ii) with respect to Batch
Receivables, the Repurchase Price with respect thereto is paid to the Purchaser
in the manner set forth in Article IV of this Agreement within five Business
Days following demand therefor) made or deemed made by a Provider under or in
connection with the Agreement or any information or report delivered by a
Provider pursuant to the Agreement shall prove to have been incorrect or untrue
in any material respect when made or deemed made or delivered.
(d) Any Provider fails to perform or observe any other term, covenant or
agreement contained in the Agreement on its part to be performed or observed and
any such failure shall remain unremedied for three Business Days after the
earlier of (i) the discovery thereof by such Provider and (ii) written notice
thereof shall have been given to such Provider or the Primary Servicer by the
Purchaser; unless such Provider is removed as a Provider in accordance with
Section 5.19(b) after the earlier of clauses (i) and (ii).
V-1
<PAGE>
(e) Any Provider or any of its Subsidiaries shall fail to pay any principal
of or premium or interest on any of its Debt when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such Debt;
or any other event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt and shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the effect
of such event or condition is to accelerate, or to permit the acceleration of,
the maturity of such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to repay, redeem,
purchase or defease such Debt shall be required to be made, in each case prior
to the stated maturity thereof.
(f) Any purchase of a Purchased Batch pursuant to the Agreement shall for
any reason (other than pursuant to the terms hereof) fail or cease to create or
fail or cease to be a valid and perfected ownership interest in each Batch
Receivable in such Purchased Batch and the Collections with respect thereto free
and clear of all Liens (other than Liens referred to in clauses (i) and (ii) of
paragraph (e) of Exhibit IV) unless, as to any such Batch Receivable, the
Repurchase Price with respect thereto is paid to the Purchaser in the manner set
forth in Article IV of the Agreement within five Business Days following demand
therefor.
(g) Any Provider or any of its Subsidiaries shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against a Provider or any
of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its Property and, in the
case of any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a period of 30
days, or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or for any
substantial part of its Property) shall occur; or a Provider or any of its
Subsidiaries shall take any action to authorize any of the actions set forth
above in this paragraph (g).
(h) As of any date of determination, any Provider is found to have been
overpaid by Governmental Entities by 8% or more during any period covered by an
audit conducted by the HCFA and such overpayment is not repaid within 30 days of
the earlier of receipt of a notice by, or the knowledge of, such Provider.
(i) There shall have occurred any Material Adverse Effect since September
30, 1996.
(j) A Provider or the Primary Servicer shall have consummated, or have
entered into any transaction which shall result in the consummation of (i) the
merger or consolidation of such
V-2
<PAGE>
Provider or the Primary Servicer, (ii) the acquisition of all or a substantial
portion of the assets of any Person, (iii) the transfer, sale, assignment, lease
or other disposition of all or a substantial portion of such Provider's or the
Primary Servicer's assets or Properties, (iv) a change in the general nature of
such Provider's or the Primary Servicer's business, or (v) the sale of a
controlling interest, directly or indirectly, in such Provider or the Primary
Servicer.
(k) Judgments or orders for payment of money (other than judgments or
orders in respect of which adequate insurance is maintained for the payment
thereof) against the Providers in excess of $500,000 in the aggregate remain
unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period
of 30 days or more.
(l) Any governmental authority (including, without limitation, the Internal
Revenue Service or the PBGC) files a notice of a Lien against the assets of a
Provider other than a Lien (i) that is limited by its terms to assets other than
Receivables and (ii) that does not result in a Material Adverse Effect.
(m) Any Provider does not maintain, keep, and preserve all of its
Properties necessary or useful in the proper conduct of its business in good
repair, working order, and condition (ordinary wear and tear excepted) and make
all necessary repairs, renewals, replacements, betterments, and improvements
thereof.
(n) Any Provider does not pay or discharge at or before maturity or before
becoming delinquent (i) all taxes, levies, assessments, and governmental charges
imposed on it or its income or profits or any of its Property, and (ii) all
lawful claims for labor, material, and supplies, which, if unpaid, might become
a Lien upon any of its Property.
(o) Any Provider does not keep insured by financially sound and reputable
insurers all Property of a character usually insured by corporations engaged in
the same or similar business similarly situated against loss or damage of the
kinds and in the amounts customarily insured against by such corporations and
carry such other insurance as is usually carried by such corporations. Each
policy referred to in this Subsection (o) shall provide that it will not be
canceled, amended, or reduced except after not less than thirty (30) days' prior
written notice to the Purchaser and DH-2 and shall also provide that the
interests of the Purchaser shall not be invalidated by any act or negligence of
a Provider. Any Provider does not advise the Purchaser promptly of any policy
cancellation, reduction, or amendment. Any insurance policy for property,
casualty, liability and business interruption coverage for a Provider does not
name DH-2 as assignee of the Purchaser as loss payee (as the Purchaser's
interests may appear) or an additional insured, as appropriate.
(p) Any Provider does not maintain proper books of record and account in
which full, true and correct entries in conformity with GAAP are made of all
dealings and transactions in relation to its business and activities.
V-3
<PAGE>
(q) Any Provider does not comply in all material respects with (i) any
document directly relating to the responsibilities of such Provider under the
Agreement or (ii) any agreement, contract, or instrument that results in a
Material Adverse Effect.
(r) Any Provider does not comply with all minimum funding requirements and
all other material requirements of ERISA, if applicable, so as not to give rise
to any liability thereunder.
(s) Any Provider engages in any line or lines of business activity other
than the businesses in which it is engaged on the date hereof.
(t) The Loss-to-Liquidation Ratio in any four consecutive calendar weeks to
exceeds 5%.
(u) The Delinquency Ratio in any four consecutive calendar weeks to exceeds
10%.
(v) An "Event of Default" (as defined in the Loan Agreement) shall occur
under the Loan Agreement.
(w) Any provision of this Agreement shall for any reason cease to be valid
and binding on a Provider or a Provider shall so state in writing.
V-4
<PAGE>
EXHIBIT VI
RECEIVABLE INFORMATION
The following information shall, as appropriate, be provided
by each Provider to the Master Servicer with respect to each Batch Receivable,
together with such other information and in such form as may reasonably be
requested from time to time by the Master Servicer and as, in accordance with
applicable law, may be disclosed and/or released to the Master Servicer (the
"Receivable Information"):
(i) patient demographic information;
(ii) insured party demographic and other policy-related information;
(iii) Provider services classification information (i.e., D.R.G. and other
like information established by the Provider from time to time to classify
services rendered at the Provider's institution);
(iv) Obligor required information (i.e., information provided in the
ordinary course of business to any specified Obligor or any other information
required to be provided to an Obligor pursuant to any agreement, contract or
other arrangement with such Obligor); and
(v) billing information (i.e., all information
provided by the Provider on invoices to Obligors and any other
information required to be provided pursuant to the Credit and
Collection Policy and, to the extent the Transmission will not be via
computer interface, including a copy of the admitting face sheet, HCFA
Form and a detailed copy of the bill).
VI-1
<PAGE>
EXHIBIT VII-A
FORM OF NOTICE TO GOVERNMENTAL ENTITIES
[Letterhead of the applicable Provider]
[Date]
[Name and Address
of Governmental Entity]
Re: Change of Account and Address
To Whom it May Concern:
Please be advised that we have opened a new bank account at _____________
and a post-office box with respect to such bank account. Accordingly, until
further notice, we hereby request that:
(1) All wire transfers be made directly into our account at:
======================
----------------------
Account #_______________
ABA #_____________________
Confirm Phone Number: _______________
Attention: ___________________
(2) All Explanations of Benefits, remittance advices and
other forms of payment, including checks, be made to our
post office box located at:
=================
-----------------
Reference: Account #____________
Thank you for your cooperation in this matter.
[Applicable Provider]
By:____________________
[Authorized Officer]
VII-A-1
<PAGE>
EXHIBIT VII-B
FORM OF NOTICE TO INSURERS
[Letterhead of the applicable Provider]
[Date]
[Name and Address
of Insurer]
Re: Change of Account and Address
To Whom it May Concern:
Please be advised that we (the "Provider") are selling and contributing to
CCA Funding LLC (the "Purchaser"), an affiliated company, our existing and
future receivables payable by you to us; and the Purchaser is assigning the
aforementioned existing and future arising receivables as collateral to Daiwa
Healthco-2 LLC (the "Lender"). Accordingly, you are hereby directed to make:
(1) All wire transfers directly to the following account:
=======================
-----------------------
Account #_______________
ABA #_____________________
Confirm Phone Number: _______________
Attention: ___________________
(2) All Explanation of Benefits, remittance advices and
other forms of payment, including checks, to the
following address:
======================
Reference: DAIWA HEALTHCO-2 LLC
The foregoing directions shall apply to all existing receivables payable to
us and (until further written notice) to all receivables arising in the future
and may not be revoked except by a writing executed by the Purchaser.
VII-B-1
<PAGE>
Please acknowledge your receipt of this notice by signing the enclosed copy
of this letter and returning it in the enclosed envelope.
Thank you for your cooperation in this matter.
[Applicable Provider]
By:____________________
[Authorized Officer]
CCA FUNDING LLC
By:____________________
[Authorized Officer]
Receipt Acknowledged:
[Name of Insurer]
By: ____________________
Title:
VII-B-2
<PAGE>
EXHIBIT VIII
PRIMARY SERVICER RESPONSIBILITIES
Each Provider shall be responsible for the following
administration and servicing obligations (the "Primary Servicer
Responsibilities") which shall be performed by the Primary Servicer on behalf of
the Providers until such time as a successor servicer shall be designated and
shall accept appointment pursuant to Section 1.05(b) of the Agreement:
(a) Servicing Standards and Activities. Each Provider agrees to administer
and service the Batch Receivables sold or contributed by such Provider in each
Transferred Batch (i) to the extent consistent with the standards set forth in
clauses (b) (i) through (iv) below, with the same care that it exercises in
administering and servicing similar receivables for its own account, (ii) within
the parameters of services set forth in paragraph (b) of this Exhibit VIII, as
such parameters may be modified by mutual written agreement of the Purchaser and
the Providers, (iii) in compliance at all times with applicable law and with the
agreements, covenants, objectives, policies and procedures set forth in the
Agreement, and (iv) in accordance with industry standards for servicing
healthcare receivables unless such standards conflict with the procedures set
forth in paragraph (b) of this Exhibit VIII in which case the provisions of
paragraph (b) shall control. The Providers shall establish and maintain
electronic data processing services for monitoring, administering and collecting
the Batch Receivables in accordance with the foregoing standards and shall,
within three (3) Business Days of the deposit of any checks, other forms of cash
deposits, EOB's or other written matter into a Lockbox, post such information to
its electronic data processing services.
(b) Parameters of Primary Servicing. The Primary Servicer Responsibilities
shall be performed within the following parameters:
(i) Subject to the review and authority of the Purchaser and except as
otherwise provided herein, each Provider shall have full power and authority to
take all actions that it may deem necessary or desirable, consistent in all
material respects with its existing policies and procedures with respect to the
administration and servicing of accounts receivable, in connection with the
administration and servicing of Batch Receivables. Without limiting the
generality of the foregoing, each Provider shall, in the performance of its
servicing obligations hereunder, act in accordance with all legal requirements
and subject to the terms and conditions of the Agreement. Each Provider agrees
that the Primary Servicing Fee has been calculated to cover all costs and
expenses incurred in the performance of its servicing obligations hereunder and
no other reimbursement of costs and expenses shall be payable to the Servicer.
(ii) A Provider shall not be entitled to sue to enforce or collect any
Batch Receivable without the prior written consent of the Purchaser unless such
Provider shall have repurchased such Batch Receivable in accordance with the
Agreement.
VIII-1
<PAGE>
(iii) No Provider shall change in any material respect its existing
policies and procedures with respect to the administration and servicing of
accounts receivable (including, without limitation, the amount and timing of
write-offs) without the prior written consent of the Purchaser.
(iv) Each Provider will be responsible for the monitoring and collection of
the Batch Receivables, including, without limitation, contacting Obligors that
have not made payment on their respective Batch Receivables within the customary
time period for such Obligor, and resubmitting any claim rejected by an Obligor
due to incomplete information.
(v) If a Provider determines that a payment with respect to a Batch
Receivable has been received directly by a patient or any other Person, such
Provider shall promptly advise the Purchaser, and the Purchaser shall be
entitled to presume that the reason such payment was made to such patient or
other Person was because of a breach of representation or warranty in the
Agreement with respect to such Batch Receivable (such as, by way of example, the
forms related to such Batch Receivable not being properly completed so as to
provide for direct payment by the Obligor to such Provider), unless such
Provider shall demonstrate that such is not the case. In the case of any such
Batch Receivable which is determined not to be a Denied Receivable, each
Provider shall promptly demand that such patient or other Person remit and
return such funds. If such funds are not promptly received by the applicable
Provider, such Provider shall take all reasonable steps to obtain such funds.
(vi) Notwithstanding anything to the contrary contained herein, no Provider
may amend, waive or otherwise permit or agree to any deviation from the terms or
conditions of any Batch Receivable in any material respect without the prior
consent of the Purchaser.
(c) Aged Term Servicing. The parties hereby agree that at such time as any
Batch Receivable is unpaid for more than 120 days after the Last Service Date,
the applicable Provider shall, upon the request of the Purchaser, turn over all
of its Primary Servicer Responsibilities under this Agreement with respect to
such Batch Receivable to a successor servicer selected by the Purchaser, and
such servicer shall thereafter service such Batch Receivable.
(d) Termination of Primary Servicer Responsibilities; Cooperation. Upon the
occurrence of a Servicer Termination Event, the Purchaser may, by written
notice, terminate each Provider's Primary Servicer Responsibilities, in which
event the Providers shall immediately transfer to a successor servicer
designated by the Purchaser all records, computer access and other information
as shall be necessary or desirable, in the judgment of such successor servicer,
to perform such responsibilities. The Providers shall otherwise cooperate fully
with such successor servicer.
(e) Primary Servicing Fee. Upon the transfer of servicing with respect to
any Purchased Receivable pursuant to this Agreement, the Providers shall no
longer be paid the Primary Servicing Fee relating to such Purchased Receivables,
which will be paid to the successor Person performing the Primary Servicer
Responsibilities.
VIII-2
<PAGE>
EXHIBIT IX
SERVICER TERMINATION EVENTS
Each of the following shall be a "Servicer Termination Event":
(a) An event has occurred and is continuing that constitutes
an Event of Termination or that would constitute an Event of Termination but for
the requirement that notice be given or time elapse or both.
(b) The Servicer is not performing, or becomes unable (in the
commercially reasonable determination of the Purchaser) to perform, fully the
Primary Servicer Responsibilities set forth in Exhibit VIII hereof.
(c) A Provider is unable to maintain the Transmission
interface described in Exhibit X to the complete satisfaction of the Master
Servicer, or the electronic information servicing capabilities of a Provider are
not functioning for a period of more than three consecutive Business Days.
(d) Any Provider has sent multiple Transmissions to the Master
Servicer in a manner that is not in compliance with the specifications set forth
in Exhibit X hereof.
(e) The Purchaser, in its sole judgement, which judgment shall
be commercially reasonable, is not satisfied with the performance by any
Provider of the Primary Servicer Responsibilities or the Servicer on behalf of
the Providers with respect to the Batch Receivables.
(f) If, at any date, the aggregate Expected Net Value of all
Delinquent Receivables that became Delinquent during the prior 3 months is in
excess of 20% of the aggregate Expected Net Value of all Receivables sold by the
Providers to the Purchaser during the prior 3 months (regardless of whether the
Denied Receivables are repurchased by the Providers pursuant to Article IV of
the Agreement).
(g) As of any date after the Initial Transfer Date, (i) the
dollar-weighted average days outstanding with respect to all outstanding Batch
Receivables on such date and on the same day of each of the two preceding
calendar months (or if there is no corresponding day in any such preceding
month, the last day of such month) is greater than 65 days, or (ii) the average
over the preceding 90- day period of the dollar-weighted average days
outstanding with respect to all outstanding Batch Receivables on each day during
such period is greater than 60 days.
(i) As of any date, after the Initial Transfer Date more than
25% of all outstanding Batch Receivables (excluding Denied Receivables) are aged
more than 120 days but less than 180 days from the respective Last Service Dates
of such Batch Receivables.
IX-1
<PAGE>
(j) As of any date, Collections on all Batch Receivables that
have been liquidated or written off during the then most recent 13 week period,
are less than 50% of the aggregate gross value (billed amount) of such Batch
Receivables.
IX-2
<PAGE>
EXHIBIT X
INTERFACE BETWEEN MASTER SERVICER AND THE PROVIDERS
1. The Master Servicer will convey appropriate data requirements and
instructions to the Providers to establish a computer interface between
the Providers' systems and the Master Servicer's receivables monitoring
system. The interface will permit the Master Servicer to receive
electronically the Providers' accounts receivable data, including the
Receivable Information, billing data and collection and other
transaction data relating to the Receivables.
2. The Providers shall give the Master Servicer and the Purchaser at least
ten Business Days' notice of any coding changes or electronic data
processing system modifications made by any Provider which could affect
the Master Servicer's processing or interpretation of data received
through the interface.
3. The Master Servicer shall have no responsibility to return to a
Provider any information which the Master Servicer receives pursuant to
the computer interface.
4. Each Provider will prepare daily accounts receivable data files of all
transaction types for all of the Providers' sites that are included in
the funding program. The weekly cutoff will occur at a predetermined
time each week, and the weekly cutoff date for all of the sites must
occur at exactly the same time. The cutoff date that will be selected
will be at the end of business for a specific day of the week, or in
other words, at the end of the Providers' transaction posting process
for that day. Each Provider will temporarily maintain a copy of the
accounts data files in the event that the data is degraded during
transmission, and needs to be re-transmitted.
The Master Servicer will be responsible for the management of the
hardware, communications and software used in the funding transaction.
5. The Master Servicer's data center will receive the Receivable files,
and immediately confirm that the files have been passed without
degradation of data by balancing the detailed items to the control
totals that accompany the files. Any problems in this process will be
immediately reported to the Providers so that the Receivable file can
be re-transmitted, if necessary.
6. Once the receipt of the Receivable data has been confirmed, the Master
Servicer will perform certain tests and edits to ensure that each
Receivable meets the specified eligibility criteria for purchase by the
Purchaser. Compliance with concentration limits will be verified and
the Master Servicer will notify the Program Manager to initiate a
Receivable purchase using the Receivable file received. Upon the
successful completion of a purchase, the Master Servicer will generate
a one-line trial balance (listing all purchased accounts) confirming
the Receivables that have been purchased. A copy of the trial balance
will be forwarded to each
X-1
<PAGE>
Provider, to the Primary Servicer, to the Purchaser and to the Program
Manager to confirm the purchase.
7. The Providers' sites will continue to post daily transactions to their
respective Receivable files. The Providers' Receivable files for each
of the eligible sites will include all transactions posted through
that day. The Providers will create a transaction report and a
Receivable file for each of the eligible sites. The transaction report
will contain all transactions posted to the respective site Receivable
file for the specified period (and will indicate the respective site
and the number of items and total dollars on each transaction report
for control purposes). The Receivable file will contain balances that
reflect the transactions posted on the Providers' systems through the
end of business of the specified period.
Each Provider will transmit the billing, transaction, and the most
current Receivable data files to the Master Servicer's data center
according to the established schedule. The Providers and the Primary
Servicer should, again, maintain the backup of each of these files in
the event that a re-transmission is necessary.
8. The Master Servicer's data center will confirm that the files have
been received intact, and will immediately communicate any problems to
the Providers in order to initiate a re- transmission. The Master
Servicer will then post the transaction files to the accounts
receivable for the previously purchased accounts that the Master
Servicer is maintaining, and consequently update the affected
balances. Upon completion of the posting process, the Master Servicer
will generate summary reports of the posting process that the Program
Manager will use to complete various funding activities. The Master
Servicer summary reports will reference the Providers' transaction
codes and activity to codes that are common to the funding program.
9. The Master Servicer will then compare the updated accounts balances on
the Master Servicer's system to the corresponding account balances
reflected on the Receivable file. The Master Servicer expects that the
balances for the funded Receivables will be congruent, and any
discrepancies will be immediately examined and resolved through the
cooperative effort of the Master Servicer and the Provider. The Master
Servicer shall produce discrepancy reports (e.g., "Funding Only" or
"Out of Balance" reports) and the Providers shall respond promptly to
such reports.
10. Once the reconciliation process has been completed and any
discrepancies between the Master Servicer and the Providers' Receivable
files resolved through the discrepancy report process described in
paragraph 9 above, the Master Servicer will then process the Receivable
file and advise the Purchaser that it may purchase any new Receivable
that is eligible. The Master Servicer will then proceed through exactly
the same process described in paragraph 6 above.
[ADD ATTACHMENT 1 WITH INTERFACE DATA]
X-2
<PAGE>
EXHIBIT XI-A
FORM OF OPINION OF PROVIDERS' COUNSELS
WITH RESPECT TO THE PATIENT CONSENT FORMS
RJE Data Processing, Inc.
2513 West Peterson
Chicago, Illinois 60659
Daiwa Healthco-2 LLC
c/o Lord Securities Corporation
2 Wall Street
New York, NY 10005
Ladies and Gentlemen:
As [special local] counsel to COMMUNITY CARE OF AMERICA, INC.
(the "CCA"), a Delaware corporation and to [each of the Providers listed on
Schedule 1 attached hereto] (the "Providers"), we have examined the following in
connection with the proposed sale by the Providers of certain healthcare
receivables (the "Receivables") to CCA FUNDING LLC (the "Purchaser") and the
assignment of those Receivables by the Purchaser to DAIWA HEALTHCO-2 LLC
("DH-2"):
(a) A copy of the Healthcare Receivables Purchase and Transfer Agreement
(the "RPA") among CCA, the Providers and the Purchaser;
(b) A copy of the Loan and Security Agreement (the "LSA") between the
Purchaser and DH-2 (terms not otherwise defined herein shall have the meanings
provided in the RPA);
(c) A sample of the Receivables proposed to be sold by the Providers and
assigned by the Purchaser;
(d) Each patient consent form used by each Provider (the "Patient Consent
Form"), copies of which are attached hereto as Exhibit A; and
(e) Such other documents, statutes, regulations and materials as we have
deemed necessary to deliver the opinion set forth herein.
This opinion is being delivered pursuant to clause 1(i) of the conditions
precedent listed on Exhibit II of the RPA.
Based upon the foregoing examination, we are of the opinion that the
Patient Consent Forms are sufficient to permit the lawful disclosure and/or
release of relevant medical information
XI-A-1
<PAGE>
and documents which have been redacted to remove patient-specific diagnostic and
procedural information or diagnosis to the Purchaser, DH-2, any third-party
servicer acting for the Purchaser or DH-2 pursuant to the RPA or LSA (whether
such servicer is performing the Primary Servicer Responsibilities or providing
data processing services with respect to the Receivables, and including without
limitation the Master Servicer), and any person guarantying such servicer's
obligations.
In order to disclose and/or release the full complement of
information regarding services rendered to a patient or resident in [name of
locale], the Provider should obtain a patient consent form in the form attached
hereto as Exhibit B (the "New Patient Consent Form") from each new and existing
patient and resident. Subject to the proper completion and execution of such New
Patient Consent Form by each patient and resident, we are of the opinion that
the New Patient Consent Form is sufficient to permit the lawful disclosure
and/or release of medical information and documents to the Purchaser, DH-2, any
third-party servicer acting for the Purchaser or DH-2 pursuant to the RPA or LSA
(whether such servicer is performing the Primary Servicer Responsibilities or
providing data processing services with respect to the Receivables, and
including without limitation the Master Servicer), and any person guarantying
such servicer's obligations.
Very truly yours,
XI-A-2
<PAGE>
EXHIBIT XI-B
FORM OF OPINION OF PROVIDER'S AND PURCHASER'S COUNSEL
WITH RESPECT TO CERTAIN CORPORATE MATTERS
[TO BE ATTACHED]
XI-B-1
<PAGE>
EXHIBIT XII
FORM OF DEPOSITARY AGREEMENT
[TO BE ATTACHED]
XII-1
<PAGE>
SCHEDULE I
ADDRESSES FOR NOTICE
If to the Program Manager:
Daiwa Securities America Inc.
Financial Square
32 Old Slip
New York, New York 10005-3538
Attention: Chief Financial Officer
Tel: (212) 612-6290
Fax: (212) 612-7122
If to the Master Servicer:
RJE Data Processing, Inc.
2513 West Peterson
Chicago, Illinois 60659
Attention: Jack Callahan, President
Tel: (312) 561-6966
Fax: (312) 878-6355
<PAGE>
SCHEDULE II
CREDIT AND COLLECTION POLICY
[TO BE ATTACHED]
<PAGE>
SCHEDULE III
LICENSE REVOCATIONS
The following facilities have been decertified from the Medicaid and Medicare
Programs during the past 24 months:
(1) Community Care of America at Toledo (Toledo, Iowa)
Community Care of America voluntarily decertified this
facility from both the Medicare and Iowa state Medicaid
programs on March 8, 1996. The company has been recertified to
participate in both programs effective September 20, 1996 and
November 20, 1996 respectively.
(2) Community Care of America at Council Bluffs North (Council
Bluffs, Iowa) This facility was decertified from both the
Medicare and Iowa state Medicaid programs on April 17, 1996.
The company has been recertified to participate in both
programs effective July 1, 1996.
<PAGE>
SCHEDULE IV
LOCKBOX INFORMATION
Provider Ancillary Lockbox:
CCA - Self-pay
Post Office Box 710278
Cincinnati, Ohio 45271-0278
Provider Ancillary Lockbox Account:
CCA - Self-pay
Account #00109-98906
KeyBank
127 Public Square, seventh floor
Cleveland, Ohio 44114-1306
ABA #041 001 039
Provider Government Lockbox:
CCA - Governmental
Post Office Box 710275
Cincinnati, Ohio 45271-0275
Provider Government Lockbox Account:
CCA - Governmental
Account #00109-98891
KeyBank
127 Public Square, seventh floor
Cleveland, Ohio 44114-1306
ABA #041 001 039
Purchaser Lockbox:
Post Office Box 710276
Cincinnati, Ohio 45271-0276
Purchaser Lockbox Account:
Account # 50020-61106
KeyBank
127 Public Square, seventh floor
Cleveland, Ohio 44114-1306
ABA #041 001 039
<PAGE>
<TABLE>
<S> <C>
SCHEDULE V
LIST OF THE PROVIDERS
Provider Trade Names State of Incorporation
- -------- ----------- ----------------------
ECA Holdings, Inc. Delaware
Active Care
Community Care of America at Canon City
Community Care of America at Delta
Community Care of America at Grand Junction
Community Care of America at Paonia
Community Care of America at Prospect Lake
Family Physicians Health
La Villa Grande
Springs Village Care Center
Community Care of America at Clarinda
Community Care of America at Mediapolis
Community Care of America at Muscatine
Community Care of America at Toledo
Community Care of America at Winterset
Community Care of America at Council Bluffs North
Community Care of America at Council Bluffs South
Community Care of America at Pacific Junction
Community Care of America at Glenwood
Community Care of America at Brighton Place
Community Care of America at Smith Center
Community Care of America at Highland Park
Community Care of America at Arma
Community Care of America at Central Topeka
Community Care of America at Ellinwood
Community Care of America at Tarkio
Community Care of America at Oak Grove
Community Care of America at Grand Island
Community Care of America at Laramie
Community Care of America at Saratoga
Community Care of America at Worland
CCA of Midwest, Inc. Delaware
Community Care of America at Palmer
Doc #RPA.WPD RPTA
<PAGE>
Community Care of Nebraska, Inc. Delaware
Community Care of America at Ainsworth
Community Care of America at Ashland
Community Care of America at Aurora
Community Care of America at Blue Hill
Community Care of America at Central City
Community Care of America at Edgar
Community Care of America at Exeter
Community Care of America at Gretna
Community Care of America at Sutherland
Community Care of America at Utica
Community Care of America at Waverly
Community Care of Georgia, Inc. Delaware
Smith Hospital
Community Care of America of Alabama, Inc. Delaware
Family Care Medical Center of Arcadia
Georgiana Doctor's Hospital
Greensboro Health Care Center
Livingston Nursing Home
Reliable Home Health Services, d/b/a
Georgiana Home Health Agency
Rural Health Clinic, d/b/a
Georgiana Health Clinic
H.P. Kinsey, M.D., sole proprietorship d/b/a
The Evergreen Clinic
Southgate Village
Voreis Clinic
ECA Properties, Inc. Delaware
Grandview Manor
Luling/SCC, Inc. Georgia
Community Care of America at Luling
Dublin/SCC, Inc. Georgia
Community Care of America at Dublin
Marietta/SCC, Inc. Georgia
Community Care of America at Marietta
Macon/SCC, Inc. Georgia
Community Care of America at Macon
<PAGE>
College Park/SCC, Inc. Georgia
Community Care of America at College Park
Glenwood/SCC, Inc. Georgia
Community Care of America at Connor
Quality Care of Columbus, Inc. Nebraska
Community Care of America at Columbus
Quality Care of Lyons, Inc. Nebraska
Community Care of America at Lyons
W.S.T. Care, Inc. Nebraska
Community Care of America at Milford
</TABLE>
LOAN AND SECURITY AGREEMENT
Dated as of December 23, 1996
Between
CCA FUNDING LLC
as Borrower
and
DAIWA HEALTHCO-2 LLC
as Lender
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
Page
ARTICLE I.
COMMITMENT; AMOUNTS AND TERMS OF THE REVOLVING ADVANCES
ss. 1.01. Revolving Advances.......................................................................1
ss. 1.02. Revolving Commitment and Borrowing Limit.................................................1
ss. 1.03. Notice of Borrowing; Borrower's Certificate..............................................2
ss. 1.04. Termination of Revolving Commitment......................................................2
ss. 1.05. Interest and Non-Utilization Fee.........................................................2
ss. 1.06. Renewals.................................................................................3
ss. 1.07. Computation of Interest..................................................................4
ss. 1.08. Procedures for Payment...................................................................4
ss. 1.09. Indemnities..............................................................................5
ss. 1.10. Telephonic Notice........................................................................6
ss. 1.11. Maximum Interest.........................................................................6
ARTICLE II.
COLLECTION AND DISTRIBUTION
ss. 2.01. Collections on the Receivables...........................................................7
ss. 2.02. Distribution of Funds....................................................................7
ss. 2.03. Distribution of Funds at the Maturity Date or Upon an Event of Default
..........................................................................................................7
ss. 2.04. Distributions to the Borrower Generally..................................................8
ss. 2.05. Avoidance of Breakage Costs..............................................................8
ARTICLE III.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
EVENTS OF DEFAULT
ss. 3.01. Representations and Warranties; Covenants................................................8
ss. 3.02. Events of Default; Remedies..............................................................8
ss. 3.03. Attorney-in-Fact.........................................................................9
ARTICLE IV.
SECURITY
ss. 4.01. Grant of Security Interest...............................................................9
ARTICLE V.
MISCELLANEOUS
ss. 5.01. Amendments, etc..........................................................................9
ss. 5.02. Notices, etc............................................................................10
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ss. 5.03. Assignability...........................................................................10
ss. 5.04. Further Assurance.......................................................................10
ss. 5.05. Costs and Expenses; Collection Costs....................................................11
ss. 5.06. Confidentiality.........................................................................11
ss. 5.07. Term and Termination; Early Termination Fee.............................................12
ss. 5.08. No Liability of Lender..................................................................13
ss. 5.09. Entire Agreement; Severability..........................................................14
ss. 5.10. GOVERNING LAW...........................................................................14
ss. 5.11. WAIVER OF JURY TRIAL, JURISDICTION AND VENUE............................................14
ss. 5.12. Execution in Counterparts...............................................................14
ss. 5.13. No Proceedings..........................................................................14
EXHIBITS
Exhibit I Definitions
Exhibit II Conditions of Purchases
Exhibit III Representations and Warranties
Exhibit IV Covenants
Exhibit V Events of Default
Exhibit VI Eligibility Criteria
Exhibit VII-A Form of Borrowing Base Certificate
Exhibit VII-B Form of Borrower's Certificate
Exhibit VIII Form of Depositary Agreement
Exhibit IX-A Form of Opinion of Counsel
Exhibit IX-B Form of Opinion of Counsel
SCHEDULES
Schedule I Addresses for Notices
Schedule II Credit and Collection Policy
Schedule III License Revocations
Schedule IV Lockbox Information
ii
</TABLE>
LOAN AND SECURITY AGREEMENT, dated as of December __, 1996,
between CCA FUNDING LLC, a Delaware limited liability company (together with its
successors and assigns, the "Borrower") and DAIWA HEALTHCO-2 LLC, a Delaware
limited liability company (together with its successors and assigns, the
"Lender"), agree as follows:
Certain terms that are capitalized and used throughout this
Agreement are defined in Exhibit I to this Agreement. References herein and in
the Exhibits and Schedules hereto to the "Agreement" refer to this Agreement, as
amended, restated, modified or supplemented from time to time in accordance with
its terms.
The Borrower (i) is a Delaware limited liability company owned
by CCA and the Providers, (ii) has acquired heathcare receivables from the
Providers pursuant to the RPA or by contribution to the capital of the Borrower,
as determined from time to time by the Borrower and the Providers, and (iii)
wishes to borrow funds from the Lender on a continuing and revolving basis
secured by healthcare receivables acquired from the Providers.
The Lender is prepared to make revolving loans secured by such
healthcare receivables on the terms and subject to the conditions set forth
herein.
Accordingly, the parties agree as follows:
ARTICLE I.
COMMITMENT; AMOUNTS AND TERMS OF THE REVOLVING ADVANCES
ss. 1.01. Revolving Advances. (a) The Lender agrees to lend to the
Borrower, subject to and upon the terms and conditions herein set forth, on any
Funding Date, such amounts as may be requested by the Borrower (each such
borrowing, a "Revolving Advance" and the outstanding principal balance of all
Revolving Advances from time to time, the "Revolving Loan").
(b) Each Revolving Advance shall be in a minimum amount of
$100,000 or an integral multiple thereof and shall be made on the date specified
in the Written Notice or telephonic notice confirmed in writing as described in
Section 1.03 hereof.
ss. 1.02. Revolving Commitment and Borrowing Limit. (a) The aggregate
unpaid principal amount of the Revolving Advances outstanding at any time shall
not exceed an amount equal to the lesser of (i) $15,000,000 (such amount, or
such greater amount after giving effect to an increase pursuant to the
provisions of Section 1.02(d) hereof, the "Revolving Commitment"), and (ii) the
Borrowing Base as of such time (the lesser of (i) and (ii) being the "Borrowing
Limit").
(b) Subject to the limitations of Article II hereof, the
Borrower may borrow, repay (without premium or penalty) and reborrow the
Revolving Loan. The Revolving Loan shall not exceed in aggregate principal
amount at any one time outstanding, and the Lender shall not have any obligation
to make any Revolving Advance which shall result in the Revolving Loan being in
excess of, the Revolving Commitment.
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(c) If at any time the outstanding principal amount of the
Revolving Loan exceeds the Borrowing Limit at such time, the Borrower shall
promptly, in accordance with Article II hereof, eliminate such excess by paying
an amount equal to such excess until such excess is eliminated in full.
(d) The Borrower may request that the Lender increase the
Revolving Commitment, and the Lender, in its sole discretion upon such request,
may decide to increase the Revolving Commitment, provided that the Revolving
Commitment, as so increased, shall in no event exceed $20,000,000. Each such
increase shall be in an amount equal to $1,000,000 or an integral multiple of
$1,000,000 in excess thereof and the Borrower shall, upon the effective date of
such increase, pay to the Lender a fee in an amount equal to 1.00% of any such
increase.
