Exhibit 10.11
$20,000,000.00
LOAN AND SECURITY AGREEMENT
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by and between
HEALTHCOR, INC.
HEALTHCOR HOLDINGS, INC.
HEALTHCOR OXYGEN & MEDICAL EQUIPMENT, INC.
HEALTHCOR PHARMACY, INC.
PHHN, INC.
HEALTHCOR REHABILITATION SERVICES, INC.
HC PERSONNEL RESOURCES, INC.
CARENETWORK, INC.
(collectively, "Borrower")
and
HCFP FUNDING, INC.
("Lender")
May 19, 1998
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made as of
May 19, 1998, by and among HEALTHCOR, INC., a Delaware corporation,
HEALTHCOR HOLDINGS, INC., a Delaware corporation (AHoldings@), HEALTHCOR OXYGEN
& MEDICAL EQUIPMENT, INC., a Texas corporation, HEALTHCOR PHARMACY, INC. a Texas
corporation, PHHN, INC. a Texas corporation, HEALTHCOR REHABILITATION SERVICES,
INC. a Texas corporation, HC PERSONNEL RESOURCES, INC., a Texas corporation,
CARENETWORK, INC., an Arkansas corporation (collectively, "Borrower"), and HCFP
FUNDING, INC., a Delaware corporation ("Lender").
RECITALS
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A. Borrower desires to establish certain financing arrangements with and
borrow funds from Lender, and Lender is willing to establish such arrangements
for and make loans and extensions of credit to Borrower, on the terms and
conditions set forth below.
B. The parties desire to define the terms and conditions of their
relationship and to reduce their agreements to writing.
NOW, THEREFORE, in consideration of the promises and covenants contained in
this Agreement, and for other consideration, the receipt and sufficiency of
which are acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
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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
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sold or leased or services rendered, whether or not evidenced by an instrument
or chattel paper, and whether or not earned by performance.
Section 1.2. Account Debtor. "Account Debtor" means any Person
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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
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specified Person, any Person directly or indirectly controlling, controlled by,
or under common control with the specified Person, including without limitation
their stockholders and any Affiliates thereof. A Person shall be deemed to
control a corporation or other entity if the Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
business of the
corporation or other entity, whether through the ownership of voting securities,
by contract, or otherwise.
Section 1.4. Agreement. "Agreement" means this Loan and Security
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Agreement, as it may be amended or supplemented from time to time.
Section 1.5. Base Rate. "Base Rate" means a rate of interest equal to
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two percent (2%) above the "Prime Rate of Interest,@ but in no event in excess
of the Highest Lawful Rate.
Section 1.6. Borrowed Money. "Borrowed Money" means any obligation to
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repay money, any indebtedness evidenced by notes, bonds, debentures or similar
obligations, any obligation under a conditional sale or other title retention
agreement and the net aggregate rentals under any lease which under GAAP would
be capitalized on the books of Borrower or which is the substantial equivalent
of the financing of the property so leased.
Section 1.7. Borrower. "Borrower" has the meaning set forth in the
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Preamble.
Section 1.8. Borrowing Base. "Borrowing Base" has the meaning set
---------------
forth in Section 2.1(d).
Section 1.9.a. Business Day. "Business Day" means any day on which
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financial institutions are open for business in the State of Maryland, excluding
Saturdays and Sundays.
Section 1.9.b. Change of Control. AChange of Control@ means the
------------------
occurrence of any of the following: (i) the sale, lease, transfer, conveyance or
other disposition (other than by way of merger of consolidation), in one or a
series of related transactions, of all or substantially all of the assets of the
Borrower taken as a whole to any Aperson@ (as such term is used in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the A1934 Act@));
(ii) the adoption of a plan relating to the liquidation or dissolution of
Holdings; or (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
Aperson@ (as defined above), other than C. Xxxxx Xxxxxx, Xxxxxx X. Xxxxxx and
any of their Affiliates, is or becomes the Abeneficial owner@ (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the 1934 Act, except that a person
shall be deemed to have Abeneficial ownership@ of all securities that such
person has the right to acquire, whether such right is currently exercisable or
is exercisable only upon the occurrence of a subsequent condition), directly or
indirectly, of more than 35% of the common equity interest in Holdings (measured
by voting power rather than number of shares or equivalent units).
Section 1.10. Closing; Closing Date. "Closing" and "Closing Date" have
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the meanings set forth in Section 5.3.
Section 1.11. Collateral. "Collateral" has the meaning set forth in
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Section 3.1.
2
Section 1.12. Commitment Fee. "Commitment Fee" has the meaning set
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forth in Section 2.4(a).
Section 1.13. Concentration Account. "Concentration Account" has the
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meaning set forth in Section 2.3.
Section 1.14. Controlled Group. "Controlled Group" means a "controlled
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group" within the meaning of Section 4001(b) of ERISA.
Section 1.15. Cost Report Settlement Account. "Cost Report Settlement
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Account" means an "Account" owed to Borrower by a Medicaid/Medicare Account
Debtor pursuant to any cost report, either interim, filed or audited, as the
context may require.
Section 1.16. Default Rate. "Default Rate" means a rate per annum equal
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to five percent (5%) above the then applicable Base Rate, but in no event in
excess of the Highest Lawful Rate.
Section 1.17a. EBITDA. AEBITDA@ has the meaning set forth in Section
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6.23.
Section 1.17b. 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
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Default" have the meanings set forth in Section 8.1.
Section 1.19. GAAP. "GAAP" means generally accepted accounting
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principles applied in a manner consistent with the financial statements referred
to in Section 4.7.
Section 1.20. Governmental Authority. "Governmental Authority" means
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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
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substances defined or designated as hazardous or toxic waste, hazardous or toxic
material, hazardous or toxic substance, or similar term, by any environmental
statute, rule or regulation or any Governmental Authority.
