$7,000,000.00
LOAN AND SECURITY AGREEMENT
by and between
BONE, MUSCLE & JOINT, INC.
(the "Borrower")
and
HCFP FUNDING, INC.
(the "Lender")
March 28, 1997
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made as of this
28th day of March, 1997, by and between BONE, MUSCLE & JOINT, INC., a Delaware
corporation (the "Borrower"), and HCFP FUNDING, INC., a Delaware corporation
("Lender").
Recitals
A. Borrower desires to establish certain financing arrangements with
and borrow funds from Lender, and Lender is willing to establish such
arrangements for and make loans and extensions of credit to Borrower with
respect to the medical practice of Southern California Orthopedic Institute
Medical Group (the "Medical Group") that is managed by Borrower pursuant to the
Management Services Agreement dated November 22, 1996, as amended, on the terms
and conditions set forth below.
B. The parties desire to define the terms and conditions of their
relationship and to reduce their agreements to writing.
NOW, THEREFORE, in consideration of the promises and covenants
contained in this Agreement, and for other consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
Section 1.1. Account. "Account" means any right to payment for goods
sold or leased or services rendered, whether or not evidenced by an instrument
or chattel paper, and whether or not earned by performance.
Section 1.2. Account Debtor. "Account Debtor" means any Person
obligated on any Account of Borrower, including without limitation, any Insurer
and any Medicaid/Medicare Account Debtor.
Section 1.3. Affiliate. "Affiliate" means, with respect to a specified
Person, any Person directly or indirectly controlling, controlled by, or under
common control with the specified Person, including without limitation their
stockholders and any Affiliates thereof. A Person shall be deemed to control a
corporation or other entity if the Person possesses, directly or
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indirectly, at least 50.1% of the outstanding voting securities or other
ownership interests of such corporation or other entity.
Section 1.4. Agreement. "Agreement" means this Loan and Security
Agreement, as it may be amended or supplemented from time to time.
Section 1.5. Base Rate. "Base Rate" means a rate of interest equal to
one and three quarters percent (1.75%) above the "Prime Rate of Interest".
Section 1.6. Borrowed Money. "Borrowed Money" means any obligation to
repay money, any indebtedness evidenced by notes, bonds, debentures or similar
obligations, any obligation under a conditional sale or other title retention
agreement and the net aggregate rentals under any lease which under GAAP would
be capitalized on the books of the Borrower or which is the substantial
equivalent of the financing of the property so leased.
Section 1.7. Borrower. "Borrower" has the meaning set forth in the
Preamble.
Section 1.8. Borrowing Base. "Borrowing Base" has the meaning set forth
in Section 2.1(d).
Section 1.9. Business Day. "Business Day" means any day on which
financial institutions are open for business in the State of Maryland, excluding
Saturdays and Sundays.
Section 1.10. Closing; Closing Date. "Closing" and "Closing Date" have
the meanings set forth in Section 5.3.
Section 1.11. Collateral. "Collateral" has the meaning set forth in
Section 3.1.
Section 1.12. Commitment Fee. "Commitment Fee" has the meaning set
forth in Section 2.4(a).
Section 1.13. Concentration Account. "Concentration Account" has the
meaning set forth in Section 2.3.
Section 1.14. Controlled Group. "Controlled Group" means a "controlled
group" within the meaning of Section 4001(b) of ERISA.
Section 1.15. INTENTIONALLY DELETED
Section 1.16. Default Rate. "Default Rate" means a rate per annum equal
to three percent (3%) above the then applicable Base Rate.
Section 1.17. ERISA. "ERISA" has the meaning set forth in Section 4.12.
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Section 1.18. Event of Default. "Event of Default" and "Events of
Default" have the meanings set forth in Section 8.1.
Section 1.19. GAAP. "GAAP" means generally accepted accounting
principles applied in a matter consistent with the financial statements referred
to in Section 4.7.
Section 1.20. Governmental Authority. "Governmental Authority" means
and includes any federal, state, District of Columbia, county, municipal, or
other government and any department, commission, board, bureau, agency or
instrumentality thereof, whether domestic or foreign.
Section 1.21. Hazardous Material. "Hazardous Material" means any
substances defined or designated as hazardous or toxic waste, hazardous or toxic
material, hazardous or toxic substance, or similar term, by any environmental
statute, rule or regulation or any Governmental Authority.
Section 1.22. Highest Lawful Rate. "Highest Lawful Rate" means the
maximum lawful rate of interest referred to in Section 2.7 that may accrue
pursuant to this Agreement.
Section 1.23. Insurer. A Person that insures a Patient against certain
of the costs incurred in the receipt by such Patient of Medical Services, or
that has an agreement with the Medical Group to compensate the Medical Group for
providing services to a Patient.
Section 1.24. Lender. "Lender" has the meaning set forth in the Preamble.
Section 1.25. Loan. "Loan" has the meaning set forth in Section 2.1(a).
Section 1.26. Loan Documents. "Loan Documents" means and includes this
Agreement, the Note, and each and every other document now or hereafter
delivered by or on behalf of the Borrower in connection with the transactions
evidenced by this Agreement, as any of them may be amended, modified, or
supplemented from time to time.
Section 1.27. Loan Management Fee. "Loan Management Fee" has the
meaning set forth in Section 2.4(c).
Section 1.28. INTENTIONALLY DELETED
Section 1.29. INTENTIONALLY DELETED
Section 1.30. Maximum Loan Amount. "Maximum Loan Amount" has the meaning
set forth in Section 2.1(a).
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Section 1.31. Medicaid/Medicare Account Debtor. "Medicaid/ Medicare
Account Debtor" means any Account Debtor which is (i) the United States of
America acting under the Medicaid/Medicare program established pursuant to the
Social Security Act, (ii) any state or the District of Columbia acting pursuant
to a health plan adopted pursuant to Title XIX of the Social Security Act or
(iii) any agent, carrier, administrator or intermediary for any of the
foregoing.
Section 1.31A. Medical Group. "Medical Group" has the meaning set forth
in the Recitals to this Agreement.
Section 1.32. Medical Services. Medical and health care services
provided to a Patient, including, but not limited to, medical and health care
services provided to a Patient and performed by the Medical Group which are
covered by a policy of insurance issued by an Insurer, and includes physician
services, nurse and therapist services, dental services, hospital services,
skilled nursing facility services, comprehensive outpatient rehabilitation
services, home health care services, residential and out-patient behavioral
healthcare services, and medicine or health care equipment provided by the
Medical Group to a Patient for a necessary or specifically requested valid and
proper medical or health purpose.
Section 1.33. Note. "Note" has the meaning set forth in Section 2.1(c).
Section 1.34. Obligations. "Obligations" has the meaning set forth in
Section 3.1.
Section 1.35. Patient. Any Person receiving Medical Services from the
Medical Group and all Persons legally liable to pay the Medical Group for such
Medical Services other than Insurers.
Section 1.36. Permitted Liens. "Permitted Liens" means: (a) liens for
taxes not delinquent, or which are being contested in good faith and by
appropriate proceedings which suspend the collection thereof and in respect of
which adequate reserves have been made (provided that such proceedings do not,
in Lender's reasonable discretion, involve any substantial risk of the sale,
loss or forfeiture of such property or assets or any interest therein); (b)
deposits or pledges to secure obligations under workmen's compensation, social
security or similar laws, or under unemployment insurance; (c) deposits or
pledges to secure bids, tenders, contracts (other than contracts for the payment
of money), leases, statutory obligations, surety and appeal bonds and other
obligations of like nature arising in the ordinary course of business; (d)
mechanic's, workmen's, materialmen's or other like liens arising in the ordinary
course of business with respect to obligations which are not due, or which are
being contested in good faith by appropriate proceedings which suspend the
collection thereof and in respect of which adequate reserves have been made
(provided that such proceedings do not, in Lender's reasonable discretion,
involve any substantial risk of the sale, loss or forfeiture of such property or
assets or any interest therein); (e) liens and encumbrances in favor of Lender;
(f) liens granted in connection with the lease or purchase of property or assets
financed by borrowings permitted by
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Section 7.1 (provided, however, that no such borrowing permitted by Section 7.1
may be secured by liens on any of the Collateral); (g) judgment liens not
affecting the Collateral to the extent the entry of such judgments does not
constitute an Event of Default under the terms of this Agreement; (h) statutory
landlord's liens not affecting the Collateral under leases to which the Borrower
or any of its Subsidiaries is a party; (i) zoning restrictions, easements,
rights of way, licenses and restrictions on the use of real property or minor
irregularities in title thereto which do not materially impair the use or value
of any such real property; (j) liens not affecting the Collateral securing
obligations under capital leases to the extent such capital leases are permitted
by the provisions of this Agreement and (k) liens set forth on Schedule 1.36.
Section 1.37. Person. "Person" means an individual, partnership,
corporation, trust, joint venture, joint stock company, limited liability
company, association, unincorporated organization, Governmental Authority, or
any other entity.
Section 1.38. Plan. "Plan" has the meaning set forth in Section 4.12.
Section 1.39. Premises. "Premises" has the meaning set forth in Section
4.14.
Section 1.40. Prime Rate of Interest. "Prime Rate of Interest" means
that rate of interest designated by Fleet National Bank of Connecticut, N.A., or
any successor thereto, as the same may from time to time fluctuate.
Section 1.41. Prohibited Transaction. "Prohibited Transaction" means a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975(c)(1) of the Internal Revenue Code.
Section 1.42. Qualified Account. "Qualified Account" means an Account
of Borrower generated in the ordinary course of the Medical Group 's business
from the sale of goods or rendition of Medical Services which Lender, in its
reasonable judgment, deems to be a Qualified Account. Without limiting the
generality of the foregoing, no Account shall be a Qualified Account if: (a) the
Account or any portion thereof is payable by an individual beneficiary,
recipient or subscriber individually and not to Borrower by a Medicaid/Medicare
Account Debtor or an Insurer; (b) the Account remains unpaid more than one
hundred fifty (150) days past the invoice date; (c) the Account is subject to
any defense, set-off, counterclaim, deduction, discount, credit, chargeback,
freight claim, allowance, or adjustment of any kind (but only to the extent
thereof); (d) any part of any goods the sale of which has given rise to the
Account has been returned, rejected, lost, or damaged prior to delivery; (e) if
the Account arises from the sale of goods by the Medical Group, such sale was
not an absolute sale or on consignment or on approval or on a sale-or-return
basis or subject to any other repurchase or return agreement, or such goods have
not been shipped to the Account Debtor; (f) if the Account arises from the
performance of services, such services have not actually been performed or were
undertaken in violation of any law; (g) the Account is subject to a lien other
than a Permitted Lien; (h) the Borrower knows or should have known of the
bankruptcy, receivership, reorganization, or
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insolvency of the Account Debtor obligated on the Account; (i) the Account is
evidenced by chattel paper or an instrument of any kind, or has been reduced to
judgment; (j) the Account is an Account of an Account Debtor domiciled outside
the United States; (k) the Account Debtor is an Affiliate or subsidiary of
Borrower; (l) more than twenty percent (20%) of the aggregate balance of all
Accounts owing from the Account Debtor obligated on the Account are outstanding
more than one hundred eighty (180) days past their invoice date; (m) fifty
percent (50%) or more of the aggregate unpaid Accounts from any individual
Account Debtor are not deemed Qualified Accounts hereunder; (n) the total unpaid
Accounts of the Account Debtor, except for a Medicaid/Medicare Account Debtor,
exceed thirty percent (30%) of the net amount of all Qualified Accounts
(including Medicaid/Medicare Account Debtors) and such Account Debtor (if an
Insurer) has a Best's rating lower than A; (o) any covenant, representation or
warranty contained in the Loan Documents with respect to such Account has been
breached; or (p) the Account fails to meet such other specifications and
requirements which may from time to time be established by Lender in its
reasonable credit judgment.