(e) The Borrower may elect to decrease the Revolving
Commitment; provided, that (i) such decrease shall be in an amount equal to
$1,000,000 or an integral multiple of $1,000,000 in excess thereof and the
Borrower shall, upon the effective date of such decrease, pay to the Lender an
amount equal to 1.25% of any such decrease, and (ii) following the delivery of
such decrease request, the Borrower shall not request any increase pursuant to
Section 1.02(d).
ss. 1.03. Notice of Borrowing; Borrower's Certificate. Whenever the
Borrower desires to make a borrowing of a Revolving Advance, the Borrower shall
give the Lender not later than 11:00 a.m. (New York time), on the day of a
proposed Revolving Advance prior Written Notice or telephonic notice from an
Authorized Representative confirmed promptly in writing (which notice shall be
irrevocable) of its desire to make a borrowing of a Revolving Advance on a
Funding Date. Each notice of borrowing under this Section 1.03 shall be
substantially in the form of Exhibit VII-B hereto (each a "Borrower's
Certificate") and specify the date on which the Borrower desires to make a
borrowing of a Revolving Advance (which in each instance shall be a Funding
Date), the amount of such borrowing, and shall attach the most recent Borrowing
Base Certificate to the Borrower's Certificate to be delivered by the Borrower
to the Lender and set forth the Borrowing Base provided therein.
ss. 1.04. Termination of Revolving Commitment. On the Maturity Date, the
Revolving Commitment shall be cancelled automatically. In addition, prior to the
Maturity Date, the Borrower may terminate the Revolving Commitment pursuant to
Section 5.07(b). Upon such cancellation, the Revolving Advances (together with
all other Lender Debt) shall become, without further action by any Person,
immediately due and payable together with all accrued interest thereon to such
date plus any fees, premiums, charges or costs provided for hereunder.
ss. 1.05. Interest and Non-Utilization Fee. (a) During the Special Period
or at any time the Revolving Loan is greater than the Basic Borrowing Amount,
the Borrower shall pay interest on the unpaid principal amount of each Revolving
Advance made to it outstanding from time to time on each Interest Payment Date
(i) on the Basic Borrowing Amount (or any lesser principal amount outstanding
from time to time), at an interest rate per annum equal to the LIBO Rate for the
Interest Period in effect for such Revolving Advance plus 2.00%, and (ii) on any
principal amount outstanding in excess of the Basic Borrowing Amount, at an
interest rate per annum equal to the
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LIBO Rate for the Interest Period in effect for such Revolving Advance plus (x)
3.50% plus, during the Special Period, (y) (1) 0.50% multiplied by (2) the
number of monthly anniversaries to have occurred since the Initial Funding Date.
(b) Interest Following the Expiration of the Special Period.
Following the expiration or termination of the Special Period and provided that
the Revolving Loan is equal to or less than the Basic Borrowing Amount, the
Borrower shall pay interest on the unpaid principal amount of each Revolving
Advance made to it outstanding from time to time (i) on each Interest Payment
Date, and (ii) on the Maturity Date (whether by acceleration or otherwise) upon
demand, in each case at an interest rate per annum equal to the LIBO Rate for
the Interest Period in effect for such Revolving Advance plus 2.00%.
(c) Default Interest. Notwithstanding anything to the contrary
contained herein, while any Event of Default is continuing, interest on the
Revolving Advances shall be payable on demand at a rate per annum equal to two
percentage points (2.00%) in excess of the rate then otherwise applicable to any
Revolving Advance.
(d) LIBO Rate Determination. The Lender, upon determining the
LIBO Rate shall promptly notify by telephone (confirmed promptly in writing) or
in writing the Borrower of such rates. Such determination shall, in the absence
of manifest error, be conclusive and binding upon the Borrower.
(e) Non-Utilization Fee. The Borrower shall pay to the Lender
on the first Funding Date of each month a fee (the "Non-Utilization Fee") equal
to 0.375% per annum on the average amount, calculated on a daily basis, by which
the Revolving Commitment exceeded the outstanding amount of the Revolving Loan
during the prior Month.
ss. 1.06. Renewals. (a) The Borrower may, from time to time following the
Initial Funding Date and prior to the Maturity Date, renew all or a portion of
its outstanding Revolving Advances so long as the aggregate principal balance of
the portion of the Revolving Advance made to the Borrower being renewed, if any,
is $100,000 or an integral multiple of $100,000 in excess of $100,000; provided,
however, that the Borrower shall not be entitled to renew any Revolving Advance,
or portion thereof unless all accrued interest on the Revolving Advance renewed
through the date of such renewal shall have been paid in full.
(b) Each renewal by the Borrower of an outstanding Revolving
Advance or portion thereof shall be made on notice to the Lender given not later
than 11:00 a.m. (New York time) on the date at least two Business Days' prior to
the last day of the Interest Period just ending for such Revolving Advance. Each
notice (which notice shall be irrevocable) by the Borrower of the renewal of a
Revolving Advance or portion thereof, shall be in writing or by telephone from
an Authorized Representative of the Borrower confirmed promptly in writing and
shall specify the amount of such renewal of the Revolving Advance or portion
thereof. Notwithstanding the above, the Borrower shall not be entitled to renew
a Revolving Advance or a portion thereof, if at the time of the selection of
such renewal there shall exist a Default or an Event of Default.
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(c) Any Revolving Advance or portion thereof as to which the
Lender shall not have received a proper notice of renewal as provided in Section
1.06(b) hereof or notice of payment or prepayment by 3:00 p.m. (New York time)
at least three Business Days prior to the last day of the Interest Period just
ending for such Revolving Advance shall (whether or not any Default or Event of
Default has occurred) shall either be paid in full or if not paid in full, at
the Lender's sole and absolute discretion, may be converted, in whole or in
part, to a new Revolving Advance on the last day of the Interest Period.
ss. 1.07. Computation of Interest. (a) Interest on the Revolving
Loan and fees and other amounts calculated by the Lender on the basis of a rate
per annum shall be computed on the basis of actual days elapsed over a
360-day year.
(b) Whenever any payment to be made hereunder or under any
other Document shall be stated to be due and payable on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall in such case be included in computing interest on
such payment; provided, however, that if such extension would cause a payment of
a Revolving Advance to be made, or the last day of such Interest Period for a
Revolving Advance to occur, in the next following Month, such payment shall be
made and the last day of such Interest Period shall occur on the next preceding
Business Day.
ss. 1.08. Procedures for Payment. (a) Each payment hereunder shall be made
not later than 12:00 noon (New York City time) on the day when due in lawful
money of the United States of America to the Lender without counterclaim,
offset, claim or recoupment of any kind and free and clear of, and without
deduction for, any present or future withholding or other taxes, duties or
charges of any nature imposed on such payments or prepayments by or on behalf of
any Governmental Body thereof or therein, except for Excluded Taxes. If any such
taxes, duties or charges are so levied or imposed on any payment to any Lender,
the Borrower will make additional payments in such amounts as may be necessary
so that the net amount received by the Lender, after withholding or deduction
for or on account of all taxes, duties or charges, including deductions
applicable to additional sums payable under this Section 1.08, will be equal to
the amount provided for herein. Whenever any taxes, duties or charges are
payable by the Borrower with respect to any payments hereunder, the Borrower
shall furnish promptly to the Lender information, including certified copies of
official receipts (to the extent that the relevant governmental authority
delivers such receipts), evidencing payment of any such taxes, duties or charges
so withheld or deducted. If the Borrower fails to pay any such taxes, duties or
charges when due to the appropriate taxing authority or fail to remit to the
Lender the required information evidencing payment of any such taxes, duties or
charges so withheld or deducted, the Borrower shall indemnify the Lender for any
incremental taxes, duties, charges, interest or penalties that may become
payable by the Lender as a result of any such failure.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Borrower agrees to pay any present or future stamp or documentary
taxes, any intangibles tax or any other sales, excise or property taxes, charges
or similar levies now or hereafter assessed that arise from and are attributable
to any payment made hereunder or from the execution, delivery of, or
4
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otherwise with respect to, this Agreement or other Documents and any and all
recording fees relating to any Documents securing any Lender Debt ("Other
Taxes").
(c) The Borrower shall indemnify the Lender for the full
amount of any taxes, duties or charges other than Excluded Taxes and Other Taxes
(including, without limitation, any taxes other than Excluded Taxes and Other
Taxes imposed by any jurisdiction on amounts payable under this Section 1.08)
duly paid or payable by the Lender and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto.
Indemnification payments shall be made within 30 days from the date the Lender
makes written demand therefor.
(d) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 1.08 shall survive the payment in full of principal
and interest hereunder and under the Notes indefinitely.
ss. 1.09. Indemnities. (a) The Borrower hereby agrees to indemnify the
Lender on demand against any loss or expense which the Lender or its branch or
Affiliate may sustain or incur as a consequence of: (i) any default in payment
or prepayment of the principal amount of any Revolving Advance made to it or any
portion thereof or interest accrued thereon, as and when due and payable (at the
due date thereof, by irrevocable notice of payment or prepayment, or otherwise);
(ii) the effect of the occurrence of any Event of Default upon any Revolving
Advance made to it; (iii) the payment or prepayment of the principal amount of
any Revolving Advance made to it or any portion thereof, on any day other than
the last day of an Interest Period or the payment of any interest on any
Revolving Advance made to it, or portion thereof, on a day other than an
Interest Payment Date for such Revolving Advance; or (iv) the failure by the
Borrower to accept or make a borrowing of a Revolving Advance or a renewal of a
Revolving Advance after it has requested such borrowing, conversion or renewal;
in each case including, but not limited to, any loss or expense sustained or
incurred in liquidating or employing deposits from third parties acquired to
effect or maintain such Revolving Advance or any portion thereof. The Lender
shall provide to the Borrower a statement, supported when applicable by
documentary evidence, explaining the amount of any such loss or expense it
incurs, which statement shall be conclusive absent manifest error.
(b) The Borrower hereby agrees to indemnify and hold harmless
the Lender and its Affiliates, directors, officers, agents, representatives,
counsel and employees and each other Person, if any, controlling them or any of
its Affiliates within the meaning of either Section 15 of the Securities Act of
1933, as amended, or Section 20(a) of the Exchange Act (each an "Indemnified
Party"), from and against any and all losses, claims, damages, costs, expenses
(including reasonable counsel fees and disbursements) and liabilities which may
be incurred by or asserted against such Indemnified Party with respect to or
arising out of the commitments hereunder to make the Revolving Advances, or the
financings contemplated hereby, the other Documents, the Collateral (including,
without limitation, the use thereof by any of such Persons or any other Person,
the exercise by the Lender of rights and remedies or any power of attorney with
respect thereto, and any action or inaction of the Lender under and in
accordance with any Security Document), the use of proceeds of any financial
accommodations provided hereunder, any investigation, litigation or other
proceeding brought or threatened relating thereto, or the role of any such
Person or Persons in
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connection with the foregoing whether or not they or any other Indemnified Party
is named as a party to any legal action or proceeding ("Claims"). The Borrower
will not, however, be responsible to any Indemnified Party hereunder for any
Claims to the extent that a court having jurisdiction shall have determined by a
final nonappealable judgment that any such Claim shall have arisen out of or
resulted solely from (a)(i) actions taken or omitted to be taken by such
Indemnified Party by reason of the bad faith, willful misconduct or gross
negligence of any Indemnified Party, or (ii) in violation of any law or
regulation applicable to such Indemnified Party (except to the extent that such
violation is attributable to any breach of any representation, warranty or
agreement by or on behalf of the Borrower, CCA, any Provider or any of their
respective designees, in each case, as determined by a final nonappealable
decision of a court of competent jurisdiction), or (b) a successful claim by CCA
or any Provider against such Indemnified Party ("Excluded Claims"). Further,
should any employee of the Lender, in connection with such employee's employment
by the Lender, be involved in any legal action or proceeding in connection with
the transactions contemplated hereby (other than relating to an Excluded Claim),
the Borrower hereby agrees to pay to the Lender such per diem compensation as
the Lender shall request for each employee for each day or portion thereof that
such employee is involved in preparation and testimony pertaining to any such
legal action or proceeding. The Indemnified Party shall give the Borrower prompt
Written Notice of any Claim setting forth a description of those elements of the
Claim of which such Indemnified Party has knowledge. The Lender, as an
Indemnified Party shall be permitted hereunder to select counsel to defend such
Claim at the expense of the Borrower and, if such Indemnified Party shall decide
to do so, then all such Indemnified Parties shall select the same counsel to
defend such Indemnified Parties with respect to such Claim; provided, however,
that if any such Indemnified Party shall in its reasonable opinion consider that
the retention of one joint counsel as aforesaid shall result in a conflict of
interest, such Indemnified Party may, at the expense of the Borrower, select its
own counsel to defend such Indemnified Party with respect to such Claim. The
Indemnified Parties and the Borrower and their respective counsel shall
cooperate with each other in all reasonable respects in any investigation, trial
and defense of any such Claim and any appeal arising therefrom.
ss. 1.10. Telephonic Notice. Without in any way limiting the Borrower's
obligation to confirm in writing any telephonic notice of a borrowing,
conversion or renewal, the Lender may act without liability upon the basis of
telephonic notice believed by the Lender in good faith to be from an Authorized
Representative of the Borrower prior to receipt of written confirmation.
ss. 1.11. Maximum Interest. (a) No provision of this Agreement or any Note
shall require the payment to any Lender or permit the collection by any Lender
of interest in excess of the maximum rate of interest from time to time
permitted (after taking into account all consideration which constitutes
interest) by laws applicable to the Lender Debt and binding on any Lender (such
maximum rate being the Lender's "Maximum Permissible Rate").
(b) If the amount of interest computed without giving effect
to this Section 1.11 and payable on any interest payment date in respect of the
preceding interest computation period would exceed the amount of interest
computed in respect of such period at the Maximum Permissible Rate, the amount
of interest payable to the Lender on such date in respect of such period shall
be computed at the Maximum Permissible Rate.
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(c) If at any time and from time to time: (i) the amount of
interest payable to any Lender on any interest payment date shall be computed at
the Maximum Permissible Rate pursuant to the preceding subsection (b); and (ii)
in respect of any subsequent interest computation period the amount of interest
otherwise payable to the Lender would be less than the amount of interest
payable to the Lender computed at the Maximum Permissible Rate, then the amount
of interest payable to the Lender in respect of such subsequent interest
computation period shall continue to be computed at the Maximum Permissible Rate
until the amount of interest payable to the Lender shall equal the total amount
of interest which would have been payable to the Lender if the total amount of
interest had been computed without giving effect to the preceding subsection
(b).
ARTICLE II.
COLLECTION AND DISTRIBUTION
ss. 2.01. Collections on the Receivables. The Lender shall be entitled with
respect to all Accounts, (i) to receive and to hold as collateral all Accounts
and all Collections on Accounts in accordance with the terms of the Depositary
Agreement, and (ii) to have and to exercise any and all rights (x) to collect,
record, track and, during the continuance of an Event of Default, take all
actions to obtain Collections with respect to all Accounts payable by
non-Governmental Entities, and (y) to the extent permitted by law and in a
manner consistent with all applicable laws and regulations, record, track and
take all actions to obtain Collections with respect to all Accounts payable by
Governmental Entities.
ss. 2.02. Distribution of Funds. On each Funding Date, and provided, that
(i) no Event of Default is continuing, and (ii) the Borrower shall have
successfully sent by Transmission to the Master Servicer all information
required with respect to the Receivables for the period since the immediately
prior Funding Date, the Lender shall distribute any and all Collections received
since the immediately prior Funding Date, together with interest thereon (at the
Overnight Rate established from time to time) from the date of receipt until the
Funding Date so distributed as follows: FIRST, to the Lender, an amount in cash
equal to the Fee and Interest Shortfall, if any, until such amount has been paid
in full; SECOND, to the Lender, an amount in cash equal to the payment, if any,
of principal on the Revolving Loan due and payable on such Funding Date, until
such amount has been paid in full; THIRD, to the Lender, an amount in cash equal
to the payment of any other Lender Debt due and payable on such Funding Date, if
any, until such amount has been paid in full; and FOURTH, to the Borrower, all
remaining amounts of Collections, together with interest thereon (at the
Overnight Rate established from time to time) from the date of receipt until the
Funding Date so distributed.
ss. 2.03. Distribution of Funds at the Maturity Date or Upon an Event of
Default. At the Maturity Date or upon the occurrence and during the continuance
of an Event of Default, subject to the rights and remedies of the Lender
pursuant to Section 3.02 hereof, the Lender shall distribute any and all
Collections to the Lender as follows: FIRST, to the Lender, an amount in cash
equal to any and all accrued fees and collection costs as set forth in Section
5.05, until such amount has been paid in full; SECOND, to the Lender, an amount
in cash equal to all accrued and unpaid interest on the Revolving Loans (at the
rate established under Section 1.05(b)) until such amount has
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been funded in full; THIRD, to the Lender, an amount in cash equal to the
principal amount of the Revolving Loan, until such amount is paid in full;
FOURTH, to the Lender, an amount in cash equal to the payment of any other
Lender Debt due and payable on such Funding Date, until such amount has been
paid in full; and FIFTH, to the Borrower, all remaining amounts of Collections.
ss. 2.04. Distributions to the Borrower Generally. Distributions to the
Borrower on each Funding Date shall be deposited in an account designated by the
Borrower in writing to the Program Manager from time to time.
ss. 2.05. Avoidance of Breakage Costs. So long as no Default or Event of
Default is continuing, the Lender shall not apply out of the Collections, unless
requested in writing by the Borrower, any payment of principal to any portion of
a Revolving Loan until the last day of the respective Interest Period thereof or
the earlier maturity of such portion of such Revolving Loan by acceleration or
otherwise.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
EVENTS OF DEFAULT
ss. 3.01. Representations and Warranties; Covenants. The Borrower makes on
the Initial Funding Date and on each subsequent Funding Date, the
representations and warranties set forth in Exhibit III hereto, and hereby
agrees to perform and observe the covenants set forth in Exhibit IV hereto.
ss. 3.02. Events of Default; Remedies. (a) If any Event of Default shall
occur and be continuing, the Lender may, by notice to the Borrower, take either
or both of the following actions: (x) declare the Maturity Date to have
occurred, and (y) without limiting any rights hereunder, replace the Borrower to
in its performance of any or all of the "Primary Servicer Responsibilities"
under the RPA (which replacement may be effectuated through the outplacement to
a qualified and experienced third-party of all back office duties, including
billing, collection and processing responsibilities, and access to all
personnel, hardware and software utilized in connection with such
responsibilities); provided, that, with respect to the Event of Default in
clause (g) of Exhibit V, the Maturity Date shall be deemed to have occurred
automatically and without notice. Upon any such declaration or designation, the
Lender shall have, in addition to the rights and remedies which it may have
under this Agreement, all other rights and remedies provided after default under
the UCC and under other applicable law, which rights and remedies shall be
cumulative.
(b) Right of Set-Off. The Borrower hereby irrevocably
authorizes and instructs the Lender to set-off the full amount of the any Lender
Debt due and payable against (i) any Collections, or (ii) the principal amount
of any Revolving Advance to be financed on or after such date. No further
notification, act or consent of any nature whatsoever is required prior to the
right of the Lender to exercise such right of set-off; provided, however, a
member of the Lender Group
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shall notify the Borrower that a set-off pursuant to this Section 3.02 occurred,
the amount of such set-off and a description of the Lender Debt that was due and
payable.
ss. 3.03. Attorney-in-Fact. The Borrower hereby irrevocably designates and
appoints the Lender, the Master Servicer and each other Person in the Lender
Group, to the extent permitted by applicable law and regulation, as the
Borrower's attorneys-in-fact, which irrevocable power of attorney is coupled
with an interest, with authority, upon the continuance of an Event of Default
(and to the extent not prohibited under applicable law and regulations) to (i)
endorse or sign the Borrower's name to financing statements, remittances,
invoices, assignments, checks (other than payments from Governmental Entities),
drafts or other instruments or documents in respect of the Receivables and the
Receivables, (ii) notify Insurers to make payments on the Receivables directly
to the Lender, and (iii) bring suit in the Borrower's name and settle or
compromise such Receivables as the Lender or the Master Servicer may, in its
discretion, deem appropriate.
ARTICLE IV.
SECURITY
ss. 4.01. Grant of Security Interest. (a) As collateral security for the
Borrower's obligations to pay the Lender Debt when due and payable hereunder,
the Borrower hereby grants to the Lender a first priority Lien on and security
interest in and right of set-off against all of the rights, title and interest
of the Borrower in and to (i) the RPA, (ii) to the maximum extent permitted by
law, the Provider Lockboxes and the Provider Lockbox Accounts, (iii) all of the
Borrower's Accounts whether now owned or hereafter acquired, (iv) any and all
amounts held in any accounts maintained at KeyBank in respect of any of the
foregoing or in compliance with any terms of this Agreement, (v) any and all
amounts held in any accounts maintained at First Union National Bank of Florida
in respect of any of the foregoing or in compliance with any terms of this
Agreement, and (vi) all proceeds of the foregoing. This Agreement shall be
deemed to be a security agreement as understood under the UCC.
(b) The Borrower agrees to execute, and hereby authorizes the
Lender to file, one or more financing statements or continuation statements or
amendments thereto or assignments thereof in respect of the Lien created
pursuant to this Section 4.01 which may at any time be required or, in the
opinion of the Lender, be desirable, and to do so without the signature of the
Borrower where permitted by law.
ARTICLE V.
MISCELLANEOUS
ss. 5.01. Amendments, etc. (a) No amendment or waiver of any provision of
this Agreement or consent to any departure therefrom by a party hereto shall be
effective unless in a writing signed by the Lender and the Borrower and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No failure on the part of
the Lender or the Borrower to exercise, and no delay in exercising, any right
hereunder
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shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right.
(b) The parties hereto agree to make any change, modification
or amendment to this Agreement as may be requested by Duff & Phelps Credit
Rating Co. or any other rating agency then rating the healthcare financing
program of the Lender, so long as any such change, modification or amendment
does not materially adversely affect the parties hereto.
ss. 5.02. Notices, etc. All notices and other communications hereunder
shall, unless otherwise stated herein, be in writing (which may include
facsimile communication) and shall be faxed or delivered, (i) to each party
hereto (and DH-2 hereby agrees that notices to or for its benefit may be
delivered to the Program Manager and such delivery to the Program Manager shall
be deemed received by DH-2), at its address set forth under its name on the
signature pages hereof or at such other address as shall be designated by such
party in a Written Notice to the other parties hereto, and (ii) to the Program
Manager and the Master Servicer at the addresses set forth on Schedule I
attached hereto. Notices and communications by facsimile shall be effective when
sent (and shall be followed by hard copy sent by regular mail), and notices and
communications sent by other means shall be effective when received.
ss. 5.03. Assignability. (a) This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective permitted successors
and assigns.
(b) Without the prior consent of CCA (acting on behalf of the
Providers) and the Borrower (which consent shall not be unreasonably withheld),
the Lender may not assign this Agreement and the Lender's rights, title and
interest and obligations contained herein (including its security interest in
the Receivables) (collectively, "Lender Position"); provided, that (i) the
Lender may assign the Lender Position to another limited purpose
bankruptcy-remote entity sponsored and managed by the Program Manager which does
not result in any increased costs or liabilities to the Borrower or diminution
of the Borrower's rights hereunder and which agrees in writing in a manner
reasonably acceptable to the Borrower to be bound by and perform all of the
Lender's obligations hereunder, and (ii) the Borrower hereby acknowledges that
the Lender is granting Daiwa Finance Corporation a security interest in the
Lender's Position, including without limitation, this Agreement.
(c) The Borrower may not assign its rights or obligations
hereunder or any interest herein without the prior written consent of the
Lender.
ss. 5.04. Further Assurance. The Borrower shall, at its cost and expense,
upon the request of the Lender, duly execute and deliver, or cause to be duly
executed and delivered, to the Lender such further instruments and do and cause
to be done such further acts as may be necessary or proper in the reasonable
opinion of the Lender to carry out more effectively the provisions and purposes
of this Agreement.
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ss. 5.05. Costs and Expenses; Collection Costs. (a) The Borrower agrees to
pay on demand (i) all reasonable non-legal costs and expenses in connection with
the preparation, execution and delivery of this Agreement; (ii) the reasonable
fees and out-of-pocket expenses of counsels for the Lender and its Affiliates in
connection with this transaction; and (iii) all reasonable costs and expenses,
if any (including reasonable counsel fees and expenses), of the Lender and its
Affiliates in connection with any waiver, modification, supplement or amendment
hereto, or the enforcement of this Agreement. The Borrower further agrees pay on
the Initial Funding Date (and with respect to costs and expenses incurred
following the Initial Funding Date, within seven days of demand therefor) (a)
all reasonable costs and expenses incurred by the Lender or its agent in
connection with periodic audits of the Receivables which audits, other than
after an Event of Default, shall occur no more frequently than annually, (b) all
reasonable costs and expenses incurred by the Master Servicer or the Program
Manager to accommodate any significant coding or data system changes made by the
Borrower that would affect the transmission or interpretation of data received
through the interface, and (c) all reasonable costs and expenses incurred by the
Lender for additional time (calculated at a rate of $100 per hour) and material
expenses of the Master Servicer resulting from a lack of cooperation or
responsiveness of the Borrrower to agreed-upon protocol and schedules with the
Master Servicer; provided, that the Borrower has been informed of the alleged
lack of cooperation or responsiveness and has been provided the opportunity to
correct such problems.
(b) In the event that the Lender shall retain an attorney or
attorneys to collect, enforce, protect, maintain, preserve or foreclose its
interests with respect to this Agreement, any other Documents, any Lender Debt,
any Receivable or the Lien on any Collateral or any other security for the
Lender Debt or under any instrument or document delivered pursuant to this
Agreement, or in connection with any Lender Debt, the Borrower shall pay all of
the reasonable costs and expenses of such collection, enforcement, protection,
maintenance, preservation or foreclosure, including reasonable attorneys' fees,
which amounts shall be part of the Lender Debt, and the Lender may take judgment
for all such amounts. The attorney's fees arising from such services, including
those of any appellate proceedings, and all expenses, costs, charges and other
fees incurred by such counsel in any way or with respect to or arising out of or
in connection with or relating to any of the events or actions described in this
Section 5.05 shall be payable by the Borrower to the Lender on demand (with
interest accruing from the earlier of two Business Days following (i) the date
of such demand, and (ii) the date that the Borrower became aware of the
incurrence of such cost), and shall be additional obligations under this
Agreement. Without limiting the generality of the foregoing, such expenses,
costs, charges and fees may include: recording costs, appraisal costs, paralegal
fees, costs and expenses; accountants' fees, costs and expenses; court costs and
expenses; photocopying and duplicating expenses; court reporter fees, costs and
expenses; long distance telephone charges; air express charges; telegram
charges; telecopier charges; secretarial overtime charges; and expenses for
travel, lodging and food paid or incurred in connection with the performance of
such legal services.
ss. 5.06. onfidentiality. (a) The Borrower and the Lender hereby
acknowledge that this Agreement and documents delivered hereunder or under the
RPA including, without limitation, any information relating to the Borrower, the
Lender or the Providers contain confidential and proprietary information. Unless
otherwise required by applicable law, the Borrower and the Lender
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each hereby agrees to maintain the confidentiality of this Agreement (and all
drafts and other documents delivered in connection therewith including, without
limitation, any information relating to the Borrower, the Lender or the
Providers delivered hereunder or under the RPA) in communications with third
parties and otherwise and to take all reasonable action to prevent the
unauthorized use or disclosure of and to protect the confidentiality of such
confidential information; provided, that, such confidential information may be
disclosed to (i) the Borrower's legal counsel and auditors and to the Provider
under the RPA and their investors and creditors, and their respective legal
counsel and auditors, (ii) the Program Manager, the Person then fulfilling the
"Primary Servicer Responsibilities" under the RPA, each member of the Lender
Group, investors in and creditors of DH-2, appropriate rating agencies with
respect to DH-2, and each of their respective legal counsel and auditors, (iii)
any Person, if such information otherwise becomes available to such Person or
publicly available through no fault of any party governed by this Section 5.06,
(iv) any Governmental Entity requesting such information and (v) any other
Person with the written consent of the other party, which consent shall not be
unreasonably withheld, and provided further that the Borrower and the Providers
shall not disclose such confidential information to any financial adviser not a
party to this Agreement, except with the consent of Lender, which will not be
unreasonably withheld.
(b) The Borrower understands and agrees that the Lender may
suffer irreparable harm if the Borrower breaches its obligations under Section
5.06(a) herein and that monetary damages shall be inadequate to compensate the
Lender for such breach. Accordingly, the Borrower agrees that, in the event of a
breach by the Borrower of Section 5.06(a), the Lender, in addition and not in
limitation of its rights and remedies under law, shall be entitled to a
temporary restraining order, preliminary injunction and permanent injunction to
prevent or restrain any such breach.
(c) Lender hereby agrees to, and shall take reasonable steps
to cause each member of the Lender Group to, comply with all applicable laws
regarding confidential patient information it receives in connection with the
transactions described in this Agreement.
ss. 5.07. Term and Termination; Early Termination Fee. (a) The obligations
of the Lender under this Agreement shall continue in full force and effect from
the date hereof until the Maturity Date. Upon the payment in full of all Lender
Debt, the Lender shall take all actions and deliver all assignments,
certificates, releases, notices and other documents, at the Borrower's expense,
as the Borrower may reasonably request to effect such termination.
(b) The Borrower may terminate this Agreement at any time
prior to the Maturity Date upon (i) lapse of not less than ten days' prior
Written Notice (which shall be irrevocable) to the Lender of default of the
commitment by the Lender pursuant to Article I hereof to make Revolving Advances
and (ii) payment in full of all Lender Debt, including all applicable fees,
charges, premiums and costs, all as provided hereunder, and in such occurrence
of clauses (i) and (ii) the commitment hereunder shall be deemed to be
terminated.
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(c) Upon the termination of this Agreement (for any reason
other than the default hereof by the Lender) prior to the Scheduled Maturity
Date, the Borrower shall pay to the Lender an early termination fee amount equal
to 1.25% of the Revolving Commitment then in effect.
(d) The termination of this Agreement shall not affect any
rights of the Lender or any obligations of the Borrower arising on or prior to
the effective date of such termination, and the provisions hereof shall continue
to be fully operative until all Lender Debt incurred on or prior to such
termination have been paid and performed in full.
(e) Upon the giving of notice of a Default or an Event of
Default of this Agreement, all Lender Debt shall be due and payable on the date
of Default or the Event of Default specified in such notice. Upon the (i) the
termination of all commitments and obligations of the Lender, and (ii) the
indefeasible payment in full of all Lender Debt, the Lender shall, at the
Borrower's request and sole cost and expense, execute and deliver to the
Borrower such documents as the Borrower shall reasonably request to evidence
such termination.
(f) The Liens and rights granted to the Lender hereunder shall
continue in full force and effect, notwithstanding the termination of this
Agreement, until all of the Lender Debt has been indefeasibly paid in full in
cash.
(g) All indemnities representations, warranties, covenants,
waivers and agreements contained herein shall survive termination hereof unless
otherwise provided.
(h) Notwithstanding the foregoing, if after receipt of any
payment of all or any part of the Lender Debt, the Lender is for any reason
compelled to surrender such payment to any Person or entity because such payment
is determined to be void or voidable as a preference, an impermissible setoff, a
diversion of trust funds or for any other reason, this Agreement shall continue
in full force (except that the Revolving Commitment of the Lender shall have
been terminated), and the Borrower shall be liable to, and shall indemnify and
hold the Lender harmless for the amount of such payment surrendered until the
Lender shall have been finally and irrevocably paid in full. The provisions of
the foregoing sentence shall be and remain effective notwithstanding any
contrary action which may have been taken by the Lender in reliance upon such
payment, and any such contrary action so taken shall be without prejudice to the
Lender's rights under this Agreement and shall be deemed to have been
conditioned upon such payment having become final and irrevocable.
ss. 5.08. No Liability of Lender. (a) Neither this Agreement nor any
document executed in connection herewith shall constitute an assumption by the
Lender of any obligation to an Obligor or a patient of the Borrower.
(b) Notwithstanding any other provision herein, no recourse
under any obligation, covenant, agreement or instrument of the Lender contained
herein or with respect hereto shall be had against any Related Person whether
arising by breach of contract, or otherwise at law or in equity (including any
claim in tort), whether express or implied, it being understood that the
agreements and other obligations of the Lender herein and with respect hereto
are solely its corporate
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obligations; provided, however, nothing herein above shall operate as a release
of any liability which may arise as a result of such Related Person's gross
negligence or willful misconduct. The provisions of this Section 5.08 shall
survive the termination of this Agreement.
ss. 5.09. Entire Agreement; Severability. (a) This Agreement embodies the
entire agreement and understanding of the parties concerning the subject matter
contained herein. This Agreement supersedes any and all prior agreements and
understandings between the parties, whether written or oral.
(b) If any provision of this Agreement shall be declared
invalid or unenforceable, the parties hereto agree that the remaining provisions
of this Agreement shall continue in full force and effect.
ss. 5.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS PRINCIPLES THEREOF).
ss. 5.11. WAIVER OF JURY TRIAL, JURISDICTION AND VENUE. THE PARTIES HERETO
HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY IN THE EVENT OF ANY LITIGATION WITH
RESPECT TO ANY MATTER RELATED TO THIS AGREEMENT, AND HEREBY IRREVOCABLY CONSENT
TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK COUNTY,
NEW YORK CITY, NEW YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT. IN ANY SUCH LITIGATION, THE PARTIES HERETO
WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND AGREE THAT
SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE
PARTIES HERETO AT THEIR ADDRESSES SET FORTH ON THE SIGNATURE PAGE HEREOF. THE
PARTIES HERETO SHALL APPEAR IN ANSWER TO SUCH SUMMONS, COMPLAINT OR OTHER
PROCESS WITHIN THE TIME PRESCRIBED BY LAW, FAILING WHICH THE PARTY FAILING TO SO
APPEAR SHALL BE DEEMED IN DEFAULT AND JUDGMENT MAY BE ENTERED BY THE PARTY
PROSECUTING THE CLAIM FOR THE AMOUNT OF THE CLAIM AND OTHER RELIEF REQUESTED
THEREIN.
ss. 5.12. Execution in Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
ss. 5.13. No Proceedings. The Borrower hereby agrees that it will not
institute against the Lender any proceeding of the type referred to in clause
(g) of Exhibit V so long as any senior indebtedness issued by the Lender shall
be outstanding or there shall not have elapsed one
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year plus one day since the last day on which any such senior indebtedness shall
have been outstanding.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER: CCA FUNDING LLC
By:
Name:
Title: Manager
Address: 3050 N. Horseshoe Drive, Suite 260
Naples, FL 33942
Attention: Mr. David H. Fater
Facsimile Number: (941) 435-0408
LENDER: DAIWA HEALTHCO-2 LLC
By:
Name:
Title:
c/o Lord Securities Corporation
Two Wall Street
New York, NY 10005
Attention: Andrew L. Stidd
Facsimile Number: (212) 346-9012
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EXHIBIT I.
DEFINITIONS
As used in the Agreement (including its Exhibits and Schedules), the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Accounts" means any and all accounts (including, without limitation, all
Receivables), general intangibles and other obligations owing or to be owing to
the Borrower for the payment of money arising out of any sale of medical
products or rendition of medical, surgical, diagnostic or other professional
medical services in the ordinary course of business by any Provider (including,
without limitation, under any tradenames of such Provider), whether now existing
or hereafter arising, including all rights to reimbursement under any agreements
with and payments from Obligors, patients, residents or other Persons and all
proceeds of any of the foregoing.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person or is a director or officer of such Person. For the purposes of this
definition, "control", when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" has the meaning set forth in the preamble hereto.