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. AInsurer@ means a Person that insures a Patient
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against certain of the costs incurred in the receipt by such Patient of Medical
Services, or that has an agreement with Borrower to compensate Borrower for
providing services to a Patient.
3
Section 1.24. Lender. "Lender" has the meaning set forth in the
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Preamble.
Section 1.25. Loan. "Loan" has the meaning set forth in Section
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Section 1.26. Loan Documents. "Loan Documents" means and includes this
---------------
Agreement, the Note, and each and every other document now or hereafter
delivered in connection therewith, as any of them may be amended, modified, or
supplemented from time to time.
Section 1.27. Loan Management Fee. "Loan Management Fee" has the meaning
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set forth in Section 2.4(c).
Section 1.28a. Lockbox. "Lockbox" has the meaning set forth in Section
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2.3.
Section 1.28b. Lockbox Account. "Lockbox Account" means an account
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maintained by Borrower at the Lockbox Bank into which all collections of
Accounts are paid directly.
Section 1.29. Lockbox Bank. "Lockbox Bank" has the meaning set forth in
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Section 2.3.
Section 1.30. Maximum Loan Amount. "Maximum Loan Amount" has the
--------------------
meaning set forth in Section 2.1(a)(i).
Section 1.31. Medicaid/Medicare Account Debtor. "Medicaid/ Medicare
---------------------------------
Account Debtor" means any Account Debtor which is (i) the United States of
America acting under the Medicaid/Medicare program established pursuant to the
Social Security Act, (ii) any state or the District of Columbia acting pursuant
to a health plan adopted pursuant to Title XIX of the Social Security Act or
(iii) any agent, carrier, administrator or intermediary for any of the
foregoing.
Section 1.32.a. Medical Services. Medical and health care services
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provided to a Patient, including, but not limited to, medical and health care
services provided to a Patient and performed by Borrower which are covered by a
policy of insurance issued by an Insurer, and includes physician services, nurse
and therapist services, dental services, hospital services, skilled nursing
facility services, comprehensive outpatient rehabilitation services, home health
care services, residential and out-patient behavioral healthcare services, and
medicine or health care equipment provided by Borrower to a Patient for a
necessary or specifically requested valid and proper medical or health purpose.
Section 1.32.b. Minimum Loan Amount. "Minimum Loan Amount" has the meaning
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set forth in Section 2.1(a)(ii).
Section 1.33. Note. "Note" has the meaning set forth in Section
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2.1(c).
4
Section 1.34. Obligations. "Obligations" has the meaning set forth in
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Section 3.1.
Section 1.35. Patient. APatient@ means any Person receiving Medical
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Services from Borrower and all Persons legally liable to pay Borrower for such
Medical Services other than Insurers.
Section 1.36. Permitted Liens. "Permitted Liens" means: (a) liens for
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taxes not delinquent, or which are being contested in good faith and by
appropriate proceedings which suspend the collection thereof and in respect of
which adequate reserves have been made (provided that such proceedings do not,
in Lender's sole discretion, involve any substantial danger of the sale, loss or
forfeiture of such property or assets or any interest therein); (b) deposits or
pledges to secure obligations under workmen's compensation, social security or
similar laws, or under unemployment insurance; (c) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of business; (d) mechanic's,
workmen's, materialmen's or other like liens arising in the ordinary course of
business with respect to obligations which are not due, or which are being
contested in good faith by appropriate proceedings which suspend the collection
thereof and in respect of which adequate reserves have been made (provided that
such proceedings do not, in Lender's sole discretion, involve any substantial
danger of the sale, loss or forfeiture of such property or assets or any
interest therein); (e) liens and encumbrances in favor of Lender; (f) liens
granted in connection with the lease or purchase of property or assets financed
by borrowings permitted by Section 7.1 (provided, however, that no such
borrowings permitted by Section 7.1 may be secured by liens on any of the
Collateral); (g) contractual and statutory landlords liens; and (h) liens set
forth on Schedule 1.36.
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Section 1.37. Person. "Person" means an individual, partnership,
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corporation, trust, joint venture, joint stock company, limited liability
company, association, unincorporated organization, Governmental Authority, or
any other entity.
Section 1.38. Plan. "Plan" has the meaning set forth in Section 4.12.
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Section 1.39. Premises. "Premises" has the meaning set forth in Section
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4.15.
Section 1.40. Prime Rate of Interest. "Prime Rate of Interest" means
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that rate of interest designated as such by Fleet National Bank of Connecticut,
N.A., or any successor thereto, as the same may from time to time fluctuate.
Section 1.41. Prohibited Transaction. "Prohibited Transaction" means a
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"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975(c)(1) of the Internal Revenue Code.