Section 1.43. Reportable Event. "Reportable Event" means a "reportable
event" as defined in Section 4043(b) of ERISA.
Section 1.44. Revolving Credit Loan. "Revolving Credit Loan" has the
meaning set forth in Section 2.1(b).
Section 1.45. Term. "Term" has the meaning set forth in Section 2.8.
ARTICLE II
LOAN
Section 2.1. Terms.
(a) The maximum aggregate principal amount of credit extended by
Lender to Borrower hereunder (the "Loan") that will be outstanding at any time
is Seven Million and No/100 Dollars ($7,000,000.00) (the "Maximum Loan Amount").
(b) The Loan shall be in the nature of a revolving line of credit,
and shall include sums advanced and other credit extended by Lender to or for
the benefit of the Borrower from time to time under this Article II (each a
"Revolving Credit Loan") up to the Maximum Loan Amount depending upon the
availability in the Borrowing Base, the requests of Borrower pursuant to the
terms and conditions of Section 2.2 below, and on such other basis as Lender may
reasonably determine. The outstanding principal balance of the Loan may
fluctuate from time to time, be reduced by repayments made by Borrower (which
may be made without penalty or premium), and may be increased or reborrowed by
future Revolving Credit Loans, advances and other extensions of credit to or for
the benefit of Borrower, and shall be due and payable in full upon the
expiration of the Term. For purposes of this Agreement, any determination as to
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whether there is ability within the Borrowing Base for advances or extensions of
credit shall be made by Lender in its reasonable discretion and is final and
binding upon Borrower absent manifest error.
(c) At Closing, Borrower shall execute and deliver to Lender a
promissory note evidencing the Borrower's unconditional obligation to repay
Lender for Revolving Credit Loans, advances, and other extensions of credit made
under the Loan, in the form of Exhibit A to this Agreement (the "Note"), dated
the date hereof, payable to the order of Lender in accordance with the terms
thereof. The Note shall bear interest from the date thereof until repaid, with
interest payable monthly in arrears on the first Business Day of each month, at
a rate per annum (on the basis of the actual number of days elapsed over a year
of 360 days) equal to the Base Rate, provided that after the occurrence and
during the continuation of an Event of Default such rate shall be equal to the
Default Rate. Each Revolving Credit Loan, advance and other extension of credit
shall be deemed evidenced by the Note, which is deemed incorporated by reference
herein and made a part hereof.
(d) Subject to the terms and conditions of this Agreement, advances
under the Loan shall be made against a borrowing base equal to eighty percent
(80%) of Qualified Accounts due and owing from any Medicaid/Medicare, Insurer or
other Account Debtor (the "Borrowing Base").
Section 2.2. Loan Administration. Borrowing under the Loan shall be as
follows:
(a) A request for a Revolving Credit Loan shall be made, or shall
be deemed to be made, in the following manner: (i) Borrower may give Lender
notice of its intention to borrow, in which notice Borrower shall specify the
amount of the proposed borrowing and the proposed borrowing date, not later than
2:00 p.m. Eastern time one (1) Business Day prior to the proposed borrowing
date; provided, however, that no such request may be made at a time when there
exists an Event of Default; and (ii) the becoming due of any amount required to
be paid under this Agreement, whether as interest or for any other Obligation,
shall be deemed irrevocably to be a request for a Revolving Credit Loan on the
day after the due date in the amount required to pay such interest or other
Obligation if not paid on the due date thereof.
(b) Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each Revolving Credit Loan requested, or deemed to be requested, as
follows: (i) the proceeds of each Revolving Credit Loan requested under
subsection 2.2(a)(i) shall be disbursed by Lender by wire transfer to such bank
account as may be agreed upon by Borrower or Lender from time to time or
elsewhere if pursuant to written direction from Borrower; and (ii) the proceeds
of each Revolving Credit Loan requested under subsection 2.2(a)(ii) shall be
disbursed by Lender by way of direct payment of the relevant interest or other
Obligation.
(c) All Revolving Credit Loans, advances and other extensions of
credit to or for the benefit of Borrower shall constitute one general Obligation
of Borrower, and shall be secured by Lender's lien upon all of the Collateral.
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(d) Lender shall enter all Revolving Credit Loans as debits to a
loan account in the name of Borrower and shall also record in said loan account
all payments, prepayments and repayments made by Borrower on any Obligations and
all proceeds of Collateral which are indefeasibly paid to Lender, and may record
therein, in accordance with customary accounting practice, other debits and
credits, including interest and all charges and expenses properly chargeable to
Borrower.
(e) Lender will account to Borrower monthly with a statement of
Revolving Credit Loans, charges and payments made pursuant to this Agreement,
and such account rendered by Lender shall be deemed final, binding and
conclusive upon Borrower unless Lender is notified by Borrower in writing to the
contrary within thirty (30) days of the date each accounting is mailed to
Borrower. Such notice shall be deemed an objection to those items specifically
objected to therein.
Section 2.3. Collections, Disbursements, Borrowing Availability, and
Lockbox Account. Borrower shall maintain a depository account (the "Depository
Account") with First Union National Bank of Florida (the "Depository Bank"),
subject to the provisions of this Agreement, and shall execute with the
Depository Bank a Depository Agreement in the form attached as Exhibit B, and
such other agreements related thereto as Lender may reasonably require. Borrower
shall ensure that all collections of Accounts are paid directly from Account
Debtors into a depository account in the name of the Medical Group, that
collected funds in such account are swept on a daily basis from the Medical
Group depository account to the Depository Account, and that all collected funds
paid into the Depository Account are immediately transferred into a depository
account maintained by Lender at Bank One Arizona, N.A. or First Bank, N.A., as
determined by Lender in its reasonable discretion and communicated to Borrower
(the "Concentration Account"). Lender shall apply, on a daily basis, all
collected funds transferred into the Concentration Account pursuant to this
Section 2.3 to reduce the outstanding indebtedness under the Revolving Credit
Loans. To the extent that any collections of Accounts or proceeds of other
Collateral are not sent to the Depository Account by the Medical Group but are
received by Borrower, such collections shall be held in trust for the benefit of
Lender and immediately remitted, in the form received, to the Concentration
Account immediately upon receipt by Borrower. All funds transferred from the
Concentration Account for application to Borrower's indebtedness to Lender shall
be applied to reduce the Loan balance on the date received in the Concentration
Account, but for purposes of calculating interest shall be subject to a nine (9)
Business Day clearance period. If as the result of collections of Accounts
pursuant to the terms and conditions of this Section 2.3 a credit balance exists
with respect to the Concentration Account, such credit balance shall not accrue
interest in favor of Borrower, but shall be available to Borrower at any time or
times for so long as no Event of Default exists.
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Section 2.4. Fees.
(a) At Closing, Borrower shall unconditionally pay to Lender a
commitment fee equal to five-sixths of one percent (0.8333%) of the Maximum Loan
Amount (the "Commitment Fee").
(b) For so long as the Loan is available to Borrower, Borrower
unconditionally shall pay to Lender a monthly usage fee (the "Usage Fee") equal
to one twelfth (1/12th) of one percent (0.08333%) of the average amount by which
the Maximum Loan Amount exceeds the average amount of the outstanding principal
balance of the Revolving Credit Loans during the preceding month. The Usage Fee
shall be payable monthly in arrears on the first Business Day of each successive
calendar month.
(c) For so long as the Loan is available to Borrower, Borrower
unconditionally shall pay to Lender a monthly loan management fee (the "Loan
Management Fee") equal to one tenth of one percent (0.10%) of the average amount
of the outstanding principal balance of the Revolving Credit Loans during the
preceding month. The Loan Management Fee shall be payable monthly in arrears on
the first day of each successive calendar month.
(d) Borrower shall pay to Lender all out-of-pocket audit and
appraisal fees in connection with audits and appraisals of Borrower's books and
records, which shall be due and payable on the first Business Day of the month
following the date of issuance by Lender of a request for payment thereof to
Borrower; provided, however, that except during the existence of an Event of
Default such audits and appraisals shall be limited to two per twelve month
period.
(e) Borrower shall pay to Lender, on demand, any and all fees,
costs or expenses which Lender pays to a bank or other similar institution
arising out of or in connection with (i) the forwarding to Borrower or any other
Person on behalf of Borrower, by Lender, of proceeds of Revolving Credit Loans
made by Lender to Borrower pursuant to this Agreement, and (ii) the depositing
for collection, by Lender of any check or item of payment received or delivered
to Lender on account of Obligations.
Section 2.5. Payments. Principal payable on account of Revolving Credit
Loans shall be payable by Borrower to Lender immediately upon the earliest of
(i) the receipt by Borrower or Lender of any proceeds of any of the Collateral,
to the extent of such proceeds, (ii) the occurrence of an Event of Default if
the Revolving Credit Loan and the maturity of the payment of the Obligations are
accelerated by the Lender, or (iii) the termination of this Agreement pursuant
to Section 2.8 hereof; provided, however, that if any Revolving Credit Loan made
by Lender in excess of the Borrowing Base shall exist at any time, Borrower
shall, immediately upon demand, repay such overadvance. Interest accrued on the
Revolving Credit Loans shall be due on the earliest of (i) the first Business
Day of each month (for the immediately preceding month), computed on the last
calendar day of the preceding month, (ii) the occurrence of an Event of Default
if the Revolving Credit Loan and the maturity of the payment of the Obligations
are accelerated by the Lender, or (iii) the termination of this Agreement
pursuant to Section 2.8
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hereof. Except to the extent otherwise set forth in this Agreement, all payments
of principal and of interest on the Loan, all other charges and any other
obligations of Borrower hereunder, shall be made to Lender to the Concentration
Account, in immediately available funds.
Section 2.6. Use of Proceeds. The proceeds of Lender's advances under
the Loan shall be used solely for general corporate purposes of Borrower.
Section 2.7. Interest Rate Limitation. The parties intend to conform
strictly to the applicable usury laws in effect from time to time during the
term of the Loan. Accordingly, if any transaction contemplated hereby would be
usurious under such laws, then notwithstanding any other provision hereof: (a)
the aggregate of all interest that is contracted for, charged, or received under
this Agreement or under any other Loan Document shall not exceed the maximum
amount of interest allowed by applicable law (the "Highest Lawful Rate"), and
any excess shall be promptly credited to Borrower by Lender (or, to the extent
that such consideration shall have been paid, such excess shall be promptly
refunded to Borrower by Lender); (b) neither Borrower nor any other Person now
or hereafter liable hereunder shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Highest Lawful Rate; and (c)
the effective rate of interest shall be reduced to the Highest Lawful Rate. All
sums paid, or agreed to be paid, to Lender for the use, forbearance, and
detention of the debt of Borrower to Lender shall, to the extent permitted by
applicable law, be allocated throughout the full term of the Note until payment
is made in full so that the actual rate of interest does not exceed the Highest
Lawful Rate in effect at any particular time during the full term thereof. If at
any time the rate of interest under the Note exceeds the Highest Lawful Rate,
the rate of interest to accrue pursuant to this Agreement shall be limited,
notwithstanding anything to the contrary herein, to the Highest Lawful Rate, but
any subsequent reductions in the Base Rate shall not reduce the interest to
accrue pursuant to this Agreement below the Highest Lawful Rate until the total
amount of interest accrued equals the amount of interest that would have accrued
if a varying rate per annum equal to the interest rate under the Note had at all
times been in effect.