"A/R Fee" means the account receivable tracking fee, due on the first
Business Day of each Month, in an amount equal to:
AORA x TD / 360 x ARP
where:
AORA = The average outstanding amount of the Revolving Loan
for the prior Month, calculated as the arithmetic
average of all daily balances
TD = The actual amount of days in such prior Month
ARP = The applicable A/R Fee Percentage, determined by
reference to the AORA for the prior Month, as follows:
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AORA for A/R Fee
the Prior Month Percentage
- --------------- ----------
less than or equal to $3,000,000 0.60% greater than $3,000,000 but less than or
equal to $5,000,000 0.55% greater than $5,000,000 but less than or equal to
$7,000,000 0.50% greater than $7,000,000 but less than or equal to $10,000,000
0.45% greater than $10,000,000 but less than or equal to $15,000,000 0.40%
greater than $15,000,000 but less than or equal to $20,000,000 0.35% greater
than $20,000,000 0.30%;
provided that if this Agreement shall be terminated on a day other than the
first Business Day of a Month, such A/R Fee for such period from the last day of
the prior Month to the date of termination shall be calculated as above by
substituting such final period for the term "Month" hereinabove.
"Authorized Representative" shall mean each Person designated from time to
time, as appropriate, in a Written Notice by the Borrower to the Lender for the
purposes of giving notices of borrowing, conversion or renewal of Revolving
Advances, which designation shall continue in force and effect until terminated
in a Written Notice to the Lender.
"Basic Borrowing Amount" shall mean an amount equal to eighty-five percent
(85%) of the Expected Net Value of Eligible Receivables as of such time.
"Borrower" has the meaning set forth in the preamble hereto.
"Borrower's Certificate" has the meaning set forth in Section 1.03.
"Borrower Account" means account #2090001617808 of the Borrower at First
Union National Bank of Florida, ABA #063 0000 21, 125 North Airport Road,
Naples, FL 34104, or such other bank account designated by the Borrower by
Written Notice to the Master Servicer, the Lender and the Program Manager from
time to time.
"Borrowing Base" shall mean, (a) during the Special Period, the greater of
(i) the Basic Borrowing Amount or (ii) an amount equal to the lesser of (x)
$14,500,000 and (y) ninety-four percent (94%) of the Expected Net Value of all
Accounts (including receivables of private payors) owned by the Borrower which
meet the criteria set forth in clauses (a) through (d), (f) through (m), and (p)
of the Eligibility Criteria hereunder, and solely for the purposes of this
clause (ii)(y), "Obligor" shall include private payors; and, (b) at any time
following the expiration of the Special Period, an amount equal to the Basic
Borrowing Amount; in each case and at all times as determined by reference to
and as set forth in the most recent Borrowing Base Certificate delivered to the
Lender by the Borrower as of such time pursuant to Exhibit IV, Clause (j)(i).
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"Borrowing Base Certificate" shall mean a certificate (which may be sent by
Transmission), substantially in the form set forth in Exhibit VII-A hereto,
which shall provide the most recently available information (including updated
information) with respect to the Eligible Receivables of the Borrower
(segregated by the classes set forth in the definition of "Net Value Factor")
that is set forth in the general trial balance of each of the Providers, in form
and substance satisfactory to the Lender and the Master Servicer.
"Borrowing Base Deficiency" shall mean, as of any date, the positive
difference, if any, between (x) the outstanding principal amount of the
Revolving Loan, minus (y) the Borrowing Base indicated on the most recent
Borrowing Base Certificate.
"Borrowing Limit" has the meaning set forth in Section 1.02.
"Business Day" means any day on which banks are not authorized or required
to close in New York City, New York or Naples, Florida.
"CCA" means Community Care of America, Inc., together with its corporate
successors and permitted assigns.
"CHAMPUS" means the Civilian Health and Medical Program of the Uniformed
Service, a program of medical benefits covering former and active members of the
uniformed services and certain of their dependents, financed and administered by
the United States Departments of Defense, Health and Human Services and
Transportation and established pursuant to 10 USC ss.ss. 1071-1106, and all
regulations promulgated thereunder including without limitation (a) all federal
statutes (whether set forth in 10 USC ss.ss. 1071-1106 or elsewhere) affecting
CHAMPUS; and (b) all rules, regulations (including 32 CFR 199), manuals, orders
and administrative, reimbursement and other guidelines of all Governmental
Authorities (including, without limitation, the Department of Health and Human
Services, the Department of Defense, the Department of Transportation, the
Assistant Secretary of Defense (Health Affairs), and the Office of CHAMPUS, or
any Person or entity succeeding to the functions of any of the foregoing)
promulgated pursuant to or in connection with any of the foregoing (whether or
not having the force of law) in each case as may be amended, supplemented or
otherwise modified from time to time.
"Claims" has the meaning set forth in Section 1.09.
"Collections" means all cash collections, wire transfers, electronic funds
transfers and other cash proceeds of Accounts deposited in or transferred to the
Lender Lockbox Account, including, without limitation, all cash proceeds
thereof.
"Credit and Collection Policy" means those receivables credit and
collection policies and practices of the Borrower in effect on the date of the
Agreement and described in Schedule II hereto, as modified from time to time
with the consent of the Lender.
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"Debt" of any Person means (without duplication): (i) all obligations of
such party for borrowed money, (ii) all obligations of such party evidenced by
bonds, notes, debentures, or other similar instruments, (iii) all obligations of
such party to pay the deferred purchase price of property or services (other
than trade payables in the ordinary course of business), (iv) all "capital
leases" (as defined by GAAP) of such party, (v) all Debt of others directly or
indirectly guaranteed (which term shall not include endorsements in the ordinary
course of business) by such party, (vi) all obligations secured by a Lien
existing on property owned by such party, whether or not the obligations secured
thereby have been assumed by such party or are non-recourse to the credit of
such party (but only to the extent of the value of such property), and (vii) all
reimbursement obligations of such party (whether contingent or otherwise) in
respect of letters of credit, bankers' acceptances and similar instruments.
"Default" shall mean an event, act or condition which with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"Defaulted Receivable" shall mean a Receivable (i) as to which the Obligor
thereof or any other Person obligated thereon has taken any action, or suffered
any event to occur, of the type described in paragraph (i) of Exhibit V, or (ii)
which, consistent with the Credit and Collection Policy, would be written off
the appropriate Provider's books as uncollectible.
"Delinquency Ratio" has the meaning set forth in the RPA.
"Delinquent Receivable" shall mean a Receivable (a) that has not been paid
in full on or following the 180th day following the Last Service Date thereof,
or (b) that is a Denied Receivable.
"Denied Receivable" shall mean any Receivable to which any related
representations or warranties have been discovered at any time to have been
breached.
"Depositary Agreement" means that certain Depositary Account Agreement,
dated the date hereof, among the Providers, CCA, the Borrower, the Lender, and
the Lockbox Bank, in substantially the form attached hereto as Exhibit VIII, as
such agreement may be amended, modified or supplemented from time to time in
accordance with its terms.
"Distribution" shall mean any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on account of any
capital interest in the Borrower, or return any capital to its members as such,
or purchase, retire, defease, redeem or otherwise acquire for value or make any
payment in respect of any shares of any class of capital interests in the
Borrower or any warrants, rights or options to acquire any such interests, now
or hereafter outstanding.
"Documents" shall mean this Agreement, the RPA, the Depositary Agreement,
each Borrower's Certificate, each Borrowing Base Certificate and each other
document or instrument now
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or hereafter executed and delivered to the Lender by or on behalf of the
Borrower pursuant to or in connection herewith or therewith.
"Eligible Receivables" means Receivables that satisfy the Eligibility
Criteria, as determined by the Lender Group.
"Eligibility Criteria" means the criteria and basis for determining whether
a Receivable shall be deemed by the Lender Group to qualify as an Eligible
Receivable, all as set forth in Exhibit VI hereto, as such Eligibility Criteria
may be modified from time to time by the Lender in its good faith discretion
upon Written Notice to the Provider.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of ss. 3(3) of ERISA maintained by any Provider, the Borrower, any of their
respective ERISA Affiliate, or with respect to which any of them have any
liability.
"EOB" means the explanation of benefit from an Obligor that identifies the
services rendered on account of the Receivable specified therein.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity which is under common control with the
Borrower within the meaning of ERISA or which is treated as a single employer
with the Borrower under the Internal Revenue Code of 1986, as amended.
"Event of Default" means any of the events specified in Exhibit V hereto.
"Event of Termination" shall have the meaning set forth in the RPA.
"Excluded Claims" has the meaning set forth in Section 1.09(b)
"Excluded Taxes" shall mean taxes upon or determined by reference to the
Lender's net income imposed by the jurisdiction that any such Lender is
organized or has its principal or registered office.
"Expected Net Value" means, with respect to any Eligible Receivable, the
gross unpaid amount of such Receivable on date of creation thereof, times the
Net Value Factor.
"Fee and Interest Shortfall" as of any Funding Date, shall mean the amount,
if any, of A/R Fee or interest that is due and payable and has not otherwise
been paid in full by the Borrower.
"Funding Date" means Tuesday of each week after the Initial Funding Date,
or if such day is not a Business Day, the next succeeding Business Day.
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"GAAP" means generally accepted accounting principles in the United States
of America, applied on a consistent basis as set forth in Opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards Board
and/or the rules and regulations of the Securities and Exchange Commission
and/or their respective successors and which are applicable in the circumstances
as of the date in question.
"Governmental Entity" means the United States of America, any state, any
political subdivision of a state and any agency or instrumentality of the United
States of America or any state or political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government. Payments from Governmental Entities
shall be deemed to include payments governed under the Social Security Act (42
U.S.C. 1395, et seq.), including payments under Medicare, Medicaid and CHAMPUS,
and payments administered or regulated by HCFA.
"HCFA" means the Health Care Financing Administration of the United States
Department of Health and Human Services.
"Indemnified Party" has the meaning set forth in Section 1.09.
"Initial Funding Date" means the date of the initial Revolving Advance in
respect of Receivables hereunder.
"Insurer" means any Person which in the ordinary course of its business or
activities agrees to pay for healthcare goods and services received by
individuals, including commercial insurance companies, nonprofit insurance
companies (such as Blue Cross, Blue Shield entities), employers or unions which
self-insure for employee or member health insurance, prepaid health care
organizations, preferred provider organizations and health maintenance
organizations. "Insurer" includes insurance companies issuing health, personal
injury, workers' compensation or other types of insurance but does not include
any individual guarantors.
"Interest Payment Date" shall mean the last day of the Interest Period for
the applicable Revolving Advance.
"Interest Period" shall mean the period commencing on, as the case may be,
the borrowing or conversion date with respect to such Revolving Advance and
ending one month thereafter; provided, however, that no Interest Period may be
selected that expires later than the Maturity Date; and provided, further, that
any Interest Period that begins on the last Business Day of a Month (or on a day
for which there is no numerically corresponding day in the Month at the end of
such Interest Period) shall, subject to the foregoing proviso, end on the last
Business Day of a Month.
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"Last Service Date" means, with respect to any Eligible Receivable, the
date set forth on the related invoice or statement as the most recent date on
which services or merchandise were provided by a Provider to the related
patient.
"Lender" has the meaning set forth in the preamble hereto.
"Lender Debt" means and includes any and all amounts due, whether now
existing or hereafter arising, under the Agreement, including, without
limitation, any and all principal, interest penalties, fees, charges, premiums,
indemnities and costs owed or owing to the Lender, the Program Manager or the
Master Servicer by the Provider, any Affiliate of the Provider or any "Lender"
under the RPA, arising under or in connection with this Agreement, the RPA or
the Depositary Agreement, in each instance, whether absolute or contingent,
direct or indirect, secured or unsecured, due or not, arising by operation of
law or otherwise, and all interest and other charges thereon, including, without
limitation, post-petition interest whether or not such interest is an allowable
claim in a bankruptcy.
"Lender Group" means (i) the Lender, the Program Manager and the Master
Servicer, and (ii) the Lender's agents and delegates identified from time to
time to effectuate this Agreement.
"Lender Lockbox" means the lockbox located at the address set forth on
Schedule IV to receive checks and EOB's with respect to Receivables payable by
Insurers.
"Lender Lockbox Account" means the account at the Lockbox Bank as set forth
on Schedule IV as associated with the Lender Lockbox and established by the
Borrower to deposit Collections, including Collections received in the Lender
Lockbox and Collections received by wire transfer directly from Insurers, all as
more fully set forth in the Depositary Agreement.
"Lender Position" has the meaning set forth in Section 5.03.
"LIBO Rate" means an annualized 30-day interest rate (calculated on the
basis of actual days elapsed over a 360-day year) equal to the offered rate that
appears on page 3751 of the Telerate Service for the Bank of Tokyo for U.S.
dollar deposits of amounts and in funds comparable to the principal amount of
such Revolving Advance requested by the Borrower for which the LIBO Rate is
being determined with maturities comparable to the 30-day period for which such
LIBO Rate will apply as of approximately 10:00 a.m. (New York time) two Business
Days prior to the commencement of such Funding Date.
"Lien" means any lien, mortgage, security interest, tax lien, pledge,
hypothecation, assignment, preference, priority, other charge or encumbrance, or
any other type of preferential arrangement of any kind or nature whatsoever by
or with any Person (including, without limitation, any conditional sale or title
retention agreement), whether arising by contract, operation of law, or
otherwise.
"Lockbox Bank" means KeyBank, as lockbox bank under the Depositary
Agreement.
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"Loss-to-Liquidation Ratio" means, as of the last Business Day of each
Month, a percentage equal to:
DR / C
where:
DR = The Expected Net Value of all Eligible
Receivables which became Defaulted
Receivables in the four week period
immediately prior to the date of
calculation.
C = Collections on such Eligible Receivables
in the four week period immediately prior to
the date of calculation.
"Master Servicer" means RJE Data Processing, Inc., and any other Person
then identified by the Lender to the Borrower as being authorized to administer
and service Receivables.
"Maturity Date" means the earlier of (a) the Scheduled Maturity Date, and
(b) the occurrence of an Event of Default unless such event is waived by the
Lender in writing.
"Material Adverse Effect" means any event, condition, change or effect that
(a) has a materially adverse effect on the business, operations or financial
condition of (i) CCA on a consolidated basis, (ii) the Borrower, or (iii) any
Provider, (b) materially impairs the ability of the Borrower to perform its
obligations under this Agreement, (c) materially impairs the ability of CCA, a
Provider or the Borrower to perform their respective obligations under the RPA,
or (d) materially impairs the validity or enforceability of, or materially
impairs the rights, remedies or benefits available to the Lender under this
Agreement or (as assignee from the Lender) under the RPA.
"Maximum Permissible Rate" has the meaning set forth inSection 1.11(a).
"Month" means a calendar month.
"Multiemployer Plan" means a plan, within the meaning of ss. 3(37) of
ERISA, as to which the Borrower or any ERISA Affiliate contributed or was
required to contribute within the preceding five (5) years.
"Net Value Factor" means, initially, as follows:
Obligor Net Value Factor
Private 98%
Medicare 99%
Medicaid 99%
Medicare Part B 99%
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Insurance 98%
VA and Other 98%
as such percentage may be adjusted, upwards or downwards with Written Notice to
the Borrower, in the good faith discretion of the Lender but in consultation
with the Borrower and CCA, based on historical actual final collections received
on the Receivables within the past 180 days.
"Non-Utilization Fee" has the meaning set forth in Section 1.05(d).
"Obligor" means the Insurer or Governmental Entity, as applicable, who is
responsible for the payment of all or any portion of a Receivable.
"Other Corporations" means each Provider and each of its direct and
indirect parents or subsidiaries other than the Borrower.
"Other Taxes" has the meaning set forth in Section 1.08.
"Overnight Rate" means the interest rate for overnight funds as set by the
Lockbox Bank from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Program Manager" means (i) Daiwa Securities America Inc. or (ii) any other
Person then identified by the Lender to the Borrower as being authorized to
provide administrative services with respect to the Lender and the Lender's
finance, funding and collection of healthcare receivables.
"Property" means property of all kinds, real, personal or mixed, tangible
or intangible (including, without limitation, all rights relating thereto),
whether owned or acquired on or after the date of this Agreement.
"Provider" means each party listed as a Provider under the RPA, together
with its corporate successors and permitted assigns.
"Provider Ancillary Lockbox" means the lockbox set forth on Schedule IV
hereto to receive checks and EOB's with respect to Receivables payable by
private payors.
"Provider Ancillary Lockbox Account" means the account set forth on
Schedule IV hereto in the name of the Providers and associated with the Provider
Ancillary Lockbox established
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and controlled by the Providers to deposit Collections, including Collections
received in the Provider Ancillary Lockbox and Collections received by wire
transfer, all as more fully set forth in the Depositary Agreement.
"Provider Government Lockbox" means the lockbox set forth on Schedule IV
hereto to receive checks and EOB's with respect to Receivables payable by
Governmental Entities.
"Provider Government Lockbox Account" means the account set forth on
Schedule IV hereto in the name of the Providers and associated with the Provider
Government Lockbox established and controlled by the Providers to deposit
Collections, including Collections received in the Provider Government Lockbox
and Collections received by wire transfer directly from Governmental Entities,
all as more fully set forth in the Depositary Agreement.
"Provider Lockboxes" means, collectively, the Provider Ancillary Lockbox
and the Provider Government Lockbox, or, as the context requires, either such
lockbox.
"Provider Lockbox Account" means, collectively, the Provider Ancillary
Lockbox Account and the Provider Government Lockbox Account, or, as the context
requires, either such lockbox account.
"Receivable Information" has the meaning set forth in the RPA.
"Receivables" means the third-party reimbursable or the third-party
directly payable portion of healthcare accounts receivable, owing (or in the
case of Unbilled Receivables, to be owing) to the Borrower, arising out of the
rendition of medical, surgical, diagnostic or other professional medical
services or the sale of medical products by the Provider, including all rights
to reimbursement under any agreements with and payments from Obligors, together
with, to the maximum extent permitted by law, all accounts and general
intangibles related thereto, all rights, remedies, guaranties, security
interests and Liens in respect of the foregoing, all books, records and other
Property evidencing or related to the foregoing and all proceeds of any of the
foregoing.
"Related Person" means any incorporator, stockholder, Affiliate (other than
the Program Manager), agent, attorney, officer, director, member, manager,
employee or partner of the Lender or its stockholders.
"RPA" means that certain Receivables Purchase and Transfer Agreement, dated
as of the date of this Agreement, among CCA, the Providers named therein, and
the Borrower, as such agreement may be amended, modified or supplemented from
time to time in accordance with the terms hereof and thereof.
"Revolving Advance" has the meaning set forth in Section 1.01.
"Revolving Commitment" has the meaning set forth in Section 1.02.
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"Revolving Loan" has the meaning set forth in Section 1.01.
"Scheduled Maturity Date" means the date 36 months after the Initial
Funding Date.
"Servicer Termination Event" shall have the meaning set forth in the RPA.
"Special Period" shall mean the period commencing on the Initial Funding
Date and ending on the earliest to occur of (i) the three month anniversary of
the Initial Funding Date, and (ii) the occurrence of any Event of Default,
unless such event is waived by the Lender in writing.
"Tangible Net Worth" with respect to the Borrower, means, at any time, the
excess of (i) the Expected Net Value of all Receivables owned and not financed
by the Lender, plus cash, plus investments, plus amounts which are owing from
the Lender minus (ii) the sum of all accrued unpaid monetary obligations and
accrued unpaid fees and expenses payable hereunder or otherwise.
"Transmission" means, upon establishment of computer interface between the
Borrower and the Master Servicer in accordance with the specifications
established by the Master Servicer, the transmission of Receivable Information
through computer interface to the Master Servicer, and prior to such time (not
to exceed 60 days from the Initial Funding Date), by facsimile or overnight
courier, all in a manner satisfactory to the Master Servicer.
"UCC" means the Uniform Commercial Code as from time to time in effect in
the specified jurisdiction.
"Unbilled Receivable" means a Receivable in respect of which the goods have
been shipped, or the services rendered, to the customer or patient, rights to
payment thereon have accrued, but the invoice has not been rendered to the
applicable Obligor.
"Written Notice" and "in writing" shall mean any form of written
communication or a communication by means of telex, telecopier device, telegraph
or cable.
Other Terms. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.
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EXHIBIT II.
CONDITIONS OF REVOLVING ADVANCES
1. Conditions Precedent on Initial Funding Date. The making of
the Revolving Advance on the Initial Funding Date is subject to the conditions
precedent that the Lender shall have received on or before the Initial Funding
Date the following, each (unless otherwise indicated) dated such date, in form
and substance satisfactory to the Lender:
(a) A certificate issued by the Secretary of State of the
State of Delaware, dated as of a recent date, as to the legal existence and good
standing of the Borrower (which certificate may be dated not more than 20 days
prior to the Initial Funding Date) or an opinion of counsel for the Borrower to
that effect.
(b) Certified copies of the Articles of Organization and
Operating Agreement of the Borrower, certified copies of resolutions of the
Managers of the Borrower approving this Agreement and certified copies of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement.
(c) A certificate of the Secretary or Assistant Secretary of
the Borrower certifying the names and true signatures of the officers of the
Borrower authorized to sign this Agreement and the other documents to be
delivered by it hereunder.
(d) A copy of the opening balance sheet of the Borrower as at
the Initial Funding Date, certified by the chief financial officer of the
Borrower.
(e) Acknowledgment or time-stamped receipt copies of proper
financing statements (showing the Borrower as debtor and the Lender as secured
party) duly filed on or before the Initial Funding Date under the UCC of all
jurisdictions that the Lender may deem necessary or reasonably desirable in
order to perfect the ownership interests contemplated by the Agreement.
(f) Releases of, and acknowledgment copies of proper
termination statements (Form UCC-3), if any, necessary to evidence the release
of all security interests, ownership and other rights of any Person previously
granted by Borrower in its Receivables.
(g) A copy of all of the Providers' existing forms of patient
consents which were signed by each patient for which the currently existing
Receivables were created, as well as a copy of each new patient consent form to
be signed by each patient for which a Receivable will be created after the
Initial Funding Date, which consents authorize certain demographic and medical
information with respect to such patient to be disclosed by each Provider to its
servicing agents and by such servicing agents to any third party obligors
thereon, certified by a Secretary or Assistant Secretary of the Borrower as
being true, complete and correct.
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(h) A favorable opinion of Blass & Driggs, substantially
in the form attached hereto as Exhibit IX-A.
(i) A favorable opinion of Blass & Driggs, counsel for the
Borrower, CCA and the Providers, substantially in the form attached hereto as
Exhibit IX-B.
(j) The Assignment of Contract with respect to the RPA and
assignments of all other documents, lockboxes and lockbox accounts with respect
to the RPA, duly executed by the Borrower and acknowledged by CCA and the
Providers.
(k) Originally executed copies of the RPA, all other
documentation required to be delivered with respect to this Agreement and the
RPA, all in form and substance satisfactory to the Lender, which agreements
shall be in full force and effect and enforceable in accordance with their
respective terms.
(l) Evidence that all of the conditions precedent with respect
to each Provider to the initial purchase from such Provider under the RPA have
been satisfied or waived.
(m) A duly executed Depositary Agreement, together with
evidence satisfactory to the Lender that the Provider Lockboxes and the Provider
Lockbox Accounts have been established.
(n) Payment of a facility fee of $150,000 to Daiwa
Securities America Inc.
(o) Payment of all reasonable attorneys' fees incurred by
the Lender Group plus reasonable disbursements.
(p) Affirmation by Duff & Phelps Credit Rating Co. or an
equivalent rating agency acceptable to the Lender of the transactions
contemplated hereunder with a minimum rating of AA/BBB-.
(q) Evidence that the capitalization of the Borrower is
satisfactory to the Lender.
2. Conditions Precedent on All Funding Dates. Each Revolving
Advance on a Funding Date (including the Initial Funding Date) shall be subject
to the further conditions precedent that the Borrower and the Lender shall have
agreed upon the terms of such Revolving Advance and also that:
(a) the Borrower shall have delivered to the Lender, at least
two Business Days prior to such Funding Date, in form and substance satisfactory
to the Lender a completed Borrower's Certificate and a Borrowing Base
Certificate, together with such additional information as may reasonably be
requested by the Lender or the Master Servicer;
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(b) on such Funding Date the following statements shall be
true (and acceptance of the proceeds of such Revolving Advance shall be deemed a
representation and warranty by the Borrower that such statements are then true):
(i) the representations and warranties contained
in Exhibits III and VII are correct on and as of the date of such Revolving
Advance as though made on and as of such date, and
(ii) no event has occurred and is continuing, or
would result from such Revolving Advance or any actions connected
therewith, that constitutes a Default or an Event of Default;
(c) the Lender shall have received such other approvals,
opinions or documents as it may reasonably request.
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EXHIBIT III.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
(a) The Borrower is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is duly qualified to do business, and is in good standing, in
every jurisdiction where the nature of its business requires it to be so
qualified.
(b) The execution, delivery and performance by the Borrower of
the Agreement and the other documents to be delivered by it thereunder, (i) are
within the Borrower's powers, (ii) have been duly authorized by all necessary
organizational action, (iii) do not contravene (1) the Borrower's Articles of
Organization or Operating Agreement, (2) any law, rule or regulation applicable
to the Borrower, (3) any contractual restriction binding on or affecting the
Borrower or its Property, or (4) any order, writ, judgment, award, injunction or
decree binding on or affecting the Borrower or its Property, and (iv) do not
result in or require the creation of any Lien upon or with respect to any of its
Properties, other than the security interest created by the Agreement. The
Agreement has been duly executed and delivered by the Borrower. The Borrower has
previously furnished to the Lender a correct and complete copy of the Borrower's
Articles of Organization and Operating Agreement including all amendments
thereto.
(c) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Entity is required for the due
execution, delivery and performance by the Borrower of the Agreement or any
other document to be delivered thereunder.
(d) The Agreement constitutes the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms, except as limited by bankruptcy, insolvency, moratorium, fraudulent
conveyance or other laws relating to the enforcement of creditors' rights
generally and general principles of equity (regardless of whether enforcement is
sought at equity or law).
(e) The Borrower has all power and authority, and has all
permits, licenses, accreditations, certifications, authorizations, approvals,
consents and agreements of all Insurers, Governmental Entities, accreditation
agencies and any other Person necessary or required for the Borrower (i) to own
the assets (including Receivables) that it now owns, (ii) to carry on its
business as now conducted, (iii) to execute, deliver and perform the Agreement,
and (iv) to receive payments from the Obligors in the manner contemplated in
this Agreement.
(f) Except as disclosed in Schedule III, the Providers have
not been notified by any Insurer, Governmental Entity or instrumentality,
accreditation agency or any other person, during the immediately preceding 12
month period, that such party has rescinded or not renewed, or is reasonably
likely to rescind or not renew, any such permit, license, accreditation,
certification,
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authorization, approval, consent or agreement granted by it to such Provider or
to which it and such Provider are parties.
(g) As of the Initial Funding Date, all conditions precedent
set forth in Exhibit II have been fulfilled or waived in writing by the Lender,
and as of each Funding Date, the conditions precedent set forth in paragraph 2
of such Exhibit II shall have been fulfilled or waived in writing by the Lender.
(h) The opening balance sheet of the Borrower, copies of which
have been furnished to the Lender, fairly present the financial condition of the
Borrower as at such date all in accordance with GAAP.
(i) The RPA is in full force and effect and no Event of
Termination or Servicer Termination Event (without regard to waivers granted or
sought) is continuing thereunder.
(j) There is no pending or, to the Borrower's knowledge,
threatened action or proceeding or injunction, writ or restraining order
affecting the Borrower or any Provider before any court, Governmental Entity or
arbitrator which could reasonably be expected to result in a Material Adverse
Effect, or which purports to affect the legality, validity or enforceability of
the Agreement, the RPA or any other document executed in connection herewith or
therewith, and neither the Borrower nor any Provider is currently the subject
of, or has any present intention of commencing, an insolvency proceeding or
petition in bankruptcy.
(k) The Borrower is the legal and beneficial owner of the
Receivables free and clear of any Lien; the Lender shall acquire a valid
security interest in the Receivables and in the Collections with respect thereto
subject to no third-party claims of interest thereon. No effective financing
statement or other instrument similar in effect covering any Receivables or the
Collections with respect thereto is on file in any recording office, except
those being terminated on or before the Initial Funding Date and those filed in
favor of the Borrower relating to the purchase of the Receivables under the RPA
and those in favor of the Lender relating to the Agreement, and no competing
notice or notice inconsistent with the transactions contemplated in the
Agreement has been sent to any Obligor.
(l) All Receivable Information, information provided in the
application for the program effectuated by the Agreement, and each other
document, report and Transmission provided by the Borrower to the Lender Group
is or shall be accurate in all material respects as of its date and as of the
date so furnished, and no such document contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.
(m) The principal place of business and chief executive office
of the Borrower and the office where the Borrower keeps its records concerning
the Receivables are located at the address referred to on the signature page of
the Agreement and there have been no other such locations for the four
immediately prior months.
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(n) The provisions of the Agreement create, on the Initial
Funding Date, legal and valid Liens in all of the Borrower's Receivables in the
Lender's favor and when all proper filings and other actions necessary to
perfect such Liens have been completed, will constitute a perfected and
continuing Lien on all of the Borrower's Receivables, having priority over all
other Liens on such Receivables of the Borrower, enforceable against the
Borrower and all third parties.
(o) The Borrower has not changed its principal place of
business or chief executive office in the last five years.
(p) The exact name of the Borrower is as set forth on the
signature page of the Agreement, and except as notified in writing to the
Lender, the Borrower has not changed its name in the last 12 months, and, except
as notified in writing to the Lender, the Borrower did not use, nor does the
Borrower now use, any fictitious or trade name.
(q) With respect to the Borrower or the Provider, since the
Funding Date prior to the making of this representation, there has occurred no
event which has or is reasonably likely to have a Material Adverse Effect.
(r) Neither the Borrower nor any Provider is in violation
under any applicable statute, rule, order, decree or regulation of any court,
arbitrator or governmental body or agency having jurisdiction over the Borrower
or any Provider which has or is reasonably likely to have a Material Adverse
Effect.
(s) The Borrower has filed on a timely basis all tax returns
(federal, state and local) required to be filed and has paid, or made adequate
provision for payment of, all taxes, assessments and other governmental charges
due from the Borrower. No tax Lien has been filed and is now effective against
the Borrower or any of its Properties except any Lien in respect of taxes and
other charges not yet due or contested in good faith by appropriate proceedings.
To the Borrower's knowledge, there is no pending investigations of the Borrower
by any taxing authority or any pending but unassessed tax liability of the
Borrower.
(t) The Borrower is solvent and will not become insolvent
after giving effect to the transactions contemplated by this Agreement; the
Borrower has not incurred debts or liabilities beyond its ability to pay; the
Borrower will, after giving effect to the transaction contemplated by this
Agreement, have an adequate amount of capital to conduct its business in the
foreseeable future; the sales of Receivables hereunder are made in good faith
and without intent to hinder, delay or defraud present or future creditors of
the Borrower.
(u) Each Provider maintains only the one Provider Government
Lockbox and only the one Provider Government Lockbox Account, each as described
on Schedule IV to this Agreement, for Receivables of which the Obligor is a
Governmental Entity (except those lockboxes and lockbox accounts terminated or
being terminated prior to or on the Initial Funding Date); and no direction is
in effect directing Obligors to remit payments on Receivables other than to the
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applicable Lender Lockbox, Lender Lockbox Account, Provider Lockbox, or Provider
Lockbox Account, each as described on Schedule IV.
(v) The Borrower has no pension plans or profit sharing
plans.
(w) There are no pending civil or criminal investigations by
any Governmental Entity involving the Borrower, any Provider or any of their
respective officers or directors and neither the Borrower, any Provider or any
of their respective officers or directors has been involved in, or the subject
of, any civil or criminal investigation by any Governmental Entity.
(x) The sole business of the Borrower is as provided in
its Operating Agreement.
(y) The assets of the Borrower are free and clear of any Liens
in favor of the Internal Revenue Service, any Employee Benefit Plan, any
Multiemployer Plan or the PBGC other than inchoate tax Liens resulting from an
assessment of any Provider, CCA or the Borrower.
(z) None of the Eligible Receivables constitutes or has
constituted an obligation of any Person which is an Affiliate of the Borrower.
(aa) The Obligor of each Proposed Eligible Receivable has not
been the Obligor of any Defaulted Receivables in the past 12 months (other than,
for the purpose of this clause, as a result of good faith disputes).
(bb) No transaction contemplated under this Agreement requires
compliance with any bulk sales act or similar law.
(cc) The Borrower has no Debt except hereunder and under
the RPA.
(dd) Each Receivable that is an Unbilled Receivable will be,
or has been, billed to the Obligor of such Receivable within 45 days of the Last
Service Date.
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<PAGE>
EXHIBIT IV.
COVENANTS
Until the payment in full of all Lender Debt and the
termination of the Revolving Commitment hereunder:
(a) Compliance with Laws, etc. The Borrower will comply in all
material respects with all applicable laws, rules, regulations and orders and
preserve and maintain its corporate existence, rights, franchises,
qualifications, and privileges except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve and
maintain such existence, rights, franchises, qualifications, and privileges
would not result in Material Adverse Effect.
(b) Offices, Records and Books of Account. The Borrower will
keep its principal place of business and chief executive office and the office
where it keeps its records concerning the Receivables at the address of the
Borrower set forth under its name on the signature page to the Agreement or,
upon 30 days' prior Written Notice to the Lender, at any other locations in
jurisdictions where all actions reasonably requested by the Lender or otherwise
necessary to protect and perfect the Lender's interest in the Receivables have
been taken and completed. The Borrower shall keep its books and accounts in
accordance with generally accepted accounting principles and shall make a
notation on its books and records, including any computer files, to indicate
which Receivables have been assigned as security to the Lender and the security
interest of the Lender in the Borrower's Accounts not assigned to the Lender.
The Borrower shall maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate records
evidencing Receivables and related contracts in the event of the destruction of
the originals thereof), and keep and maintain all documents, books, records and
other information reasonably necessary or advisable for collecting all
Receivables (including, without limitation, records adequate to permit the daily
identification of each Receivable and all Collections of and adjustments to each
existing Receivable) and for providing the Receivable Information.
(c) Performance and Compliance with Contracts and Credit and
Collection Policy. The Borrower will, at its expense, timely and fully perform
and comply (and will cause the applicable Provider or its designee to fully
perform and comply) with all material provisions, covenants and other promises
required to be observed by it under the contracts related to the Receivables,
and timely and fully comply in all material respects with the Credit and
Collection Policy in regard to each Receivable and the related contract, and the
Borrower shall maintain, at its expense, in full operation each of the bank
accounts and lockboxes required to be maintained under the Agreement. The
Borrower shall do nothing, nor suffer or permit any other Person, to impede or
interfere with the collection by the Lender or the Master Servicer, on behalf of
the Lender, of the Receivables.
(d) Notice of Breach of Representations and Warranties.
The Borrower shall promptly (and in no event later than five Business Days
following actual knowledge thereof) inform
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the Lender and the Master Servicer of any breach of covenants or representations
and warranties hereunder and under the RPA, including, without limitation, upon
discovery of a breach of the criteria set forth in Exhibit VI hereof and
thereof.
(e) Debt, Sales, Liens, etc. The Borrower will not incur or
assume any Debt or issue any securities except under or as contemplated by this
Agreement. The Borrower will not sell, assign (by operation of law or otherwise)
or otherwise dispose of, or create or suffer to exist any Liens upon or with
respect to, the Borrower's Accounts, or upon or with respect to any account to
which any Collections are sent, or assign any right to receive income in respect
thereof except (i) the Borrower may grant a Lien on Accounts that is expressly
subordinated in writing to the Lien created hereunder in a manner acceptable to
the Lender, in its sole discretion, and (ii) those Liens in favor of the Lender
or any assignee of the Lender relating to the Agreement.
(f) Extension or Amendment of Receivables. The Borrower shall
not amend, waive or otherwise suffer or permit a Provider to, or agree to any
deviation from the terms or conditions of any Receivable owned by the Borrower
in a manner inconsistent with the Credit and Collection Policy.
(g) Change in Business or Credit and Collection Policy. The
Borrower will not make any change in the Credit and Collection Policy or make
any change in the character of its business that, in either event, is reasonably
likely to result in a Material Adverse Effect. The Borrower will not make any
other material changes in the Credit and Collection Policy without the prior
written consent of the Lender.