5
Section 1.42. Qualified Account. "Qualified Account" means an Account
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of Borrower generated in the ordinary course of Borrower's business from the
sale of goods or rendition of medical services which Lender, in its reasonable
credit judgment, deems to be a Qualified Account. Without limiting the
generality of the foregoing, no Account shall be a Qualified Account if: (a)
the Account or any portion thereof is payable by an individual beneficiary,
recipient or subscriber individually and not directly to Borrower by a
Medicaid/Medicare Account Debtor or commercial medical insurance carrier
acceptable to Lender in its sole discretion; (b) except for those Accounts
listed on Schedule 1.42, the Account remains unpaid more than one hundred-twenty
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(120) days past the claim or invoice date; (c) the Account is listed on Schedule
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1.42 and remains unpaid more than ninety (90) days past the claim or invoice
----
date; (d) the Account is subject to any defense, set-off, counterclaim,
deduction, discount, credit, chargeback, freight claim, allowance, or adjustment
of any kind; (e) any part of any goods the sale of which has given rise to the
Account has been returned, rejected, lost, or damaged; (f) if the Account arises
from the sale of goods by Borrower, such sale was not an absolute sale or on
consignment or on approval or on a sale-or-return basis or subject to any other
repurchase or return agreement, or such goods have not been shipped to the
Account Debtor or its designee; (g) if the Account arises from the performance
of services, such services have not been actually been performed or were
undertaken in violation of any law; (h) the Account is subject to a lien other
than a Permitted Lien; (i) Borrower knows or should have known of the
bankruptcy, receivership, reorganization, or insolvency of the Account Debtor;
(j) the Account is evidenced by chattel paper or an instrument of any kind, or
has been reduced to judgment; (k) the Account is an Account of an Account Debtor
having its principal place of business or executive office outside the United
States; (l) the Account Debtor is an Affiliate or Subsidiary of Borrower; (m)
more than ten percent (10%) of the aggregate balance of all Accounts owing from
the Account Debtor obligated on the Account are outstanding more than one
hundred-fifty (150) days past their invoice date; (n) fifty percent (50%) or
more of the aggregate unpaid Accounts from any individual Account Debtor are not
deemed Qualified Accounts hereunder; (o) the total unpaid Accounts of the
Account Debtor, except for a Medicaid/Medicare Account Debtor, exceed twenty
percent (20%) of the net amount of all Qualified Accounts (including
Medicaid/Medicare Account Debtors); (p) any covenant, representation or warranty
contained in the Loan Documents with respect to such Account has been breached;
or (q) the Account fails to meet such other specifications and requirements
which may from time to time be established by Lender.
Section 1.43. Reportable Event. "Reportable Event" means a "reportable
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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.
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6
ARTICLE II
LOAN
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Section 2.1. Terms.
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(a) (i) The maximum aggregate principal amount of credit extended
by Lender to Borrower hereunder (the "Loan") that will be outstanding at any
time is twenty million and No/100 Dollars ($20,000,000.00) (the "Maximum Loan
Amount").
(ii) The minimum aggregate principal amount of Revolving Credit
Loans that must remain outstanding at all times under the Loan during the Term
of this Agreement, as amended from time to time, is five million and No/100
Dollars ($5,000,000.00) (the AMinimum Loan Amount@).
(b) The Loan shall be in the nature of a revolving line of credit, and
shall include sums advanced and other credit extended by Lender to or for the
benefit of Borrower from time to time under this Article II (each a "Revolving
Credit Loan") up to the Maximum Loan Amount depending upon the availability in
the Borrowing Base, the requests of Borrower pursuant to the terms and
conditions of Section 2.2 below, and on such other basis as Lender may
reasonably determine. The outstanding principal balance of the Loan may
fluctuate from time to time, to be reduced by repayments made by Borrower (which
may be made without penalty or premium), and to be increased by future Revolving
Credit Loans, advances and other extensions of credit to or for the benefit of
Borrower, and shall be due and payable in full upon the expiration of the Term.
For purposes of this Agreement, any determination as to whether there is ability
within the Borrowing Base for advances or extensions of credit shall be made by
Lender in its reasonable discretion, subject to notice to Borrower and ten (10)
days opportunity to cure, and thereafter shall be final and binding upon
Borrower.
(c) At Closing, Borrower shall execute and deliver to Lender a
promissory note evidencing Borrower's unconditional obligation to repay Lender
for Revolving Credit Loans, advances, and other extensions of credit made under
the Loan, in the form of Exhibit A to this Agreement (the "Note"), dated the
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date hereof, payable to the order of Lender in accordance with the terms
thereof. The Note shall bear interest from the date thereof until repaid, with
interest payable monthly in arrears on the first Business Day of each month, at
a rate per annum (on the basis of the actual number of days elapsed over a year
of 360 days) equal to the Base Rate, provided that after an Event of Default
such rate shall be equal to the Default Rate. Each Revolving Credit Loan,
advance and other extension of credit shall be deemed evidenced by the Note,
which is deemed incorporated by reference herein and made a part hereof.
(d) Subject to the terms and conditions of this Agreement, advances
under the Loan shall be made against a borrowing base equal to eighty percent
(80%) of Qualified Accounts (the "Borrowing Base").
7
Section 2.2. Loan Administration. Borrowings under the Loan shall be as
--------------------
follows:
(a) A request for a Revolving Credit Loan shall be made, or shall be
deemed to be made, in the following manner: (i) Borrower may give Lender notice
of its intention to borrow, in which notice Borrower shall specify the amount of
the proposed borrowing and the proposed borrowing date, not later than 3:00 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
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an Event of Default; and (ii) the becoming due of any amount required to be paid
under this Agreement, whether as interest or for any other Obligation, shall be
deemed irrevocably to be a request for a Revolving Credit Loan on the due date
in the amount required to pay such interest or other Obligation.
(b) Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each Revolving Credit Loan requested, or deemed to be requested, as
follows: (i) the proceeds of each Revolving Credit Loan requested under
subsection 2.2(a)(i) shall be disbursed by Lender by wire transfer to such bank
account as may be agreed upon by Borrower or Lender from time to time or
elsewhere if pursuant to written direction from Borrower; and (ii) the proceeds
of each Revolving Credit Loan requested under subsection 2.2(a)(ii) shall be
disbursed by Lender by way of direct payment of the relevant interest or other
Obligation.
(c) All Revolving Credit Loans, advances and other extensions of
credit to or for the benefit of Borrower shall constitute one general Obligation
of Borrower, and shall be secured by Lender's lien upon all of the Collateral.