Section 2.8. Term.
(a) Subject to Lender's right to cease making Revolving Credit
Loans to Borrower upon or after any Event of Default, this Agreement shall be in
effect for a period of two (2) years from the Closing Date, unless terminated as
provided in this Section 2.8 (the "Term"), and this Agreement shall be renewed
for one-year periods thereafter upon the mutual written agreement of the
parties; provided that without limiting the generality of the foregoing,
Borrower shall have the right to request, and Lender shall consider in good
faith, the renewal during the period commencing 14 months prior to the
expiration of the Term.
(b) Notwithstanding anything herein to the contrary, Lender may
terminate this Agreement without notice upon or after the occurrence and during
the continuation of an Event of Default.
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(c) Upon at least five (5) days prior written notice to Lender,
Borrower may terminate this Agreement, provided that, at the effective date of
such termination, Borrower shall pay to Lender (in addition to the then
outstanding principal, accrued interest and other Obligations owing under the
terms of this Agreement and any other Loan Documents) as liquidated damages for
the loss of bargain and not as a penalty, an amount equal to (i) two percent
(2%) of the Maximum Loan Amount if the effective date of such termination by
Borrower is on or prior to the first annual anniversary of the Closing Date, and
(ii) one percent (1%) of the Maximum Loan Amount if the effective date of such
termination by Borrower is after the first annual anniversary of the Closing
Date and prior to the second annual anniversary of the Closing Date.
(d) All of the Obligations shall be immediately due and payable
upon the termination date stated in any notice of termination of this Agreement.
All undertakings, agreements, covenants, warranties, and representations, of
Borrower contained in the Loan Documents shall survive any such termination and
Lender shall retain its liens in the Collateral and all of its rights and
remedies under the Loan Documents notwithstanding such termination until
Borrower has paid the Obligations to Lender, in full, in immediately available
funds.
ARTICLE III
COLLATERAL
Section 3.1. Generally. As security for the payment of all liabilities
of Borrower to Lender under this Agreement, including without limitation: (i)
indebtedness evidenced under the Note, repayment of Revolving Credit Loans,
advances and other extensions of credit, all fees and charges owing by Borrower,
and all other liabilities and obligations of every kind or nature whatsoever of
Borrower to Lender, whether now existing or hereafter incurred, joint or
several, matured or unmatured, direct or indirect, primary or secondary, related
or unrelated, due or to become due, including but not limited to any extensions,
modifications, substitutions, increases and renewals thereof, (ii) the payment
of all amounts advanced by Lender to preserve, protect, defend, and enforce its
rights hereunder and in the following property in accordance with the terms of
this Agreement, and (iii) the payment of all expenses incurred by Lender in
connection therewith (collectively, the "Obligations"), Borrower hereby assigns
and grants to Lender a continuing first priority lien on and security interest
in, upon, and to the following property (the "Collateral"):
(a) All of Borrower's now-owned and hereafter acquired or arising
Accounts, accounts receivable and rights to payment of every kind and
description, and any contract rights, chattel paper, documents and instruments
with respect thereto;
(b) All of Borrower's now owned and hereafter acquired or arising
general intangibles of every kind and description pertaining to its Accounts,
accounts receivable and other rights to payment, including, but not limited to,
all existing and future customer lists,
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choses in action, claims, books, records, contracts, returned and unearned
insurance premiums, rights and claims under insurance policies, and computer
information, software, records, and data related to the Accounts;
(c) All of Borrower's monies and other property of every kind and
nature now or at any time or times hereafter in the possession of or under the
control of Lender or a bailee or Affiliate of Lender; and
(d) The proceeds (including, without limitation, insurance
proceeds) of all of the foregoing.
Section 3.2. Lien Documents. At Closing and thereafter as Lender deems
necessary in its reasonable discretion, Borrower shall execute and deliver to
Lender, or have executed and delivered (all in form and substance satisfactory
to Lender in its sole discretion):
(a) UCC-1 Financing statements pursuant to the Uniform Commercial
Code in effect in the jurisdiction(s) in which Borrower operates, which Lender
may file in any jurisdiction where any Collateral is or may be located and in
any other jurisdiction that Lender deems appropriate; provided that a carbon,
photographic, or other reproduction or other copy of this Agreement or of a
financing statement is sufficient as and may be filed in lieu of a financing
statement; and
(b) Any other agreements, documents, instruments, and writings
deemed reasonably necessary by Lender or as Lender may otherwise request from
time to time in its reasonable discretion to evidence, perfect, or protect
Lender's lien and security interest in the Collateral required hereunder.
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Section 3.3. Collateral Administration.
(a) All Collateral (except deposit accounts) will at all times be
kept by Borrower at its principal office(s) as set forth on Exhibit C hereto and
shall not, without prior notice to Lender, be moved therefrom.
(b) Borrower shall keep accurate and complete records of its
Accounts and all payments and collections thereon and shall submit to Lender on
such periodic basis as Lender shall reasonably request a sales and collections
report for the preceding period, in form reasonably satisfactory to Lender. In
addition, if Borrower's chief financial officer has actual knowledge that
Accounts in an aggregate face amount in excess of $50,000.00 have become
ineligible because they fall within one of the specified categories of
ineligibility set forth in the definition of Qualified Accounts or otherwise,
Borrower shall notify Lender of such occurrence on the first Business Day
following such occurrence and the Borrowing Base shall thereupon be adjusted to
reflect such occurrence. If requested by Lender upon an Event of Default,
Borrower shall execute and deliver to Lender formal written assignments of all
of its Accounts weekly or daily, which shall include all Accounts that have been
created since the date of the last assignment, together with copies of claims,
invoices or other information related thereto.
(c) Whether or not an Event of Default has occurred, any of
Lender's officers, employees or agents shall have the right, at any time or
times hereafter, in the name of Lender or any designee of Lender to verify the
validity, amount or any other matter relating to any Accounts by mail,
telephone, telegraph or otherwise. Borrower shall cooperate fully with Lender in
an effort to facilitate and promptly conclude such verification process.
(d) To expedite collection, Borrower shall endeavor in the first
instance to make collection of its Accounts for Lender. Lender retains the right
at all times after the occurrence and during the continuation of an Event of
Default, subject to applicable law regarding Medicaid/Medicare Account Debtors,
to notify Account Debtors that Accounts have been assigned to Lender and to
collect Accounts directly in its own name and to charge the collection costs and
expenses, including attorneys' fees, to Borrower.
Section 3.4. Other Actions. In addition to the foregoing, Borrower (i)
shall, upon Lender's request, provide prompt written notice to each private
indemnity, managed care or other Insurer who either is currently an Account
Debtor or becomes an Account Debtor at any time following the date hereof that
the Lender has been granted a first priority lien and security interest in, upon
and to all Accounts applicable to such Insurer, and (ii) shall do anything
further that may be lawfully required by Lender to secure Lender and effectuate
the intentions and objects of this Agreement, including but not limited to the
execution and delivery of continuation statements, amendments to financing
statements, and any other documents required hereunder. At Lender's request,
Borrower shall also immediately deliver to Lender all items for which
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Lender must receive possession to obtain a perfected security interest. Borrower
shall, on Lender's demand, deliver to Lender all notes, certificates, and
documents of title, chattel paper, warehouse receipts, instruments, and any
other similar instruments constituting Collateral.
Section 3.5. Searches. Prior to Closing, and thereafter (as and when
requested by Lender in its reasonable discretion), Borrower shall obtain and
deliver to Lender the following documents (the results of which are to be
consistent with Borrower's representations and warranties under this Agreement),
all at its own expense:
(a) Uniform Commercial Code searches with the Secretary of State
and local filing offices of each jurisdiction where Borrower maintains its
executive offices, a place of business, or assets;
(b) Judgment, federal tax lien and corporate and partnership tax
lien searches, in each jurisdiction searched under clause (a) above; and
(c) Good standing certificates showing Borrower to be in good
standing in its state of incorporation and in each other state in which it is
doing and presently intends to do business for which qualification is required.
Section 3.6. Power of Attorney. Each of the officers of Lender is
hereby irrevocably made, constituted and appointed the true and lawful attorney
for Borrower (without requiring any of them to act as such) effective upon the
occurrence and during the continuance of an Event of Default, with full power of
substitution to do the following: (a) endorse the name of Borrower upon any and
all checks, drafts, money orders, and other instruments for the payment of money
that are payable to Borrower and constitute collections on Borrower's Accounts;
(b) execute in the name of Borrower any financing statements, schedules,
assignments, instruments, documents, and statements that Borrower is obligated
to give Lender hereunder (provided that it deliver copies of the foregoing
promptly to the Borrower); and (c) do such other and further acts and deeds in
the name of Borrower that Lender may deem necessary or desirable to enforce any
Account or other Collateral or perfect Lender's security interest or lien in any
Collateral.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender, and shall be deemed to
represent and warrant on each day on which any Revolving Credit Loans shall be
borrowed, that:
Section 4.1. Subsidiaries. Except as set forth in Schedule 4.1,
Borrower has no subsidiaries.
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Section 4.2. Organization and Good Standing. Borrower is a corporation
duly organized, validly existing, and in good standing under the laws of its
state of incorporation, is in good standing as a foreign corporation in each
jurisdiction in which the character of the properties owned or leased by it
therein or the nature of its business makes such qualification necessary except
where the failure to be so qualified would not have a material adverse effect on
the business, properties, condition (financial or otherwise) or operations of
the Borrower and its Subsidiaries taken as a whole or on the ability of the
Borrower to perform its obligations under the Loan Documents (a "Material
Adverse Effect"), has the corporate power and authority to own its assets and
transact the business in which it is engaged, and has obtained all material
certificates, licenses and qualifications required under all laws, regulations,
ordinances, or orders of public authorities necessary for the ownership and
operation of all of its properties and transaction of its business.
Section 4.3. Authority. Borrower has full corporate power and authority
to enter into, execute, and deliver this Agreement and to perform its
obligations hereunder, to borrow the Loan, to execute and deliver the Note, and
to incur and perform the obligations provided for in the Loan Documents, all of
which have been duly authorized by all necessary corporate action. No consent or
approval of shareholders of, or lenders to, Borrower and no consent, approval,
filing or registration with any Governmental Authority is required as a
condition to the validity of the Loan Documents or the performance by Borrower
of its obligations hereunder.
Section 4.4. Binding Agreement. This Agreement and all other Loan
Documents constitute, and the Note, when issued and delivered pursuant hereto
for value received, will constitute, the valid and legally binding obligations
of Borrower, enforceable against Borrower in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws generally affecting creditors' rights or remedies..
Section 4.5. Litigation. Except as disclosed in Schedule 4.5, there are
no actions, suits, proceedings or investigations pending or threatened, to
Borrower's knowledge, against Borrower before any court or arbitrator or before
or by any Governmental Authority which, in any one case or in the aggregate,
could reasonably be expected to have a Material Adverse Effect. Borrower is not
in default with respect to any order of any court, arbitrator, or Governmental
Authority applicable to Borrower or its properties.