(h) Audits and Visits. The Borrower will, from time to time
during regular business hours as requested by the Lender, permit the Lender upon
reasonable notice, without interfering with the Borrower's or a Provider's
business or operations and subject to compliance with applicable law in the case
of review of patient information, or its agents or representatives (including
the Master Servicer), (i) to examine and make copies of and abstracts from all
books, records and documents (including, without limitation, computer tapes and
disks) in the possession or under the control of the Borrower relating to
Receivables including, without limitation, the related contracts, and (ii) to
visit the offices and properties of the Borrower for the purpose of examining
such materials described in clause (i) above, and to discuss matters relating to
Receivables or the Borrower's performance hereunder or under the contracts with
any of the officers or employees of the Borrower having knowledge of such
matters. The Borrower shall permit the Master Servicer to have at least one of
its agents or representatives physically present in the Borrower's
administrative office during normal business hours to assist the Borrower in the
collection of Receivables.
(i) Change in Payment Instructions. The Borrower will not
terminate the Provider Lockboxes, the Provider Lockbox Accounts, the Lender
Lockbox, or the Lender Lockbox Account, or make any change or replacement in the
instructions contained in any Notice or otherwise, or regarding payments to be
made to the Borrower, the Lender or the Master Servicer, except upon the prior
and express direction of the Program Manager or the Lender.
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<PAGE>
(j) Reporting Requirements. The Borrower will provide to
the Lender (in multiple copies, if requested by the Lender) the following:
(i) on Monday of each week (or, if such day is
not a Business Day, the immediately following Business Day), a Borrowing Base
Certificate;
(ii) as soon as available and in any event within 45
days after the end of each of the first three quarters of each fiscal
year of the Borrower, balance sheets of the Borrower as of the end of
such quarter and statements of income, cash flows and retained earnings
of the Borrower for the period commencing at the beginning of the
current fiscal year and ending with the end of such quarter, certified
by the chief financial officer of the Borrower, and accompanied by a
certificate of an authorized officer of the Borrower detailing its
compliance for such fiscal period with the financial covenants
contained in this Agreement;
(iii) as soon as available and in any event within 90
days after the end of each fiscal year of the Borrower, balance sheets
as of, and statements of income for, such fiscal year, and accompanied
by a certificate of an authorized officer of the Borrower detailing its
compliance for such fiscal period with the financial covenants
contained in this Agreement;
(iv) promptly and in any event within five Business
Days after the occurrence of each Event of Default or event which, with
the giving of notice or lapse of time, or both, would constitute an
Event of Default, a statement of the chief financial officer of the
Borrower setting forth details of such Event of Default or event, and
the action that the Borrower has taken and proposes to take with
respect thereto;
(v) at least ten Business Days prior to any change in
the Borrower's name, a notice setting forth the new name and
the proposed effective date thereof;
(vi) promptly (and in no event later than five
Business Days following actual knowledge or receipt thereof), Written
Notice in reasonable detail, of (x) any Lien asserted or claim made
against a Receivable, (y) the occurrence of a Event of Default,
including the occurrence of any other event which could have a Material
Adverse Effect, or (z) the results of any cost report or similar audits
of a Provider being conducted by any federal, state or county
Governmental Entity or its agents or designees;
(vii) no later than five (5) Business Days after the
commencement thereof, Written Notice of all actions, suits, and
proceedings before any Governmental Authority or arbitrator affecting
the Borrower which, if determined adversely to the Borrower, could have
a Material Adverse Effect;
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<PAGE>
(viii) as soon as possible and in any event within
five (5) Business Days after becoming aware of the occurrence thereof,
Written Notice of any matter that could have a Material Adverse Effect;
(ix) within 90 days after the end of each fiscal year
of the Borrower, a certificate of independent certified public
accountants stating that to their knowledge no Servicer Termination
Event has occurred and exists as of the end of such fiscal year, or if
in their opinion such a Servicer Termination Event has occurred and is
continuing, a statement as to the nature thereof; and
(x) such other information respecting the Receivables
or the condition or operations, financial or otherwise, of the Borrower
as the Lender may from time to time reasonably request.
(k) Notice of Proceedings; Overpayments. The Borrower shall
promptly notify the Master Servicer (and modify the next Borrowing Base
Certificate to be delivered hereunder) in the event of any action, suit,
proceeding, dispute, set-off, deduction, defense or counterclaim that is or may
be asserted by an Obligor with respect to any Receivable. The Borrower shall
make all payments to the Obligors necessary to prevent the Obligors from
offsetting any earlier overpayment to the Borrower against any amounts the
Obligors owe on any Receivables.
(l) Officer's Certificate. On the date the financial
statements referred to in clause (ii) above are to be delivered each fiscal year
after the Initial Funding Date, the chief financial officer of the Borrower
shall deliver a certificate to the Lender, stating that, as of such date, (i)
all representations and warranties are true and correct, (ii) the conditions
precedent set forth in paragraph 2 of Exhibit II have been fulfilled or waived
in writing by the Lender, and (iii) no Event of Default exists and is
continuing.
(m) Further Instruments, Continuation Statements. The Borrower
shall, at its expense, promptly execute and deliver all further instruments and
documents, and take all further action that the Program Manager or the Lender
may reasonably request, from time to time, in order to perfect, protect or more
fully evidence the assignment as security of the Receivables, or to enable the
Lender or the Program Manager to exercise or enforce the rights of the Lender
hereunder or under the Receivables. Without limiting the generality of the
foregoing, the Borrower will upon the request of the Program Manager execute and
file such UCC financing or continuation statements, or amendments thereto or
assignments thereof, and such other instruments or notices, as may be, in the
opinion of the Program Manager, necessary or appropriate. The Borrower hereby
authorizes the Program Manager, upon two Business Days' notice, to file one or
more financing or continuation statements and amendments thereto and assignments
thereof, relative to all or any of the Receivables now existing or hereafter
arising without the signature of the Borrower where permitted by law. If the
Borrower fails to perform any of its agreements or obligations under the
Agreement, the Program Manager may (but shall not be required to) itself
perform, or cause performance of, such agreement or obligation, and the expenses
of the Program Manager incurred in connection therewith shall be payable by the
Borrower.
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<PAGE>
(n) Merger, Consolidation. The Borrower shall not merge with
or into or consolidate with or into, another Person, or convey, transfer, lease
or otherwise dispose of all or substantially all of its assets (whether now
owned or hereafter acquired).
(o) No "Instruments". The Borrower shall not take any action
which would allow, result in or cause any Eligible Receivable to be evidenced by
an "instrument" within the meaning of the UCC of the applicable jurisdiction.
(p) Preservation of Corporate Existence. The Borrower shall
preserve and maintain its corporate existence, rights, franchises and privileges
in the jurisdiction of its organization, and qualify and remain qualified in
good standing as a foreign corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises, privileges and
qualification would materially adversely affect the interests of the Lender or
the Program Manager or their ability of to perform their respective obligations
hereunder or under the RPA.
(q) RPA. The Borrower will, at its sole expense, timely and
fully perform and comply with all provisions, covenants and other promises
required to be observed to be observed by it under the RPA, maintain the RPA in
full force and effect, enforce the RPA in accordance with its terms, take all
such action to such end as may be from time to time reasonably requested by the
Lender, and make to any party to the RPA such demands and requests for
information and reports or for action as the Borrower is entitled to make
thereunder and as may be from time to time reasonably requested by the Lender.
The Borrower shall not permit any waiver, modification or amendment of the RPA.
The Borrower shall not permit any other Person to become a "Provider" under the
RPA or permit the removal of any "Provider" thereunder pursuant to Section 5.19
of the RPA without the written consent of the Lender (which consent, unless an
Event of Default is continuing hereunder, shall be governed by the conditions
set forth in Section 5.19 of the RPA).
(r) Master Servicer Certificate. On or before the thirtieth
calendar day after the Initial Funding Date, the Purchaser shall receive a
certificate from the Master Servicer stating that all computer linkups and
interfaces necessary or desirable, in the judgment of the Master Servicer, to
effectuate the transactions and information transfers contemplated hereunder,
are fully operational to the satisfaction of the Master Servicer.
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<PAGE>
SPECIAL COVENANTS
ENTITY SEPARATENESS
Until the payment in full of all Lender Debt and the termination
of the Revolving Commitment hereunder:
(i) The Borrower will at all times maintain at least one
independent manager who is (x) not a current or former officer,
director or employee of an Affiliate of the Borrower or any Other
Corporation and who is not a current or former officer or employee of
the Borrower and (y) not a stockholder of any Other Corporation or any
of their respective Affiliates.
(ii) The Borrower will not direct or participate in the
management of any of the Other Corporations' operations.
(iii) The Borrower will at all times be adequately capitalized in
light of its contemplated business.
(iv) The Borrower will at all times provide for its own operating
expenses and liabilities from its own funds.
(v) Subject to consolidation with CCA for accounting and tax
purposes, the Borrower will maintain its assets and transactions
separately from those of the Other Corporations and reflect such
assets and transactions in financial statements separate and distinct
from those of the Other Corporations and evidence such assets and
transactions by appropriate entries in books and records separate and
distinct from those of the Other Corporations. The Borrower will not
hold itself out as being liable, primarily or secondarily, for any
obligations of the Other Corporations.
(vi) The Borrower will not maintain any joint account with any
Provider or any Other Corporation, or be a party, whether as a
co-obligor or otherwise, to any agreement to which any Other
Corporation is a party (other than the RPA) or become liable as a
guarantor or otherwise with respect to any indebtedness or contractual
obligation of any Other Corporation.
(vii) Other than as contemplated under this Agreement or under
the RPA and the payment of dividends or distributions to its members,
the Borrower will not make any payment or distribution of assets with
respect to any obligation of any Other Corporation or grant a Lien on
any of its assets to secure any obligation of any Other Corporation.
(viii) The Borrower will not make loans, Revolving Advances or
otherwise extend credit to any of the Other Corporations, provided
that, the Borrower may issue dividends or distributions to each of its
members to the extent otherwise permitted under this Agreement and
under applicable law.
(ix) The Borrower will hold regular duly noticed meetings of its
members and make and retain minutes of such meetings.
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<PAGE>
(x) The Borrower will comply in full with the procedures set
forth in the RPA with respect to the assignment of all assets from any of the
Other Corporations.
(xi) The Borrower will not engage in any transaction with any
of the Other Corporations or any of their respective subsidiaries, except as
permitted or contemplated by the Agreement and as contemplated by the RPA.
(xii) The Borrower will not enter into any transaction with
any Affiliate or third party except (a)(x) as permitted or contemplated by this
Agreement or the RPA, or (y) investments of cash and cash equivalents with third
parties and (b) on terms and conditions which reasonably approximate an arm's
length transaction between unaffiliated parties.
(xiii) The Borrower will not amend, modify or supplement its
Articles of Organization or Operating Agreement.
(xiv) The Borrower will not have any Subsidiaries.
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<PAGE>
EXHIBIT V.
EVENTS OF DEFAULT
Each of the following shall be an "Event of Default":
(a) The Borrower shall default in the due and punctual payment
of the principal of the Revolving Loan, when and as the same shall become due
and payable (except that the Borrower shall have up 15 days to cure such a
default with respect to a Borrowing Base Deficiency) whether pursuant to Article
II of this Agreement, at maturity, by acceleration or otherwise.
(b) The Borrower shall default in the due and punctual payment
of any installment of interest on any of the Revolving Loans or any other Lender
Debt or of any fee or expense owing to the Lender pursuant to any of the
Documents, when and as such amount of interest, fee or expense shall become due
and payable and such default shall continue unremedied for three (3) Business
Days.
(c) The Borrower shall default in the performance or
observance of any covenant, agreement or provision (other than as described in
clause (a) or (b) above) contained in this Agreement or any other Document or in
any instrument or document evidencing or creating any obligation, guaranty or
Lien in favor of the Lender in connection with or pursuant to this Agreement or
any Lender Debt, and, except in the case of the agreements and covenants
contained in any Document as to each of which no notice or grace period shall
apply, such default continues for a period of thirty days (or, in the case where
agreements and covenants contained in any Document provide for a grace period
that is less than thirty days, continuance of a default for such shorter period)
after the earlier of (i) there has been given Written Notice of such default to
any of CCA, the Borrower or the Providers by the Lender or (ii) discovery
thereof by the Borrower; or if this Agreement or any other Document or any such
other instrument or document shall terminate, be terminated or become void or
unenforceable for any reason whatsoever without the written consent of the
Agent.
(d) An Event of Termination shall have occurred under the RPA
(without regard to waivers granted or sought).
(e) The Borrower shall send a Revocation Order (as defined in
the Depositary Agreement) or make any change or replacement in the Standing
Revocable Instruction (as defined in the Depositary Agreement).
(f) Any representation or warranty made or deemed made by the
Borrower (other than with respect to the eligibility of Receivables as Eligible
Receivables hereunder) under or in connection with the Agreement or any
information or report delivered by the Borrower (other than with respect to a
Provider) pursuant to the Agreement shall prove to have been incorrect or untrue
in any material respect when made or deemed made or delivered.
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<PAGE>
(g) The Borrower shall fail to pay any principal of or premium
or interest on any of its Debt when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity of
such Debt; or any such Debt shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required prepayment),
redeemed, purchased or defeased, or an offer to repay, redeem, purchase or
defease such Debt shall be required to be made, in each case prior to the stated
maturity thereof.
(h) This Agreement shall for any reason (other than pursuant
to the terms hereof) fail or cease to create or fail or cease to be a valid and
perfected security interest in the Receivables and the Collections with respect
thereto free and clear of all Liens (other than Liens referred to in clauses (i)
and (ii) of paragraph (e) of Exhibit IV).
(i) The Borrower or any Provider shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower or
any Provider seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its Property and, in the
case of any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a period of 30
days, or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or for any
substantial part of its Property) shall occur; or the Borrower or any Provider
shall take any action to authorize any of the actions set forth above in this
paragraph (i).
(j) As of any date of determination, a Provider is found to
have been overpaid by Governmental Entities by 8% or more during any period
covered by an audit conducted by the HCFA and such overpayment is not repaid
within 30 days of the earlier of receipt of a notice by, or the knowledge of,
such Provider of a notice of such overpayment.
(k) There shall have occurred any change in the financial
condition or operations of the Borrower since September 30, 1996 that has
resulted in a Material Adverse Effect.
(l) The Borrower (x) shall have entered into any transaction
and not provided prompt Written Notice thereof to the Lender, or (y) shall have
consummated, any transaction which shall result in the consummation of (i) the
merger or consolidation of the Borrower, (ii) the acquisition of all or a
substantial portion of the assets of any Person, (iii) the transfer, sale,
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<PAGE>
assignment, lease or other disposition of all or a substantial portion of the
Borrower's assets or Properties, (iv) a change in the general nature of the
Borrower's business, or (v) the sale of a controlling interest, directly or
indirectly, in the Borrower.
(m) The Loss-to-Liquidation Ratio in any four week period exceeds 5%.
(n) The arithmetic average of the Loss-to-Liquidation Ratios in any three
consecutive four week periods exceeds 3%.
(o) The Delinquency Ratio in any four week period exceeds 10%.
(p) Judgments or orders for payment of money (other than judgments or
orders in respect of which adequate insurance is maintained for the payment
thereof) in excess of $500,000 in the aggregate against the Borrower remain
unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period
of 90 days or more.
(q) Any governmental authority (including, without limitation, the Internal
Revenue Service or the PBGC) files a notice of a Lien against (i) any of the
Receivables or (ii) assets other than the Receivables involving an aggregate
amount in excess of $500,000 which remains unpaid or discharged for a period of
60 days or more.
(r) The Borrower shall fail to discharge within a period of thirty (30)
days after the commencement thereof any attachment, sequestration, forfeiture,
or similar proceeding or proceedings involving an aggregate amount in excess of
$500,000 against any of its Properties.
(s) The Borrower does not pay or discharge at or before maturity or before
becoming delinquent all taxes, levies, assessments, and governmental charges
imposed on it or its income or profits or any of its Property, except any taxes,
levies, assessments or charges contested in good faith by appropriate
proceedings.
(t) The Borrower sells, leases, assigns, transfers, or otherwise disposes
of any of its Receivables, except as permitted or contemplated under this
Agreement.
(u) The Borrower declares or makes any Distribution, unless both prior and
subsequent to the effectiveness of such proposed Distribution, (i) no Event of
Default is continuing, including an Event of Default under clause (w) of this
Exhibit V hereof, (ii) such Distribution is in full compliance with applicable
law, including the law of the State of Delaware as in effect at such time, and
(iii) the Borrower and the recipient of such Distribution have taken all
necessary and appropriate corporate action to effectuate such Distribution.
(v) The Borrower engages in any business other than solely the businesses
of directly or indirectly purchasing Receivables from the Provider and financing
in such Receivables to the Lender hereunder and the other transactions permitted
or contemplated hereby.
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(w) The Borrower shall at any time fail to maintain a Tangible
Net Worth of at least 3.0% of the higher of (i) the Revolving Advance Limit, and
(ii) the then outstanding amount of the Revolving Loan.
(x) Any representation or warranty made or deemed made by the
Provider under or in connection with the RPA or any information or report
delivered by the Provider pursuant to the RPA shall prove to have been incorrect
or untrue in any material respect when made or deemed made or delivered and such
misstatement causes a Event of Default under the RPA.
(y) The Borrower shall fail to perform or observe any other
term, covenant or agreement contained in the Collateral Account Agreement on its
part to be performed or observed.
(z) If, at any date, the aggregate Expected Net Value of all
Delinquent Receivables that became Delinquent during the prior 3 months is in
excess of 20% of the aggregate Expected Net Value of all Receivables sold by the
Borrower to the Lender during the prior 3 months (regardless of whether the
Denied Receivables are reassigned by the Borrower pursuant to Article IV of the
Agreement).
(aa) As of any date after the Initial Funding Date, (i) the
dollar-weighted average days outstanding with respect to all outstanding
Eligible Receivables on such date and on the same day of each of the two
preceding Months (or if there is no corresponding day in any such preceding
month, the last day of such month) is greater than 65 days, or (ii) the average
over the preceding 90- day period of the dollar-weighted average days
outstanding with respect to all outstanding Eligible Receivables on each day
during such period is greater than 60 days.
(bb) As of any date after the Initial Funding Date, more than
25% of all outstanding Eligible Receivables are aged more than 120 days but less
than 180 days from the respective Last Service Dates of such Eligible
Receivables.
(cc) As of any date, Collections on all Eligible Receivables
that have been liquidated or written off during the then most recent 13 week
period, are less than 50% of the aggregate gross value (billed amount) of such
Eligible Receivables.
V-4
<PAGE>
EXHIBIT VI.
ELIGIBILITY CRITERIA
The following shall constitute the eligibility criteria for
acceptance of Receivables for financing and inclusion in the Borrowing Base
under the Agreement (the "Eligibility Criteria"):
(a) The information provided by the Borrower with respect to
each such Receivable is complete and correct and all documents, attestations and
agreements relating thereto that have been delivered to the Lender are true and
correct. Other than in respect of Unbilled Receivables, the applicable Provider
has billed the applicable Obligor and has delivered to such Obligor all
requested supporting claim documents with respect to such Receivable and no
amounts with respect to such Receivable have been paid as of the date and time
of the sale of such Receivable to the Lender. Each such Provider has, or has the
right to use, valid provider identification numbers and licenses to generate
valid Receivables. All information set forth in the bill and supporting claim
documents with respect to such Receivable is true, complete and correct; if
additional information is requested by the Obligor, the Borrower (or the
applicable Provider) has or will promptly provide the same, and if any error has
been made with respect to such information, the Borrower will promptly correct
the same and, if necessary, rebill such Receivable.
(b) Each Provider's Medicare and Medicaid cost reports with
respect to such Receivable for all cost reporting periods ending on or before
the date of the last audited cost report have been examined and audited by (i),
as to Medicaid, the applicable state agency or other HCFA- designated agents or
agents of such state agency, charged with such responsibility or (ii), as to
Medicare, the Medicare intermediary or other HCFA-designated agents charged with
such responsibility; and there is no basis for any Governmental Entity to assert
an offset against each such Provider.
(c) Each such Receivable (i) is payable, in an amount not less
than its Expected Net Value, by the Obligor identified by the applicable
Provider as being obligated to do so, (ii) is based on an actual and bona fide
rendition of services or sale of goods to the patient by the applicable Provider
in the ordinary course of business, (iii) is denominated and payable only in
U.S. dollars in the United States, (iv) is (or, in the case of Unbilled
Receivables, will be upon billing) an account receivable or general intangible
within the meaning of the UCC of the state in which the applicable Provider has
its principal place of business, or is a right to payment under a policy of
insurance or proceeds thereof, and is not evidenced by any instrument or chattel
paper, and (v) shall be subject to a patient consent form approved by the Lender
and executed by the applicable patient. There is no payor other than the Obligor
identified by the Borrower as the payor primarily liable on such Receivable;
provided, however, notwithstanding the foregoing, Receivables billed or to be
billed to Medicaid or Medicare for services or goods which were initially the
obligation of the patient or customer on a "Medicaid/Medicare pending" basis are
eligible to be Eligible Receivables hereunder.
VI-1
<PAGE>
(d) Each such Receivable (i) is not the subject of any action, suit,
proceeding or dispute (pending or threatened), setoff, counterclaim, defense,
abatement, suspension, deferment, deductible, reduction or termination by the
Obligor (except for statutory rights of Governmental Entities that are not
pending or threatened), (ii) is not past, or within 60 days of, the statutory
limit for collection applicable to the Obligor or is not aged more than 180 days
from its Last Service Date, and (iii) was not billed to the Obligor on a date
more than 45 days after the Last Service Date.
(e) Each such Receivable is not due from any Governmental Entity based on
any cost report settlement or expected settlement.
(f) Neither the Borrower nor any Provider has any guaranty of, letter of
credit providing credit support for, or collateral security for, such
Receivable, other than any such guaranty, letter of credit or collateral
security as has been assigned to the Lender, and any such guaranty, letter of
credit or collateral security is not subject to any Lien in favor of any other
Person.
(g) The goods or services provided and reflected by such Receivable were
medically necessary for the patient, and the patient has received such goods or
services.
(h) The fees charged for the goods or services constituting the basis for
such Receivable are consistent with the usual, customary and reasonable fees
charged by other similar medical goods or service providers for the same or
similar goods or services in the applicable Provider's community and in the
community in which the patient resides.
(i) The Obligor with respect to each such Receivable is (i) not currently
the subject of any bankruptcy, insolvency or receivership proceeding, nor is it
unable to make payments on its obligations when due, (ii) located in the United
States of America, and (iii) one of the following: (x) a Person which in the
ordinary course of its business or activities agrees to pay for healthcare
services received by individuals, including, without limitation, commercial
insurance companies and non-profit insurance companies (such as Blue Cross and
Blue Shield) issuing health, personal injury, worker's compensation or other
types of insurance, employers or unions which self-insure for employee or member
health insurance, prepaid healthcare organizations, preferred provider
organizations, health maintenance organizations, commercial hospitals,
physician's groups or any other similar person and which has a debt rating
equivalent to "A" or higher, (y) a state, an agency or instrumentality of a
state or a political subdivision of a state, or (z) the United States of America
or an agency or instrumentality of the United States of America.
(j) The financing of such Receivables hereunder is made in good faith and
without actual intent to hinder, delay or defraud present or future creditors of
the Borrower.
(k) The insurance policy, contract or other instrument obligating an
Insurer to make payment with respect to such Receivable (i) does not contain any
provision prohibiting the grant of a security interest in such payment
obligation from the patient to the applicable Provider, from such Provider to
the Borrower, or from the Borrower to the Lender, (ii) has been duly authorized
and, together with such Receivable, constitutes the legal, valid and binding
obligation of
VI-2
<PAGE>
the Insurer in accordance with its terms, (iii) together with such Receivable,
does not contravene in any material respect any requirement of law applicable
thereto, and (iv) was in full force and effect and applicable to the patient at
the time the goods or services constituting the basis for such Receivable were
sold or performed.
(l) The insurance policy, contract or other instrument
obligating a Governmental Entity to make payment with respect to such Receivable
(i) has been duly authorized and, together with the applicable Receivable,
constitutes the legal, valid and binding obligation of the Governmental Entity
in accordance with its terms, (ii) together with the applicable Receivable, does
not contravene in any material respect any requirement of law applicable
thereto, and (iii) was in full force and effect and applicable to the patient at
the time the goods or services constituting the basis for such Receivable were
sold or performed.
(m) No consents by any third party to the sale of such
Receivable are required other than consents previously obtained in writing by
the Borrower, a copy of each such consent having been provided to the Lender.
(n) The inclusion of such Receivable in the Borrowing Base
would not increase the fraction expressed as a percentage where (i) the
numerator is the sum of the then outstanding principal amount of Eligible
Receivables for any obligor (or group of obligors) listed below included in the
Borrowing Base, and (ii) the denominator is the Borrowing Base for all Eligible
Receivables, above the corresponding maximum percentage listed below:
Maximum
Obligor Percentage
- ------- ----------
Medicare 50%
Medicaid 85%
Blue Cross/Blue Shield 25%
All Commercial Insurance Obligors, HMOs and PPOs 75%
CHAMPUS/Champva 20%
any single AAA rated (non-governmental) Obligor 10%
any single AA rated (non-governmental) Obligor 10%
any single A rated (non-governmental) Obligor 5%
any single BBB rated (non-governmental) Obligor 2%
any single unrated (non-governmental) Obligor 1%
(o) Unless specifically verified and accepted by the Master
Servicer or Program Manager, no single Eligible Receivable has an Expected Net
Value greater than $25,000 for inpatient services or $5,000 for outpatient
services.
VI-3
<PAGE>
(p) No prior sale or assignment of security interest which is
still in effect on the applicable Funding Date has been made with respect to or
granted in any such Receivable.
VI-4
<PAGE>
EXHIBIT VII-A
FORM OF BORROWING BASE CERTIFICATE
[FOR USE DURING THE SPECIAL PERIOD]
DAIWA HEALTHCO-2 LLC
Borrowing Base Report
Report Submission Date:_____________
Schedule #:______________
As of Date:______________
A. Eligible B. A/R's less
Receivables than 180 days
----------- -------------
VII. Beginning A/R Balance (from Previous Report)
VIII. Additions:
8.01. New billings
8.02. Late Charges/Adjustments
Total Additions
IX. Deductions:
9.01. Collections
9.02. Contractual/Discounts
9.03. Transfers Bad Debt
9.04. Other Discounts/Adjustments
Total Deductions
X. Accounts Receivable Balance
XI. Less: Ineligible Collateral
XII. Total Eligible Collateral (Gross)
XIII. Estimated Net Value %
XIV. Total Eligible Collateral (Net)
XV. Less: Unposted Cash
VII-1
<PAGE>
XVI. Adjusted Net Eligible Collateral
XVII. Advance Rate Percentage 85% 94%
XVIII. Maximum Loan Availability on Collateral
XIX. Maximum Loan Availability per Agreement $15,000,000 $14,500,000
----------- -----------
XX. TOTAL LOAN AVAILABILITY (LESSOR OF 12 OR 13)
XXI. Outstanding Loan Balance Prior Report
XXII. Less Collections (Net Cash)
XXIII. Plus Draws Since Prior Report
XXIV. Interest Due/Fees
XXV. Additional Advance Requested
XXVI. LOAN BALANCE THIS REPORT
XXVII. NET AVAILABILITY (14. minus 20.)
The undersigned represents and warrants that the foregoing information is true,
complete and correct and that the collateral reflected herein with the
conditions, terms, warrantees, representations and covenants set forth in the
Loan and Security Agreement between the undersigned and Daiwa Healthco-2 LCC and
any supplements and amendments, if any, thereto (the "Agreement"). The
undersigned promises to pay to Daiwa Healthco-2 LCC the new loan balances
reflected above, plus interest, as set forth in the Agreement.
CCA FUNDING LLC
By:_____________________________ Date:____________
Name:
Title:
VII-2
<PAGE>
[FOR USE AFTER THE SPECIAL PERIOD]
DAIWA HEALTHCO-2 LLC
Borrowing Base Report
Report Submission Date:_____________
Schedule #:______________
As of Date:______________
XXVIII. Beginning A/R Balance (from Previous Report)
XXIX. Additions:
29.01. New billings
29.02. Late Charges/Adjustments
Total Additions
XXX. Deductions:
30.01. Collections
30.02. Contractual/Discounts
30.03. Transfers Bad Debt
30.04. Other Discounts/Adjustments
Total Deductions
XXXI. Accounts Receivable Balance
XXXII. Less: Ineligible Collateral
XXXIII. Total Eligible Collateral (Gross)
XXXIV. Estimated Net Value %
XXXV. Total Eligible Collateral (Net)
XXXVI. Less: Unposted Cash
XXXVII. Adjusted Net Eligible Collateral
XXXVIII. Advance Rate Percentage 85%
XXXIX. Maximum Loan Availability on Collateral
VII-1
<PAGE>
XL. Maximum Loan Availability per Agreement
XLI. TOTAL LOAN AVAILABILITY (LESSOR OF 12 OR 13)
XLII. Outstanding Loan Balance Prior Report
XLIII. Less Collections (Net Cash)
XLIV. Plus Draws Since Prior Report
XLV. Interest Due/Fees
XLVI. Additional Advance Requested
XLVII. LOAN BALANCE THIS REPORT
XLVIII. NET AVAILABILITY (14. minus 20.)
The undersigned represents and warrants that the foregoing information is true,
complete and correct and that the collateral reflected herein with the
conditions, terms, warrantees, representations and covenants set forth in the
Loan and Security Agreement between the undersigned and Daiwa Healthco-2 LCC and
any supplements and amendments, if any, thereto (the "Agreement"). The
undersigned promises to pay to Daiwa Healthco-2 LCC the new loan balances
reflected above, plus interest, as set forth in the Agreement.
CCA FUNDING LLC
By:_____________________________ Date:____________
Name:
Title:
VII-2
<PAGE>
EXHIBIT VII-B
FORM OF BORROWER'S CERTIFICATE
Daiwa Healthco-2 LLC
Two Wall Street
New York, New York 10005
Ladies and Gentlemen:
The undersigned refers to the Loan and Security Agreement,
dated as of December __, 1996 (as the same may be amended, supplemented,
restated, or modified from time to time, the "Loan Agreement") between CCA
Funding LLC (the "Borrower") and Daiwa Healthco-2 LLC (the "Lender").
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Loan Agreement.
In accordance with Section 1.03 of the Loan Agreement and in
fulfillment of the condition precedent set forth in Section 2(a) of Exhibit II
thereto, the Borrower hereby gives you irrevocable notice that the undersigned
requests a Revolving Advance under the Loan Agreement, and in connection
therewith sets forth below the information relating to such Advance as required
by Section 1.03 of the Loan Agreement:
Proposed Revolving Advance:
(i) The Funding Date of such Revolving Advance is requested
to be _______ __, 199_;
(ii) The amount of the Revolving Advance is requested to be
$_______________; and
(iii)Attached is the Borrowing Base Certificate delivered to
you on the immediately prior Monday.
The Borrower hereby certifies that the following statements
are true and correct on the date hereof, and will be true and correct on the
date of the proposed Revolving Advance:
(A) the representations and warranties contained in
Exhibits III and IV of the Loan Agreement are and will be true
and correct, both before and after giving effect to the
Revolving Advance requested herein and to the application of
the proceeds thereof, as though made on and as of such date
(it being understood and agreed that
VII-3
<PAGE>
any representation or warranty which by its terms is made on a
specified date shall be required to be true and correct only
as of such specified date); and
(B) no event has occurred and is continuing, or would
result from the Revolving Advance requested herein or from the
application of the proceeds thereof that constitutes or an
Event of Default; and
(C) the aggregate outstanding principal amount of the
Revolving Advances after giving effect to the Revolving
Advance requested herein is not in excess of the lesser of the
Revolving Commitment and the Borrowing Limit.
Very truly yours,
CCA FUNDING LLC
By:__________________________
Name:
Title:
VII-4
<PAGE>
EXHIBIT VIII
FORM OF DEPOSITARY AGREEMENT
[TO BE ATTACHED]
VIII-1
<PAGE>
EXHIBIT IX-A
FORM OF OPINION OF COUNSEL
IX-1
<PAGE>
EXHIBIT IX-B
FORM OF OPINION OF COUNSEL
IX-2
<PAGE>
SCHEDULE I
ADDRESSES FOR NOTICE
If to the Program Manager:
Daiwa Securities America Inc.
Financial Square
32 Old Slip
New York, New York 10005-3538
Attention: Chief Financial Officer
Tel: (212) 612-6290
Fax: (212) 612-7122
If to the Master Servicer:
RJE Data Processing, Inc.
2513 West Peterson
Chicago, Illinois 60659
Attention: Jack Callahan, President
Tel: (312) 561-6966
Fax: (312) 878-6355
IX-3
<PAGE>
SCHEDULE II
CREDIT AND COLLECTION POLICY
[TO BE ATTACHED]
IX-4
<PAGE>
SCHEDULE III
LICENSE REVOCATIONS
The following facilities have been decertified from the Medicaid and Medicare
Programs during the past 24 months:
(1) Community Care of America at Toledo (Toledo, Iowa)
Community Care of America voluntarily decertified this
facility from both the Medicare and Iowa state Medicaid
programs on March 8, 1996. The company has been recertified to
participate in both programs effective September 20, 1996 and
November 20, 1996 respectively.
(2) Community Care of America at Council Bluffs North (Council
Bluffs, Iowa) This facility was decertified from both the
Medicare and Iowa state Medicaid programs on April 17, 1996.
The company has been recertified to participate in both
programs effective July 1, 1996.
IX-5
<PAGE>
SCHEDULE IV
LOCKBOX INFORMATION
Provider Ancillary Lockbox:
CCA - Self-pay
Post Office Box 710278
Cincinnati, Ohio 45271-0278
Provider Ancillary Lockbox Account:
CCA - Self-pay
Account #00109-98906
KeyBank
127 Public Square, seventh floor
Cleveland, Ohio 44114-1306
ABA #041 001 039
Provider Government Lockbox:
CCA - Governmental
Post Office Box 710275
Cincinnati, Ohio 45271-0275
Provider Government Lockbox Account:
CCA - Governmental
Account #00109-98891
KeyBank
127 Public Square, seventh floor
Cleveland, Ohio 44114-1306
ABA #041 001 039
Lender Lockbox:
Post Office Box 710276
Cincinnati, Ohio 45271-0276
Lender Lockbox Account:
Account # 50020-61106
KeyBank
127 Public Square, seventh floor
Cleveland, Ohio 44114-1306
ABA #041 001 039
IX-6
ASSIGNMENT OF HEALTHCARE RECEIVABLES
PURCHASE AND TRANSFER AGREEMENT
AS COLLATERAL SECURITY
FOR VALUE RECEIVED, CCA FUNDING LLC, a Delaware limited
liability company (the "Assignor"), hereby grants a security interest in and
assigns and transfers to DAIWA HEALTHCO-2 LLC, as Lender (the "Assignee"), all
right, title and interest of the Assignor in and to, all benefits of the
Assignor under, and all monies due or to become due to the Assignor under or in
connection with, the contract more particularly described as follows:
That certain Healthcare Receivables Purchase and Transfer
Agreement, dated as of December __, 1996, among Community Care of
America, Inc., the other parties named therein as Providers, and the
Assignor as Purchaser (as may be amended, restated, modified or
supplemented from time to time in accordance with the terms thereof and
hereof, the "Transfer Agreement")
as collateral security for any and all of the obligations of the Assignor
pursuant to that certain Loan and Security Agreement dated as of December __,
1996 between the Assignor and the Assignee (as such may be amended, modified or
supplemented from time to time, the "Loan Agreement", the terms defined therein
and not otherwise defined herein being used herein as therein defined), whether
at stated maturity, by acceleration or otherwise (including, without limitation,
all interest thereon, whether accruing prior or subsequent to the commencement
of a bankruptcy or similar proceeding involving the Assignor as a debtor), and
all present and future obligations of the Assignor under this Assignment,
whether at stated maturity, by acceleration or otherwise (all of the foregoing
being herein referred to as the "Obligations").