(d) Lender shall enter all Revolving Credit Loans as debits to a loan
account in the name of Borrower and shall also record in said loan account all
payments made by Borrower on any Obligations and all proceeds of Collateral
which are indefeasibly paid to Lender, and may record therein, in accordance
with customary accounting practice, other debits and credits, including interest
and all charges and expenses properly chargeable to Borrower. All collections
into the Concentration Account pursuant to Section 2.3 shall be applied first to
fees, costs and expenses due and owing under the Loan Documents, then to
interest due and owing under the Loan Documents, and then to principal
outstanding with respect to Revolving Credit Loans.
(e) Lender will account to Borrower monthly with a statement of
Revolving Credit Loans, charges and payments made pursuant to this Agreement,
and such accounting rendered by Lender shall be deemed final, binding and
conclusive upon Borrower unless Lender is notified by Borrower in writing to the
contrary within thirty (30) days of the date each 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
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Lockbox Account. Borrower shall maintain a lockbox account (the "Lockbox") with
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Bank One Arizona,
8
N.A. (the "Lockbox Bank"), subject to the provisions of this Agreement, and
shall execute with the Lockbox Bank a Lockbox Agreement in the form attached as
Exhibit B, and such other agreements related thereto as Lender may require. In
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the event that the Lockbox Bank becomes a participant in the Loan, a bank that
is not a participant in the Loan will become the Lockbox Bank. Borrower shall
ensure that all collections of Accounts are paid directly from Account Debtors
into the Lockbox, and that all funds paid into the Lockbox are transferred by
the close of business on the day of payment to the Lockbox, into a depository
account maintained by Lender at Bank One Arizona, N.A. or U.S. Bank N.A., as
determined by Lender in its sole discretion and communicated to Borrower (the
"Concentration Account"). Lender shall apply, on a daily basis, all funds
transferred into the Concentration Account pursuant to this Section 2.3 to
reduce the outstanding indebtedness under the Loan (in accordance with Section
2.2(d)) with future Revolving Credit Loans, advances and other extensions of
credit to be made by Lender under the conditions set forth in this Article II.
To the extent that any collections of Accounts or proceeds of other Collateral
are not sent directly to the Lockbox but are received by Borrower, such
collections shall be held in trust for the benefit of Lender and immediately
remitted, in the form received, to the Lockbox Bank for transfer to the
Concentration Account immediately upon receipt by Borrower. Borrower
acknowledges and agrees that its compliance with the terms of this Section 2.3
is essential, and that upon its failure to comply with any such terms, Lender
shall be entitled to assess Borrower a fee in an amount that shall have the
effect of increasing the Base Rate by two percent (2%) per annum during the
continuance of such non-compliance. Lender shall be entitled to assess such fee
whether or not an Event of Default is declared or otherwise occurs. All funds
transferred from the Concentration Account for application to Borrower's
indebtedness to Lender shall be applied to reduce the Loan balance, but for
purposes of calculating interest shall be subject to a five (5) Business Day
clearance period. If as the result of collections of Accounts pursuant to the
terms and conditions of this Section 2.3 a credit balance exists with respect to
the Concentration Account, such credit balance shall not accrue interest in
favor of Borrower, but shall be available to Borrower at any time or times for
so long as no Event of Default exists.
Section 2.4. Fees.
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(a) At Closing, Borrower shall unconditionally pay to Lender a
commitment fee equal to one percent (1%) of the Maximum Loan Amount (the
"Commitment Fee"), payable as follows:
Outstanding Revolving Credit Loans Portion of Commitment Fee Due
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Initial advance under this Agreement $150,000.00
due at or prior to Closing
Total of Revolving Credit Loans Additional $50,000.00
exceeds 15,000,000.00 for the first time
9
(b) INTENTIONALLY OMITTED.
(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 eighty-three thousandths of one percent (0.083%) 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
and such other matters as Lender shall deem appropriate, which shall be due and
payable on the first Business Day of the month following the date of issuance by
Lender of a request for payment thereof to Borrower. Absent an Event of
Default, such fees shall not exceed $25,000.00 per year.
(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
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Loans shall be payable by Borrower to Lender immediately upon the earliest of
(i) the receipt by Borrower of any proceeds of any of the Collateral, to the
extent of such proceeds, (ii) the occurrence of an Event of Default in
consequence of which the Loan and the maturity of the payment of the Obligations
are accelerated, or (iii) the termination of this Agreement pursuant to Section
2.8 hereof; provided, however, that if any advance made by Lender in excess of
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the Borrowing Base shall exist at any time, Borrower shall, immediately upon
demand, repay such overadvance. Interest accrued on the Revolving Credit Loans
shall be due on the earliest of (i) the first Business Day of each month (for
the immediately preceding month), computed on the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in consequence of
which the Loan and the maturity of the payment of the Obligations are
accelerated, or (iii) the termination of this Agreement pursuant to Section 2.8
hereof. Except to the extent otherwise set forth in this Agreement, all
payments of principal and of interest on the Loan, all other charges and any
other obligations of Borrower hereunder, shall be made to Lender to the
Concentration Account, in immediately available funds.
Section 2.6. Use of Proceeds. The proceeds of Lender's advances under
----------------
the Loan shall be used solely for working capital and for other costs of
Borrower arising in the ordinary course of Borrower's business.