Section 4.6. No Conflicts. The execution and delivery by Borrower of
this Agreement and the other Loan Documents do not, and the performance of its
obligations thereunder will not, violate, conflict with, constitute a default
under, or result in the creation of a lien or encumbrance upon the property of
Borrower under: (a) any provision of Borrower's certificate of incorporation or
bylaws, (b) any provision of any law, rule, or regulation applicable to
Borrower, or (c) any of the following: (i) any material indenture or other
material agreement or instrument to which Borrower is a party or by which
Borrower or its property is bound; or (ii) any judgment, order or decree of any
court, arbitration tribunal, or Governmental Authority having jurisdiction over
Borrower which is applicable to Borrower.
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Section 4.7. Financial Condition. The financial statements of the
Borrower as of November 30, 1996, certified by the chief financial officer of
the Borrower, which have been delivered to Lender, fairly present in all
material respects the financial condition of the Borrower and the results of its
operations and changes in financial condition as of the dates and for the
periods referred to, and have been prepared in accordance with GAAP (subject to
year-end audit adjustments and the absence of footnote disclosure). There are no
material unrealized or anticipated liabilities, direct or indirect, fixed or
contingent, of the Borrower as of the dates of such financial statements which
are not reflected therein or in the notes thereto. There has been no material
adverse change in the business, properties, condition (financial or otherwise)
or operations of the Borrower since December 31, 1996. The Borrower's fiscal
year ends on December 31. The federal tax identification number of Borrower is
00-0000000.
Section 4.8. No Default. Borrower is not in default under or with
respect to any obligation which would cause a Material Adverse Effect. No Event
of Default or event which, with the giving of notice or lapse of time, or both,
could become an Event of Default, has occurred and is continuing.
Section 4.9. Title to Properties. Borrower has good and marketable
title to its properties and assets, including the Collateral and the properties
and assets reflected in the financial statements described in Section 4.7,
subject to no lien, mortgage, pledge, encumbrance or charge of any kind, other
than Permitted Liens. Borrower has not agreed or consented to cause any of its
properties or assets whether owned now or hereafter acquired to be subject in
the future (upon the happening of a contingency or otherwise) to any lien,
mortgage, pledge, encumbrance or charge of any kind other than Permitted Liens.
Section 4.10. Taxes. Borrower has filed, or has obtained extensions for
the filing of, all federal, state and other tax returns which are required to be
filed, and has paid all taxes shown as due on those returns and all assessments,
fees and other amounts due as of the date hereof except for taxes being
contested in good faith by appropriate proceedings. All tax liabilities of
Borrower were, as of December 31, 1996 and are now, adequately provided for on
Borrower's books. No tax liability has been asserted by the Internal Revenue
Service or other taxing authority against Borrower for taxes in excess of those
already paid.
Section 4.11. Securities and Banking Laws and Regulations.
(a) The use of the proceeds of the Loan and Borrower's issuance of
the Note will not directly or indirectly violate or result in a violation of the
Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including without limitation
Regulations U, T, G, or X of the Board of Governors of the Federal Reserve
System. Borrower is not engaged in the business of extending credit for the
purpose of the purchasing or carrying "margin stock" within the meaning of those
regulations. No part of the proceeds of the Loan hereunder will be used to
purchase or carry any margin stock or to extend credit to others for such
purpose.
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(b) Borrower is not an investment company within the meaning of the
Investment Company Act of 1940, as amended, nor is it, directly or indirectly,
controlled by or acting on behalf of any Person which is an investment company
within the meaning of that Act.
Section 4.12. ERISA. Except as described in SCHEDULE 4.12, no employee
benefit plan (a "Plan") subject to the Employee Retirement Income Security Act
of 1974 ("ERISA") and regulations issued pursuant thereto that is maintained by
Borrower or under which Borrower could have any liability under ERISA (a) has
failed to meet minimum funding standards established in Section 302 of ERISA,
(b) has failed to comply with all applicable material requirements of ERISA and
of the Internal Revenue Code, including all applicable material rulings and
regulations thereunder, (c) has engaged in or been involved in a prohibited
transaction (as defined in ERISA) under ERISA or under the Internal Revenue
Code, or (d) has been terminated. Borrower has not assumed, or received notice
of a claim asserted against Borrower for, withdrawal liability (as defined in
the Multi-Employer Pension Plan Amendments Act of 1980, as amended) with respect
to any multi-employer pension plan and is not a member of any Controlled Group
(as defined in ERISA). Borrower has timely made when due all contributions with
respect to any multi-employer pension plan in which it participates and no event
has occurred triggering a claim against Borrower for withdrawal liability with
respect to any multi-employer pension plan in which Borrower participates.
Section 4.13. Compliance with Law. Except as described in SCHEDULE
4.13, Borrower is not in violation of any material statute, rule or regulation
of any Governmental Authority (including, without limitation, any material
statute, rule or regulation relating to employment practices or to
environmental, occupational and health standards and controls) except any
violation that would not have a Material Adverse Effect. Borrower has obtained
all licenses, permits, franchises, and other governmental authorizations
necessary for the ownership of its properties and the conduct of its business
which if not obtained would have a material adverse effect on Borrower and its
Subsidiaries taken as a whole. Borrower is current with all material reports and
documents required to be filed with any state or federal securities commission
or similar Governmental Authority and is in full compliance with all applicable
rules and regulations of such commissions.
Section 4.14. Environmental Matters. No use, exposure, release,
generation, manufacture, storage, treatment, transportation or disposal of
Hazardous Material is occurring on or from any real property on which the
Collateral is located or which is owned, leased or otherwise occupied by
Borrower (the "Premises"), as a result of any action of Borrower, except as
described in SCHEDULE 4.14. All Hazardous Material used, treated, stored,
transported to or from, generated or handled on the Premises, by Borrower, has
been disposed of on or off the Premises by or on behalf of Borrower in a lawful
manner. There are no underground storage tanks present on or under the Premises.
No material environmental, public health or safety hazards exist with respect to
the Premises.
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Section 4.15. Places of Business. As of the Closing Date, the only
places of business of Borrower, and the places where it keeps the Collateral and
records concerning the Collateral, are at the addresses set forth in SCHEDULE
4.15.
Section 4.16. Intellectual Property. Borrower owns or possesses all the
material patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, franchises, licenses, and rights with
respect to the foregoing necessary for the present and planned future conduct of
its business, without, to the Borrower's knowledge, any conflict with the rights
of others. Borrower is not in default of any obligation or undertaking with
respect to such intellectual property or rights which would have a Material
Adverse Effect.
Section 4.17. Stock Ownership. As of the Closing Date, the identity of
the stockholders of record of all classes of the outstanding stock of the
Borrower, together with the respective ownership percentages held by such
stockholders, are as set forth on SCHEDULE 4.17.
Section 4.18. Material Facts. Neither this Agreement nor any other Loan
Document nor any other agreement, document, certificate, or statement furnished
to Lender by or on behalf of Borrower in connection with the transactions
contemplated hereby contains any untrue statement of material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading. To the Borrower's knowledge, there is no fact known
to Borrower that materially adversely affects or in the future may materially
adversely affect the business, operations, affairs or financial condition of
Borrower, or any of its properties or assets.
Section 4.19. Investments, Guarantees, and Certain Contracts. As of the
Closing Date, Borrower does not own or hold any equity or long-term debt
investments in, have any outstanding advances to, have any outstanding
guarantees for the obligations of, or have any outstanding borrowing from, any
Person, except as described on SCHEDULE 4.19.
Section 4.20. Business Interruptions. Within five years prior to the
date hereof, neither the business, property or assets, or operations of Borrower
has been materially adversely affected in any way by any casualty, strike,
lockout, combination of workers, or order of the United States of America or
other Governmental Authority, directed against Borrower. There are no pending
or, to the Borrower's knowledge, threatened labor disputes, strikes, lockouts,
or similar occurrences or grievances against Borrower or its business.
Section 4.21. Names. Within five years prior to the date hereof,
Borrower has not conducted business under or used any other name (whether
corporate, partnership or assumed) other than as shown on SCHEDULE 4.21.
Borrower is the sole owner of all names listed on that Schedule and any and all
business done and invoices issued in such names are Borrower's sales, business,
and invoices. Each trade name of Borrower represents a division or trading style
of Borrower and not a separate Person or independent Affiliate.
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Section 4.22 Joint Ventures. As of the Closing Date, Borrower is not
engaged in any joint venture or partnership with any other Person, except as set
forth on SCHEDULE 4.22.
Section 4.23 Accounts. Lender may rely, in determining which Accounts
are Qualified Accounts, on all statements and representations made by Borrower
with respect to any Account or Accounts. Except in the case of any
representation or statement known by Borrower to be inaccurate when made or
deemed made, the inaccuracy or breach thereof shall result in the applicable
Account ceasing to be a Qualified Account but shall not result in an Event of
Default if the applicable Account or Accounts are for an aggregate amount that
is less than two percent (2%) of the Maximum Loan Amount. Unless otherwise
indicated in writing to Lender, with respect to each Qualified Account:
(a) It is genuine and in all respects what it purports to be, and
has not been reduced by a judgment;
(b) It arises out of a completed, BONA FIDE sale and delivery of
goods or rendition of services by the Medical Group in the ordinary course of
its business and in accordance (in all material respects) with the terms and
conditions of all purchase orders, contracts, or other documents relating
thereto and forming a part of the contract between the Medical Group and the
Account Debtor;
(c) It is for an amount maturing as stated in an invoice covering
such sale or rendition of services;
(d) Such Account, and Lender's security interest therein, is not,
and will not (by voluntary act or omission by Borrower), be in the future,
subject to any lien or any known offset, deduction, defense, dispute,
counterclaim or any other adverse condition, and to the best of Borrower's
knowledge each such Account is absolutely owing to Borrower and is not
contingent in any respect or for any reason;
(e) To the best of Borrower's knowledge there are no facts, events
or occurrences which to Borrower's knowledge in any way impair the validity or
enforceability of any Qualified Accounts;
(f) To the best of Borrower's knowledge the Account Debtor
thereunder had the capacity to contract at the time any contract or other
document giving rise to the Qualified Account was executed;
(g) It has been billed and forwarded to the Account Debtor for
payment in accordance in all material respects with applicable laws and
compliance and conformance in all material respects with any requisite
procedures, requirements and regulations governing payment by such Account
Debtor with respect to such Qualified Account; and
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(h) the Medical Group has obtained and currently has all Medicaid
and Medicare provider numbers, licenses, permits and authorizations to the
extent necessary to ensure the validity of such Qualified Accounts.
Notwithstanding anything in this Agreement to the contrary, Lender
acknowledges and agrees that, where the context requires, all references to
herein to (i) Medical Services provided by Borrower (or language of similar
import), and (ii) contracts and other payment obligations from Insurers and
Medicaid/Medicare Account Debtors to Borrower shall mean and refer to the
Medical Group (as defined in the Recitals to this Agreement) in lieu of
Borrower; provided, however, that such construction shall in no way limit the
scope of any of Borrower's representations, warranties, covenants or Obligations
contained herein or in any of the other Loan Documents.