The Assignor agrees, covenants, represents and warrants that:
1. The Assignor's right, title and interest in the Transfer
Agreement is owned by the Assignor free and clear of all claims,
mortgages, pledges, liens, encumbrances and security interests of every
nature whatsoever, except in favor of the Assignee. Without the
Assignee's prior written consent, the Assignor will not sell, transfer,
assign, pledge or grant a security interest in the Transfer Agreement
to any other person. Any such sale, transfer, assignment, mortgage,
pledge or encumbrance without the Assignee's written consent shall be
void and of no force and effect.
2. Without the Assignee's prior written consent, the Assignor
will not amend (directly or indirectly), modify, supplement, waive
compliance with, seek or grant a waiver under or assent to
non-compliance with the Transfer Agreement.
3. The Assignor specifically acknowledges and agrees that the
Assignee does not assume, and shall have no responsibility for, the
payment of any sums due or to become due under the Transfer Agreement
by the Assignor or the performance of any obligations to be performed
under or with respect to the Transfer Agreement by the Assignor, and
the
1
<PAGE>
Assignor hereby agrees to indemnify and hold the Assignee harmless with
respect to any and all claims by any person relating thereto. The
Assignee, in its discretion, may file or record this Assignment.
4. If an Event of Termination shall occur and be continuing,
in addition to all other rights and remedies of the Assignee pursuant
to any agreements of the Assignor in favor of or assigned to and held
by the Assignee or pursuant to applicable law or otherwise, the
Assignee or its successor shall have all rights and benefits under the
Transfer Agreement, including, without limitation, any and all rights
to indemnification claims of the Assignor, without modifying or
discharging any of the Obligations, except to the extent payment in
respect thereof is received. Upon the occurrence and continuance of an
Event of Termination, the Assignor agrees to execute any and all
documents requested by the Assignee in its sole discretion to enable
the Assignee to exercise all of the rights of the Assignor under the
Transfer Agreement. The specified remedies to which the Assignee may
resort under the terms of this Assignment are cumulative and are not
intended to be exclusive of any other remedies or means of redress to
which the Assignee may be lawfully entitled in case of any breach or
threatened breach by the Assignor of any provision hereof or of any of
the Obligations. Nothing contained in this Assignment and no act or
action taken or done by the Assignee pursuant to the powers and rights
granted to it hereunder or under any instrument collateral hereto shall
be deemed to be a waiver by the Assignee of any of its rights and
remedies against the Assignor in connection with, or in respect of, any
of the Obligations. The right of the Assignee to collect and enforce
collection of the Obligations and to enforce any security and
collateral held by it may be exercised by the Assignee prior to,
simultaneously with, or subsequent to any action taken by the Assignee
hereunder.
5. Upon the payment and satisfaction in full of all of the
Obligations and the termination of any commitment by the Assignee to
make loans or other financial accommodations to or for the benefit of
the Assignor under the Loan Agreement, this Assignment shall be
terminated by the Assignee and shall be of no further force or effect,
but the affidavit, certificate, letter or statement of any officer,
agent or attorney of the Assignee showing that any part of the
Obligations remains unpaid or unsatisfied shall be and constitute prima
facie evidence of the validity, effectiveness and continuing force of
this Assignment and any person may, and is hereby authorized to, rely
thereon.
6. The Assignee may take, or release, in whole or in part,
other security which it may hold for the payment of the Obligations,
may release any party primarily or secondarily liable therefor, and may
apply any other security held by it to the satisfaction, or partial
satisfaction, of such Obligations, without prejudice to any of its
rights under this Assignment.
7. This Assignment shall inure to the benefit of the Assignee
and its permitted successors, assigns and designees, and shall be
binding upon any subsequent owner of the Assignor's interest in and to
the Transfer Agreement.
2
<PAGE>
8. The Assignor covenants to execute and deliver to the
Assignee, upon demand, such additional assurances, writings or other
instruments as may be reasonably required by the Assignee to effectuate
the purpose hereof. This Assignment may not be changed orally and is to
be governed by the internal laws of the State of New York applicable to
contracts executed and to be performed in such State.
9. The Assignor hereby irrevocably designates and appoints the
Assignee as attorney-in-fact of the Assignor with power of
substitution, and with authority from and after and during the
continuance of an Event of Termination: to execute and deliver for and
on behalf of the Assignor any and all instruments, documents,
agreements and other writings necessary or advisable for the exercise
on behalf of the Assignor pursuant hereto of any rights, benefits or
options created or existing under or pursuant to the Transfer Agreement
and in this regard; to endorse the name of the Assignor on its behalf
on any and all notes, acceptances, checks, drafts, money orders,
instruments or other evidences of collateral, that may come into the
Assignee's possession; to execute proofs of claim and loss; to execute
endorsements, assignments or other instruments of conveyance and
transfer; to execute releases; and, to do all other acts and things
necessary and advisable in the discretion of the Assignee to carry out
and enforce this Assignment or the Obligations. All acts done by the
Assignee under the foregoing authorization are hereby ratified and
approved, and neither the Assignee or its successors nor any designee
or agent thereof shall be liable for any acts of commission or omission
(other than acts committed or omitted through bad faith, gross
negligence or willful misconduct), for any error of judgment or for
mistake of facts or law. This power of attorney being coupled with an
interest is irrevocable while any of the Obligations shall remain
unpaid and unperformed.
10. If an Event of Termination shall occur and be continuing,
the Assignee may, in its discretion, in its name or the Assignor's,
notify any obligor under the Transfer Agreement to make payment to the
Assignee of all amounts due or to become due under the Transfer
Agreement.
11. If an Event of Termination shall occur and be continuing,
the Assignee may, in its discretion, demand, sue for, collect or
receive any money or property at any time payable or receivable on
account of or in exchange for the Transfer Agreement, or, with respect
to payments which have become due and payable under the Transfer
Agreement, make any compromise or settlement deemed desirable by the
Assignee.
12. The Assignor agrees that any copy of this Assignment
signed by the Assignor and transmitted by telefax for delivery to the
Assignee shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is
in existence.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
executed this __th day of December, 1996.
CCA FUNDING LLC
By: CCA Funding Manager, Inc., its Manager
By:
Name:
Title:
Acknowledged By:
COMMUNITY CARE OF AMERICA,
INC.
By:
Name:
Title:
ECA HOLDINGS, INC.
By:
Name:
Title:
COMMUNITY CARE OF NEBRASKA,
INC.
By:
Name:
Title:
COMMUNITY CARE OF GEORGIA, INC.
By:
Name:
Title:
COMMUNITY CARE OF AMERICA OF
ALABAMA, INC.
By:
Name:
Title:
CCA OF MIDWEST, INC.
By:
Name:
Title:
4
<PAGE>
ECA PROPERTIES, INC.
By:
Name:
Title:
LULING/SCC, INC.
By:
Name:
Title:
DUBLIN/SCC, INC.
By:
Name:
Title:
MARIETTA/SCC, INC.
By:
Name:
Title:
MACON/SCC, INC.
By:
Name:
Title:
COLLEGE PARK/SCC, INC.
By:
Name:
Title:
GLENWOOD/SCC, INC.
By:
Name:
Title:
QUALITY CARE OF COLUMBUS, INC.
By:
Name:
Title:
QUALITY CARE OF LYONS, INC.
By:
Name:
Title:
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
AGREEMENT made as of the 27th day of December, 1996, between
COMMUNITY CARE OF AMERICA, INC., a Delaware corporation ("Borrower"), and IHS
FINANCIAL HOLDINGS, INC., a Delaware corporation ("Lender" or "Manager").
WHEREAS, Borrower and Lender are concurrently herewith
entering into a Management Agreement (the "Management Agreement") pursuant to
which Borrower has engaged the services of Lender to manage various functions of
the Borrower's business; and
WHEREAS, Lender is willing to make available to the Borrower a
revolving line of credit in the maximum aggregate amount of $5,000,000, and
Borrower wishes to obtain such revolving line of credit, all upon the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual promises
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree that:
<PAGE>
1. IHS Revolving Line of Credit.
(a) Subject to the terms and conditions hereof and relying upon the
representations and warranties of the Borrower herein set forth, Lender hereby
makes available to Borrower a revolving line of credit (the "IHS Line of
Credit") in the aggregate maximum principal amount outstanding at any time of
FIVE MILLION DOLLARS ($5,000,000). It is contemplated that, subject to the terms
and conditions hereof, the Borrower will be permitted to effect draws under the
IHS Line of Credit at any time and from time to time during the period that
commences on the date hereof and ends on the second anniversary of the date
hereof.
(b) Lender shall not be required to make any advances under the IHS Line of
Credit to the Borrower unless all of the following conditions shall have been
satisfied at the time the advance is requested and at the time such advance is
to be made: (i) all of the representations and warranties made by the Borrower
in this Agreement and the Management Agreement shall be true and correct in all
respects at and as of the date on which such advance is to be made with the same
force and effect as if each such representation or warranty were made at and as
of such time, and in furtherance thereof, the Borrower shall automatically be
deemed to have remade each of such representations and warranties on each such
date; (ii) the Borrower shall have performed and complied with all covenants,
agreements and obligations required to be performed or complied with by it, on
or prior to the date on which such advance is to be made; (iii) no Event of
Default (as defined in Section 5) shall have occurred and be continuing; (iv)
the Borrower shall have complied with the procedure set forth in subsection (c)
below with respect to such advance; and (v) Lender shall have consented to the
making of such advance, such consent not to, be unreasonably withheld; provided,
however, that Lender's consent to the making of an advance shall not be required
if the proceeds of such advance are applied to payment of fees under the
Management Agreement.
(c) (i) If the Borrower shall desire that Lender make an advance to it, it
shall provide Lender with a written request, certified to be true, complete and
correct by its President or Chief Financial Officer, at least forty-eight (48)
hours prior to the date on which the borrowing is to be made. Such request shall
set forth: (A) the amount of the requested advance, (B) the proposed use thereof
in reasonable detail, and (C) shall contain a statement that: (I) all of the
representations and warranties made in this Agreement are true and correct in
all respects as if made on the date of the request, (II) the Borrower is in
compliance with all of its covenants and obligations under this Agreement and
the Management Agreement, and (III) no Event of Default has occurred. Such
request shall also contain an undertaking by the individual executing same to
immediately notify Lender if any of the statements made therein shall become
untrue, incomplete or incorrect after the date of delivery and on or prior to
the date of the requested borrowing.
(ii) If the Manager shall desire that an advance be made to the Borrower,
it shall provide the Borrower with notice (which notice may be oral) thereof at
least forty-eight (48) hours prior to the date on which the borrowing is to be
made. Such request shall set forth: (A) the amount of the requested advance, and
(B) the proposed use thereof in reasonable detail. No such advance shall be made
at Manager's request (unless pursuant to Section 5.3 of the Management
Agreement) without the consent of the Borrower, which consent shall not be
unreasonably withheld and shall be deemed given unless Borrower shall otherwise
notify Manager (which notice may be oral) within forty-eight hours of said
request. (d) The proceeds of each advance shall be used as directed by the
Manager in accordance with the terms of the Management Agreement.
(e) Lender shall have no obligation to make any further advances if the
payment of the Note (as defined below) shall have been accelerated.
2. Loan Note.
The obligation of the Borrower to repay the unpaid principal amount of the
IHS Line of Credit, together with interest thereon, and Lender's fees and costs
in connection therewith shall be evidenced by that certain Subordinated Note
dated December 27, 1996 (the "Note") of Borrower of even date herewith, payable
to the order of Lender in a face amount equal to the maximum loan amount set
forth in Section 1, above, and having a maturity date which is on the second
anniversary of the date hereof (the "Maturity Date").
3. Repayment of IHS Line of Credit.
Interest on the IHS Line of Credit shall be payable monthly during the
period commencing on the date hereof and ending on the Maturity Date. Such
interest shall be payable at a rate per annum equal to the annual rate of
interest set forth in the Revolving Credit Agreement by and between Integrated
Health Services, Inc., as Borrower, and Citibank, N.A., as Lender, dated May 16,
1996 plus two (2%) percent.
4. Additional Covenants of Borrowers.
Until all of the Borrower's obligations under this Agreement and the Note
(the "Obligations") are satisfied in full, subject to the provisions of Section
5, below, the Borrower agrees that it will do or perform each of the following
(except to the extent that any of the following are the responsibility of Lender
in its capacity as Manager pursuant to the Management Agreement):
(a) furnish or cause to be furnished to the Lender any financial or other
information that the Lender may reasonably deem necessary or desirable;
(b) duly pay and discharge all taxes, assessments and governmental charges
owed by or against the Borrower or any of its subsidiaries or any of their
respective properties, prior to the date on which penalty will attach thereto,
unless and only to the extent that any such taxes are contested in good faith by
appropriate proceedings by the Borrower;
(c) take whatever actions are necessary to comply with all statutes and
regulations governing the operation of the Borrower's business;
(d) promptly cure any defects in the execution and delivery of this
Agreement and all other instruments executed in connection with this
transaction;
(e) execute and deliver or cause to be executed and delivered any other
instruments or documents which the Lender may reasonably request;
(g) promptly notify the Lender of any Event of Default discovered by the
Borrower; and
(h) permit the Lender to designate one additional member of the Board of
Directors of Borrower.
5. Events of Default.
At the option of Lender, all or any part of the Obligations shall
immediately become due and payable irrespective of any agreed maturity upon the
happening of any of the following events of default ("Events of Default"): (a)
any Acceleration Event occurs under the Note; (b) any breach by the Borrower of
any of its representations or warranties under this Agreement or the Management
Agreement; (c) any other breach of this Agreement which breach continues for a
period of sixty (60) days following notice from Lender to the Borrower; or (d)
the termination of the Management Agreement.
6. Waivers.
The Lender shall not be deemed to have waived any of its rights upon or
under any of the Obligations unless such waiver be in writing, shall expressly
refer to this Section 6 and shall be signed by the Lender. No delay or omission
on the part of the Lender on Obligations, whether evidenced hereby or by any
other instrument or papers, shall be cumulative and may be exercised separately
or concurrently.
7. Transfers by Lender.
Subject to the same limitations as are set forth in Section 11.1 of the
Management Agreement, Lender may transfer any or all of the Obligations.
8. Definition of Borrowers.
The term "Borrower" as used throughout this Agreement shall include (a) its
successors and assigns; (b) any individual, association, trust, partnership,
corporation, or other entity to which all or substantially all of the business
or assets of the Borrower shall have been transferred or with or into which any
of them shall have been merged, consolidated, reorganized or absorbed; and (c)
in the case of a partnership or joint venture, any general or limited
partnership or joint venture which shall have been created by reason of, or
continued in existence after, the admission of any new partner, partners or
joint venturers therein or the dissolution of the existing partnership or joint
venture by the death, resignation or other withdrawal of any partner or joint
venturer.
9. Maximum Interest.
All agreements between the Borrower and Lender are hereby expressly limited
so that in no contingency or event whatsoever, whether by reason of deferment in
accordance with this Agreement or advancement of the loan proceeds, acceleration
of maturity of the Obligations, or otherwise, shall the amount paid or agreed to
be paid to Lender for the use, forbearance or detention of the money to be
loaned hereunder exceed the maximum permissible under applicable law. If, from
any circumstance whatsoever, fulfillment of any provision hereof, at the time
performance of such provision shall be due, shall involve transcending the limit
of validity prescribed by law, then, ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity, and if from any circumstance
Lender should ever receive as interest an amount which would exceed the highest
lawful rate, such amount which would be excessive interest shall be applied to
the reduction of the principal of the Obligations and not to the payment of
interest. This provision shall control every other provision of all agreements
between the Borrower and Lender.
10. Borrower's Representations and Warranties.
To induce the Lender to lend monies pursuant to the Note, the Borrower
represents and warrants to Lender that:
(a) The Borrower is duly authorized to execute and deliver this Agreement,
the Note and the Management Agreement and to perform its obligations hereunder
and thereunder;
(b) the execution and delivery by the Borrower of this Agreement, the Note
and the Management Agreement, and the performance by the Borrower of its
obligations hereunder and thereunder do not and will not conflict with any
provision of the charter or by-laws of the Borrower;
(c) this Agreement, the Note and the Management Agreement when duly
executed and delivered, will be the legal, valid and binding obligation of
Borrower enforceable against it in accordance with its terms;
(d) Neither the execution and delivery of this Agreement, the Note or the
Management Agreement nor the performance by Borrower of its obligations
hereunder and thereunder will result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the property or
assets of the Borrower, except as contemplated or provided herein or therein,
and such execution, delivery and performance will not conflict with or result in
the breach or violation of or a default (with due notice or passing of time or
both) under the terms, conditions or provisions of (a) any indenture, evidence
of indebtedness, loan or financing agreement, or other agreement or instrument
of whatever nature to which the Borrower is a party or by which the Borrower is
bound; or (b) any provision of any existing law, rule, regulation, order, writ,
injunction or decree of any court or federal, state, county or municipal
governmental authority to which the Borrower is subject;
(e) Each representation and warranty contained in Sections 6.4, 6.5, 6.6
and 6.7 of the Management Agreement is true and correct.
(f) No person is entitled to receive from the Borrower any brokerage
commission, finder's fee or similar fee or payment in connection with the
consummation of the transactions contemplated by this Agreement, the Note or the
Management Agreement.
11. Notices.
Any notice or other communication by either party to the other shall be
in writing (except as otherwise expressly provided in this Agreement) and shall
be given and be deemed to have been duly given, upon the date delivered if
delivered personally or upon the date received if mailed postage pre-paid,
registered, or certified mail, or upon confirmation of receipt if sent by
telefacsimile transmission, or one business day after sent if sent by nationally
recognized overnight courier service, in each case, addressed as follows:
To the Borrower: Community Care of America, Inc.
3050 N. Horseshoe Drive
Naples, FL 33942
Attention: Gary Singleton, President
Fax: 941-435-0087
With a copy to: J. Allen Miller
Chadbourne & Parke, LLP
30 Rockefeller Plaza
New York, NY 10022
Fax: 212-541-5369
To the Lender: IHS Financial Holdings, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attention: Eleanor Harding
Fax: 410-998-8716
With a copy to: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attention: Marshall A. Elkins, Esq.
Fax: 410-998-8747
- and -
Frank Agostino
Calo Agostino
27 Warren Street
Hackensack, NJ 07601
Fax: 201-488-5855
or to such other address, and to the attention of such other person or officer
as either party may designate in writing by notice.
12. Applicable Law.
The substantive laws of the State of Maryland shall govern the validity,
construction, enforcement and interpretation of this Agreement and all other
documents and instruments referred to herein, unless otherwise specified
therein.
13. Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
14. Construction.
The parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement. If any party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty, or covenant.
15. Press Releases and Public Announcements.
Neither party shall issue any press release nor make any public
announcement relating to the subject matter of this Agreement, the Note or the
Management Agreement without the prior written approval of an officer of the
Borrower and the Lender; provided, however, that any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing party will use its best efforts to advise and consult with
the other party before making the disclosure.
16. Arbitration.
If any controversy should arise between the parties in performance,
interpretation, or application of this Agreement or the Note which involves any
matter, either party may serve upon the other a written notice stating that such
party desires to have the controversy reviewed by an arbitrator. If the parties
cannot agree within fifteen (15) days from the service of such notice upon the
selection of such arbitrator, an arbitrator shall be selected or designated by
the American Arbitration Association upon written request of either party
hereto. Arbitration of such controversy, disagreement, or dispute shall be
conducted in accordance with the Commercial Arbitration Rules then in force of
the American Arbitration Association and the decision and award of the
arbitrator so selected shall be binding upon the Owner and Manager. The
arbitration will be held in New York, New York.
As a condition precedent to the appointment of any arbitrator both parties
shall be required to make a good faith effort to resolve the controversy which
effort shall continue for a period of thirty (30) days prior to any demand for
arbitration. The cost of any such arbitration shall be shared equally by the
parties. Each party shall pay its own costs incurred as a result of its
participation in any such arbitration.
The Arbitrator shall have no authority to award punitive damages or any
other damages in excess of the prevailing party's actual damages, and may not
make any ruling, finding or award that does not conform to the terms and
conditions of this Agreement.
[SIGNATURES ON THE FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date
first above written.
Borrower: LENDER:
COMMUNITY CARE OF AMERICA, IHS FINANCIAL HOLDINGS,
INC. INC.
By: By:
Title: Title:
Attest: Attest:
SUBORDINATED NOTE
December 27, 1996 $5,000,000
FOR VALUE RECEIVED, Community Care of America, a Delaware corporation (the
"Maker"), having an address at 3050 N. Horseshoe Drive, Naples, FL 33942, hereby
promises to pay to the order of IHS Financial Holdings, Inc., a Delaware
corporation ("Payee"), or assigns, in lawful money of the United States at its
address at 10065 Red Run Boulevard, Owings Mills, MD 21244, or at such other
address as the holder of this Note shall specify from time to time to the Maker,
on the second anniversary of the date hereof, such amounts as are advanced to
the Maker by the holder of this Note from time to time in accordance with the
Credit Agreement (as hereinafter defined), such principal amount not to exceed
in the aggregate at any one time Five Million Dollars ($5,000,000), and which
shall be then outstanding. All amounts due under this Note shall bear interest
at the Applicable Rate (as hereinafter defined) as in effect from time to time,
payable on each date when a payment of principal is made or due and, commencing
with and continuing after January 1, 1997, on the first day of each calendar
month of each year.
The "Applicable Rate" shall mean two percent (2%) above the rate of
interest charged to Integrated Health Services in that certain Revolving Credit
Agreement by and between Integrated Health Services, Inc., as Borrower, and
Citibank, N.A., as Lender, dated May 16, 1996 (hereinafter referred to as the
"Citibank Rate"), or any replacement of such senior secured debt.
<PAGE>
Upon and during the continuance of an Acceleration Event (as defined
below), all amounts payable under this Note shall accrue interest at a rate per
annum equal to three percent (3%) in excess of the Applicable Rate (the "Default
Rate"). Any such default interest shall be due on demand.
In the event that any payment, including, without limitation, interest or
principal, required to be made by the Borrower under this Note shall not be
received by the Lender within ten (10) days after the same shall be due and
payable, the Lender may charge, and if so charged, the Borrower shall pay upon
demand, a late charge of five cents ($0.05) for each dollar ($1.00) of such
delinquent payment. This Note may be prepaid in whole at any time or in part
from time to time without penalty. Each such prepayment shall be applied first
to unpaid fees and charges under this note, accrued and unpaid interest and then
to principal.
At the time of making of each advance by the holder of this Note to the Maker,
and upon each payment of principal of any such advances the holder of this Note
shall, and is hereby authorized to, make a notation on the Grid attached hereto
and made a part hereof, of the date and the amount of such advance or payment,
as the case may be. The notations on the Grid shall constitute prima facie
evidence of the amount of principal outstanding under this Note from time to
time. Notwithstanding the foregoing, the failure to make a notation with respect
to any advance or payment shall not limit or otherwise affect the obligation of
the Maker hereunder with respect to any advance or payment. Although this Note
is dated the date of issue, interest in respect hereof shall be payable only for
the periods during which the advances evidenced hereby are outstanding and
although the stated principal amount of this Note shall be Five Million Dollars
($5,000,000), this Note shall be enforceable, with respect to the Maker's
obligation to pay this principal amount hereof, only to the extent of the unpaid
principal amount of the advances at the time evidenced hereby.
This is the Grid Note referred to in, and is entitled to the benefits of the
Revolving Credit Agreement of even date herewith between Payee and the Maker
(the "Credit Agreement"). Without limiting the generality of the foregoing,
Payee's obligation to make advances to the Maker under this Note shall be
governed by the Credit Agreement. The remedies of the holder of this Note as
provided herein, in the Credit Agreement, or in any other loan or security
instrument, agreement or document, or any of them relating to this Note, or at
law or in equity, shall be cumulative and concurrent, and may be pursued singly,
successively, or together at the sole discretion of the holder of this Note and
may be exercised as often as occasion therefor shall occur.
If an Acceleration Event shall occur, then, at the option of the holder hereof
upon written notice thereof to the Maker, all amounts then outstanding under
this Note shall become immediately due and payable; provided, however, if an
Acceleration Event as defined in Paragraph (e) of the next succeeding paragraph
shall occur with respect to the Maker, then this Note automatically shall become
immediately due and payable in its entirety.
An "Acceleration Event" shall be deemed to have occurred hereunder if:
a) the Maker shall fail to pay any amount due under this Note for more than
ten (10) days after the holder of this Note shall have given the Maker notice of
such failure;
(b) the Maker shall breach any of its obligations under this Note or the
Credit Agreement (other than for the payment of any amount due under this Note)
and such breach shall continue for thirty (30) days after the holder of this
Note shall have given the Maker notice of said default;
(c) any statement, representation, or warranty of the Maker contained in
this Note or the Credit Agreement shall be untrue in any material respect when
made;
<PAGE>
(d) any creditor of the Maker or of any principal subsidiary of the Maker
(other than any creditor identified in writing by Maker to Payer prior to
execution and delivery of this Note, with respect to the amount so specified)
shall give notice or demand that any obligations of the Maker or of such
subsidiary for the payment of money due to such creditor in an amount not less
than $100,000 be immediately paid or otherwise declares such obligations to
become immediately due and payable; or
(e) the Maker or any principal subsidiary of the Maker, shall become
insolvent or bankrupt or make an assignment for the benefit of creditors or
consent to the appointment of a trustee or receiver; or a trustee or a receiver
shall be appointed for any of them or for a substantial part of its or his
respective property; or bankruptcy, liquidation, termination of existence,
reorganization or insolvency or similar proceedings shall be instituted by or
against any of them; or
(f) there shall be a Fundamental Event (as hereinafter defined) of the
Maker.
A "Fundamental Event" shall be deemed to occur if (i) there shall be
consummated (x) any consolidation or merger of the Maker or any principal
subsidiary of the Maker in which the Maker or such subsidiary, as the case may
be, is not the continuing or surviving corporation or pursuant to which shares
of the capital stock of the Maker or such subsidiary would be converted into
cash, securities or other property, other than a merger of the Maker or such
subsidiary, as the case may be, in which the holders of the capital stock
thereof immediately prior to the merger have the same proportionate ownership of
capital stock of the surviving corporation immediately after the merger, or (y)
any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the Maker or
any of its principal subsidiaries (including by way of management agreement), or
(ii) stockholders of the Maker shall approve any plan or proposal for
liquidation or dissolution of the Maker or any principal subsidiary of the
Maker, or (iii) any new person or group (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended) shall become
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act)
of 30% or more of the capital stock of the Maker, or (iv) during any period of
two consecutive years, individuals who at the beginning of such period
constitute the entire Board of Directors shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Maker stockholders, of each new director was approved by a vote
of at least two-thirds of the directors then still in office who were directors
at the beginning of the period, or (v) the Maker or any principal subsidiary of
the Maker shall issue any equity securities or any securities convertible into
or exchangeable for equity securities in an aggregate amount in excess of 30%
percent (thirty percent) of the equity of the Maker or such principal subsidiary
on a fully diluted basis on the date hereof.
The indebtedness represented by this Note (including the interest thereon)
shall be subordinate and junior in right of payment to the prior payment in full
of all Senior Indebtedness (as defined below). By accepting this Note, the Payee
agrees from time to time to enter into such commercially reasonable
subordination agreements with or for the benefit of holders of Senior
Indebtedness as such holders shall reasonably require from time to time to
evidence the subordination of the Payee's rights hereunder to the rights of the
holders of Senior Indebtedness; provided such agreements shall contain only
subordination provisions ordinarily obtained by such holders under similar
circumstances, provided, further, that Payee shall not be required to return any
payment made prior to the receipt of a written notice of an Event of Default
from the holder of the Senior Indebtedness. Each such subordination agreement is
sometimes referred to in this Note as a "Subordination Agreement" and
collectively as the "Subordination Agreements". "Senior Indebtedness" means (a)
the principal of, premium, if any, and interest on, and all other obligations to
pay money or expend funds under, all Indebtedness to Daiwa Bank, Health and
Retirement Properties Trust ("HRPT") or any other lender or lessor which
replaces, refinances, or succeeds to the position, in whole or in part, of Daiwa
Bank, or HRPT, in an amount not to exceed thirty million dollars ($30,000,000);
and (b) any amendments, modifications, deferrals, renewals or extensions of any
such Senior Indebtedness, or debentures, notes or other evidences of
indebtedness issued in exchange for any such Senior Indebtedness. The term
"Indebtedness" as used in the foregoing sentence means any liability of the
Maker (i) for money borrowed from, or the issuance of letters of credit and
other financial accommodations by, any bank, financial institution or other
lender, or (ii) arising under a lease of property, equipment or other assets
whether or not classified upon the balance sheet of the Maker as a liability of
the Maker, or (iii) arising under a guaranty by the Maker of the liability of
another (including any subsidiary of the Maker) where the liability of the Maker
arising thereunder is, under the express provisions of such guaranty, superior
in right of payment to this Note.
Subject to the payment in full of all Senior Indebtedness, the holder of
this Note shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Maker applicable to the Senior Indebtedness until all amounts
owing on this Note shall be paid in full, and, as between the Maker, its
creditors other than holders of Senior Indebtedness, and the holder of this
Note, no payment or distribution of cash, property or securities made to the
holders of Senior Indebtedness by virtue of the subordination provisions hereof
which otherwise would have been made to the holder of this Note shall be deemed
to be a payment by the Maker on account of the Senior Indebtedness, and no
payment or distribution of cash, property or securities made to the holder of
this Note by virtue of the subrogation provided for herein which otherwise would
have been made to the holders of Senior Indebtedness shall be deemed to be a
payment on account of this Note; it being understood that the provisions hereof
are, and are intended solely, for the purpose of defining the relative rights of
the holder of this Note, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
<PAGE>
The obligation of the Maker to pay to the holder of this Note the principal
of and interest on this Note and all other sums due in connection herewith as
and when the same shall become due and payable in accordance with the terms
hereof is absolute and unconditional. The holder of this Note shall be entitled
to exercise singularly or cumulatively and in any order, all remedies permitted
by applicable law, equity, this Note, or otherwise upon default hereunder.
The Maker agrees to pay all costs of collection arising out of or under
this Note, including, without limitation, reasonable attorneys' fees and
expenses. Such costs shall be due on demand.
Anything to the contrary contained in this Note notwithstanding, at no time
shall the Maker be obligated or required to pay interest on the principal
balance due hereunder at a rate which could subject the holder hereof to either
civil or criminal liability as a result of being in excess of the maximum
interest rate which the Maker is permitted by applicable law to contract or
agree to pay. If, by the terms of this Note or any security agreement, the Maker
is at any time required or obligated to pay interest on the principal balance
due hereunder at a rate in excess of such maximum rate, the applicable interest
rate shall be deemed to be immediately reduced to such maximum rate and all
previous payments in excess of the maximum rate shall be deemed to have been
payments in reduction of principal and not on account of the interest due
hereunder.
The obligations hereunder shall be binding upon the successors and assigns
of the Maker. The Maker, for itself and its successors and assigns, and each
endorser, co-obligor, surety and guarantor hereof, hereby waives presentment for
payment, notice of nonpayment or dishonor, protest, notice of protest and all
other notices in connection with delivery, acceptance, performance or
enforcement of this Note. [SIGNATURE ON NEXT PAGE]
<PAGE>
This Note shall be construed in
accordance with and governed by the
laws of the State of Maryland
applicable to contracts executed,
delivered and to be fully performed
in Florida without regard to its
choice of law provisions. COMMUNITY
CARE OF AMERICA, INC.
By: __________________________
Gary Singleton, President
<PAGE>
GRID
ADVANCE AND PAYMENT SCHEDULE
Amount of Unpaid Name of
Date of Amount of Principal Paid Principal Person Making
Advance Advance or Prepaid Balance Notation
------- ------- ---------- ------- --------
Warrant ACQUISITION agreement
This Warrant Acquisition Agreement (this "Agreement") is entered into as of
January 13, 1997 (the "Effective Date") by and between Community Care of
America, Inc., a Delaware corporation ("CCA"), on the one hand, and on the other
hand, Integrated Health Services, Inc., a Delaware corporation ("IHS").
WHEREAS, CCA and IHS are parties to that certain Management Agreement, dated as
of December 27, 1996 (the "Management Agreement"), pursuant to which IHS has
agreed to provide certain services to CCA, on the terms and conditions contained
therein; and
WHEREAS, in connection with the Management Agreement, CCA and IHS entered into
that certain Revolving Credit Agreement, dated as of December 27, 1996 (the
"Revolving Credit Agreement"), pursuant to which IHS agreed to make available to
CCA a line of credit (the "Line of Credit") for up to Two Million Dollars
($2,000,000) to be evidenced by a Subordinated Note (the "Subordinated Note");
and
WHEREAS, CCA and IHS have continued to negotiate the terms upon which IHS would
be willing to provide CCA with a Line of Credit for up to Five Million Dollars
($5,000,000); and
WHEREAS, in order to induce IHS to provide an aggregate Line of Credit to CCA of
Five Million Dollars ($5,000,000), CCA has agreed to issue to IHS warrants (the
"Warrants") to purchase up to 9.9% of the outstanding common stock of CCA (the
"Common Stock"), on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS.1.DEFINITIONS As used in this Agreement, the following terms
shall have the following respective meanings:
"Affiliate" of any particular Person means any executive officer, director
(regardless of whether an officer), general partner, trustee and any other
Person that controls, is controlled by or is under common control with such
particular Person, where "control" means the possession, directly or indirectly,
of the power to direct the management and policies of the particular Person
<PAGE>
whether through the ownership of voting securities, contract or otherwise.
"Common Stock" shall mean CCA's common stock, $.0025 par value.
"day" shall mean any calendar day; "business day" shall mean any day
other than Saturdays, Sundays and days that are a banking holiday in New York
City; and "trading day" shall mean any day other than Saturdays, Sundays and
days that are a scheduled holiday for the principal securities market in which
the Common Stock is quoted or traded.
"Additional Transaction Documents" shall mean the Series A and Series B
Warrants described in Section 2.1 and the Registration Rights Agreement in the
form attached hereto as Exhibit 3.
"Person" shall mean any natural person and any corporation,
partnership, limited liability company, limited liability partnership, joint
venture, association, joint-stock partnership, trust, unincorporated
organization or government or other agency or political subdivision thereof.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited liability company, limited liability partnership, partnership,
association or other business entity of which (i) if a corporation, a majority
of the total voting power of shares of stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company, limited liability
partnership, partnership, association or other business entity, a majority of
the partnership or other similar ownership interest thereof is at the time owned
or controlled, directly or indirectly, by a Person or one or more Subsidiaries
of that Person or a combination thereof. For purposes hereof, a Person or
Persons shall be deemed to have a majority ownership interest in a limited
liability company, limited liability partnership, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, limited liability partnership, partnership,
association or other business entity gains or losses or shall be or control any
managing director or general partner of such limited liability company, limited
liability partnership, partnership, association or other business entity.
"Underlying Common Stock" shall mean (i) the shares of Common Stock
issued or issuable upon exercise of the Warrant and (ii) any Common Stock issued
or issuable with respect to the securities referred to in clause (i) above by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
2. PURCHASE AND SALE OF THE WARRANTS.2.PURCHASE AND SALE OF THE WARRANTS
2.1. The Effective Date Transaction. Simultaneously with the execution
and delivery of this Agreement: (a) CCA is issuing to IHS the Series A Warrant,
in the form attached hereto as Exhibit 1 (the "A-Warrant"); (b) CCA is issuing
to IHS the Series B Warrant, in the form attached hereto as Exhibit 2 (the
"B-Warrant"); and (c) the Revolving Credit Agreement is deemed to have been
amended by CCA and IHS to provide an aggregate Line of Credit of Five Million
Dollars ($5,000,000) in consideration for the issuance and sale of the Warrants.