10
Section 2.7. Interest Rate Limitation. The parties intend to conform
-------------------------
strictly to the applicable usury laws in effect from time to time during the
term of the Loan. Accordingly, if any transaction contemplated hereby would be
usurious under such laws, then notwithstanding any other provision hereof: (i)
the aggregate of all interest that is contracted for, charged, or received under
this Agreement or under any other Loan Document shall not exceed the maximum
amount of interest allowed by applicable law (the "Highest Lawful Rate"), and
any excess shall be promptly credited to Borrower by Lender (or, to the extent
that such consideration shall have been paid, such excess shall be promptly
refunded to Borrower by Lender); (ii) neither Borrower nor any other Person now
or hereafter liable hereunder shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Highest Lawful Rate; and
(iii) the effective rate of interest shall be reduced to the Highest Lawful
Rate. All sums paid, or agreed to be paid, to Lender for the use, forbearance,
and detention of the debt of Borrower to Lender shall, to the extent permitted
by applicable law, be allocated throughout the full term of the Note until
payment is made in full so that the actual rate of interest does not exceed the
Highest Lawful Rate in effect at any particular time during the full term
thereof. If at any time the rate of interest under the Note exceeds the Highest
Lawful Rate, the rate of interest to accrue pursuant to this Agreement shall be
limited, notwithstanding anything to the contrary herein, to the Highest Lawful
Rate, but any subsequent reductions in the Base Rate shall not reduce the
interest to accrue pursuant to this Agreement below the Highest Lawful Rate
until the total amount of interest accrued equals the amount of interest that
would have accrued if a varying rate per annum equal to the interest rate under
the Note had at all times been in effect. If the total amount of interest paid
or accrued pursuant to this Agreement under the foregoing provisions is less
than the total amount of interest that would have accrued if a varying rate per
annum equal to the interest rate under the Note had been in effect, then
Borrower agrees to pay to Lender an amount equal to the difference between (i)
the lesser of (x) the amount of interest that would have accrued if the Highest
Lawful Rate had at all times been in effect, or (y) the amount of interest that
would have accrued if a varying rate per annum equal to the interest rate under
the Note had at all times been in effect, and (ii) the amount of interest
actually paid or accrued in accordance with the other provisions of this
Agreement.
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Section 2.8. Term.
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(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 may be renewed for
one-year periods thereafter upon the mutual written agreement of the parties.
(b) Notwithstanding anything herein to the contrary, Lender may
terminate this Agreement with notice upon an Event of Default.
(c) Upon at least thirty (30) days prior written notice to Lender,
Borrower may terminate this Agreement prior to the second annual anniversary of
the Closing Date, provided that, at the effective date of such termination,
Borrower shall pay to Lender (in addition to the then outstanding principal,
accrued interest and other Obligations owing under the terms of this Agreement
and any other Loan Documents) as liquidated damages for the loss of bargain and
not as a penalty, an amount equal to (i) one and one-half (1.5%) 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.
Section 2.9. Joint and Several Liability; Binding Obligations. Each
-------------------------------------------------
entity comprising Borrower and executing this Agreement on behalf of Borrower
shall be jointly and severally liable for all of the Obligations. In addition,
each entity comprising Borrower hereby acknowledges and agrees that all of the
representations, warranties, covenants, obligations, conditions, agreements and
other terms contained in this Agreement shall be applicable to and shall be
binding upon each individual entity comprising Borrower, and shall be binding
upon all such entities when taken together.
12
ARTICLE III
COLLATERAL
----------
Section 3.1. Generally. As security for the payment of all liabilities
----------
of Borrower to Lender, including without limitation: (i) indebtedness evidenced
under the Note, repayment of Revolving Credit Loans, advances and other
extensions of credit, all fees and charges owing by Borrower, and all other
liabilities and obligations of every kind or nature whatsoever of Borrower to
Lender, whether now existing or hereafter incurred, joint or several, matured or
unmatured, direct or indirect, primary or secondary, related or unrelated, due
or to become due, including but not limited to any extensions, modifications,
substitutions, increases and renewals thereof, (ii) the payment of all amounts
advanced by Lender to preserve, protect, defend, and enforce its rights
hereunder and in the following property in accordance with the terms of this
Agreement, and (iii) the payment of all expenses incurred by Lender in
connection therewith (collectively, the "Obligations"). Borrower hereby assigns
and grants to Lender, to the extent permitted by applicable law, 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 Accounts,
contract rights, general intangibles, chattel paper, documents and instruments,
as such terms are defined in the UCC, including, without limitation, all
obligations for the payment of money arising out of Borrower's sale of goods or
rendition of services;
(b) all moneys, securities and other property and the proceeds
thereof, now or hereafter held or received by, or in transit to, Lender from or
for Borrower, whether for safekeeping, pledge, custody, transmission, collection
or otherwise, and all of Borrower's deposits (general or special), balances,
sums and credits with Lender at any time existing;
(c) all of Borrower's right, title and interest, and all of Borrower's
rights, remedies, security and liens, in, to and in respect of the Accounts,
including, without limitation, rights of stoppage in transit, replevin,
repossession and reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, guaranties or other contracts of suretyship with
respect to the Accounts, deposits or other security for the obligation of any
Account debtor, and credit and other insurance;
(d) all of Borrower's right, title and interest in, to and in respect
of all goods relating to, or which by sale have resulted in, Accounts,
including, without limitation, all goods described in invoices or other
documents or instruments with respect to, or otherwise representing or
evidencing, any Account, and all returned, reclaimed or repossessed goods;
(e) All of Borrower's now or hereafter acquired deposit accounts into
which Accounts are deposited, including the Lockbox Account;
13
(f) all books, records, ledger cards, computer programs and other
property at any time evidencing or relating to the Accounts;
(g) all of Borrower's now owned or hereafter acquired inventory of
every description which is held by Borrower for sale or lease or is furnished by
Borrower under any contract of service or is held by Borrower as raw materials,
work in process or materials used or consumed in a business, wherever located,
and as the same may now and hereafter from time to time be constituted, together
with all cash and non-cash proceeds and products thereof;