ARTICLE V
CLOSING AND CONDITIONS OF LENDING
Section 5.1. Conditions Precedent to Agreement. The obligation of
Lender to enter into and perform this Agreement and to make Revolving Credit
Loans is subject to the following conditions precedent:
(a) Lender shall have received two (2) originals of this Agreement
and all other Loan Documents required to be executed and delivered at or prior
to Closing (other than the Note, as to which Lender shall receive only one
original), executed by Borrower and any other required Persons, as applicable.
(b) Lender shall have received all searches and good standing
certificates required by Section 3.5.
(c) Borrower shall have complied and shall then be in compliance
with all the terms, covenants and conditions of the Loan Documents.
(d) There shall have occurred and be continuing no Event of Default
and no event which, with the giving of notice or the lapse of time, or both,
could constitute such an Event of Default.
(e) The representations and warranties contained in Article IV
shall be true and correct.
(f) Lender shall have received copies of all board of directors
resolutions of the Borrower, and other corporate action taken by Borrower to
authorize the execution, delivery and performance of the Loan Documents and the
borrowing of the Loan thereunder, as well as the names and signatures of the
officers of Borrower authorized to execute documents on its behalf
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in connection herewith, all as also certified as of the date hereof by
Borrower's chief financial officer, and such other papers as Lender may require.
(g) Lender shall have received copies, certified as true, correct
and complete by a corporate officer of Borrower, of the certificate of
incorporation of Borrower, with any amendments thereto and all other documents
necessary for performance of the obligations of Borrower under this Agreement
and the other Loan Documents.
(h) Lender shall have received a written opinion of counsel for
Borrower, dated the date hereof, in the form of EXHIBIT D.
(i) Lender shall have received such financial statements, reports,
certifications, and other operational information required to be delivered
hereunder, including without limitation an initial borrowing base certificate
calculating the Borrowing Base.
(j) Lender shall have received the Commitment Fee.
(k) The Depository Accounts and the Concentration Account shall
have been established.
(l) Lender shall have received a certificate of Borrower's chief
financial officer, dated the Closing Date, certifying that all of the conditions
specified in this Section have been fulfilled.
Section 5.2. Conditions Precedent to Advances. Notwithstanding any
other provision of this Agreement, no Loan proceeds, Revolving Credit Loans,
advances or other extensions of credit under the Loan shall be disbursed
hereunder unless the following conditions have been satisfied or waived
immediately prior to such disbursement:
(a) The representations and warranties on the part of Borrower
contained in Article IV of this Agreement shall be true and correct in all
respects at and as of the date of disbursement or advance, as though made on and
as of such date (except to the extent that such representations and warranties
expressly relate solely to an earlier date and except that the references in
Section 4.7 to financial statements shall be deemed to be a reference to the
then most recent annual and interim financial statements of Borrower furnished
to Lender pursuant to Section 6.1 hereof).
(b) No Event of Default or event which, with the giving of notice
or the lapse of time, or both, could become an Event of Default shall have
occurred and be continuing or would result from the making of the disbursement
or advance.
(c) No material adverse change in the condition (financial or
otherwise), properties, business, or operations of Borrower and its Subsidiaries
taken as a whole shall have occurred and be continuing with respect to Borrower
since the date hereof.
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Section 5.3. Closing. Subject to the conditions of this Article V, the
Loan shall be made available on the date as is mutually agreed by the parties
(the "Closing Date") at such time as may by mutually agreeable to the parties
upon the execution hereof (the "Closing") at such place as may be requested by
Lender.
Section 5.4. Waiver of Rights. By completing the Closing hereunder, or
by making advances under the Loan, Lender does not waive a breach of any
representation or warranty of Borrower hereunder or under any other Loan
Document, and all of Lender's claims and rights resulting from any breach or
misrepresentation by Borrower are specifically reserved by Lender.
ARTICLE VI
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that for so long as Borrower may borrow
hereunder and until payment in full of the Note and performance of all other
obligations of Borrower under the Loan Documents:
Section 6.1. Financial Statements and Collateral Reports. Borrower will
furnish to Lender (a) an accounts receivable aging schedule on a form reasonably
acceptable to Lender within fifteen (15) days after the end of each calendar
month; (b) payable aging schedules within fifteen (15) days after the end of
each calendar month; (c) internally prepared monthly financial statements for
Borrower, certified by the chief financial officer of Borrower, within
forty-five (45) days of the end of each calendar month, accompanied by
management analysis and actual versus budget variance reports; (d) if and to the
extent prepared by Borrower, annual projected, profit and loss statements,
balance sheets, and cash flow reports (prepared on a monthly basis) for the
succeeding fiscal year within thirty (30) days before the end of each of
Borrower's fiscal years; (e) internally prepared annual financial statements for
Borrower within sixty (60) days after the end of each of Borrower's fiscal
years; (f) beginning with fiscal year ending December 31, 1996 annual audited
financial statements for the Borrower prepared by Ernst & Young, LLP, or a firm
of independent public accountants reasonably satisfactory to Lender, within one
hundred thirty-five (135) days (or one hundred fifty (150) days in the case of
the 1996 audit) after the end of each of Borrower's fiscal years; (g) promptly
upon receipt thereof, copies of any reports submitted to Borrower by independent
accountants in connection with any interim audit of the books of Borrower and
copies of each management control letter provided to Borrower by independent
accountants; (h) as soon as available, copies of all financial statements and
notices provided by Borrower to all of its stockholders; and (i) such additional
information, reports or statements as Lender may from time to time reasonably
request. Annual financial statements shall set forth in comparative form figures
for the corresponding periods in the prior fiscal year. All financial statements
shall include a balance sheet and statement of earnings and shall be prepared in
accordance with GAAP. All internally prepared financial statements shall be
preliminary, unaudited and subject to year end adjustments.
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Section 6.2. Payments Hereunder. Borrower will make all payments of
principal, interest, fees, and all other payments required hereunder, under the
Loan, and under any other Loan Documents, as and when due.
Section 6.3. Existence, Good Standing, and Compliance with Laws.
Borrower will do or cause to be done all things necessary (a) to obtain and keep
in full force and effect all material corporate existence, rights, licenses,
privileges, and franchises of Borrower necessary to the ownership of its
property or the conduct of its business, and comply in all material respects
with all applicable present and future laws, ordinances, rules, regulations,
orders and decrees of any Governmental Authority having or claiming jurisdiction
over Borrower; and (b) to maintain and protect the properties used or useful in
the conduct of the operations of Borrower, in a prudent manner, including
without limitation the maintenance at all times of such insurance upon its
insurable property and operations as required by law or by Section 6.7 hereof.
Section 6.4. Legality. The Borrower shall make sure that the making of
the Loan and each disbursement or advance under the Loan shall not be subject to
any penalty or special tax (other than withholding taxes), shall not be
prohibited by any governmental order or regulation applicable to Borrower, and
shall not violate any rule or regulation of any Governmental Authority, and
necessary consents, approvals and authorizations of any Governmental Authority
to or of any such disbursement or advance shall have been obtained.
Section 6.5. INTENTIONALLY DELETED.
Section 6.6. Taxes and Charges. Borrower will timely file all tax
reports and pay and discharge all taxes, assessments and governmental charges or
levies imposed upon Borrower, or its income or profits or upon its properties or
any part thereof, before the same shall be in default and prior to the date on
which penalties attach thereto, as well as all lawful claims for labor,
material, supplies or otherwise which, if unpaid, would become a lien or charge
upon the properties or any part thereof of Borrower; PROVIDED, HOWEVER, that the
Borrower shall not be required to pay and discharge or cause to be paid and
discharged any such tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith and by appropriate
proceedings by Borrower, and the Borrower shall have set aside on their books
adequate reserve therefor; and PROVIDED FURTHER, that such deferment of payment
is permissible only so long as Borrower's title to, and its right to use, the
Collateral is not materially adversely affected thereby and Lender's lien and
priority on the Collateral are not materially adversely affected, altered or
impaired thereby.
Section 6.7. Insurance. Borrower will carry adequate public liability
and professional liability insurance with responsible companies reasonably
satisfactory to Lender in such amounts and against such risks as is customarily
maintained by similar businesses and by owners of similar property in the same
general area.
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Section 6.8. General Information. Subject to Section 9.20, Borrower
will furnish to Lender such information as Lender may, from time to time,
reasonably request with respect to the business or financial affairs of
Borrower, and permit upon reasonable notice and only during business hours, any
officer, employee or agent of Lender to visit and inspect any of the properties,
to examine the minute books, books of account and other records, including
management letters prepared by Borrower's auditors, of Borrower, and make copies
thereof or extracts therefrom, and to discuss its and their business affairs,
finances and accounts with, and be advised as to the same by, the accountants
and officers of Borrower, all at such times and as often as Lender may
reasonably require provided that Lender shall give Borrower reasonable
opportunity to participate in any discussions with Borrower's accountants.
Section 6.9. Maintenance of Property. Except as permitted by Section
7.4, Borrower will maintain, keep and preserve all of its properties in good
repair, working order and condition and from time to time make all needful and
proper repairs, renewals, replacements, betterment and improvements thereto, so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
Section 6.10. Notification of Events of Default and Adverse
Developments. Borrower promptly will notify Lender upon the occurrence of: (a)
any Event of Default; (b) any event which, with the giving of notice or lapse of
time, or both, would constitute an Event of Default; (c) any event, development
or circumstance whereby the financial statements previously furnished to Lender
fail in any material respect to present fairly, in accordance with GAAP, the
financial condition and operational results of Borrower as of the date of such
statements; (d) any judicial, administrative or arbitration proceeding pending
against Borrower, and any judicial or administrative proceeding known by
Borrower to be threatened against it which could reasonably be expected to
materially adversely affect its condition (financial or otherwise) or operations
or to expose Borrower to uninsured liability of $250,000.00 or more; (e) any
default claimed by any other creditor for Borrowed Money of Borrower other than
Lender in respect of Borrowed Money in a principal amount in excess of
$250,000.00; and (f) any other development in the business or affairs of
Borrower which would be materially adverse; in each case describing the nature
thereof and (in the case of notification under clauses (a) and (b)) the action
Borrower proposes to take with respect thereto.
Section 6.11. Employee Benefit Plans. Borrower will (a) comply with the
funding requirements of ERISA with respect to the Plans for its employees, or
will promptly satisfy any accumulated funding deficiency that arises under
Section 302 of ERISA; (b) furnish Lender, promptly after filing the same, with
copies of all reports or other statements filed with the United States
Department of Labor, the Pension Benefit Guaranty Corporation, or the Internal
Revenue Service with respect to all Plans, or which Borrower, or any member of a
Controlled Group, may receive from such Governmental Authority with respect to
any such Plans, and (c) promptly advise Lender of the occurrence of any
Reportable Event or Prohibited Transaction with respect to any such Plan and the
action which Borrower proposes to take with respect thereto. Borrower will make
all contributions when due with respect to any multi-employer pension plan in
which it participates and will promptly advise Lender: (a) upon its receipt of
notice of the assertion
- 24 -
against Borrower of a claim for withdrawal liability; (b) upon the occurrence of
any event which would trigger the assertion of a claim for withdrawal liability
against Borrower; and (c) upon the occurrence of any event which would place
Borrower in a Controlled Group as a result of which any member (including
Borrower) thereof may be subject to a claim for withdrawal liability, whether
liquidated or contingent.