3. ADDITIONAL TRANSACTION DOCUMENTS.7.ADDITIONAL TRANSACTION DOCUMENTS.
3.1. Registration Rights Agreement. Simultaneously with the execution and
delivery of this Agreement, CCA and IHS shall enter into a Registration Rights
Agreement in the form attached hereto as Exhibit 3.
4. REPRESENTATIONS AND WARRANTIES OF CCA; COVENANTS OF CCA.8.REPRESENTATIONS AND
WARRANTIES OF CCA. CCA hereby represents and warrants to IHS that the statements
in the following subsections of this Section 4 are all true and correct as of
the Effective Date and covenants to CCA as follows:
4.1. Organization, Standing, and Qualification of CCA. CCA is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Copies of the Certificate of Incorporation and Bylaws of CCA,
and all the amendments thereof to date, have been, if requested, delivered to
IHS and are complete and correct. CCA has the power and the authority to own the
property and assets now owned by it and to conduct the business presently being
conducted by it.
4.2. Absence of Conflicting Agreements. Neither (a) the execution or
delivery of this Agreement, the Additional Transaction Documents, the amendment
to the Revolving Credit Agreement or the other instruments and documents
required or contemplated hereby and thereby, nor (b) the performance by CCA of
the transactions contemplated hereby or thereby, conflicts with, or constitutes
a breach of or a default or requires the consent of any third party under (i) to
the best of its knowledge after due inquiry, any applicable law, rule, judgment,
order, writ, injunction, or decree of any court, currently in effect; or (ii) to
the best of its knowledge after due inquiry, any applicable rule or regulation
of any administrative agency or other governmental authority currently in
effect; or (iii) any agreement, indenture, contract or instrument to which CCA
(or any of its Subsidiaries) is now a party or by which the assets of CCA (or
any of its Subsidiaries) are bound.
<PAGE>
4.3. Authority. CCA has been and is duly authorized to execute and deliver
this Agreement, the Additional Transaction Documents, the Management Agreement,
the Revolving Credit Agreement (as amended hereby) and the other instruments and
transactions required or contemplated hereby and thereby, and to perform its
obligations hereunder and thereunder. The execution and delivery by CCA of this
Agreement, the Additional Transaction Documents, the Management Agreement, the
Revolving Credit Agreement (as amended hereby) and the other instruments and
transactions required or contemplated hereby and thereby, and the performance by
CCA of its obligations hereunder and thereunder do not and will not conflict
with any provision of the Certificate of Incorporation or Bylaws of CCA (or any
of its Subsidiaries) as amended to date. This Agreement, the Additional
Transaction Documents, the Management Agreement, the Revolving Credit Agreement
(as amended hereby) and the other instruments and transactions required or
contemplated hereby and thereby, when duly executed and delivered, will be the
legal, valid and binding obligation of CCA enforceable against it in accordance
with its and their terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, moratorium, reorganization and similar laws affecting
creditors rights generally. Upon execution of this Agreement, CCA will have
received the full purchase price or other consideration to be paid or given by
IHS for the Warrants, as evidenced by the execution and delivery of the Warrants
by CCA.
4.4 Legal Proceedings. There are no claims, actions, suits or proceedings
or arbitrations, either administrative or judicial, pending, or, to the
knowledge of CCA, overtly threatened against or affecting CCA, its subsidiaries
or affiliates, affecting CCA's ability to consummate the transactions
contemplated herein or, except as may be set forth in reports filed by CCA with
the Securities and Exchange Commission ("SEC"), of a nature required to be
disclosed in reports filed with the SEC.
4.5. Consents. No authorization, consent, approval, license, exemption by,
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary in connection with the execution, delivery and performance of this
Agreement by CCA other than any notice filing that is permitted to be made after
the event that causes such filing to be made. CCA will timely make all such
notice filings.
4.6. Capitalization. The authorized capital stock of CCA consists of the
following:
(a) Common Stock. A total of 15,000,000 authorized shares of Common Stock,
$.0025 par value, of which [7,597,801] shares are issued and outstanding.
(b) Preferred Stock. A total of authorized shares of Preferred Stock, none
of which is issued and outstanding.
(c) Options, Warrants, Reserved Shares. CCA will provide IHS within five
business days of the Effective Date a list of each stock option, warrant,
convertible security or other rights to acquire its Common Stock outstanding as
of the Effective Date. Except as disclosed in its filings under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), CCA has no obligation,
contingent or otherwise, to repurchase any shares of Common Stock, whether or
not currently outstanding.
4.7. Disclosure. No representation or warranty by CCA in this Agreement or
in any statement or certificate signed by any officer of CCA furnished or to be
furnished to IHS pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they are made, not misleading.
CCA's Form 10-K for the period ending December 31, 1995, filed on April 1, 1996;
Forms 10-Q for the periods ending March 30, 1996, June 31, 1996, and September
30, 1996; Forms 8-K filed on October 11, 1996, July 12, 1996, June 11, 1996, May
29, 1996 (as amended on July 30, 1996) and May 2, 1996 (as amended on July 12,
1996), and Proxy Statement dated May 10, 1996, each contained all material
information required to be stated therein under the Exchange Act and the rules
and regulations thereunder, as applicable, and as of their respective dates did
not contain any untrue statement of a material fact.
<PAGE>
4.8. Registration Rights. CCA has not granted or agreed to grant any Person
any rights inconsistent with the rights granted under the Registration Rights
Agreement.
4.9 Reservation of Shares. CCA hereby represents and covenants that it has
reserved and at all times there shall be reserved for issuance such number and
type of securities as the holders of the Warrants are entitled to receive upon
exercise thereof. Prior to the issuance of any equity securities (or any
instrument exercisable for or convertible into equity securities) and whenever
otherwise required to satisfy this Section 4.9, CCA will amend its Certificate
of Incorporation to the extent necessary to ensure that there is reserved for
issuance a sufficient number and type of securities as the holders of the
Warrants are entitled to receive upon exercise thereof.
4.10 Press Release. CCA shall issue a press release on the Effective Date
in the form attached hereto as Exhibit 4.
5. REPRESENTATIONS AND WARRANTIES OF IHS.9.REPRESENTATIONS AND WARRANTIES OF
IHS. IHS represents and warrants to CCA as follows:
5.1. Purchase for Own Account; Investment Intent. The Warrants are being
acquired for IHS's own account, not as a nominee or agent, and not with a view
to or in connection with the sale or distribution of any part thereof, other
than pursuant to a transaction, or series of transactions, registered or exempt
from registration under the Securities Act.
6. INFORMATION & INSPECTION RIGHTS.14.INFORMATION & INSPECTION RIGHTS.
6.1. Information Rights. Prior to the expiration or full exercise of the
Warrants, CCA shall deliver to IHS and any other Registered Holder (as such term
is defined in the Warrants) of the Warrants copies of CCA's Forms 10-K, 10-Q and
8-K and CCA's Annual Reports to Stockholders and definitive proxy statement
promptly after such documents are filed with the SEC.
6.2 Inspection Rights. Prior to the expiration or full exercise of the
Warrants, IHS and any person IHS may designate as agent shall have the same
right as a stockholder to review all books and records, reports, accounts and
other financial documents of CCA and to copy the same and to make excerpts
therefrom, all at such reasonable times and as often as IHS may reasonably
request, upon prior written notice to CCA, so long as such review and copying
does not unreasonably interfere with the business of CCA and IHS and its agent
agree to keep confidential, and not disclose, except as may be required by law
or court order, any information obtained during such review of a confidential or
proprietary nature (and not otherwise known to IHS through other sources or
publicly known).
7. MISCELLANEOUS.17.MISCELLANEOUS.
7.1. Governing Law. This Agreement shall be governed in all respects by and
construed in accordance with the laws of the State of Delaware without regard to
provisions regarding choice of laws.
7.2. Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any party hereto and the
closing of the transactions contemplated hereby.
7.3. Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto
whose rights or obligations hereunder are affected by such amendments. Any
assignment or transfer of the Warrants shall be governed by the terms and
conditions set forth therein. This Agreement and the rights and obligations
therein may not be assigned by CCA without the advance written consent of IHS.
<PAGE>
7.4. Notices. Except as may be otherwise provided herein, all notices and
other communications required or permitted hereunder shall be in writing and
shall be conclusively deemed to have been duly given (a) when hand delivered to
the other party; (b) when received when sent by facsimile to number set forth
below (provided, however, that notices given by facsimile shall not be effective
unless either (i) a duplicate copy of such facsimile notice is promptly given by
one of the other methods described in this Section, or (ii) the receiving party
delivers a written confirmation of receipt for such notice either by facsimile
or any other method described in this Section; and (c) the next business day
after deposit with a national overnight delivery service, postage prepaid,
addressed to the parties as set forth below with next-business-day delivery
guaranteed, provided that the sending party receives a confirmation of delivery
from the delivery service provider.
To: IHS To: CCA
Integrated Health Services, Inc. Community Care of America, Inc.
10065 Red Run Boulevard 3050 N. Horseshoe Drive
Owings Mills, MD 21117 Naples, FL 33942
Fax: 410-998-8747 Fax: 941-435-0087
Attn. Marshall A. Elkins, Esq. Attn: Gary Singleton, President
A party may change or supplement the addresses given above, or designate
additional addresses, for purposes of this Section by giving the other party
written notice of the new address in the manner set forth above.
7.5. Amendments. Any term of this Agreement may be amended only with the
written consent of CCA and IHS.
7.6. Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to CCA or to IHS, upon any breach or default of any party
hereto under this Agreement, shall impair any such right, power or remedy of CCA
or IHS, nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of any similar breach or default thereafter
occurring; nor shall any waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of CCA or IHS of any breach or default under this
Agreement and any waiver on the part of CCA or IHS of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement, or by law or otherwise, afforded to CCA or IHS shall be
cumulative and not alternative.
7.7. Finder's Fees. Each party hereby agrees to indemnify and to hold
harmless the other party hereto from and against any liability for any
commission or compensation in the nature of a finder's fee claimed by any broker
or other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which the indemnifying party or any of its
employees or representatives are responsible.
7.8. Titles and Subtitles. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
<PAGE>
7.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.10. Severability. Should any provision of this Agreement be determined to
be illegal or unenforceable, such determination shall not affect the remaining
provisions of this Agreement.
7.11. Public Disclosure. Each party hereto agrees that neither it nor its
Affiliates shall make any public statement or issue any press release relating
to this Agreement, the Additional Transaction Documents or the transactions
contemplated hereby or thereby, without the prior consent and approval of the
other party, unless such party determines that such disclosure is required by
law, in which case a copy of the disclosure shall provided to the other party
for review and comment a reasonable time prior to public disclosure.
IN WITNESS WHEREOF, the parties have executed this Warrant Acquisition
Agreement to be effective as of the date first above written.
INTEGRATED HEALTH SERVICES, INC. COMMUNITY CARE OF AMERICA, INC
By: By:
Name: Name:
Title: Title:
<PAGE>
Warrant No. A-1 ___________ Shares
No sale, offer or transfer of this warrant shall be made
unless a registration statement under the Securities Act
of 1933, as amended, with respect to such
transaction is then in effect or such
transfer is exempt from
registration under such Act.
Warrant
To Subscribe for and Purchase Shares of
Common Stock of
COMMUNITY CARE OF AMERICA, INC.
This certifies that, for value received, Integrated Health Services,
Inc., a Delaware corporation (the "Holder") or its registered assigns, is
entitled, subject to the terms and conditions of this Warrant, at any time or
from time to time at or after the time the Purchase Price (as defined herein)
has been established (the "Commencement Date") and at or before 5:00 P.M., New
York time, on January 13, 1999 (the "Expiration Date"), to subscribe for and
purchase an aggregate of _____________ (_________) fully paid and non-assessable
shares of the common stock, $.0025 par value ("Common Stock"), of Community Care
of America, Inc. (the "Company"), at the Purchase Price (as defined herein),
upon surrender of this Warrant and payment of the Purchase Price to the Company
at the address set forth herein for notices to the Company or at such other
place as the Company may designate by written notice to the Registered Holder.
The number of shares of Common Stock issuable upon exercise of this Warrant and
the Purchase Price are subject to adjustment and change as provided herein (any
reference hereinafter to Purchase Price shall mean the Purchase Price as
adjusted pursuant the terms of this Warrant). This Warrant is issued pursuant to
that certain Warrant Acquisition Agreement, dated of even date herewith, between
the Company and the Holder (the "Purchase Agreement").
1.Certain Definitions.
As used in this Warrant the following terms shall have the following
respective meanings:
<PAGE>
"Common Stock Deemed Outstanding" means, at any given time, the number of
shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Sections 4.1(i) and
4.1(ii) hereof regardless of whether the Options or Convertible Securities are
actually exercisable at such time, but excluding any shares of Common Stock
issuable upon exercise of the IHS Warrants. "Convertible Securities" shall mean
any stock or securities directly or indirectly convertible into Common Stock.
"IHS Warrants" shall mean this Warrant and Warrant No. W-2, issued to the
Holder on even date herewith, and any warrants delivered in substitution or
exchange therefor as provided herein and therein.
"Market Price" as to any security on any day shall mean the closing sale
price of such security as reported for such day pursuant to the consolidated
quotation system or any other transaction reporting plan under Section 11A of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or, if
there have been no sales so reported for such day, the average of the best bid
and best offer prices quoted under the consolidated quotation system or any
other such transaction reporting plan as of 4:00 P.M., New York time, on such
day, or, if on any day such security is not so quoted, the average of the best
bid and best offered prices on such day in the domestic over-the-counter market
as reported by any electronic communications network, as such term is used in
Rule 11Ac1-1(a)(8) under the Exchange Act or by the National Quotation Bureau,
Incorporated, or any similar successor or comparable organization. If at any
time such security is not listed on any domestic securities exchange or quoted
under a transaction reporting plan or in the domestic over-the-counter market,
the "Market Price" shall be the fair value thereof determined jointly by the
Company and the Registered Holders; provided that if such parties are unable to
reach agreement as to the Market Price, the Market Price shall be determined by
appraisal as set forth in Section 12 of this Warrant.
"Note" shall mean the Subordinated Note, dated as of December 27, 1996,
executed by the Company pursuant to that certain Revolving Credit Agreement,
dated as of December 27, 1996, between the Company and the Holder.
"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"Person" shall mean any natural person and any corporation, partnership,
limited liability company, limited liability partnership, joint venture,
association, joint-stock partnership, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"Purchase Price" shall mean the price per share equal to the average of the
high and low trading price of the Common Stock reported in The Wall Street
Journal, Eastern edition, for the first two full trading days following the Date
of Issuance (as such term is defined in Section 7.2 hereof) of this Warrant, as
such price may be adjusted from time to time pursuant to Section 4 hereof.
"Registered Holder" shall mean any Person in whose name this Warrant is
registered upon the books and records maintained by the Company.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Underlying Common Stock" shall mean (i) the shares of Common Stock issued
or issuable upon exercise of the Warrant and (ii) any Common Stock issued or
issuable with respect to the securities referred to in clause (i) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Warrant" as used herein, shall include this Warrant and any warrant
delivered in substitution or exchange therefor as provided herein.
2. Exercise.
2.1 Exercise Period. The Warrant shall be exercisable in whole or in part
from and after 9:00 A.M., New York time, on the Commencement Date.
2.2 Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when the Company
has received all of the following items:
(a) an Election to Purchase in the form attached hereto as Exhibit A,
properly completed and executed by the Person (the "Purchaser") exercising all
or part of the purchase rights represented by this Warrant;
(b) this Warrant;
(c) if this Warrant is not registered in the name of the Purchaser, an
Assignment or Assignments in the form set forth in Exhibit B hereto evidencing
the assignment of this Warrant to the Purchaser, in which case the Registered
Holder shall have complied with the provisions set forth in Section 7.1 hereof;
and
(d) either (1) a check or wire transfer payable to the Company in an amount
equal to the product of the Purchase Price multiplied by the number of shares of
Common Stock being purchased upon such exercise (the "Aggregate Exercise
Price"), (2) a written notice to the Company that the Purchaser is exercising
the Warrant (or a portion thereof) by authorizing the Company to withhold from
issuance a number of shares of Common Stock issuable upon such exercise of the
Warrant which when multiplied by the Market Price of Common Stock is equal to
the Aggregate Exercise Price (and such withheld shares of Common Stock shall no
longer be issuable under this Warrant), or (3) if the Holder holds the Note, a
written notice to the Company that the Holder is exercising the Warrant (or a
portion thereof) by authorizing the Company to withhold and apply such amount of
principal or accrued but unpaid interest under the Note (whether or not then
due) as is equal to the Aggregate Purchase Price (and such amount of principal
or accrued and unpaid interest under the Note shall no longer be payable to the
Holder).
(ii) Certificates for shares of Common Stock purchased upon exercise of
this Warrant shall be delivered by the Company to the Purchaser within three (3)
business days after the date of the exercise, together with cash in lieu of any
fraction of a share of Common Stock that would be issuable upon such exercise in
an amount equal to the Market Price of such fractional share as of the date of
exercise. No fractional shares of Common Stock or scrip representing fractional
shares of Common Stock shall be issued upon an exercise of this Warrant. Unless
this Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company shall prepare a new Warrant, substantially identical
hereto, representing the rights formerly represented by this Warrant which have
not expired or been exercised and shall within such three (3) business day
period deliver such new Warrant to the Purchaser.
(iii) The shares of Common Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the time of exercise,
and the Purchaser shall be deemed for all purposes to have become the record
holder of such Common Stock at such time.
(iv) The Company shall not close its books against the transfer of this
Warrant or of any share of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company shall from time to time take all such action as may be
necessary to assure that the par value per share of the unissued Common Stock
acquirable upon exercise of this Warrant is at all times equal to or less than
the Purchase Price then in effect.
(v) The Company shall assist and cooperate with any Registered Holder or
Purchaser to make any governmental filings or obtain any governmental approvals
required prior to or in connection with any exercise of this Warrant (including,
without limitation, making at the Company's own expense any filings required to
be made by the Company).
3. Expiration Date.
The Warrant evidenced hereby may not be exercise after 5:00 P.M., New York
time, on the Expiration Date with respect to the shares of the Common Stock as
to which the Warrant may be exercised and, to the extent not exercised by the
Expiration Date, the Warrant evidenced hereby shall become void.
4. Adjustments.
Subject to the provisions of this Section 4, the Purchase Price and the
number of shares of the Common Stock as to which the Warrant may be exercised
shall be subject to adjustment from time to time as hereinafter set forth:
4.1 Effect on Purchase Price and Number of Shares of Certain Events. If and
whenever on or after the Commencement Date, the Company issues or sells, or in
accordance with this Section 4.1 is deemed to have issued or sold, any share of
Common Stock for a consideration per share less than the Purchase Price in
effect immediately prior to such time, then immediately upon such issuance or
sale the Purchase Price shall be reduced pursuant to this Section 4.1 to a new
Purchase Price determined by dividing (A) the sum of (x) the product derived by
multiplying the Purchase Price in effect immediately prior to such issue or sale
times the number of shares of Common Stock Deemed Outstanding immediately prior
to such issue or sale, plus (y) the consideration, if any, received by the
Company upon such issue or sale, by (B) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale. Upon each such
adjustment of the Purchase Price, the number of shares of Common Stock issuable
upon the exercise of this Warrant (to the extent not theretofore exercised)
shall be increased to a number determined by multiplying the number of such
shares so purchasable immediately prior to such adjustment by a fraction, the
numerator of which shall be the Purchase Price in effect immediately prior to
such adjustment and the denominator of which shall be the Purchase Price in
effect immediately after such adjustment. For purposes of determining the
Purchase Price as adjusted under this Section 4.1, the following shall be
applicable:
(i) Issuance of Rights or Options. If on or after the Commencement Date the
Company in any manner issues, grants or sells any Options and the price per
share for which a share of Common Stock is issuable upon the exercise of any
such Option, or upon conversion or exchange of any Convertible Security issuable
upon exercise of such Option, is less than the Purchase Price in effect
immediately prior to the time of the granting or sale of such Option, then the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options, or upon conversion or exchange of the total maximum amounts of
such Convertible Securities issuable upon the exercise of such Options, shall be
deemed to be outstanding for purposes of determining the Common Stock Deemed
Outstanding and to have been issued and sold by the Company at such time for
such price per share. For purposes of this Section 4.1(i), the "price per share
for which a share of Common Stock is issuable" shall be equal to the sum of the
amount of consideration (if any) received or receivable by the Company with
respect to the issuance, grant or sale of the Option, plus the amount of
consideration (if any) that would be received by the Company with respect to
exercise of the Option in full plus the amount of consideration (if any) that
would be received by the Company with respect to conversion or exchange in full
of any Convertible Security issuable upon exercise of such Option, all divided
by the total number of shares of Common Stock issuable upon exercise of the
Option and conversion or exchange of the Convertible Security. No further
adjustment of the Purchase Price shall be made upon the actual issue of such
Common Stock or of such Convertible Security upon the exercise of such Options
or upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Security.
(ii) Issuance of Convertible Securities. If on or after the Commencement
Date the Company in any manner issues, grants or sells any Convertible Security
and the price per share for which a share of Common Stock is issuable upon
conversion or exchange thereof is less than the Purchase Price in effect
immediately prior to the time of such issue or sale, then the maximum number of
shares of Common Stock issuable upon conversion or exchange of such Convertible
Securities shall be deemed to be outstanding for purposes of determining the
Common Stock Deemed Outstanding and to have been issued and sold by the Company
at such time for such price per share. For the purposes of this Section 4.1(ii),
the "price per share for which a share of Common Stock is issuable" shall be
equal to the sum of the amount of consideration (if any) received or receivable
by the Company with respect to the issuance, grant or sale of the Convertible
Security plus the amount of consideration (if any) that would be received by the
Company with respect to the conversion or exchange of such Convertible Security
in full, all divided by the total number of shares of Common Stock issuable upon
conversion or exchange of the Convertible Security. No further adjustment of the
Purchase Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of any Convertible Security, and if any such issue or
sale of such Convertible Security is made upon exercise of any Options for which
adjustments of the Purchase Price has been or is to be made pursuant to other
provisions of this Section 4, no further adjustment of the Purchase Price shall
be made under this Section 4.1(ii) by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the amount to be
received by the Company upon the exercise of any Options outstanding as of the
Commencement Date, the additional consideration, if any, payable upon the
issuance, conversion or exchange of any Convertible Securities outstanding as of
the Commencement Date, or the rate at which any Convertible Securities
outstanding as of the Commencement Date are convertible into or exchangeable for
Common Stock changes at any time after the Commencement Date, then such Option
or Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed for purposes of this Section 4.1
to have been issued, granted or sold as of the date of such changes and the
Purchase Price shall be adjusted as provided herein; provided that no such
change shall at any time cause the Purchase Price hereunder to be increased.
(iv) Treatment of Expired Options and Unexercised Convertible Securities.
Upon the expiration of any Option described in Section 4.1(i) or the termination
of any right to convert or exchange any Convertible Securities described in
Section 4.1(ii) without the exercise or conversion in whole or in part of such
Option or Convertible Security, the Purchase Price then in effect and the number
of shares of Common Stock issuable hereunder shall be adjusted immediately to
the Purchase Price and the number of shares of Common Stock which would have
been in effect at the time of such expiration or termination had such Option or
Convertible Securities, never been issued, granted or sold; provided that if
such expiration or termination would result in an increase in the Purchase Price
then in effect, such increase shall not be effective until thirty (30) days
after written notice thereof has been given to the Registered Holder. For
purposes of this Section 4.1, the expiration or termination of any Option or
Convertible Security which was outstanding as of the Commencement Date shall not
cause the Purchase Price hereunder to be adjusted unless, and only to the extent
that, a change in the term of such Option or Convertible Security caused it to
be deemed to have been issued after the Commencement Date pursuant to Section
4.1(iii).
(v) Calculation of Consideration Received. If any Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the net
amount received by the Company therefor. In case any Common Stock, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the Company
shall be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor shall be deemed to
be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash or securities shall be determined jointly by the Company and the
Registered Holder. If such parties are unable to reach agreement, such fair
value shall be determined by appraisal pursuant to Section 12.
(vi) Integrated Transactions. In case any Option is issued in connection
with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options shall be deemed to have been
issued without consideration.
(vii) Each Series a Separate Security. In case an agreement relating to
Options or Convertible Securities provides that more than one Purchase Price,
conversion or exchange provisions are applicable to the securities issuable
thereunder, then the securities subject to each different exercise price,
conversion or exchange provisions shall be deemed to be subject to separate
Options or Convertible Securities for purposes of applying this Section 4.1.
(viii) Treasury Shares. The Common Stock outstanding at any given time does
not include shares owned or held by or for the account of the Company or any
Subsidiary, and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(ix) Record Date. If the Company takes a record of the holders of Common
Stock for the purpose of entitling them (A) to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible Securities or
(B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
4.2 Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant (to the extent not theretofore
exercised) shall be proportionally increased. If the Company at any time
combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Purchase
Price shall be proportionately increased and the number of shares of Common
Stock issuable upon exercise of this Warrant (to the extent not theretofore
exercised) shall be proportionally decreased.
4.3 Reorganization, Reclassification, Consolidation, Merger or Sale. Any
recapitalization, reorganization, reclassification, spin-off, consolidation,
merger, sale or distribution of the Company's assets or other transaction, in
each case which is effected in such a way that the holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as "Organic Change." Prior to the consummation of any Organic Change,
the Company shall make appropriate provision (in form and substance satisfactory
to the Registered Holders) to insure that each of the Registered Holders shall
thereafter have the right to acquire and receive, in lieu of or in addition to
(as the case may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the exercise of such Warrant, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
issuable upon exercise of the Warrant had such Organic Change not taken place.
In any such case, the Company shall make appropriate provision (in form and
substance satisfactory to the Registered Holders) with respect to such Holders'
rights and interests to insure that the provisions of this Section 4, Section 5
and Section 6 hereof shall thereafter be applicable to the Warrant (including,
in the case of any such consolidation, merger or sale in which the successor
entity or purchasing entity is other than the Company, an immediate reduction in
the Purchase Price to the value of the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate adjustment in
the number of shares of Common Stock issuable upon exercise of this Warrant (to
the extent not theretofore exercised), if the value so reflected is less than
the Purchase Price in effect immediately prior to such consolidation, merger or
sale). The Company shall not effect any such spin-off, consolidation, merger or
sale, unless prior to the consummation thereof, the successor entity (if other
than the Company) resulting from spin-off, consolidation or merger or the entity
purchasing such assets assumes by written instrument (in form and substance
satisfactory to the Registered Holders), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
4.4 Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 4 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features or equity-based
valuation or any dividend or distribution of the capital stock issued by any
Person other than the Company), then the Company's Board of Directors shall make
an appropriate adjustment in the Purchase Price and the number of shares
issuable upon exercise of this Warrant (to the extent not theretofore exercised)
so as to protect the rights of the Registered Holders; provided that no such
adjustment shall increase the Purchase Price as otherwise determined pursuant to
this Section 4.
4.5 Calculation of Purchase Price; Notices.
(i) All calculations of the Purchase Price under this Section 4 shall be
computed to the nearest One-Thousandth (1/1000th) of a cent.
(ii) Immediately upon any adjustment of the Purchase Price, the Company
shall give written notice thereof to the Registered Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment, provided
however, that such notice shall not be deemed to be conclusive as to the
Purchase Price calculation. At the request of the Registered Holder, the Company
shall certify the Purchase Price of and the number of shares for which a Warrant
at the time may be exercised.
(iii) The Company shall give written notice to the Registered Holder at
least thirty (30) days prior to the date on which the Company closes its books
or takes a record (A) with respect to any subdivision or combination of the
Common Stock that is subject to Section 4.2, or any other dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change, dissolution or liquidation.
(iv) The Company shall also give written notice to the Registered Holder at
least thirty (30) days prior to the date on which any Organic Change,
dissolution or liquidation shall take place.
4.6 Excluded Transactions. The provisions of this Section 4 shall not apply
to the exercise of the IHS Warrants.
4.7 Expression of Purchase Price and Number of Shares. Irrespective of any
adjustments or change in the Purchase Price or the number of securities actually
purchasable under the Warrant, the Warrants theretofore and thereafter issued
may continue to express the purchase price and the number of securities
purchasable thereunder as the Purchase Price and the number of securities
purchasable were expressed in the Warrant when initially issued.
5. No Rights or Liabilities as Stockholders and Notice to Registered
Holder.
Nothing contained herein shall be construed as conferring upon the
Registered Holder the right to vote or to consent or to receive notice as a
stockholder in respect of the meetings of stockholders for the election of
directors of the Company or any other matter, or any other rights whatsoever as
a stockholder of the Company; provided, however, that in the event that:
(a) the Company shall take a record of the holders of its Common Stock or
other stock or securities for the purpose of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities or to receive any other
right;
(b) the Company shall take action to accomplish any capital reorganization,
or reclassification of the capital stock of the Company, or a consolidation or
merger of the Company into, or a sale of all or substantially all of its assets
to, another corporation;
(c) the Company shall take action to redeem or convert any or all of
outstanding Common Stock or other stock or securities of the Company; or
(d) the Company shall take action looking to a voluntary dissolution,
liquidation or winding up of the Company;
then, and in each such case, the Company shall mail or cause to be mailed
to the Registered Holder of this Warrant a notice specifying, as the case may
be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, or (ii) the date on which such reorganization,
reclassification, spin-off consolidation, merger, conveyance, dissolution,
liquidation, winding-up, redemption or conversion is to take place, and the
time, if any, is to be fixed, as of which the holders of record of Common Stock
or such other stock or securities shall be entitled to exchange their shares of
Common Stock or such other stock or securities for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation, winding-up, conversion or redemption. Such
notice shall be delivered at least thirty (30) days prior to the date therein
specified.
6. Duty to Register Common Stock.
The shares of Common Stock issuable under this Warrant are subject to a
Registration Rights Agreement with the Company dated of even date herewith.
7. Transfers and Exchanges.
7.1 Warrant Transferable. Subject to the transfer conditions referred to in
the legend endorsed hereon, this Warrant and all rights hereunder (including
those under the Purchase Agreement) are transferable, in whole or in part,
without charge to the Registered Holder, upon surrender of this Warrant with a
properly executed Assignment (in the form of Exhibit B hereto) at the principal
office of the Company. The Company shall record on its books the transferee as
the Registered Holder of the portion of this Warrant transferred pursuant to
this Section 7.1.
7.2 Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like terms representing in
the aggregate the purchase rights hereunder, and each of such new Warrants shall
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein as the
"Warrants."
8. Valid Issuance and Payment of Taxes.
All shares of Common Stock issued upon the exercise of this Warrant shall
be validly issued, fully paid and non-assessable, and the Company shall pay all
taxes and other governmental charges that may be imposed in respect of the issue
or delivery thereof. The Company shall not be required to pay any tax or other
charge imposed in connection with any transfer involved in the issuance of any
certificate for shares of Common Stock in any name other than that of the
Registered Holder of this Warrant, and in such case the Company shall not be
required to issue or deliver any stock certificate or security until such tax or
other charge has been paid, or it has been established that no tax or other
charge is due.
9. Mutilated or Missing Warrants.
In case any of the Warrants shall be mutilated, lost, stolen or destroyed,
the Company shall issue and deliver in exchange and substitution for, and upon
cancellation of the mutilated Warrant, or in lieu of, and in substitution for,
the Warrant lost, stolen or destroyed, a new Warrant of like tenor and
representing an equivalent right or interest, but only upon receipt of
reasonable evidence of such loss, theft, or destruction of such Warrant.
10. Reserve.
The Company hereby represents and covenants that it has reserved and at all
times there shall be reserved for issuance such number and type of securities as
the Registered Holders are entitled to receive upon exercise of the IHS
Warrants. Prior to the issuance of any equity securities (or any instrument
exercisable for or convertible into equity securities) and whenever otherwise
required to satisfy this Section 10, the Company will amend its Certificate of
Incorporation to the extent necessary to ensure that there is reserved for
issuance a sufficient number and type of securities as the Registered Holders of
the IHS Warrants are entitled to receive upon exercise thereof. 11. No
Impairment.
The Company will not, by amendment of its Certificate of Incorporation or
bylaws, or through reorganization, consolidation, merger, dissolution, issue or
sale of securities, sale of assets or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Registered Holders against impairment. Without
limiting the generality of the foregoing, the Company (a) shall not increase the
par value of any shares issuable upon exercise of this Warrant above the
Purchase Price and (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable shares of Common Stock upon exercise of this Warrant.
12. Appraisal.
In case of any dispute as to valuation of a security under this Agreement,
the fair value of such security shall be determined by an appraiser without any
discount for liquidity or restrictions under the Securities Act. This appraisal
process shall be instituted within fourteen (14) days after a party to this
Agreement notifies the other party of its desire to submit the issue to an
appraiser. In the event that, within seven (7) days after a party to this
Agreement notifies the other party of its desire to submit the issue to an
appraiser, the parties do not agree on a single appraiser to determine the fair
value of such security, the fair value of such security shall be determined,
without any discount for liquidity or restrictions under the Securities Act, by
the majority determination of a panel of three (3) appraisers who shall be
selected in the following manner: the Company shall select one (1) appraiser and
the Registered Holder entitled to exercise this Warrant for the greatest number
of shares of Common Stock (in the event there shall be more than one Registered
Holder), on behalf of all of the Registered Holders, shall select one (1)
appraiser and the two (2) appraisers selected by the Company and the Registered
Holder shall jointly select a third appraiser. The appraiser selected jointly by
the parties and, if applicable, each member of the appraisal panel shall be an
individual who personally and whose Affiliates shall not have a previous
business relationship with either party. The appraiser and, if applicable, the
appraisal panel shall endeavor to complete the appraisal as soon as practicable.
The determination of such appraiser and, if applicable, the appraisal panel
shall be final and binding on the Company and the Registered Holders, and the
fees and expenses of such appraisal shall be borne equally by the Company, on
the one hand, and the Registered Holders, on the other.
13. Notices.
Except as may be otherwise provided herein, all notices and other communications
required or permitted hereunder shall be in writing and shall be conclusively
deemed to have been duly given (a) when hand delivered to the other party, (b)
when received when sent by facsimile to number set forth below (provided,
however, that notices given by facsimile shall not be effective unless either
(i) a duplicate copy of such facsimile notice is promptly given by one of the
other methods described in this Section 13, or (ii) the receiving party delivers
a written confirmation of receipt for such notice either by facsimile or any
other method described in this Section 13) and (c) the next business day after
deposit with a national overnight delivery service, postage prepaid, addressed
to the parties as set forth below with next-business-day delivery guaranteed,
provided that the sending party receives a confirmation of delivery from the
delivery service provider.
To: the Registered Holder To: the Company
Integrated Health Services, Inc. Community Care of America, Inc.
10065 Red Run Boulevard 3050 North Horseshoe Drive
Owings Mills, MD 21117 Naples, FL 33942
Fax No.: (410) 998-8747 Fax No.: (941) 435-0087
Attn: Marshall A. Elkins, Esq. Attn: Gary Singleton, President
A party may change or supplement the addresses given above, or designate
additional addresses, for purposes of this Section 13 by giving the other party
written notice of the new address in the manner set forth above.
14. Headings.
The headings in this Warrant are for purposes of convenience in reference
only, and shall not be deemed to constitute a part hereof.
15. Governing Law.
This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the State of New York without regard to provisions
regarding choice of laws.
16. Severability.
If any term, provision, covenant or restriction of this Warrant is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Warrant
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
17. No Inconsistent Agreements.
The Company will not on or after the date of this Warrant enter into any
agreement which is inconsistent with the rights granted to the Registered
Holders of this Warrant or otherwise conflicts with the provisions hereof. The
Company hereby represents and warrants that the rights granted to the Registered
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to holders of the Company's securities under any other
agreements, except rights that have been waived.