(h) unless such assets are subject to a conflicting lien on specific
equipment (and not a blanket lien) arising (i) in connection with equipment
financing, or (ii) in connection with a purchase money financing, all of
Borrower's now owned or hereafter acquired machinery, equipment, computer
equipment, tools, tooling, furniture, fixtures, goods, supplies, materials, work
in process, whether now owned or hereafter acquired (unless acquired under an
equipment lease), together with all additions, parts, fittings, accessories,
special tools, attachments, and accessions now and hereafter affixed thereto
and/or used in connection therewith, all replacements thereof and substitutions
therefor, and all cash and non-cash proceeds and products thereof;
(i) all of Borrower's general intangibles (including, without
limitation, any proceeds from insurance policies after payment of prior
interests), patents, unpatented inventions, trade secrets, copyrights, contract
rights (except for rights arising under equipment leases under which Borrower is
lessee), goodwill, literary rights, rights to performance, rights under
licenses, choses-in-action, claims, information contained in computer media
(such as data bases, source and object codes, and information therein), things
in action, investment property (other than investment property pledged to secure
Borrower=s $747,000.00 letter of credit issued by Chase Bank of Texas National
Association and renewals and refinancings thereof (the AL/C@)), trademarks and
trademarks applied for (together with the goodwill associated therewith) and
derivatives thereof (other than intent-to-use trademark applications to the
extent that the grant of a lien thereon would result in the termination thereof
under applicable law), trade names, including the right to make, use, and vend
goods utilizing any of the foregoing, and permits, licenses, certifications,
authorizations and approvals, and the rights of Borrower thereunder, issued by
any governmental, regulatory, or private authority, agency, or entity whether
now owned or hereafter acquired, together with all cash and non-cash proceeds
and products thereof;
(j) other than property pledged to secure the L/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 Secured Party or a bailee
or Affiliate of Secured Party; and
(k) other than property pledged to secure the L/C, all proceeds of the
foregoing, in any form, including, without limitation, any claims against third
parties for loss or damage to or destruction of any or all of the foregoing.
14
Section 3.2. Lien Documents. At Closing and thereafter as Lender deems
---------------
necessary in its sole discretion, Borrower shall execute and deliver to Lender,
or have executed and delivered (all in form and substance satisfactory to Lender
in its sole discretion):
(a) UCC-1 Financing statements pursuant to the Uniform Commercial Code
in effect in the jurisdiction(s) in which Borrower operates, which Lender may
file in any jurisdiction where any Collateral is or may be located and in any
other jurisdiction that Lender deems appropriate; provided that a carbon,
--------
photographic, or other reproduction or other copy of this Agreement or of a
financing statement is sufficient as and may be filed in lieu of a financing
statement; and
(b) Any other agreements, documents, instruments, and writings deemed
necessary by Lender or as Lender may otherwise request from time to time in its
reasonable discretion to evidence, perfect, or protect Lender's lien and
security interest in the Collateral required hereunder.
Section 3.3. Collateral Administration.
--------------------------
(a) All Collateral (except deposit accounts) will at all times be kept
by Borrower at its principal office(s) as set forth on Schedule 4.15 hereto and
-------------
shall not, without the prior written approval of Lender, be moved therefrom.
(b) Borrower shall keep accurate and complete records of its Accounts
and all payments and collections thereon and shall submit to Lender on such
periodic basis as Lender shall request a sales and collections report for the
preceding period, in form satisfactory to Lender. In addition, if Accounts in
an aggregate face amount in excess of $50,000.00 become ineligible because they
fall within one of the specified categories of ineligibility set forth in the
definition of Qualified Accounts or otherwise, Borrower shall notify Lender of
such occurrence on the first Business Day following such occurrence and the
Borrowing Base shall thereupon be adjusted to reflect such occurrence. If
requested by Lender, Borrower shall execute and deliver to Lender formal written
assignments of all of its Accounts weekly or daily, which shall include all
Accounts that have been created since the date of the last assignment, together
with copies of claims, invoices or other information related thereto.
(c) Whether or not an Event of Default has occurred, any of Lender's
officers, employees or agents shall have the right, at any time or times
hereafter, in the name of Lender, any designee of Lender or Borrower, to verify
the validity, amount or any other matter relating to any Accounts by mail,
telephone, telegraph or otherwise. Borrower shall cooperate fully with Lender
in an effort to facilitate and promptly conclude such verification process.
(d) To expedite collection, Borrower shall endeavor in the first
instance to make collection of its Accounts for Lender. Lender retains the
right at all times upon the occurrence of and during the existence of an Event
of Default, subject to applicable law
15
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 provide prompt written notice to each private indemnity, managed care or
other Insurer who either is currently an Account Debtor or becomes an Account
Debtor at any time following the date hereof that Lender has been granted a
first priority lien and security interest in, upon and to all Accounts
applicable to such Insurer, and hereby authorizes Lender to send any and all
similar notices to such Insurers by Lender, and (ii) shall do anything further
that may be lawfully required by Lender to secure Lender and effectuate the
intentions and objects of this Agreement, including but not limited to the
execution and delivery of lockbox agreements, continuation statements,
amendments to financing statements, and any other documents required hereunder.
At Lender's request, Borrower shall also immediately deliver to Lender all items
for which Lender must receive possession to obtain a perfected security
interest. Borrower shall, on Lender's demand, deliver to Lender all notes,
certificates, and documents of title, chattel paper, warehouse receipts,
instruments, and any other similar instruments constituting Collateral.
Section 3.5. Searches. Prior to Closing, and thereafter (as and when
---------
requested by Lender in its reasonable discretion), Borrower shall obtain and
deliver to Lender the following searches against Borrower (the results of which
are to be consistent with Borrower's representations and warranties under this
Agreement), all at its own expense:
(a) Uniform Commercial Code searches with the Secretary of State and
local filing offices of each jurisdiction where Borrower maintains its executive
offices, a place of business, or assets;
(b) Judgment, federal tax lien and corporate and partnership tax lien
searches, in each jurisdiction searched under clause (a) above; and
(c) Good standing certificates showing Borrower to be in good standing
in its state of formation and in each other state in which it is doing and
presently intends to do business for which qualification is required.