Section 6.12. Financing Statements. Borrower shall provide to Lender
evidence satisfactory to Lender as to the due recording of termination
statements, releases of collateral, and Forms UCC-3, and shall cause to be
recorded financing statements on Form UCC-1, duly executed by Borrower and
Lender, in all places necessary to release all existing security interests and
other liens in the Collateral (other than as permitted hereby) and to perfect
and protect Lender's first priority lien and security interest in the
Collateral, as Lender may request.
Section 6.13. Financial Records. Borrower shall keep current and
accurate books of records and accounts in which full and correct entries will be
made of its business transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP.
Section 6.14. Collection of Accounts. Borrower shall continue to
collect its Accounts in the ordinary course of business.
Section 6.15. Places of Business. Borrower shall give ten (10) days'
prior written notice to Lender of any change in the location of any of its
places of business, of the places where its records concerning its Accounts are
kept, of the places where the Collateral is kept, or of the establishment of any
new, or the discontinuance of any existing, places of business.
Section 6.16. Business Conducted. Borrower shall continue in the
business presently conducted by it. Borrower shall not engage, directly or
indirectly, in any line of business substantially different from the business
conducted by it immediately prior to the Closing Date, or engage in business or
lines of business which are not reasonably related thereto.
Section 6.17. Litigation and Other Proceedings. Borrower shall give
prompt notice to Lender of any litigation, arbitration, or other proceeding
before any Governmental Authority against or affecting Borrower if the amount
claimed is more than $250,000.00
Section 6.18. Bank Accounts. Borrower shall assign to Lender all of its
depository and disbursement accounts into which proceeds of accounts are
deposited.
Section 6.19. Submission of Collateral Documents. Borrower will, on
reasonable demand of Lender, but subject to limitations under applicable law and
contractual or other confidentiality obligations, make available to Lender
copies of shipping and delivery receipts evidencing the shipment of goods that
gave rise to an Account, medical records, insurance verification forms,
assignment of benefits, in-take forms or other proof of the satisfactory
- 25 -
performance of services that gave rise to an Account, a copy of the claim or
invoice for each Account and copies of any written contract or order from which
the Account arose. Borrower shall promptly notify Lender if an Account becomes
evidenced or secured by an instrument or chattel paper and upon request of
Lender, will promptly deliver any such instrument or chattel paper to Lender.
Section 6.20. Licensure; Medicaid/Medicare Cost Reports. The Medical
Group will maintain all provider numbers and licenses necessary to ensure the
validity of Qualified Accounts, and take any steps required to comply with any
such new or additional requirements that may be imposed on providers of medical
products and services. If required, all Medicaid/Medicare cost reports will be
properly filed by the Medical Group.
Section 6.21. Officer's Certificates. Together with the monthly
financial statements delivered pursuant to clause (c) of Section 6.1, and
together with the audited annual financial statements delivered pursuant to
clause (f) of that Section, Borrower shall deliver to Lender a certificate of
its chief financial officer, in form and substance reasonably satisfactory to
Lender setting forth:
(a) The information required in order to establish whether Borrower
is in compliance with the requirements of Section 7.18 as of the end of the
period covered by the financial statements then being furnished; and
(b) That the signer has reviewed the relevant terms of this
Agreement, and has made (or caused to be made under his supervision) a review of
the transactions and conditions of Borrower from the beginning of the accounting
period covered by the statements being delivered and that such review has not
disclosed the existence during such period of any condition or event which
constitutes an Event of Default or which is then, or with the passage of time or
giving of notice or both, could become an Event of Default, and if any such
condition or event existed during such period or now exists, specifying the
nature and period of existence thereof and what action Borrower has taken or
proposes to take with respect thereto.
Section 6.22. INTENTIONALLY DELETED.
Section 6.23. Retention of Key Officers. Absent death or disability,
Xxxxxx Xxxxxx, M.D. and Xxxxx Xxxxx shall serve without interruption as
President and Chief Executive Officer, and Chief Financial Officer,
respectively, of Borrower.
- 26 -
ARTICLE VII
NEGATIVE COVENANTS
Borrower covenants and agrees that so long as Borrower may borrow
hereunder and until payment in full of the Note and performance of all other
obligations of the Borrower under the Loan Documents:
Section 7.1. Borrowing. Borrower will not create, incur, assume or
suffer to exist any liability for Borrowed Money without Lender's prior written
consent, which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, Borrower shall be permitted to incur the following: (a) indebtedness
to Lender; (b) indebtedness of Borrower secured by mortgages, encumbrances or
liens expressly permitted or not prohibited by Section 7.3 hereof; (c) accounts
payable to trade creditors and current operating expenses which are not aged
more than one hundred twenty (120) days from the billing date or more than sixty
(60) days from the due date, in each case incurred in the ordinary course of
business and paid within such time period, unless the same are being contested
in good faith and by appropriate and lawful proceedings, and Borrower shall have
set aside such reserves, if any, with respect thereto as are required by GAAP
and deemed adequate by Borrower and its independent accountants; (d) borrowing
incurred in the ordinary course of its business and not exceeding $100,000.00 in
the aggregate outstanding at any one time; (e) borrowed money not to exceed
$250,000.00 in the aggregate outstanding at any one time incurred by the
Borrower or any subsidiary after the Closing Date; provided, that (i) such
Indebtedness for Borrowed Money is incurred on account of purchase money or
finance lease arrangements of assets acquired by the Borrower or a Subsidiary
after the Closing Date, (ii) each such purchase money or finance lease
arrangement does not exceed the cost of the assets acquired or leased; (iii) any
Lien securing such purchase money or finance lease arrangement does not extend
to the Collateral or any assets or property other than that purchased or leased;
(f) capital leases of equipment not to exceed $100,000.00 of aggregate lease
obligations in any calendar year; (g) indebtedness for Borrowed Money as set
forth on Schedule 7.1 of this Agreement. If an Event of Default shall have
occurred, Borrower will not make voluntary prepayments on any existing or future
indebtedness for Borrowed Money to any Person (other than Lender, to the extent
permitted by this Agreement or any subsequent agreement between Borrower and
Lender).
Section 7.2. INTENTIONALLY OMITTED
Section 7.3. Liens and Encumbrances. Borrower will not create, incur,
assume or suffer to exist any mortgage, pledge, lien or other encumbrance of any
kind (including the charge upon property purchased under a conditional sale or
other title retention agreement) upon, or any security interest in, any of its
Collateral, whether now owned or hereafter acquired, except for Permitted Liens.
Section 7.4. Merger, Acquisition, or Sale of Assets. Borrower will not
without Lender's prior written consent, which shall not be unreasonably
withheld, enter into any merger or consolidation with or acquire all or
substantially all of the assets of any Person, and will not sell, lease, or
otherwise dispose of any of the assets except in the ordinary course of its
business except for (a) sales of assets not to exceed $50,000.00 in any calendar
year; (b) asset purchases in
- 27 -
the ordinary course of Borrower's business of acquiring/managing medical
practices (including without limitation purchases of assets from medical
practitioners for use in rendering services under management service agreements
with such practitioners); and (c) sales or dispositions of used or obsolete
equipment no longer useful in the business.
Section 7.5. Sale and Leaseback. Borrower will not, directly or
indirectly, enter into any arrangement whereby Borrower sells or transfers all
or any part of its assets and thereupon and within one year thereafter rents or
leases the assets so sold or transferred without the prior written notice to,
and the express written consent of, Lender, which consent may be withheld in
Lender's sole discretion.
Section 7.6. Distributions and Management Fees. Borrower will not
declare or pay any dividends or other distributions with respect to, purchase,
redeem or otherwise acquire for value any of its outstanding stock now or
hereafter outstanding, or return any capital of its stockholders, nor shall
Borrower pay or become obligated to pay management fees or fees of a similar
nature to any Person; provided, however, that so long as Lender has not notified
Borrower of the existence of an Event Default hereunder, Borrower may make any
such dividends or other distributions or purchase, redeem or otherwise acquire
for value such outstanding stock, return any such capital, or pay any such
management fees or fees of a similar nature subject any other terms and
conditions of this Agreement.
Section 7.7. Loans. Borrower will not make loans or advances to any
Person, other than (i) trade credit extended in the ordinary course of its
business; (ii) advances for business travel and similar temporary advances in
the ordinary course of business to officers, stockholders, directors, and
employees; and (iii) advances to physician groups under management services
agreements.
Section 7.8. Contingent Liabilities. Borrower will not assume,
guarantee, endorse, contingently agree to purchase or otherwise become liable
upon the obligation of any Person, except (i) by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business; and (ii) for Borrowed Money permitted to be incurred under
Section 7.1.
Section 7.9. Subsidiaries. Borrower will not, without Lender's prior
written consent, which shall not be unreasonably withheld, form any subsidiary.
Section 7.10. Compliance with ERISA. Borrower will not permit with
respect to any Plan covered by Title IV of ERISA any Prohibited Transaction or
any Reportable Event.
Section 7.11. INTENTIONALLY DELETED.
Section 7.12. Transactions with Affiliates. Borrower will not enter
into any transaction, including without limitation the purchase, sale, or
exchange of property, or the
- 28 -
loaning or giving of funds to any Affiliate or subsidiary, except in the
ordinary course of business and pursuant to the reasonable requirements of
Borrower's business and upon terms no less favorable to Borrower than it would
obtain in a comparable arm's length transaction with any Person not an Affiliate
or subsidiary, and so long as the transaction is not otherwise prohibited
hereunder. For purposes of the foregoing, Lender consents to the transactions
described on Schedule 7.12.
Section 7.13. Use of Lender's Name. Borrower may disclose to third
parties that Borrower has a borrowing relationship with Lender. Nothing herein
contained is intended to permit or authorize Borrower to make any contract on
behalf of Lender.
Section 7.14. INTENTIONALLY DELETED.
Section 7.15. Contracts and Agreements. Borrower will not become or be
a party to any contract or agreement which would cause the Borrower to breach
this Agreement.
Section 7.16. Margin Stock. Borrower will not carry or purchase any
"margin security" within the meaning of Regulations U, G, T or X of the Board of
Governors of the Federal Reserve System.
Section 7.17. Truth of Statements and Certificates. Borrower will not
furnish to Lender any certificate or other document that contains any untrue
statement of a material fact or that omits to state a material fact necessary to
make it not misleading in light of the circumstances under which it was
furnished.
Section 7.18. Net Worth. Borrower will not at any time allow its net
worth, as computed in accordance with GAAP, to fall below $5,000,000.00
(excluding the effect of accelerated write-offs of intangibles).