18. Saturdays, Sundays and Holidays.
If the Expiration Date falls on a Saturday, Sunday or legal holiday, the
Expiration Date shall automatically be extended until 5:00 p.m. the next
business day.
IN WITNESS WHEREOF, Community Care of America, Inc. has caused this Warrant
to be signed manually by a duly authorized officer of the Company on this 13th
day of January, 1997.
COMMUNITY CARE OF AMERICA, INC
By:
Name:
Title:
<PAGE>
EXHIBIT A
ELECTION TO PURCHASE
To: Community Care of America, Inc.
__________________________________
__________________________________
__________________________________
The undersigned hereby elects to exercise the Warrant represented by the within
Warrant Certificate to purchase __________ shares of the Common Stock issuable
upon the exercise of the Warrant and requests that certificates for such shares
shall be issued in the name of:
(Name)
(Address)
(Taxpayer number)
and be delivered to:
(Name)
at
(Address)
and, if said number of shares of the Common Stock shall not be all the
shares of the Common Stock evidenced by the within Warrant Certificate, that a
new Warrant Certificate for the balance remaining of such said shares be
registered in the name of:
(Name)
(Address)
(Taxpayer number)
and delivered to the undersigned at the address below stated.
Dated: _______________, 19__
Name of holder of Warrant Certificate:
(please print)
(Address)
(Signature)
<PAGE>
EXHIBIT B
ASSIGNMENT
(to be executed by the registered holder
to effect a transfer of the within Warrant)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Name)
(Address)
the right to purchase the ________ shares of Common Stock evidenced by this
Warrant, and does hereby irrevocably constitute and appoint to transfer the said
right on the books of the Company, with full power of substitution.
Dated: _______________________
(Signature)
/
<PAGE>
EXHIBIT 2
SERIES B Warrant
Warrant No. B-1 ___________ Shares
No sale, offer or transfer of this warrant shall be made
unless a registration statement under the Securities Act
of 1933, as amended, with respect to such
transaction is then in effect or such
transfer is exempt from
registration under such Act.
Warrant
To Subscribe for and Purchase Shares of
Common Stock of
COMMUNITY CARE OF AMERICA, INC.
This certifies that, for value received, Integrated Health Services,
Inc., a Delaware corporation (the "Holder") or its registered assigns, is
entitled, subject to the terms and conditions of this Warrant, at any time or
from time to time at or after the time the Purchase Price (as defined herein)
has been established (the "Commencement Date") and at or before 5:00 P.M., New
York time, on January 13, 2002 (the "Expiration Date"), to subscribe for and
purchase an aggregate of _____________ (_________) fully paid and non-assessable
shares of the common stock, $.0025 par value ("Common Stock"), of Community Care
of America, Inc. (the "Company"), at the Purchase Price (as defined herein),
upon surrender of this Warrant and payment of the Purchase Price to the Company
at the address set forth herein for notices to the Company or at such other
place as the Company may designate by written notice to the Registered Holder.
The number of shares of Common Stock issuable upon exercise of this Warrant and
the Purchase Price are subject to adjustment and change as provided herein (any
reference hereinafter to Purchase Price shall mean the Purchase Price as
adjusted pursuant the terms of this Warrant). This Warrant is issued pursuant to
that certain Warrant Acquisition Agreement, dated of even date herewith, between
the Company and the Holder (the "Purchase Agreement").
1.Certain Definitions.
As used in this Warrant the following terms shall have the following respective
meanings:
<PAGE>
"Common Stock Deemed Outstanding" means, at any given time, the number of
shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Sections 4.1(i) and
4.1(ii) hereof regardless of whether the Options or Convertible Securities are
actually exercisable at such time, but excluding any shares of Common Stock
issuable upon exercise of the IHS Warrants. "Convertible Securities" shall mean
any stock or securities directly or indirectly convertible into Common Stock.
"IHS Warrants" shall mean this Warrant and Warrant No. W-2, issued to the
Holder on even date herewith, and any warrants delivered in substitution or
exchange therefor as provided
<PAGE>
herein and therein.
"Market Price" as to any security on any day shall mean the closing sale
price of such security as reported for such day pursuant to the consolidated
quotation system or any other transaction reporting plan under Section 11A of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or, if
there have been no sales so reported for such day, the average of the best bid
and best offer prices quoted under the consolidated quotation system or any
other such transaction reporting plan as of 4:00 P.M., New York time, on such
day, or, if on any day such security is not so quoted, the average of the best
bid and best offered prices on such day in the domestic over-the-counter market
as reported by any electronic communications network, as such term is used in
Rule 11Ac1-1(a)(8) under the Exchange Act or by the National Quotation Bureau,
Incorporated, or any similar successor or comparable organization. If at any
time such security is not listed on any domestic securities exchange or quoted
under a transaction reporting plan or in the domestic over-the-counter market,
the "Market Price" shall be the fair value thereof determined jointly by the
Company and the Registered Holders; provided that if such parties are unable to
reach agreement as to the Market Price, the Market Price shall be determined by
appraisal as set forth in Section 12 of this Warrant.
"Note" shall mean the Subordinated Note, dated as of December 27, 1996,
executed by the Company pursuant to that certain Revolving Credit Agreement,
dated as of December 27, 1996, between the Company and the Holder.
"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities. "Person" shall mean any natural
person and any corporation, partnership, limited liability company, limited
liability partnership, joint venture, association, joint-stock partnership,
trust, unincorporated organization or government or other agency or political
subdivision thereof.
"Purchase Price" shall mean two times the price per share equal to the
average of the high and low trading price of the Common Stock reported in The
Wall Street Journal, Eastern edition, for the first two full trading days
following the Date of Issuance (as such term is defined in Section 7.2 hereof)
of this Warrant, as such price may be adjusted from time to time pursuant to
Section 4 hereof.
"Registered Holder" shall mean any Person in whose name this Warrant is
registered upon the books and records maintained by the Company.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Underlying Common Stock" shall mean (i) the shares of Common Stock issued
or issuable upon exercise of the Warrant and (ii) any Common Stock issued or
issuable with respect to the securities referred to in clause (i) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Warrant" as used herein, shall include this Warrant and any warrant
delivered in substitution or exchange therefor as provided herein.
2. Exercise.
2.1 Exercise Period. The Warrant shall be exercisable in whole or in part
from and after 9:00 A.M., New York time, on the Commencement Date.
2.2 Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when the Company
has received all of the following items:
(a) an Election to Purchase in the form attached hereto as Exhibit A,
properly completed and executed by the Person (the "Purchaser") exercising all
or part of the purchase rights represented by this Warrant;
(b) this Warrant;
(c) if this Warrant is not registered in the name of the Purchaser, an
Assignment or Assignments in the form set forth in Exhibit B hereto evidencing
the assignment of this Warrant to the Purchaser, in which case the Registered
Holder shall have complied with the provisions set forth in Section 7.1 hereof;
and
(d) either (1) a check or wire transfer payable to the Company in an amount
equal to the product of the Purchase Price multiplied by the number of shares of
Common Stock being purchased upon such exercise (the "Aggregate Exercise
Price"), (2) a written notice to the Company that the Purchaser is exercising
the Warrant (or a portion thereof) by authorizing the Company to withhold from
issuance a number of shares of Common Stock issuable upon such exercise of the
Warrant which when multiplied by the Market Price of Common Stock is equal to
the Aggregate Exercise Price (and such withheld shares of Common Stock shall no
longer be issuable under this Warrant), or (3) if the Holder holds the Note, a
written notice to the Company that the Holder is exercising the Warrant (or a
portion thereof) by authorizing the Company to withhold and apply such amount of
principal or accrued but unpaid interest under the Note (whether or not then
due) as is equal to the Aggregate Purchase Price (and such amount of principal
or accrued and unpaid interest under the Note shall no longer be payable to the
Holder).
(ii) Certificates for shares of Common Stock purchased upon exercise of
this Warrant shall be delivered by the Company to the Purchaser within three (3)
business days after the date of the exercise, together with cash in lieu of any
fraction of a share of Common Stock that would be issuable upon such exercise in
an amount equal to the Market Price of such fractional share as of the date of
exercise. No fractional shares of Common Stock or scrip representing fractional
shares of Common Stock shall be issued upon an exercise of this Warrant. Unless
this Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company shall prepare a new Warrant, substantially identical
hereto, representing the rights formerly represented by this Warrant which have
not expired or been exercised and shall within such three (3) business day
period deliver such new Warrant to the Purchaser.
(iii) The shares of Common Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the time of exercise,
and the Purchaser shall be deemed for all purposes to have become the record
holder of such Common Stock at such time.
(iv) The Company shall not close its books against the transfer of this
Warrant or of any share of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company shall from time to time take all such action as may be
necessary to assure that the par value per share of the unissued Common Stock
acquirable upon exercise of this Warrant is at all times equal to or less than
the Purchase Price then in effect.
(v) The Company shall assist and cooperate with any Registered Holder or
Purchaser to make any governmental filings or obtain any governmental approvals
required prior to or in connection with any exercise of this Warrant (including,
without limitation, making at the Company's own expense any filings required to
be made by the Company).
3. Expiration Date.
The Warrant evidenced hereby may not be exercise after 5:00 P.M., New York
time, on the Expiration Date with respect to the shares of the Common Stock as
to which the Warrant may be exercised and, to the extent not exercised by the
Expiration Date, the Warrant evidenced hereby shall become void.
4. Adjustments.
Subject to the provisions of this Section 4, the Purchase Price and the
number of shares of the Common Stock as to which the Warrant may be exercised
shall be subject to adjustment from time to time as hereinafter set forth:
4.1 Effect on Purchase Price and Number of Shares of Certain Events. If and
whenever on or after the Commencement Date, the Company issues or sells, or in
accordance with this Section 4.1 is deemed to have issued or sold, any share of
Common Stock for a consideration per share less than one half of the Purchase
Price in effect immediately prior to such time, then immediately upon such
issuance or sale the Purchase Price shall be reduced pursuant to this Section
4.1 to a new Purchase Price determined by dividing (A) the sum of (x) the
product derived by multiplying one half of the Purchase Price in effect
immediately prior to such issue or sale times the number of shares of Common
Stock Deemed Outstanding immediately prior to such issue or sale, plus (y) the
consideration, if any, received by the Company upon such issue or sale, by (B)
the number of shares of Common Stock Deemed Outstanding immediately after such
issue or sale, and multiplying the result by two. Upon each such adjustment of
the Purchase Price, the number of shares of Common Stock issuable upon the
exercise of this Warrant (to the extent not theretofore exercised) shall be
increased to a number determined by multiplying the number of such shares so
purchasable immediately prior to such adjustment by a fraction, the numerator of
which shall be the Purchase Price in effect immediately prior to such adjustment
and the denominator of which shall be the Purchase Price in effect immediately
after such adjustment. For purposes of determining the Purchase Price as
adjusted under this Section 4.1, the following shall be applicable:
(i) Issuance of Rights or Options. If on or after the Commencement Date the
Company in any manner issues, grants or sells any Options and the price per
share for which a share of Common Stock is issuable upon the exercise of any
such Option, or upon conversion or exchange of any Convertible Security issuable
upon exercise of such Option, is less than one half of the Purchase Price in
effect immediately prior to the time of the granting or sale of such Option,
then the total maximum number of shares of Common Stock issuable upon the
exercise of such Options, or upon conversion or exchange of the total maximum
amounts of such Convertible Securities issuable upon the exercise of such
Options, shall be deemed to be outstanding for purposes of determining the
Common Stock Deemed Outstanding and to have been issued and sold by the Company
at such time for such price per share. For purposes of this Section 4.1(i), the
"price per share for which a share of Common Stock is issuable" shall be equal
to the sum of the amount of consideration (if any) received or receivable by the
Company with respect to the issuance, grant or sale of the Option, plus the
amount of consideration (if any) that would be received by the Company with
respect to exercise of the Option in full plus the amount of consideration (if
any) that would be received by the Company with respect to conversion or
exchange in full of any Convertible Security issuable upon exercise of such
Option, all divided by the total number of shares of Common Stock issuable upon
exercise of the Option and conversion or exchange of the Convertible Security.
No further adjustment of the Purchase Price shall be made upon the actual issue
of such Common Stock or of such Convertible Security upon the exercise of such
Options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Security.
(ii) Issuance of Convertible Securities. If on or after the Commencement
Date the Company in any manner issues, grants or sells any Convertible Security
and the price per share for which a share of Common Stock is issuable upon
conversion or exchange thereof is less than one half of the Purchase Price in
effect immediately prior to the time of such issue or sale, then the maximum
number of shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities shall be deemed to be outstanding for purposes of
determining the Common Stock Deemed Outstanding and to have been issued and sold
by the Company at such time for such price per share. For the purposes of this
Section 4.1(ii), the "price per share for which a share of Common Stock is
issuable" shall be equal to the sum of the amount of consideration (if any)
received or receivable by the Company with respect to the issuance, grant or
sale of the Convertible Security plus the amount of consideration (if any) that
would be received by the Company with respect to the conversion or exchange of
such Convertible Security in full, all divided by the total number of shares of
Common Stock issuable upon conversion or exchange of the Convertible Security.
No further adjustment of the Purchase Price shall be made upon the actual issue
of such Common Stock upon conversion or exchange of any Convertible Security,
and if any such issue or sale of such Convertible Security is made upon exercise
of any Options for which adjustments of the Purchase Price has been or is to be
made pursuant to other provisions of this Section 4, no further adjustment of
the Purchase Price shall be made under this Section 4.1(ii) by reason of such
issue or sale.
(iii) Change in Option Price or Conversion Rate. If the amount to be
received by the Company upon the exercise of any Options outstanding as of the
Commencement Date, the additional consideration, if any, payable upon the
issuance, conversion or exchange of any Convertible Securities outstanding as of
the Commencement Date, or the rate at which any Convertible Securities
outstanding as of the Commencement Date are convertible into or exchangeable for
Common Stock changes at any time after the Commencement Date, then such Option
or Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed for purposes of this Section 4.1
to have been issued, granted or sold as of the date of such changes and the
Purchase Price shall be adjusted as provided herein; provided that no such
change shall at any time cause the Purchase Price hereunder to be increased.
(iv) Treatment of Expired Options and Unexercised Convertible Securities.
Upon the expiration of any Option described in Section 4.1(i) or the termination
of any right to convert or exchange any Convertible Securities described in
Section 4.1(ii) without the exercise or conversion in whole or in part of such
Option or Convertible Security, the Purchase Price then in effect and the number
of shares of Common Stock issuable hereunder shall be adjusted immediately to
the Purchase Price and the number of shares of Common Stock which would have
been in effect at the time of such expiration or termination had such Option or
Convertible Securities, never been issued, granted or sold; provided that if
such expiration or termination would result in an increase in the Purchase Price
then in effect, such increase shall not be effective until thirty (30) days
after written notice thereof has been given to the Registered Holder. For
purposes of this Section 4.1, the expiration or termination of any Option or
Convertible Security which was outstanding as of the Commencement Date shall not
cause the Purchase Price hereunder to be adjusted unless, and only to the extent
that, a change in the term of such Option or Convertible Security caused it to
be deemed to have been issued after the Commencement Date pursuant to Section
4.1(iii).
(v) Calculation of Consideration Received. If any Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the net
amount received by the Company therefor. In case any Common Stock, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the Company
shall be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor shall be deemed to
be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash or securities shall be determined jointly by the Company and the
Registered Holder. If such parties are unable to reach agreement, such fair
value shall be determined by appraisal pursuant to Section 12.
(vi) Integrated Transactions. In case any Option is issued in connection
with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options shall be deemed to have been
issued without consideration.
(vii) Each Series a Separate Security. In case an agreement relating to
Options or Convertible Securities provides that more than one Purchase Price,
conversion or exchange provisions are applicable to the securities issuable
thereunder, then the securities subject to each different exercise price,
conversion or exchange provisions shall be deemed to be subject to separate
Options or Convertible Securities for purposes of applying this Section 4.1.
(viii) Treasury Shares. The Common Stock outstanding at any given time does
not include shares owned or held by or for the account of the Company or any
Subsidiary, and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(ix) Record Date. If the Company takes a record of the holders of Common
Stock for the purpose of entitling them (A) to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible Securities or
(B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
4.2 Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant (to the extent not theretofore
exercised) shall be proportionally increased. If the Company at any time
combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Purchase
Price shall be proportionately increased and the number of shares of Common
Stock issuable upon exercise of this Warrant (to the extent not theretofore
exercised) shall be proportionally decreased.
4.3 Reorganization, Reclassification, Consolidation, Merger or Sale. Any
recapitalization, reorganization, reclassification, spin-off, consolidation,
merger, sale or distribution of the Company's assets or other transaction, in
each case which is effected in such a way that the holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as "Organic Change." Prior to the consummation of any Organic Change,
the Company shall make appropriate provision (in form and substance satisfactory
to the Registered Holders) to insure that each of the Registered Holders shall
thereafter have the right to acquire and receive, in lieu of or in addition to
(as the case may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the exercise of such Warrant, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
issuable upon exercise of the Warrant had such Organic Change not taken place.
In any such case, the Company shall make appropriate provision (in form and
substance satisfactory to the Registered Holders) with respect to such Holders'
rights and interests to insure that the provisions of this Section 4, Section 5
and Section 6 hereof shall thereafter be applicable to the Warrant (including,
in the case of any such consolidation, merger or sale in which the successor
entity or purchasing entity is other than the Company, an immediate reduction in
the Purchase Price to the value of the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate adjustment in
the number of shares of Common Stock issuable upon exercise of this Warrant (to
the extent not theretofore exercised), if the value so reflected is less than
one half of the Purchase Price in effect immediately prior to such
consolidation, merger or sale). The Company shall not effect any such spin-off,
consolidation, merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from spin-off,
consolidation or merger or the entity purchasing such assets assumes by written
instrument (in form and substance satisfactory to the Registered Holders), the
obligation to deliver to each such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire.
4.4 Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 4 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features or equity-based
valuation or any dividend or distribution of the capital stock issued by any
Person other than the Company), then the Company's Board of Directors shall make
an appropriate adjustment in the Purchase Price and the number of shares
issuable upon exercise of this Warrant (to the extent not theretofore exercised)
so as to protect the rights of the Registered Holders; provided that no such
adjustment shall increase the Purchase Price as otherwise determined pursuant to
this Section 4.
4.5 Calculation of Purchase Price; Notices.
(i) All calculations of the Purchase Price under this Section 4 shall be
computed to the nearest One-Thousandth (1/1000th) of a cent.
(ii) Immediately upon any adjustment of the Purchase Price, the Company
shall give written notice thereof to the Registered Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment, provided
however, that such notice shall not be deemed to be conclusive as to the
Purchase Price calculation. At the request of the Registered Holder, the Company
shall certify the Purchase Price of and the number of shares for which a Warrant
at the time may be exercised.
(iii) The Company shall give written notice to the Registered Holder at
least thirty (30) days prior to the date on which the Company closes its books
or takes a record (A) with respect to any subdivision or combination of the
Common Stock that is subject to Section 4.2, or any other dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change, dissolution or liquidation.
(iv) The Company shall also give written notice to the Registered Holder at
least thirty (30) days prior to the date on which any Organic Change,
dissolution or liquidation shall take place.
4.6 Excluded Transactions. The provisions of this Section 4 shall not apply
to the exercise of the IHS Warrants.
4.7 Expression of Purchase Price and Number of Shares. Irrespective of any
adjustments or change in the Purchase Price or the number of securities actually
purchasable under the Warrant, the Warrants theretofore and thereafter issued
may continue to express the purchase price and the number of securities
purchasable thereunder as the Purchase Price and the number of securities
purchasable were expressed in the Warrant when initially issued.
5. No Rights or Liabilities as Stockholders and Notice to Registered
Holder.
Nothing contained herein shall be construed as conferring upon the
Registered Holder the right to vote or to consent or to receive notice as a
stockholder in respect of the meetings of stockholders for the election of
directors of the Company or any other matter, or any other rights whatsoever as
a stockholder of the Company; provided, however, that in the event that:
(a) the Company shall take a record of the holders of its Common Stock or
other stock or securities for the purpose of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities or to receive any other
right;
(b) the Company shall take action to accomplish any capital reorganization,
or reclassification of the capital stock of the Company, or a consolidation or
merger of the Company into, or a sale of all or substantially all of its assets
to, another corporation;
(c) the Company shall take action to redeem or convert any or all of
outstanding Common Stock or other stock or securities of the Company; or
(d) the Company shall take action looking to a voluntary dissolution,
liquidation or winding up of the Company;
then, and in each such case, the Company shall mail or cause to be mailed
to the Registered Holder of this Warrant a notice specifying, as the case may
be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, or (ii) the date on which such reorganization,
reclassification, spin-off consolidation, merger, conveyance, dissolution,
liquidation, winding-up, redemption or conversion is to take place, and the
time, if any, is to be fixed, as of which the holders of record of Common Stock
or such other stock or securities shall be entitled to exchange their shares of
Common Stock or such other stock or securities for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation, winding-up, conversion or redemption. Such
notice shall be delivered at least thirty (30) days prior to the date therein
specified.
6. Duty to Register Common Stock.
The shares of Common Stock issuable under this Warrant are subject to a
Registration Rights Agreement with the Company dated of even date herewith.
7. Transfers and Exchanges.
7.1 Warrant Transferable. Subject to the transfer conditions referred to in
the legend endorsed hereon, this Warrant and all rights hereunder (including
those under the Purchase Agreement) are transferable, in whole or in part,
without charge to the Registered Holder, upon surrender of this Warrant with a
properly executed Assignment (in the form of Exhibit B hereto) at the principal
office of the Company. The Company shall record on its books the transferee as
the Registered Holder of the portion of this Warrant transferred pursuant to
this Section 7.1.
7.2 Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like terms representing in
the aggregate the purchase rights hereunder, and each of such new Warrants shall
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein as the
"Warrants."
8. Valid Issuance and Payment of Taxes.
All shares of Common Stock issued upon the exercise of this Warrant shall
be validly issued, fully paid and non-assessable, and the Company shall pay all
taxes and other governmental charges that may be imposed in respect of the issue
or delivery thereof. The Company shall not be required to pay any tax or other
charge imposed in connection with any transfer involved in the issuance of any
certificate for shares of Common Stock in any name other than that of the
Registered Holder of this Warrant, and in such case the Company shall not be
required to issue or deliver any stock certificate or security until such tax or
other charge has been paid, or it has been established that no tax or other
charge is due.
9. Mutilated or Missing Warrants.
In case any of the Warrants shall be mutilated, lost, stolen or destroyed,
the Company shall issue and deliver in exchange and substitution for, and upon
cancellation of the mutilated Warrant, or in lieu of, and in substitution for,
the Warrant lost, stolen or destroyed, a new Warrant of like tenor and
representing an equivalent right or interest, but only upon receipt of
reasonable evidence of such loss, theft, or destruction of such Warrant.
10. Reserve.
The Company hereby represents and covenants that it has reserved and at all
times there shall be reserved for issuance such number and type of securities as
the Registered Holders are entitled to receive upon exercise of the IHS
Warrants. Prior to the issuance of any equity securities (or any instrument
exercisable for or convertible into equity securities) and whenever otherwise
required to satisfy this Section 10, the Company will amend its Certificate of
Incorporation to the extent necessary to ensure that there is reserved for
issuance a sufficient number and type of securities as the Registered Holders of
the IHS Warrants are entitled to receive upon exercise thereof. 11. No
Impairment.
The Company will not, by amendment of its Certificate of Incorporation or
bylaws, or through reorganization, consolidation, merger, dissolution, issue or
sale of securities, sale of assets or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Registered Holders against impairment. Without
limiting the generality of the foregoing, the Company (a) shall not increase the
par value of any shares issuable upon exercise of this Warrant above the
Purchase Price and (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable shares of Common Stock upon exercise of this Warrant.
12. Appraisal.
In case of any dispute as to valuation of a security under this Agreement,
the fair value of such security shall be determined by an appraiser without any
discount for liquidity or restrictions under the Securities Act. This appraisal
process shall be instituted within fourteen (14) days after a party to this
Agreement notifies the other party of its desire to submit the issue to an
appraiser. In the event that, within seven (7) days after a party to this
Agreement notifies the other party of its desire to submit the issue to an
appraiser, the parties do not agree on a single appraiser to determine the fair
value of such security, the fair value of such security shall be determined,
without any discount for liquidity or restrictions under the Securities Act, by
the majority determination of a panel of three (3) appraisers who shall be
selected in the following manner: the Company shall select one (1) appraiser and
the Registered Holder entitled to exercise this Warrant for the greatest number
of shares of Common Stock (in the event there shall be more than one Registered
Holder), on behalf of all of the Registered Holders, shall select one (1)
appraiser and the two (2) appraisers selected by the Company and the Registered
Holder shall jointly select a third appraiser. The appraiser selected jointly by
the parties and, if applicable, each member of the appraisal panel shall be an
individual who personally and whose Affiliates shall not have a previous
business relationship with either party. The appraiser and, if applicable, the
appraisal panel shall endeavor to complete the appraisal as soon as practicable.
The determination of such appraiser and, if applicable, the appraisal panel
shall be final and binding on the Company and the Registered Holders, and the
fees and expenses of such appraisal shall be borne equally by the Company, on
the one hand, and the Registered Holders, on the other.
13. Notices.
Except as may be otherwise provided herein, all notices and other
communications required or permitted hereunder shall be in writing and shall be
conclusively deemed to have been duly given (a) when hand delivered to the other
party, (b) when received when sent by facsimile to number set forth below
(provided, however, that notices given by facsimile shall not be effective
unless either (i) a duplicate copy of such facsimile notice is promptly given by
one of the other methods described in this Section 13, or (ii) the receiving
party delivers a written confirmation of receipt for such notice either by
facsimile or any other method described in this Section 13) and (c) the next
business day after deposit with a national overnight delivery service, postage
prepaid, addressed to the parties as set forth below with next-business-day
delivery guaranteed, provided that the sending party receives a confirmation of
delivery from the delivery service provider.
To: the Registered Holder To: the Company
Integrated Health Services, Inc. Community Care of America, Inc.
10065 Red Run Boulevard 3050 North Horseshoe Drive
Owings Mills, MD 21117 Naples, FL 33942
Fax No.: (410) 998-8747 Fax No.: (941) 435-0087
Attn: Marshall A. Elkins, Esq. Attn: Gary Singleton, President
A party may change or supplement the addresses given above, or designate
additional addresses, for purposes of this Section 13 by giving the other party
written notice of the new address in the manner set forth above.
14. Headings.
The headings in this Warrant are for purposes of convenience in reference
only, and shall not be deemed to constitute a part hereof.
15. Governing Law.
I This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the State of New York without regard to provisions
regarding choice of laws.
16. Severability.
If any term, provision, covenant or restriction of this Warrant is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Warrant
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
17. No Inconsistent Agreements.
The Company will not on or after the date of this Warrant enter into any
agreement which is inconsistent with the rights granted to the Registered
Holders of this Warrant or otherwise conflicts with the provisions hereof. The
Company hereby represents and warrants that the rights granted to the Registered
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to holders of the Company's securities under any other
agreements, except rights that have been waived.
18. Saturdays, Sundays and Holidays.
If the Expiration Date falls on a Saturday, Sunday or legal holiday, the
Expiration Date shall automatically be extended until 5:00 p.m. the next
business day.
IN WITNESS WHEREOF, Community Care of America, Inc. has caused this Warrant to
be signed manually by a duly authorized officer of the Company on this 13th day
of January, 1997.
COMMUNITY CARE OF AMERICA, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT A
ELECTION TO PURCHASE
To: Community Care of America, Inc.
__________________________________
__________________________________
__________________________________
The undersigned hereby elects to exercise the Warrant represented by the within
Warrant Certificate to purchase __________ shares of the Common Stock issuable
upon the exercise of the Warrant and requests that certificates for such shares
shall be issued in the name of:
(Name)
(Address)
(Taxpayer number)
and be delivered to:
(Name)
at
(Address)
and, if said number of shares of the Common Stock shall not be all the shares of
the Common Stock evidenced by the within Warrant Certificate, that a new Warrant
Certificate for the balance remaining of such said shares be registered in the
name of:
(Name)
(Address)
(Taxpayer number)
and delivered to the undersigned at the address below stated.
Dated: _______________, 19__
Name of holder of Warrant Certificate:
(please print)
(Address)
(Signature)
<PAGE>
EXHIBIT B
ASSIGNMENT
(to be executed by the registered holder
to effect a transfer of the within Warrant)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Name)
(Address)
the right to purchase the ________ shares of Common Stock evidenced by this
Warrant, and does hereby irrevocably constitute and appoint to transfer the said
right on the books of the Company, with full power of substitution.
Dated: _______________________
(Signature)
/
<PAGE>
EXHIBIT 3
REGISTRATION RIGHTS AGREEMENT
[TO BE INSERTED]
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 13th day of
January 1997 (the "Effective Date"), by and between Community Care of America,
Inc., a Delaware corporation (the "Company"), on the one hand, and on the other
hand, Integrated Health Services, Inc., a Delaware Corporation (the
"Stockholder").
RECITALS
WHEREAS, the Company and the Stockholder are parties to a Warrant
Acquisition Agreement, dated of even date herewith (the "Warrant Agreement"),
pursuant to which the Company issued Series A Warrants and Series B Warrants
(collectively, the "Warrants") to the Stockholder;
WHEREAS, the Stockholder may acquire shares of the Common Stock of the
Company, $0.0025 par value (the "Common Stock"), under the Warrants; and
WHEREAS, the Warrant Agreement provides that the Company shall extend
certain registration rights to the Stockholder;
NOW, THEREFORE, the parties hereby agrees as follows:
1.1 Definitions. For purposes of this Agreement:
(a) The term "register", "registered", and "registration" refer to a
registration affected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Act"), and the use, by the Company, of its best efforts to cause the
declaration or ordering of effectiveness of such registration statement or
document.
(b) The term "Underlying Common Stock" means (1) any of the shares of
Common Stock issued upon exercise of the Warrants, and (2) any shares of the
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the shares of Common Stock issued or issuable under the Warrants, excluding in
all cases, however, any Underlying Common Stock sold by a person in a
transaction in which his, her or its rights under Section 1 are not assigned.
(c) The term "Holder" means any person owning or having the right to
acquire Underlying Common Stock or any assignee thereof in accordance with
Section 1.10 hereof.
<PAGE>
(d) The term "Person" means a natural person and any corporation,
partnership, limited liability company, limited liability partnership, joint
venture, association, joint-stock partnership, trust, unincorporated
organization or a government or any department or agency thereof.
1.2 Registration Rights. The Company covenants and agrees as follows:
(a) Piggyback Registration Rights. If, at any time after the first
anniversary of the Effective Date (but without any obligation to do so), the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration statement or Form S-8 or
Form S-4 or any successor form thereto), the Company shall, at such time,
promptly give each Holder written notice of such registration. The Company
shall, subject to the provisions of Section 1.6(b), cause all of the Underlying
Common Stock owned by each Holder to be registered under the Act under the
proposed registration statement, except that the Company shall not be required
to register the Underlying Common Stock owned by a Holder if, within twenty (20)
days after the Company gives notice of the proposed registration to the Holder,
the Holder gives the Company written notice in accordance with Section 2.5 that
he does not want all or a portion of the Underlying Common Stock held by him to
be so registered.
(b) Demand Registration Rights for Firm Commitment Underwritten Offerings.
At any time after the first anniversary of the Effective Date, the Holders
representing a majority of the Common Stock issued and issuable under the
Warrants (regardless of whether representing a majority of the then outstanding
Underlying Common Stock) may demand that the Company register under the Act, all
or a portion of the shares of Common Stock issued or issuable under the
Warrants, for sale pursuant to a firm commitment underwritten public offering,
provided that the Company shall not be obligated to effect such registration and
firm commitment underwritten public offering and sale of the Underlying Common
Stock on more than two occasions in the aggregate for all of the Holders (it
being understood that any firm commitment public offering that does not close
for whatever reason shall not count against such limit).
(c) Registration Rights for Shelf Offerings Not Involving Firm Commitment
Underwritings.
(1) If at any time after the first anniversary of the Effective Date the Company
is eligible to register on Form S-3 under the Act (or any successor "short form"
registration statement) securities which are to be offered or sold solely by or
on behalf of persons other than the Company, then the Holders of a majority of
the outstanding Underlying Common Stock may demand that the Company register
under the Act all or a portion of the Common Stock issued and issuable under the
Warrants for offer and sale in transactions not involving a firm commitment
underwritten offering. The Company shall as soon as practicable after the date
thereof register with the Commission on a Form S-3 registration statement (or
any successor "short form" registration statement) the Common Stock issued and
issuable under the Warrants. Thereafter, the Holders of a majority of the
outstanding Underlying Common Stock may, subject to the limitations set forth in
Section 1.2(c)(2) hereof, demand that the Company, on one occasion during each
twelve month period from the Effective Date, prepare and file a post effective
amendment to such registration statement, pursuant to Rule 424(b) under the Act,
containing a prospectus meeting the requirements of Section 10 of the Act in
order to permit the Holders to sell or distribute their Underlying Common Stock
in transactions not involving a firm commitment underwritten public offering,
and the Company shall prepare and file such other amendments and supplements
thereto, and take such other actions as may be necessary to keep such prospectus
and registration statement accurate and effective and to comply with the
provisions of the Act with respect to the disposition of the Underlying Common
Stock for a period of not less than ninety (90) days, provided that such time
period shall be extended by the amount of time that any Holder is prevented from
selling Underlying Common Stock under such registration statement as a result of
Section 1.2(c)(2) hereof.
(2) Notwithstanding the provisions of Section 1.2(c)(1) to the contrary, the
Company shall not be obligated to file a post effective amendment to such
registration statement pursuant to Rule 424(b) under the Act and/or a prospectus
meeting the requirements of Section 10 of the Act pursuant to this Section
1.2(c) during any period if (i) the Company shall furnish to the Holders
requesting such registration a certificate signed by the President of the
Company stating that, in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental at such time to the Company and
its stockholders to file such amendments to such registration statement or
prospectus (including by filing information incorporated by reference into such
registration statement and/or prospectus) necessary to meet the requirements of
Section 10 of the Act, in which event the Company shall have the right to defer
the filing of such amendments for a period of not more than sixty (60) days
after presentation of such certificate to the Holders, (ii) if the Company has
within twelve (12) months preceding the date of such request effected a
registration of its securities in which Holders were entitled to participate
pursuant to Section 1.2(a) or (b) hereof, or (iii) if the requesting Holder or
Holders receive an opinion from counsel to the Company that registration of such
Holder's or Holders' Underlying Common Stock is not required under the Act in
order to effect the sale or other distribution contemplated by such Holder or
Holders.
1.3 Obligations of the Company. Whenever undertaking under this Section 1
to effect the registration of any Underlying Common Stock, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the Commission a registration statement with
respect to such Underlying Common Stock and use its best efforts to cause such
registration statement to become effective and keep such registration statement
effective for ninety (90) days or such shorter period as requested by the
Holders of a majority of the Underlying Common Stock registered thereunder.
(b) Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Underlying Common Stock owned by them.
(d) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as the Holders shall reasonably request, provided that the Company
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions.
(e) In the event that a firm commitment underwritten public offering is
utilized under the registration described in Section 1.2(a) or is demanded for
the registration described in Section 1.2(b), include the Underlying Common
Stock in such firm commitment underwritten public offering and enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Immediately notify each Holder of the Underlying Common Stock covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and
promptly prepare and furnish to the Holders a reasonable number of copies of a
prospectus supplement or amendment so that, as thereafter delivered to the
purchasers of such Underlying Common Stock, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting registration of
Underlying Common Stock pursuant to this Section 1, on the date that such
Underlying Common Stock is delivered to the underwriters for sale in connection
with a registration pursuant to this Section 1, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in a firm commitment
underwritten public offering, addressed to the underwriters, if any, and to the
Holders requesting registration of the Underlying Common Stock and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in a firm commitment underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of the Underlying Common Stock.