Section 3.6. Power of Attorney. Upon the occurrence of an Event of
------------------
Default and while an Event of Default is continuing, and subject to applicable
law regarding Medicaid/Medicare Account Debtors, each of the officers of Lender
is hereby irrevocably made, constituted and appointed the true and lawful
attorney for Borrower (without requiring any of them to act as such) with full
power of substitution to do the following: (i) endorse the name of Borrower upon
any and all checks, drafts, money orders, and other instruments for the payment
of money that are payable to Borrower and constitute collections on Borrower's
Accounts; (ii) execute in the name of Borrower any financing statements,
schedules, assignments, instruments, documents, and statements that Borrower is
obligated to give Lender hereunder; and (iii) do such other and
16
further acts and deeds in the name of Borrower that Lender may deem necessary or
desirable to enforce any Account or other Collateral or perfect Lender's
security interest or lien in any Collateral.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Each entity comprising Borrower represents and warrants to Lender, and
shall be deemed to represent and warrant on each day on which any Obligations
shall be outstanding hereunder, that:
Section 4.1. Subsidiaries. Except as set forth in Schedule 4.1,
------------- ------------
Borrower has no subsidiaries.
Section 4.2. Organization and Good Standing. Borrower is a corporation
-------------------------------
duly organized, validly existing, and in good standing under the laws of its
state of formation, is in good standing as a foreign corporation in each
jurisdiction in which the character of the properties owned or leased by it
therein or the nature of its business makes such qualification necessary, has
the corporate power and authority to own its assets and transact the business in
which it is engaged, and has obtained all certificates, licenses and
qualifications required under all laws, regulations, ordinances, or orders of
public authorities necessary for the ownership and operation of all of its
properties and transaction of all of its business except where the failure to
have obtained such certificates, licenses, or qualifications would not have a
material adverse effect on the business properties, condition (financial or
otherwise) or operations of Borrower taken as a whole or upon its ability to
perform its obligations under the Loan Documents (AMaterial Adverse Effect@).
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.
Except as otherwise disclosed on Schedule 4.3, no consent or approval of
------------
shareholders of, or lenders to, Borrower and no consent, approval, filing or
registration with any Governmental Authority is required as a condition to the
validity of the Loan Documents or the performance by Borrower of its obligations
thereunder.
Section 4.4. Binding Agreement. This Agreement and all other Loan
-----------------
Documents constitute, and the Note, when issued and delivered pursuant hereto
for value received, will constitute, the valid and legally binding obligations
of Borrower, enforceable against Borrower in accordance with their respective
terms.
17
Section 4.5. Litigation. Except as disclosed in Schedule 4.5, there are
---------- ------------
no actions, suits, proceedings or investigations pending or threatened against
Borrower before any court or arbitrator or before or by any Governmental
Authority which, in any one case or in the aggregate, 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: (i) any provision of Borrower's articles of incorporation or
bylaws, (ii) any provision of any law, rule, or regulation applicable to
Borrower, or (iii) any of the following: (A) any indenture or other agreement or
instrument to which Borrower is a party or by which Borrower or its property is
bound; or (B) any judgment, order or decree of any court, arbitration tribunal,
or Governmental Authority having jurisdiction over Borrower which is applicable
to Borrower, the violation of any of which would have a Material Adverse Effect.
Section 4.7. Financial Condition. The annual financial statements of
--------------------
Borrower as of December 31, 1997, audited by Xxxxxx Xxxxxxxx L.L.P. and the
unaudited financial statements of Borrower as of March 31, 1998, certified by
the chief financial officer of Borrower, which have been delivered to Lender,
fairly present in all material respects the financial condition of Borrower and
the results of its operations and changes in financial condition as of the dates
and for the periods referred to, and have been prepared in accordance with GAAP.
There are no material unrealized or anticipated liabilities, direct or indirect,
fixed or contingent, of Borrower as of the dates of such financial statements
which are required by GAAP to be disclosed therein that are not reflected
therein or in the notes thereto. There has been no adverse change in the
business, properties, condition (financial or otherwise) or operations (present
or prospective) of Borrower since December 31, 1997. Borrower's fiscal year
ends on December 31. The federal tax identification number of each entity
comprising Borrower is set forth on Schedule 4.15.
--------------
Section 4.8. No Default. Borrower is not in default under or with
-----------
respect to any obligation in any respect which could reasonably be expected to
result in 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.
18
Section 4.10. Taxes. Borrower has filed, or has obtained extensions for
------
the filing of, all federal, state and other tax returns which are required to be
filed, and has paid all taxes shown as due on those returns and all assessments,
fees and other amounts due as of the date hereof. All tax liabilities of
Borrower were, as of December 31, 1996 and are now, adequately provided for on
Borrower's books. No tax liability has been asserted by the Internal Revenue
Service or other taxing authority against Borrower for taxes in excess of those
already paid.
Section 4.11. Securities and Banking Laws and Regulations.
--------------------------------------------
(a) The use of the proceeds of the Loan and Borrower's issuance of the
Note will not directly or indirectly violate or result in a violation of the
Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including without limitation
Regulations U, T, G, or X of the Board of Governors of the Federal Reserve
System. Borrower is not engaged in the business of extending credit for the
purpose of the purchasing or carrying "margin stock" within the meaning of those
regulations. No part of the proceeds of the Loan hereunder will be used to
purchase or carry any margin stock or to extend credit to others for such
purpose.
(b) Borrower is not an investment company within the meaning of the
Investment Company Act of 1940, as amended, nor is it, directly or indirectly,
controlled by or acting on behalf of any Person which is an investment company
within the meaning of that Act.