- 29 -
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1. Events of Default. Each of the following (individually, an
"Event of Default" and collectively, the "Events of Default") shall constitute
an Event of Default hereunder:
(a) A default in the payment of any installment of principal of, or
interest upon, the Note when due and payable, whether at maturity or otherwise,
which default shall have continued unremedied for a period of five (5) days
after written notice thereof from Lender to Borrower;
(b) A default in the payment of any other charges, fees, or other
monetary obligations owing to Lender arising out of or incurred in connection
with this Agreement when such payment is due and payable, which default shall
have continued unremedied for a period of five (5) days after written notice
from Lender;
(c) A default in the due observance or performance by Borrower of
any other term, covenant or agreement contained in any of the Loan Documents,
which default shall have continued unremedied for a period of twenty (20) days
after written notice from Lender;
(d) If any representation or warranty made by Borrower herein or in
any of the other Loan Documents, any financial statement, or any statement or
representation made in any other certificate, report or opinion delivered in
connection herewith or therewith proves to have been incorrect or misleading in
any material respect when made, which default shall have continued unremedied
for a period of ten (10) days after written notice from Lender;
(e) If any obligation of Borrower (other than its Obligations
hereunder or under any agreement referred to in Section 8.1(r)) for the payment
of Borrowed Money in a principal amount in excess of $250,000.00 is not paid
when due or within any applicable grace period, or such obligation becomes or is
declared to be due and payable prior to the expressed maturity thereof, or there
shall have occurred an event which, with the giving of notice or lapse of time,
or both, would cause any such obligation to become, or allow any such obligation
to be declared to be, due and payable;
(f) If Borrower makes an assignment for the benefit of creditors,
offers a composition or extension to creditors, or makes or sends notice of an
intended bulk sale of any business or assets now or hereafter conducted by
Borrower;
(g) If Borrower files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal for any receiver of
or any trustee for itself or any substantial part of its property, commences any
proceeding relating to itself under any reorganization,
- 30 -
arrangement, readjustment or debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect, or there is commenced
against Borrower any such proceeding which remains undismissed for a period of
sixty (60) days, or any Borrower by any act indicates its consent to, approval
of, or acquiescence in, any such proceeding or the appointment of any receiver
of or any trustee for a Borrower or any substantial part of its property, or
suffers any such receivership or trusteeship to continue undischarged for a
period of sixty (60) days;
(h) If one or more final judgments in excess of $250,000.00 against
Borrower or attachments against its property not fully and unconditionally
covered by insurance shall be rendered by a court of record and shall remain
unpaid, unstated on appeal, undischarged, unbounded and undismissed for a period
of ten (10) days;
(i) A Reportable Event which would constitute grounds for
termination of any Plan covered by Title IV of ERISA or for the appointment by
the appropriate United States District Court of a trustee to administer any such
Plan or for the entry of a lien or encumbrance to secure any deficiency, has
occurred and is continuing thirty (30) days after its occurrence, or any such
Plan is terminated, or a trustee is appointed by an appropriate United States
District Court to administer any such Plan, or the Pension Benefit Guaranty
Corporation institutes proceedings to terminate any such Plan or to appoint a
trustee to administer any such Plan, or a lien or encumbrance is entered to
secure any deficiency or claim;
(j) INTENTIONALLY DELETED.
(k) If there shall occur any uninsured damage to or loss, theft or
destruction of any portion of the Collateral with a fair market value in excess
of $100,000.00;
(l) INTENTIONALLY DELETED.
(m) INTENTIONALLY DELETED.
(n) If Borrower ceases any material portion of its business
operations as presently conducted;
(o) Borrower or any Affiliate of Borrower, shall challenge or
contest, in any action, suit or proceeding, the validity or enforceability of
this Agreement, or any of the other Loan Documents, the legality or the
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Lender;
(p) Borrower shall be criminally indicted or convicted under any
law that would lead to a forfeiture of substantially all of the Collateral.
(q) There shall occur a material adverse change in the financial
condition or business prospects of Borrower and its Subsidiaries taken as a
whole, which default shall have continued unremedied for a period of ten (10)
days after written notice from Lender.
- 31 -
(r) Borrower or the Medical Group shall have breached any of the
material terms of the Tri-Party Agreement executed by Borrower, Lender and the
Medical Group in connection with this Agreement and such breach shall be
continuing, or an Event of Default shall have occurred and be continuing under
any other loan agreement between Borrower (or any of its subsidiaries or other
Affiliates) and Lender (or any Affiliate of Lender) having a loan commitment in
excess of $250,000; provided, however, that if such Event of Default arises
under either Article IV, Article VI or Article VII of a Loan and Security
Agreement that is substantially in the form of this Agreement (or any comparable
provisions in any other form of loan agreement) and pertains to a medical
practice other than the Medical Group, the Event of Default under such other
loan agreement shall not constitute an Event of Default under this Agreement
unless Lender determines, in its reasonable business judgment, that the Event of
Default in question has a material adverse effect on Lender's security interest
in the Collateral under this Agreement or on Borrower and its subsidiaries when
taken as a whole.
Section 8.2. Acceleration. Upon the occurrence and during the
continuation of any of the foregoing Events of Default, the Note shall become
and be immediately due and payable upon declaration to that effect delivered by
Lender to Borrower; provided that, upon the happening of any event specified in
Section 8.1.(g) hereof, the Note shall be immediately due and payable without
declaration or other notice to Borrower.
Section 8.3. Remedies.
(a) In addition to all other rights, options, and remedies granted
to Lender under this Agreement, upon the occurrence and during the continuance
of an Event of Default Lender may (i) terminate the Loan, whereupon all
outstanding Obligations shall be immediately due and payable, (ii) exercise all
other rights granted to it hereunder and all rights under the Uniform Commercial
Code in effect in the applicable jurisdiction(s) and under any other applicable
law, and (iii) exercise all rights and remedies under all Loan Documents now or
hereafter in effect, including the following rights and remedies (which list is
given by way of example and is not intended to be an exhaustive list of all such
rights and remedies):
(i) The right to take possession of, send notices regarding,
and collect directly the Collateral, with or without judicial process, and to
exercise all rights and remedies available to Lender with respect to the
Collateral under the Uniform Commercial Code in effect in the jurisdiction(s) in
which such Collateral is located;
(ii) The right to (by its own means or with judicial
assistance) enter any of Borrower's premises and take possession of the
Collateral, or render it unusable, or dispose of the Collateral on such premises
in compliance with subsection (b), without any liability for rent, storage,
utilities, or other sums, and Borrower shall not resist or interfere with such
action;
(iii) The right to require Borrower at Borrower's expense to
assemble all or any part of the Collateral and make it available to Lender at
any place designated by Lender;
- 32 -
(iv) The right to reduce the Maximum Loan Amount or to use
the Collateral and/or funds in the Concentration Account in amounts up to the
Maximum Loan Amount for any reason; and
(v) The right to relinquish or abandon any Collateral or any
security interest therein.
(b) Borrower agrees that a notice received by it at least five (5)
days before the time of any intended public sale, or the time after which any
private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted
by applicable law, any perishable Collateral which threatens to speedily decline
in value or which is sold on a recognized market may be sold immediately by
Lender without prior notice to Borrower. At any sale or disposition of
Collateral, Lender may (to the extent permitted by applicable law) purchase all
or any part of the Collateral, free from any right of redemption by Borrower,
which right is hereby waived and released. At any sale or disposition of
Collateral, Lender may (to the extent permitted by applicable law) purchase all
or any part of the Collateral, free from any right of redemption by Borrower,
which right is hereby waived and released. Borrower covenants and agrees not to
interfere with or impose any obstacle to Lender's exercise of its rights and
remedies with respect to the Collateral.
Section 8.4. Nature of Remedies. Lender shall have the right to proceed
against all or any portion of the Collateral to satisfy, in any order, (a) the
liabilities and Obligations of Borrower to Lender under this Agreement, or (b)
upon the occurrence of an Event of Default under the Loan and Security Agreement
relating to Orthopaedic Associates of Bethlehem, Inc./ Lehigh Valley Bone,
Muscle & Joint Group, L.L.C. (the "Pennsylvania Loan Agreement") that causes an
Event of Default hereunder pursuant to Section 8.1(r) above, the liabilities and
obligations of Borrower to Lender thereunder, or (c) upon the occurrence of an
Event of Default under the Loan and Security Agreement relating to South Texas
Spinal Clinic, P.A. (the "San Antonio Loan Agreement") that causes an Event of
Default hereunder pursuant to Section 8.1(r) above, the liabilities and
obligations of Borrower to Lender thereunder. All rights and remedies granted
Lender hereunder and under any agreement referred to herein, or otherwise
available at law or in equity, shall be deemed concurrent and cumulative, and
not alternative remedies, and Lender may proceed with any number of remedies at
the same time until the Loan, and all other existing and future liabilities and
obligations of Borrower to Lender (including, without limitation, those arising
under the Pennsylvania Loan Agreement and the San Antonio Loan Agreement), are
satisfied in full. The exercise of any one right or remedy shall not be deemed a
waiver or release of any other right or remedy, and Lender, upon the occurrence
of an Event of Default, may proceed against Borrower, and/or the Collateral, at
any time, under any agreement, with any available remedy and in any order.
Notwithstanding anything in this Section 8.4 to the contrary, Lender
acknowledges and agrees that if as of September 1, 1997 there is no continuing
Event of Default under either this Agreement, the Pennsylvania Loan Agreement or
the San Antonio Loan Agreement, the cross-collateralization provisions of this
Section 8.4 involving the Pennsylvania Loan Agreement and the San Antonio Loan
Agreement shall be eliminated.
- 33 -
ARTICLE IX
MISCELLANEOUS
Section 9.1. Expenses and Taxes.
(a) Borrower agrees to pay, whether or not the Closing occurs, a
reasonable documentation preparation fee, together with all out-of-pocket
charges and expenses incurred by Lender in connection with the negotiation,
preparation and execution of each of the Loan Documents. Borrower also agrees to
pay all out-of-pocket charges and expenses incurred by Lender (including the
fees and expenses of Lender's counsel) in connection with the enforcement,
protection or preservation of any right or claim of Lender and the collection of
any amounts due under the Loan Documents.
(b) Borrower shall pay all taxes (other than taxes based upon or
measured by Lender's income or revenues, any personal property tax or any
withholding taxes), if any, in connection with the issuance of the Note and the
recording of the security documents therefor. The obligations of Borrower under
this clause (b) shall survive the payment of Borrower's indebtedness hereunder
and the termination of this Agreement.
Section 9.2. Entire Agreement; Amendments. This Agreement and the other
Loan Documents constitute the full and entire understanding and agreement among
the parties with regard to their subject matter and supersede all prior written
or oral agreements, understandings, representations and warranties made with
respect thereto. No amendment, supplement or modification of this Agreement nor
any waiver of any provision thereof shall be made except in writing executed by
the party against whom enforcement is sought.
Section 9.3. No Waiver; Cumulative Rights. No waiver by any party
hereto of any one or more defaults by the other party in the performance of any
of the provisions of this Agreement shall operate or be construed as a waiver of
any future default or defaults, whether of a like or different nature. No
failure or delay on the part of any party in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to any party hereto at law, in equity or
otherwise.
Section 9.4. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and personally delivered, mailed by
registered or certified mail (return receipt requested and postage prepaid),
sent by telecopier (with a confirming copy sent by regular mail), or sent by
prepaid overnight courier service, and addressed to the relevant party at its
address set forth below, or at such other address as such party may, by written
notice, designate as its address for purposes of notice hereunder:
- 34 -
(a) If to Lender, at:
HCFP Funding, Inc.
0 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(b) If to Borrower, at:
Bone, Muscle & Joint, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxx 000-X
Xxxx Xxxxx, XX 00000
Attn: Xx. Xxxxx X. Xxxxx
Executive Vice President
and Chief Financial Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Copies to:
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx X. Xxxxx, Esquire
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If mailed, notice shall be deemed to be given five (5) days after being sent, if
sent by personal delivery or telecopier, notice shall be deemed to be given when
delivered, and if sent by prepaid courier, notice shall be deemed to be given on
the next Business Day following deposit with the courier.
Section 9.5. Severability. If any term, covenant or condition of this
Agreement, or the application of such term, covenant or condition to any party
or circumstance shall be found by a court of competent jurisdiction to be, to
any extent, invalid or unenforceable, the remainder of this Agreement and the
application of such term, covenant, or condition to parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition shall be valid and
enforced to the fullest extent permitted by law. Upon determination that any
such term is invalid, illegal or unenforceable, the parties hereto shall amend
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner.