(h) If the Common Stock of the Company is listed on a national securities
exchange or quoted on NASDAQ, use its best efforts to comply with the
requirements of such exchange or NASDAQ to include shares of Underlying Common
Stock covered by such registration statement for listing on each such securities
exchange or for quotation on NASDAQ.
<PAGE>
1.4 Furnish Information.
(a) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 1 with respect to the Underlying Common
Stock of any selling Holder that such Holder shall furnish to the Company such
information regarding itself, the Underlying Common Stock held by it, and the
intended method of disposition of such securities as shall be required to effect
the registration of such Holder's Underlying Common Stock.
(b) The Company shall give the Holders registering Underlying Common Stock
and their underwriters, if any, the opportunity to participate in the
preparation of the registration statement, each prospectus included therein or
filed with the Commission and each amendment thereof or supplement thereto, and
will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Holders and such underwriters or
their respective counsel, to conduct a reasonable investigation within the
meaning of the Act.
1.5 Expenses of Registration. The Company shall bear and pay all expenses
incurred in connection with any registration, filing or qualification, to the
extent set forth in Section 1.3, of the Underlying Common Stock with respect to
each registration pursuant to Section 1.2 for each Holder (which right may be
assigned as provided in Section 1.10), including (without limitation) all
registration, filing, and qualification fees, printers, legal and accounting
fees relating or apportionable thereto, but excluding underwriting discounts and
commissions relating to Underlying Common Stock (in the case of a firm
commitment underwritten public offering).
1.6 Underwritten Offers.
(a) Whenever a registration requested pursuant to Section 1.2(b) hereof is
for a firm commitment underwritten offering, the Holder(s) holding a majority of
the Underlying Common Stock so requested to be included in such registration
shall select the managing underwriter(s) of recognized standing to administer
the offering, and each Holder requesting registration of its Underlying Common
Stock for disposition in a firm commitment underwritten offering agrees to
include such Underlying Common Stock in such firm commitment underwritten
offering and shall be bound by the terms of the underwriting as agreed between
the majority of Holders requesting registration and the underwriters.
(b) In connection with a firm commitment underwritten offering of the
Company's capital stock under Section 1.2(a) hereof, the Company shall not be
required to include any of the Holders' securities in such underwriting unless
they accept the terms of the underwriting as agreed upon between the Company and
the underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine in
good faith will not jeopardize the success of the offering by the Company. If
the total amount of securities, including Underlying Common Stock, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Underlying Common Stock, which the underwriters determine
in good faith will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders). For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder which is a holder of
Underlying Common Stock and which is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder", as defined in this sentence.
1.7 Delay of Registration. No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.8 Indemnification. In the event any Underlying Common Stock is included
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder who is not a director or executive officer of the Company,
any underwriter (as defined in the Act) for such Holder and each person, if any,
who controls such Holder or underwriter within the meaning of the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, or the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Act, or the
Exchange Act or any state securities law; and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.8(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company, nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the Company
within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages, liabilities
(joint or several) or actions to which any of the foregoing persons may become
subject, under the Act, or the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.8(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder.
(c) Promptly after receipt by an indemnified party under this Section 1.8
of notice of the commencement of any action (including any governmental action)
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 1.7, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party (together with all other indemnified parties
which may be represented without conflict by one counsel) shall have the right
to retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.8, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the firm commitment underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Section 1.8 shall
survive the completion of any offering of Underlying Common Stock in a
registration statement under this Section 1, and otherwise.
1.9 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the Commission that may at any time permit a
Holder to sell securities of the Company to the public without registration, the
Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Commission Rule 144 promulgated under the Act;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Act and the Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns any Underlying Common
Stock, forthwith upon request (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144 promulgated under the Act
and the Exchange Act, (ii) a copy of the most recent annual and quarterly
reports of the Company and such other report and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
1.10 Assignment of Registration Rights. The rights to cause the Company to
register Underlying Common Stock pursuant to this Section 1 may be assigned (but
only with all related obligations) by a Holder to a transferee or assignee of
such securities, provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted or subject to volume or manner of sale limitations under the Act.
2. Miscellaneous.
2.1 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties (including transferees
of the Warrants and the Underlying Common Stock). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
2.2 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York.
2.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
2.5 Notices. Except as may be otherwise provided herein, all notices and
other communications required or permitted hereunder shall be in writing and
shall be conclusively deemed to have been duly given (a) when hand delivered to
the other party, (b) when sent by facsimile to the number set forth below such
party's signature (provided, however, that notices given by facsimile shall not
be effective unless either (i) a duplicate copy of such facsimile notice is
promptly given by one of the other methods described in this Section 2.5, or
(ii) the receiving party delivers a written confirmation of receipt of such
notice either by facsimile or any other method described in this Section 2.5)
and (c) the next business day after deposit with a national overnight delivery
service, postage prepaid, addressed to the parties as set forth below such
party's signature, with next-business-day delivery guaranteed, provided that the
sending party receives a confirmation of delivery from the service provider. A
party may change or supplement the address given above, or designate additional
addresses, for purposes of this Section 2.5 by giving the other party written
notice of the new address in the manner set forth above.
2.6 Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
2.7 Amendments and Waivers. The Company and Holders of a majority of the
Underlying Common Stock (to the extent issued and outstanding) can agree to an
amendment of, or a waiver to, the terms of this Agreement.
2.8 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTEGRATED HEALTH SERVICES, INC. COMMUNITY CARE OF AMERICA, INC.
By:
Name: By:
Title: Name:
Address for Notice: Title:
Address for Notice:
10065 Red Run Boulevard
Owings Mills, MD 21117 3050 North Horseshoe Drive
Fax No. (410) 998-8747 Naples, FL 33942
Attn: Marshall A. Elkins, Esq. Fax No. (941) 435-0087
Attn: Gary Singleton, President
<PAGE>
EXHIBIT 4
CCA PRESS RELEASE
DATED JANUARY 13, 1997
[TO BE INSERTED]
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made and
entered into as of December 27, 1996, by and between COMMUNITY CARE OF AMERICA,
INC., a Delaware corporation with offices at 3050 N. Horseshoe Drive, Naples, FL
33942 ("Owner") and INTEGRATED HEALTH SERVICES, INC., a Delaware corporation
with offices at 10065 Red Run Boulevard, Owings Mills, MD 21117 ("Manager").
WHEREAS, the Owner is a publicly-traded corporation that is,
directly and indirectly through its subsidiaries, engaged in the business of
owning, operating and managing skilled nursing facilities, hospitals and other
health care related facilities (the "Business"); and
WHEREAS, the Manager is a publicly-traded corporation engaged
in the ownership and operation of similar facilities and is experienced in
various phases of the management, operation and ownership thereof, including,
without limitation, the management of the financial and accounting functions
related thereto, and arranging and negotiation of contracts for the provision of
ancillary services for health care facilities; and
WHEREAS, the Owner desires to engage the Manager to manage the
financial, accounting and ancillary services contracting functions for Owner's
account during the term herein provided, and the Manager desires to accept such
engagement, upon the terms and subject to the conditions contained herein.
<PAGE>
NOW, THEREFORE, in consideration of the premises and covenants
herein contained, and intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
EMPLOYMENT OF THE MANAGER
1.1 Employment. For and during the term of this Agreement, the
Owner hereby grants to the Manager the sole and exclusive right, and employs the
Manager to supervise, manage, and operate the financial, accounting, MIS,
reimbursement and ancillary services contracting functions (the "Applicable
Functions") in the name and for the account of the Owner upon the terms and
conditions hereinafter set forth.
1.2 Acceptance. The Manager accepts such employment and agrees
that it will (a) faithfully perform its duties and responsibilities hereunder,
(b) use its best efforts to supervise and direct the management of the
Applicable Functions in an efficient manner, and (c) consult with the Owner and
keep the Owner advised of all major policy matters relating to the management of
the Applicable Functions. The Manager shall report to the principal financial or
chief accounting officer of the Owner, whose approval shall be required prior to
the public issuance or filing with the Securities and Exchange Commission ("the
SEC") of any financial or accounting report.
ARTICLE II
TERM
The initial term of this Agreement shall commence on January 1, 1997, or
such earlier date as Manager and Owner shall agree (the "Commencement Date") and
shall extend until December 31, 2001 ("Term").
<PAGE>
ARTICLE III
RIGHTS AND DUTIES OF THE MANAGER
During the term of this Agreement, and in the course of its
management of the Applicable Functions:
3.1 Employees. The Manager, on the Owner's behalf, shall hire,
promote, discharge, and supervise the work of all employees involved in
performing services related to the Applicable Functions below the Owner officer
level. All of such employees shall be employees of the Manager, except for such
employees of the Owner as the Owner and Manager shall mutually agree, provided,
however, that the compensation of any such employees of Owner, including fringe
benefits, with respect to such employees, shall be deducted from the amount of
the Management Fee. The term "fringe benefits" as used herein shall include but
not be limited to the employer's contribution of FICA, unemployment
compensation, and other employment taxes, retirement plan contributions,
workman's compensation, group life, accident, and health insurance premium,
profit sharing contributions, disability, and other similar benefits paid or
payable by the Manager with respect to its own business or other businesses
managed by it, but shall in any event be consistent with the compensation
provided to other similarly situated employees of the Owner.
3.2 Ancillary Services, Utilities, Etc. The Manager shall
enter into such contracts in the name of and at the expense of the Owner as may
be deemed necessary or advisable for the furnishing of all ancillary services,
including, without limitation, utilities, concessions, supplies and other
services as may be needed from time to time for the maintenance and operation of
the Business. Manager is authorized to contract for or provide ancillary
services,
<PAGE>
including, but not limited to, rehabilitation and respiratory therapy services,
and mobile diagnostic services, through providers that are affiliates of the
Manager, provided that such services are rendered at levels of quality and
pricing that are competitive with those available in the community.
3.3 Deposit and Disbursement of Funds. The Manager shall
deposit in a banking institution which is a member of the FDIC in accounts in
the Manager's name as agent for Owner, all monies arising from the operation of
the Business or otherwise received by the Manager for and on behalf of the Owner
("Business Funds"), and shall disburse and pay the same from said accounts on
behalf and in the name of Owner in the following order of priority and, in each
case, such amounts and at such times as the same are required to be made in
connection with:
(a) Payment of Debt Service (as hereinafter defined)
and all costs and expenses arising out of the ownership, maintenance,
expansion, and operation of the Business, including, without
limitation, the reimbursable expenses of the Manager hereunder set
forth in Exhibit A hereto;
(b) Payment of the Manager's Management Fee (as
hereinafter defined) provided for in Article V, below (including any
accrued and unpaid Management Fees for prior periods);
(c) The balance of such funds, after provision for
such adequate working capital reserves on a monthly basis as shall be
determined by the Manager in its reasonable business
<PAGE>
judgment, shall be invested by the Manager on behalf of the Owner or,
if directed by the Owner, shall be used to reduce existing debt of the
Owner (including, without limitation, any debt due to Manager or any of
its affiliates or subsidiaries), to make distributions to the Owner's
stockholders or to repurchase outstanding shares of its capital stock.
As used herein, "Debt Service" means scheduled payments of the
principal and interest with respect to:
(x) existing debt service payments; and
(y) any additional indebtedness incurred by the Owner
for the improvement, maintenance, or operation of the Business as
mutually agreed upon by Owner and Manager.
"Debt Service" includes payments made with respect to
any revolving credit line with the Manager or others, but does not
include any other amounts payable by reason of voluntary prepayments or
the acceleration of such indebtedness for any reason.
3.4 Statements. The Manager shall deliver or cause
to be delivered to the Owner statements as follows:
(a) Within thirty (30) days following the end of each
calendar month, a profit and loss statement and balance sheet statement
(both prepared on an accrual basis in accordance with GAAP) showing the
results of operation of the Business for such calendar month and the
year-to-date, and having annexed thereto a computation of the
Management Fee (as determined under Article VI hereof) for such
preceding month and the year-to-date;
<PAGE>
(b) On or before ninety (90) days after the close of
each fiscal year during the term of this Agreement, the Manager will
also deliver or cause to be delivered to the Owner a balance sheet and
related statement of profit and loss certified by an independent public
accounting firm and prepared in accordance with GAAP showing the assets
employed in the operation of the Business and the liabilities incurred
in connection therewith as of the end of the fiscal year, and the
results of the operation of the Business during the preceding twelve
(12) months then ended, and having annexed thereto (i) a copy of all
Medicare and Medicaid cost reports prepared by the Manager with respect
to each facility constituting any part of the Business for such twelve
month period, and (ii) a computation of the Management Fee for such
twelve (12) month period; and
(c) all other financial and accounting reports and
statements that the Owner is required to prepare or file pursuant to
applicable law, including, without limitation, any required pursuant to
the Securities Exchange Act of 1934, as amended and the rules and
regulations promulgated thereunder (the "Exchange Act"). All of such
reports and statements shall be delivered to the Owner a reasonable
amount of time prior to the date on which such report or statement is
required to be reported, filed or disclosed in accordance with
applicable law.
3.5 Data Processing. The Manager shall, directly or through an
affiliate, provide the data processing required to maintain the financial,
payroll, and accounting records of the Business; except that the Manager agrees
that the Business
<PAGE>
payroll will not be moved to Manager's central payroll administration until same
can be accomplished without a material disruption to Business cash flow.
3.6 Books and Records. The Manager on behalf of the Owner
shall manage the keeping of full and accurate books of account and such other
records reflecting the results of operation of the Business as required by law.
3.7 Taxes. The Manager shall cause all taxes, assessments, and
charges of every kind imposed upon the Business by any governmental authority,
including interest and penalties thereon, to be paid when due if funds are
available, except that the Manager shall not cause such payment to be made if
(a) same is in good faith being contested by the Owner at its sole expense and
without cost to the Manager, (b) enforcement thereof is stayed, and (c) the
Owner shall have given the Manager written notice of such contest and stay and
authorized the non-payment thereof, not less than ten (10) days prior to the
date on which such tax assessment, or charge is due and payable. Interest or
penalty payments shall be reimbursed by the Manager to the Owner if imposed upon
the Owner by reason of negligence on the part of the Manager in making the
payment if funds are available therefor. Manager shall notify Owner of all
taxes, assessments or penalties assessed against the Business other than in the
normal course of business.
<PAGE>
ARTICLE IV
RIGHTS AND DUTIES OF THE OWNER
During the term of this Agreement:
4.1 Right of Inspection. The books and records of the Business
shall be the property of Owner. The books and records of the Business shall not
be removed by the Manager without the consent of the Owner. The Owner
acknowledges that some books and records will be maintained at the Manager's
principal place of business.
4.2 Cooperation with Manager. The Owner will fully cooperate
with the Manager in connection with the management of the Applicable Functions
and will reimburse the Manager for all funds expended or costs and expenses
incurred to which the Manager is entitled to reimbursement as set forth in
Exhibit A of this Agreement.
4.3 Operating Capital. To any extent necessary after taking
into account Manager's loans under Article V, below, the Owner shall provide the
Manager with such amount of working capital as may be required from time to time
for the operation of the Business on a sound financial basis (including the
payment of all amounts owed to Manager including, but not limited to, the
payment of all management fees, reimbursable expenses and amounts due under the
Line of Credit). If additional working capital is required, the Manager shall
notify the Owner thereof in writing and the Owner shall provide the Manager with
such increase in working capital within fifteen (15) days thereafter. If the
Owner fails to provide such additional working capital, Manager may, but is not
obligated to, provide the same as a loan to the Owner.
<PAGE>
ARTICLE V
COMPENSATION AND DISTRIBUTIONS
5.1 As full and exclusive compensation for all of the services
to be rendered by Manager during the Term of this Agreement, the Owner shall pay
to the Manager at its principal office, or at such other place as the Manager
may from time to time designate in writing, and at the times hereinafter
specified a monthly fee (the "Management Fee"). The aggregate amount of the
Management Fee for the period commencing with the effective date of this
Agreement and ending on December 31, 1997 shall be an amount equal to the lesser
of (a) two percent (2%) of Gross Revenues or (b) twice the amount of the total
direct and indirect costs of Owner for the Applicable Functions during the
period July 1, 1996 through December 31, 1996 ("Owner's Cost"). The monthly
payment of the Management Fee for such period shall be based on the percentage
of Gross Revenue specified in clause (a), with an adjustment being made to the
amount of Management Fee payable for the final month of such period if the
amount in clause (b) shall be less than clause (a). The Lender and Borrower may
by mutual agreement increase the percentages in clause (a) above to an amount
not greater than two and one half percent (2.5%) following completion of
Lender's due diligence review. The Management Fee for periods commencing January
1, 1998 and thereafter shall be an amount equal to the lesser of (a) two percent
(2%) of Gross Revenues or (b) a percentage of Gross Revenues determined by
dividing (x) an amount equal to Owner's Cost, by (y) an amount equal to the
Gross Revenues for the period July 1, 1996 through December 31, 1996. The Lender
and Borrower may by mutual agreement increase the percentages in clause (a)
above to an amount not greater than two and one half percent (2.5%) following
completion of Lender's due diligence review. At the completion of its review of
Owner's books and records, Managers will notify Owner of its calculation of
Owner's Cost.
<PAGE>
If Owner disagrees with Manager's calculation of Owner's Cost, the parties agree
that KPMG Peat Marwick shall recompute Owner's Cost for purposes of this
Agreement using generally accepted accounting principals, which recomputation
shall be final and binding on the parties hereto. All fees incurred by KPMG Peat
Marwick shall be borne by the Owner. The Management Fee shall be payable five
days after delivery to Owner of the monthly financial statement referred to in
Section 3.4(a) (each such date being hereinafter referred to as a "Payment
Date") and shall be calculated based upon the Business's Gross Revenues during
the preceding month as set forth in such financial statements.
5.2 For the purposes of determining the Management Fees,
"Gross Revenues" for any period shall be determined on the basis of all revenues
of any kind derived directly or indirectly from the Business during such period
(including rental or other payment from concessionaires, licensees, tenants, and
other users of the Business) as determined in accordance with generally accepted
accounting principles consistently applied, excluding, however:
(a) federal, state, and municipal excise, sales, and use
taxes collected directly from patients as a part of the sales
prices of any goods or services;
(b) proceeds of any life or casualty insurance policies,
condemnation or eminent domain;
(c) gains or losses arising from the sale or other
disposition of capital assets;
<PAGE>
(d) any reversal or accrual of any contingency or tax
reserve;
(e) interest earned on sinking funds, Special Security
Accounts, bonds funds, etc. originally and specifically formed as
a requirement of any bond issue utilized to finance any part of
the Business;
(f) patient trust accounts;
(g) tax refunds;
(h) uncollectible accounts receivable, in the reasonable
judgment of Manager and in accordance with industry standards;
(i) miscellaneous revenues arising from dividends,
discounts, or refunds related to items previously expensed; and
bequests, gifts, or similar donations.
The proceeds of business interruption insurance or proceeds as
a result of Medicare and Medicaid audits shall be included in Gross Revenues of
the Business. However, funds required to be repaid as a result of Medicare and
Medicaid audits shall be deducted from Gross Revenues of the Business.
5.3 Notwithstanding the foregoing, the Management Fee
(including any amount carried over pursuant to the succeeding sentence hereof)
shall be payable on each Payment Date only to the extent that the Business Funds
(as defined in Section 3.3) shall be sufficient as of such date; provided that
the Manager shall be entitled to cause a draw-down under any revolving credit
facility of the Owner to make payment of
<PAGE>
any Management Fee then payable or accrued from prior periods. Any portion of
the Management Fee not paid due to the foregoing shall be carried over and be
payable on the immediately succeeding Payment Date; provided, however, that
Owner shall pay Manager interest on such unpaid portion of the Management Fee at
the rate specified in the Subordinated Note of even date herewith made by Owner
in favor of IHS Financial Holdings, Inc.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF OWNER
The Owner represents and warrants to the Manager as follows:
6.1 Organization and Standing of the Owner. The
Owner is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Copies
of the Articles of Incorporation and By-Laws of the Owner, and
all amendments thereof to date, have been, if requested,
delivered to Manager and are complete and correct. The Owner
and its subsidiaries have the power and authority to own the
property and assets now owned by them and to conduct the
business presently being conducted by them.
6.2 Absence of Conflicting Agreements. Neither the execution
or delivery of this Agreement, including all Schedules and Exhibits hereto, or
any of the other instruments and documents required or contemplated hereby and
thereby ("Transaction Documents") by the Owner, nor the performance by the Owner
of the transactions contemplated hereby and thereby, conflicts with, or
constitutes a breach of or a default or
<PAGE>
requires the consent of any third party under (i) the Articles of Incorporation
or By-Laws of the Owner (or any of its subsidiaries); or (ii) to the best of its
knowledge after due inquiry, any applicable law, rule, judgment, order, writ,
injunction, or decree of any court, currently in effect; or (iii) to the best of
its knowledge after due inquiry, any applicable rule or regulation of any
administrative agency or other governmental authority currently in effect; or
(iv) any agreement, indenture, contract or instrument to which the Owner (or any
of its subsidiaries) is now a party or by which the assets of the Owner (or any
of its subsidiaries) are bound.
6.3 Consents. No authorization, consent, approval, license,
exemption by, filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, is or
will be necessary in connection with the execution, delivery and performance of
this Agreement by the Owner.
6.4 Financial Statements.
(a) The audited consolidated balance sheets of the
Business as of December 31, 1995, and the related statements of
operations and cash flow for the year then ended, filed with the SEC,
present fairly in all material respects the financial condition and
results of operations of the Business at and for the periods therein
specified and were prepared in accordance with GAAP.
(b) The unaudited consolidated balance sheets and the
related statements of operations of the Business as of September 30,
1996, and cash flow for the 9-month period then
<PAGE>
ended, filed with the SEC, present fairly in all material respects the
financial condition and results of operations of the Business at and
for the periods therein specified and were prepared in accordance with
GAAP.
6.5 Material Changes. Since September 30, 1996, except as set
forth in reports filed by the Owner with the SEC, there has not been any
material adverse change in the condition (financial or otherwise) of the assets,
properties or operations of the Owner on a consolidated basis, whether or not
covered by insurance, and during such period of time the Owner has and from the
date of this Agreement through the Commencement Date, will have, conducted the
Business only in the ordinary and normal course, and made no distributions to
any shareholders of the Owner other than wages paid and expenses reimbursed in
the ordinary and normal course of business.
6.6 Legal Proceedings. Other than as may be set forth in
reports filed by the Owner with the SEC, there are no claims, actions, suits or
proceedings or arbitrations, either administrative or judicial, pending, or, to
the knowledge of Owner, overtly threatened against or affecting the Owner, its
subsidiaries or affiliates, of a nature required to be disclosed in reports
filed with the SEC, or affecting Owner's ability to consummate the transactions
contemplated herein.
6.7 Tax Returns. The Owner have filed all Federal, state,
county and local income, excise, property, employment-related and other tax
returns and abandoned property reports (if any) to date that are due and
required to be filed by it, and there are no claims, liens, or judgments for
taxes due
<PAGE>
from the Owner, and to the knowledge of the Owner, no basis for any such claim,
lien, or judgment exists.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF MANAGER
The Manager represents and warrants to the Owner as follows:
7.1 Organization and Standing of the Manager. The
Manager is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
Copies of the Articles of Incorporation and By-Laws of the
Manager, and all amendments thereof to date, have been, if
requested, delivered to the Owner and are complete and
correct. The Manager has the power and authority to own the
property and assets now owned by it and to conduct the
business presently being conducted by it.
ARTICLE VIII
TERMINATION RIGHTS
This Agreement may be terminated and, except as to liabilities
or claims of either party hereto which shall have theretofore accrued or arisen,
the obligations of the parties hereto with respect to this Agreement may be
terminated, upon the happening of any of the following events:
8.1 Termination by the Owner: If at any time or from time to
time during the term of this Agreement any of the following events shall occur
and not be remedied within the applicable period of time herein specified,
namely:
<PAGE>
(a) The Manager shall apply for or consent to the
appointment of a receiver, trustee, or liquidator of the Manager
of all or a substantial part of its assets, file a voluntary
petition in bankruptcy, make a general assignment for the benefit
of creditors, file a petition or an answer seeking reorganization
or arrangement with creditors or take advantage of any insolvency
law, or if an order, judgment or decree shall be entered by any
court of competent jurisdiction, on the application of a
creditor, adjudicating the Manager as bankrupt or insolvent or
approving a petition seeking reorganization of the Manager or
appointing a receiver, trustee, or liquidator of the Manager or
of all or substantial part of its assets, and such order,
judgment or decree shall continue unstayed and in effect for any
period of ninety (90) consecutive days;
(b) The Manager shall fail to keep, observe, or perform any
material covenant, agreement, term or provision of this Agreement
to be kept, observed, or performed by the Manager, and such
default shall continue for a period of sixty (60) days after
written notice thereof by the Owner to the Manager; or
(c) There shall occur a "Fundamental Event" of the Owner;
then in case of any such event and upon the expiration of the period of grace
applicable thereto, the term of this Agreement shall expire, at the Owner's
option and upon ten (10) days written notice to the Manager; provided, however,
that, upon termination, pursuant to Section 8.1(c), Owner shall pay Manager a
termination fee equal to the Management Fee for the
<PAGE>
six months immediately preceding the date notice of termination is given. For
purposes of Section 8.1(c) a "Fundamental Event" shall have the meaning
attributed to it in the Subordinated Note of even date herewith made by Owner in
favor of IHS Financial Holdings, Inc.
8.2 Termination by the Manager: If at any time or from time to
time during the term of this Agreement any of the following events shall occur
and not be remedied within the applicable period of time herein specified,
namely:
(a) The Owner shall fail to keep, observe, or perform
any material covenants, agreement, term or provision of this Agreement
to be kept, observed, or performed by the Owner and such default shall
continue for a period of sixty (60) days after written notice thereof
by the Manager to the Owner, except for Owner's duty to provide for
adequate working capital under Section 4.3 hereof, which shall continue
uncured for a period of thirty (30) days after written notice thereof;
(b) The Owner (or any of its principal subsidiaries)
shall apply for or consent to the appointment of a receiver, trustee,
or liquidator (or any principal subsidiary of the Owner) or of all or a
substantial part of its assets, file a voluntary petition in bankruptcy
or admit in writing its inability to pay its debts as they become due,
make a general assignment for the benefit of creditors, file a petition
or any answer seeking reorganization or arrangement with creditors or
to take advantage of any insolvency law, or if an order, judgment or
decree shall be entered by a court of competent jurisdiction, on the
application of a creditor, adjudicating the Owner (or any principal
subsidiary of the Owner) bankrupt or appointing a receiver, trustee, or
liquidator with respect to all or substantial part of the
<PAGE>
assets of the Owner (or any principal subsidiary of the Owner), and
such order, judgment or decree shall continue unstayed and in effect
for any period of ninety (90) consecutive days;
(c) Business Funds shall be insufficient for the
payment of the management fees to the Manager pursuant to Article V
hereof for a period of at least six (6) consecutive months;
then in case of any such event and upon the expiration of the period of grace
applicable thereto, the term of this Agreement shall expire, at the Manager's
option and upon ten (10) days written notice to the Owner.
8.3 Material Adverse Change. Manager shall be entitled to
terminate this Agreement forthwith upon notice to the Owner in the event that
(a) there shall have occurred since the date hereof any material adverse change
in the financial or operating condition of the Business or its prospects, or (b)
any representation or warranty of the Owner herein shall have ceased to be true
and correct in any material respect.
8.4 Surviving Rights Upon Termination. If either party
exercises its option to terminate pursuant to this Article VIII, each party
shall forthwith account for and pay to the other all sums due and owing pursuant
to the terms of this Agreement. All other rights and obligations of the parties
under this Agreement shall terminate (except as set forth in Article IX hereof).
<PAGE>
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification of Owner by Manager. Manager shall at all
times indemnify and hold harmless the Owner, its officers, directors, employees,
and shareholders, from and against any and all claims, losses, liabilities,
actions, proceedings, and expenses (including reasonable attorneys fees) arising
out of any breach by the Manager of its obligations under this Agreement. The
provisions of this Section 9.1 shall survive the termination or expiration of
this Agreement.
9.2 Indemnification of Manager by Owner. The Owner shall at
all times indemnify and hold harmless the Manager, its officers, directors,
employees, and shareholders, from and against any and all claims, losses,
liabilities, actions, proceedings, and expenses (including reasonable attorneys
fees) (i) arising out of any breach of the obligations, representations and
warranties made by Owner in this Agreement and (ii) asserted by customers,
vendors or shareholders of Owner based upon the entry by Manager into this
Agreement and not related to the performance by Manager of the Applicable
Functions, including but not limited to medical malpractice claims. The
provisions of this Section 9.2 shall survive the termination or expiration of
this Agreement.
9.3 Control of Defense of Indemnifiable Claims. A party
seeking indemnification under this Article IX shall give the other party prompt
written notice of the claim for which it seeks indemnification. Failure of the
party seeking indemnification to give such prompt notice shall not relieve the
other party of its indemnification obligation, provided
<PAGE>
that such indemnification obligation shall be reduced by any damages suffered by
such other party resulting from a failure to give prompt notice hereunder. The
party receiving the aforementioned notice shall provide the defense of such
claim, including, without limitation, retention and payment of attorneys.
9.4 Period of Limitation. Any claim for indemnification
herewith must be asserted within twelve (12) months following discovery of the
indemnifiable event, except that no such limitation shall apply to any claim
based upon (a) any liability of the Owner to the Medicare and Medicaid programs,
or to any other third party payor, for excess reimbursement received by the
Owner prior to the Commencement Date, or (b) any breach of Owner's
representations and warranties pertaining to litigation or tax matters.
ARTICLE X
ARBITRATION
If any controversy should arise between the parties in
performance, interpretation, or application of this Agreement which involves any
matter, either party may serve upon the other a written notice stating that such
party desires to have the controversy reviewed by an arbitrator. If the parties
cannot agree within fifteen (15) days from the service of such notice upon the
selection of such arbitrator, an arbitrator shall be selected or designated by
the American Arbitration Association upon written request of either party
hereto. Arbitration of such controversy, disagreement, or dispute shall be
conducted in accordance with the Commercial Arbitration Rules then in force of
the American Arbitration
<PAGE>
Association and the decision and award of the arbitrator so selected shall be
binding upon the Owner and Manager. The arbitration will be held in New York,
New York.
As a condition precedent to the appointment of any arbitrator
both parties shall be required to make a good faith effort to resolve the
controversy which effort shall continue for a period of thirty (30) days prior
to any demand for arbitration. The cost of any such arbitration shall be shared
equally by the parties. Each party shall pay its own costs incurred as a result
of its participation in any such arbitration.
If the issue to be arbitrated is Manager's alleged breach of
this Agreement and as a result thereof, Owner has the right to terminate this
Agreement, Manager shall continue to manage the Applicable Functions hereunder
pending the outcome of such arbitration.
The Arbitrator shall have no authority to award punitive
damages or any other damages in excess of the prevailing party's actual damages,
and may not make any ruling, finding or award that does not conform to the terms
and conditions of this Agreement.
ARTICLE XI
SUCCESSORS AND ASSIGNS
11.1 Assignments by the Manager. The Manager, without the
consent of the Owner, shall have the right to assign this Agreement to a wholly
or majority owned subsidiary provided that the Manager shall not thereby be
released from its obligations hereunder.
<PAGE>
In the event that all or substantially all the assets of the
Manager or its capital stock shall during the term of this Agreement be acquired
by another corporation (hereinafter referred to as the "Acquiring Corporation")
as a result of a merger, consolidation, reorganization, or other transaction,
the Acquiring Corporation assumes all of the obligations of the Manager then
accrued hereunder, if any, and Manager shall be relieved of all such obligations
(and such Acquiring Corporation shall be relieved of liability hereunder if it
subsequently is involved in such an acquisition).
Except as otherwise permitted herein, the Manager shall have
no right to assign this Agreement.
11.2 Sale, Assignment, or Sub-Lease by the Owner. Any sale,
sub-lease, or assignment with respect to the Business, other than to the
Manager, shall be expressly subject to the terms and provisions of this
Agreement and shall not relieve the Owner of its liability or obligations
hereunder, and Owner shall cause any purchaser, assignee, or sub-lessee to
deliver to the Manager written acknowledgment of its agreement to perform
hereunder including the payment of the management fee described herein.
The Owner may not at any time, without the prior written
consent of the Manager, incur any additional debt that is secured by the lien of
one or more deeds of trust, mortgages, or other security instruments.
<PAGE>
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Notices. Any notice or other communication by either
party to the other shall be in writing and shall be given and be deemed to have
been duly given, upon the date delivered if delivered personally or upon the
date received if mailed postage pre-paid, registered, or certified mail,
addressed as follows:
To the Owner: Community Care of America, Inc.
3050 N. Horseshoe Drive
Naples, FL 33942
Attention: Gary Singleton,
President
Fax: 941-435-0087
With a copy to: J. Allen Miller
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10022
Fax: 212-541-5369
To the Manager: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attention:Marshall A.Elkins, Esq.
Fax: 410-998-8747
With a copy to: IHS Financial Holdings, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attention: Eleanor Harding
Fax: 410-998-8716
<PAGE>
- and -
Frank Agostino
Calo Agostino
27 Warren Street
Hackensack, NJ 07601
Fax: 201-488-5855
or to such other address, and to the attention of such other person or officer
as either party may designate in writing by notice.
12.2 No Partnership or Joint Venture. Nothing contained in the
Agreement shall constitute or be construed to be or create a partnership or
joint venture between the Owner, its successors, or assigns on the one part and
the Manager, its successors, or assigns on the other part. Notwithstanding the
foregoing, the parties hereby agree that they shall each have a duty to act in
good faith and to deal fairly with the other party hereto.
12.3 Modifications and Changes. This Agreement cannot be
changed or modified except by another agreement in writing signed by the party
sought to be charged therewith or by its duly authorized agent.
12.4 Understanding and Agreements. This Agreement
constitutes the entire understanding and agreements of
<PAGE>
whatsoever nature or kind existing between the parties with respect to the
Manager's management of the Business.
12.5 Headings. The article and paragraph headings contained
herein are for convenience of reference only and are not intended to define,
limit, or describe the scope of intent of any provision of this Agreement.
12.6 Approval or Consent. Whenever under any provisions of
this Agreement, the approval or consent of either party is required, the
decision thereon shall be promptly given and such approval or consent shall not
be unreasonably withheld. It is further understood and agreed that whenever
under any provisions of this Agreement the approval or consent of the Owner is
required, such approval or consent is given by the person or any one of the
persons, as the case may be, designated in a notification signed by or on behalf
of the Owner. For all purposes under this Agreement, the Manager shall determine
solely from the latest such notification received by it the person or persons
authorized to give such approval or consent. The Manager shall rely exclusively
and conclusively on the designation set forth in such notification,
notwithstanding any notice of knowledge to the contrary.
12.7 Governing Law. This Agreement shall be deemed to have
been made and shall be construed and interpreted in accordance with the laws of
the State of Maryland.
12.8 Enforceability. Should any provision of this Agreement be
unenforceable as between the parties, such unenforceability shall not affect the
enforceability of the other provisions of this Agreement.
<PAGE>
12.9 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.10 Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Management Agreement effective as of the day and year first above
written.
Owner: Manager:
COMMUNITY CARE OF AMERICA, INC. INTEGRATED HEALTH
SERVICES, INC.
By: ____________________ By: _________________
Title: ____________________ Title:A _________________
Attest: ____________________ Attest: _________________
Title: ____________________ Title: _________________
<PAGE>
EXHIBIT A
The following is a list of items and travel expenses not included in the IHS
management fee. These facility-specific expenses are passed directly to the
Owner incurred.
a) Computer hardware and software purchased for Owner.
b) Owner specific legal and accounting fees.
c) Owner specific fees associated with union organization
attempts, elections, etc.
d) Other owner specific expenses, including travel and
other out-of-pocket costs.