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Section 9.6. Successors and Assigns. This Agreement, the Note, and the
other Loan Documents shall be binding upon and inure to the benefit of Borrower
and Lender and their respective successors and assigns. Notwithstanding the
foregoing, Borrower may not assign any of its rights or delegate any of its
obligations hereunder without the prior written consent of Lender, which may be
withheld in its sole discretion. Lender may sell, assign or transfer, all (but
not less than all) of its rights or obligations hereunder, or participate any or
all of its rights or obligations hereunder, without the consent of Borrower, but
will notify Borrower in advance of any such assignment, transfer or
participations. In the event of any such participation by Lender, Lender's
obligations under the Loan Documents shall remain unchanged, Lender shall remain
solely responsible to Borrower for the performance of such obligations, Lender
shall remain the holder of any Note for all purposes under the Loan Documents,
all amounts payable by the Borrower under this Agreement shall be determined as
if Lender had not sold such participating interest, and the Borrower shall
continue to deal solely and directly with Lender in connection with Lender's
rights and obligations under the Loan Documents. Lender shall retain the sole
right to approve, without the consent of participant, any amendment,
modification or waiver of any provision of the Loan Documents other than any
amendment, modification or waiver with respect to the Loan or any commitment in
which such participant has an interest which forgives principal, interest or
fees or reduces the interest rate or fees payable pursuant to the terms of this
Agreement with respect to the Loan or such commitment, postpones any date fixed
for any regularly-scheduled payment of principal of, or interest or fees on, any
the Loan or such commitment, or releases all or substantially all of the
Collateral.
Section 9.7. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one instrument.
Section 9.8. Interpretation. No provision of this Agreement or any
other Loan Document shall be interpreted or construed against any party because
that party or its legal representative drafted that provision. The titles of the
paragraphs of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement. Any pronoun used in this
Agreement shall be deemed to include singular and plural and masculine, feminine
and neuter gender as the case may be. The words "herein," "hereof," and
"hereunder" shall be deemed to refer to this entire Agreement, except as the
context otherwise requires.
Section 9.9. Survival of Terms. All covenants, agreements,
representations and warranties made in this Agreement, any other Loan Document,
and in any certificates and other instruments delivered in connection therewith
shall be considered to have been relied upon by Lender and shall survive the
making by Lender of the Loans herein contemplated and the execution and delivery
to Lender of the Note, and shall continue in full force and effect until all
liabilities and obligations of Borrower to Lender are satisfied in full.
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Section 9.10. Release of Lender. Borrower releases Lender, its
officers, employees, and agents, of and from any claims for loss or damage
resulting from acts or conduct of any or all of them, unless caused by Lender's
recklessness, gross negligence, or willful misconduct.
Section 9.11. Time. Whenever Borrower is required to make any payment
or perform any act on a Saturday, Sunday, or a legal holiday under the laws of
the State of Maryland (or other jurisdiction where Borrower is required to make
the payment or perform the act), the payment may be made or the act performed on
the next Business Day. Time is of the essence in Borrower's performance under
this Agreement and all other Loan Documents.
Section 9.12. Commissions. The transaction contemplated by this
Agreement was brought about by Lender and Borrower acting as principals and
without any brokers, agents, or finders being the effective procuring cause.
Borrower represents that it has not committed Lender to the payment of any
brokerage fee, commission, or charge in connection with this transaction. If any
such claim is made on Lender by any broker, finder, or agent or other person,
Borrower will indemnify, defend, and hold Lender harmless from and against the
claim and will defend any action to recover on that claim, at Borrower's cost
and expense, including Lender's counsel fees. Borrower further agrees that until
any such claim or demand is adjudicated in Lender's favor, the amount demanded
will be deemed a liability of Borrower under this Agreement, secured by the
Collateral.
Section 9.13. Third Parties. No rights are intended to be created
hereunder or under any other Loan Document for the benefit of any third party
donee, creditor, or incidental beneficiary of Borrower. Nothing contained in
this Agreement shall be construed as a delegation to Lender of Borrower's duty
of performance, including without limitation Borrower's duties under any account
or contract in which Lender has a security interest.
Section 9.14. Discharge of Borrower's Obligations. Lender, in its sole
discretion, shall have the right at any time, and from time to time, without
prior notice to Borrower if Borrower fails to do so in violation of the
provisions of this Agreement, to: (a) obtain insurance covering any of the
Collateral as required hereunder; (b) pay for the performance of any of
Borrower's obligations hereunder; (c) discharge taxes, liens, security
interests, or other encumbrances at any time levied or placed on any of the
Collateral in violation of this Agreement unless Borrower is in good faith with
due diligence by appropriate proceedings contesting those items; and (d) pay for
the maintenance and preservation of any of the Collateral. Expenses and advances
shall be added to the Loan, until reimbursed to Lender and shall be secured by
the Collateral. Such payments and advances by Lender shall not be construed as a
waiver by Lender of an Event of Default.
Section 9.15. Information to Participants. Lender may divulge (subject
to the confidentiality obligations contained in Section 9.20) to any it may
obtain in the Loan, or any portion thereof, all information, and furnish to such
participant copies of reports, financial
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statements, certificates, and documents obtained under any provision of this
Agreement or any other Loan Document.
Section 9.16. Indemnity. Borrower hereby agrees to indemnify and hold
harmless Lender, its partners, officers, agents and employees (collectively,
"Indemnitee") from and against any liability, loss, cost, expense, claim,
damage, suit, action or proceeding ever suffered or incurred by Lender
(including reasonable attorneys' fees and expenses) arising from Borrower's
failure to observe, perform or discharge any of its covenants, obligations,
agreements or duties hereunder, or from the breach of any of the representations
or warranties contained in Article IV hereof unless caused by Lenders
recklessness, gross negligence or willful misconduct. In addition, Borrower
shall defend Indemnitee against and save it harmless from all claims of any
Person with respect to the Collateral unless caused by Lenders recklessness,
gross negligence or willful misconduct. Notwithstanding any contrary provision
in this Agreement, the obligation of Borrower under this Section 9.16 shall
survive the payment in full of the Obligations and the termination of this
Agreement.
Section 9.17. Choice of Law; Consent to Jurisdiction. THIS AGREEMENT
AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF
CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS AGREEMENT OR THE NOTE IS
COMMENCED BY LENDER IN THE STATE OF MARYLAND OR FEDERAL COURT LOCATED IN THE
STATE OF MARYLAND, BORROWER AND LENDER HEREBY CONSENT TO THE JURISDICTION OF ANY
SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN THE STATE OF
MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF MAILED BY
REGISTERED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS DESCRIBED IN
SECTION 9.4 HEREOF.
Section 9.18. Waiver of Trial by Jury. EACH OF BORROWER AND LENDER
HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUES
TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO
THE EXTENT THAT ANY SUCH RIGHT SHALL NOW HEREAFTER EXIST. THIS WAIVER OF RIGHT
TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY EACH OF
BORROWER AND LENDER, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE
ACCRUE. EACH PARTY IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT
TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO,
SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF THE FOREGOING WAIVER OF THE RIGHT TO
JURY TRIAL. FURTHER, EACH OF BORROWER AND LENDER HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT
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SUCH OTHER PARTY WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION.
Section 9.19. Confession of Judgment. UPON AN EVENT OF DEFAULT,
BORROWER AUTHORIZES ANY ATTORNEY ADMITTED TO PRACTICE BEFORE ANY COURT OF RECORD
IN THE UNITED STATES OR THE CLERK OF SUCH COURT TO APPEAR ON BEHALF OF BORROWER
IN ANY COURT IN ONE OR MORE PROCEEDINGS, OR BEFORE ANY CLERK THEREOF OR
PROTHONOTARY OR OTHER COURT OFFICIAL, AND TO CONFESS JUDGMENT AGAINST BORROWER
IN FAVOR OF LENDER IN THE FULL AMOUNT DUE ON THIS AGREEMENT (INCLUDING
PRINCIPAL, ACCRUED INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS
ATTORNEYS' FEES PLUS COURT COSTS, ALL WITHOUT PRIOR NOTICE OR OPPORTUNITY OF
BORROWER FOR PRIOR HEARING. BORROWER AGREES AND CONSENTS THAT VENUE AND
JURISDICTION SHALL BE PROPER IN THE CIRCUIT COURT OF ANY COUNTY OF THE STATE OF
MARYLAND OR OF BALTIMORE CITY, MARYLAND, OR IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND. BORROWER WAIVES THE BENEFIT OF ANY AND EVERY
STATUTE, ORDINANCE, OR RULE OF COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING
UPON BORROWER ANY RIGHT OR PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF
EXECUTION, OR SUPPLEMENTARY PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR
IMMEDIATE ENFORCEMENT OF A JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. THE
AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST BORROWER SHALL NOT
BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE
THEREOF, AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO;
SUCH AUTHORITY AND POWER MAY BE EXERCISED ON ONE OR MORE OCCASIONS FROM TIME TO
TIME, IN THE SAME OR DIFFERENT JURISDICTIONS, AS OFTEN AS LENDER SHALL DEEM
NECESSARY, CONVENIENT, OR PROPER.
Section 9.20 Confidentiality. Subject to the provisions of the
following paragraph, Lender shall hold all nonpublic information obtained
pursuant to the requirements of this Agreement in accordance with Lender's
customary procedures for handling confidential information of this nature and in
accordance with safe and sound practices of banks and other financial
institutions and in any event may make disclosure reasonably required by a
prospective assignee or participant (a participant or assignee being referred to
as a "Transferee") in connection with the contemplated participation or
assignment or as required by any Governmental Authority or representative
thereof or pursuant to legal process and shall require any such Transferee or
prospective Transferee to agree (and require any of its Transferees to agree) to
comply with this paragraph. Each prospective Transferee shall be required to
agree that if it does not become a participant or assignee it shall return all
materials furnished to it by or on behalf of the Borrower in connection with
this Agreement.
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The Borrower authorizes Lender to disclose to any Transferee and any
prospective Transferee any and all information in Lender's possession concerning
the Borrower and the Collateral; provided that prior to any such disclosure,
such prospective Transferee shall agree to preserve in accordance with the
immediately preceding paragraph the confidentiality of any confidential
information described therein.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
ATTEST: HCFP FUNDING, INC.
(Seal) a Delaware corporation
By:________________________ By:__________________________
Name: Name:
Title: Title:
ATTEST: BONE, MUSCLE & JOINT, INC.
(Seal) a Delaware corporation
By:________________________ By:__________________________
Name: Name:
Title: Title:
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LIST OF EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Concentration Account Agreement
Exhibit C - Locations of Collateral
Exhibit D - Form of Legal Opinion
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LIST OF SCHEDULES
Schedule 1.36 - Permitted Liens
Schedule 4.1 - Subsidiaries
Schedule 4.5 - Litigation
Schedule 4.13 - Non-Compliance with Law
Schedule 4.14 - Environmental Matters
Schedule 4.15 - Places of Business
Schedule 4.16 - Licenses
Schedule 4.17 - Stock Ownership
Schedule 4.19 - Borrowing and Guarantees
Schedule 4.21 - Trade Names
Schedule 4.22 - Joint Ventures
Schedule 7.12 - Transactions with Affiliates
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