Section 4.12. ERISA. No employee benefit plan (a "Plan") subject to the
------
Employee Retirement Income Security Act of 1974 ("ERISA") and regulations issued
pursuant thereto that is maintained by Borrower or under which Borrower could
have any liability under ERISA (a) has failed to meet minimum funding standards
established in Section 302 of ERISA, (b) has failed to comply with all
applicable requirements of ERISA and of the Internal Revenue Code, including all
applicable rulings and regulations thereunder, (c) has engaged in or been
involved in a prohibited transaction (as defined in ERISA) under ERISA or under
the Internal Revenue Code, or (d) has been terminated. Borrower has not
assumed, or received notice of a claim asserted against Borrower for, withdrawal
liability (as defined in the Multi-Employer Pension Plan Amendments Act of 1980,
as amended) with respect to any multi-employer pension plan and is not a member
of any Controlled Group (as defined in ERISA). Borrower has timely made when
due all contributions with respect to any multi-employer pension plan in which
it participates and no event has occurred triggering a claim against Borrower
for withdrawal liability with respect to any multi-employer pension plan in
which Borrower participates.
Section 4.13. Compliance with Law. Except as described in Schedule 4.13,
-------------------- -------------
Borrower is not in violation of any statute, rule or regulation of any
Governmental Authority (including, without limitation, any statute, rule or
regulation relating to employment practices or to environmental, occupational
and health standards and controls), the violation of which could reasonably be
expected to have a Material Adverse Effect. Borrower has obtained all licenses,
permits, franchises, and other governmental authorizations necessary for the
ownership of its
19
properties and the conduct of its business. Except for such failure to file or
failure to comply as could not reasonably be expected to have a Material Adverse
Effect, Borrower is current with all reports and documents required to be filed
with any state or federal securities commission or similar Governmental
Authority and is in full compliance with all applicable rules and regulations of
such commissions.
Section 4.14. Environmental Matters. No use, exposure, release,
----------------------
generation, manufacture, storage, treatment, transportation or disposal of
Hazardous Material has occurred or is occurring on or from any real property on
which the Collateral is located or which is owned, leased or otherwise occupied
by Borrower (the "Premises"), or off the Premises as a result of any action of
Borrower, except as would not have a Material Adverse Effect and except as
described in Schedule 4.14. Except as would not have a Material Adverse Effect,
-------------
all Hazardous Material used, treated, stored, transported to or from, generated
or handled on the Premises, or off the Premises by Borrower, has been disposed
of on or off the Premises by or on behalf of Borrower in a lawful manner. There
are no underground storage tanks present on or under the Premises owned or
leased by Borrower. Except as would not have a Material Adverse Effect, no
other environmental, public health or safety hazards exist with respect to the
Premises.
Section 4.15. Places of Business. The only places of business of
-------------------
Borrower, and the places where it keeps and intends to keep the Collateral and
records concerning the Collateral, are at the addresses set forth in Schedule
--------
4.15. Schedule 4.15 also lists the owner of record of each such property.
---- -------------
Section 4.16. Intellectual Property. Borrower exclusively owns or
----------------------
possesses all the patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, franchises, licenses, and
rights with respect to the foregoing necessary for the present and planned
future conduct of its business, without any conflict with the rights of others.
A list of all such intellectual property (indicating the nature of Borrower's
interest), as well as all outstanding franchises and licenses given by or held
by Borrower, is attached as Schedule 4.16. Borrower is not in default of any
-------------
obligation or undertaking with respect to such intellectual property or rights.
Section 4.17. Stock Ownership. The identity of the stockholders of
----------------
record of all classes of the outstanding stock of each entity comprising
Borrower, other than Holdings, together with the respective ownership
percentages held by such stockholders, are as set forth on Schedule 4.17.
-------------
Section 4.18. Material Facts. Neither this Agreement nor any other
---------------
Loan Document nor any other agreement, document, certificate, or statement
furnished to Lender by or on behalf of Borrower in connection with the
transactions contemplated hereby contains any untrue statement of material fact
or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading. There is no fact known to Borrower
that has or in the future could reasonably be expected to have a Material
Adverse Effect.
20
Section 4.19. Investments, Guarantees, and Certain Contracts. Borrower
-----------------------------------------------
does not own or hold any equity or long-term debt investments in, have any
outstanding advances to, have any outstanding guarantees for the obligations of,
or have any outstanding borrowings from, any Person, except as described on
Schedule 4.19. Borrower is not a party to any contract or agreement, or subject
-------------
to any corporate restriction, which materially adversely affects its business.
Section 4.20. Business Interruptions. Within five years prior to the
-----------------------
date hereof, neither the business, property or assets, or operations of Borrower
has been adversely affected in any way by any casualty, strike, lockout,
combination of workers, or order of the United States of America or other
Governmental Authority, directed against Borrower. There are no pending or
threatened labor disputes, strikes, lockouts, or similar occurrences or
grievances against Borrower or its business.
Section 4.21. Names. Within five years prior to the date hereof,
------
Borrower has not conducted business under or used any other name (whether
corporate, partnership or assumed) other than as shown on Schedule 4.21.
--------------
Borrower is the sole owner of all names listed on that Schedule and any and all
business done and invoices issued in such names are Borrower's sales, business,
and invoices. Each trade name of Borrower represents a division or trading style
of Borrower and not a separate Person or independent Affiliate.
Section 4.22 Joint Ventures. Borrower is not engaged in any joint
---------------
venture or partnership with any other Person, except as set forth on Schedule
--------
4.22.
-----
Section 4.23 Accounts. Lender may rely, in determining which Accounts
---------
are Qualified Accounts, on all statements and representations made by Borrower
with respect to any Account or Accounts. 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 $100,000.00. Unless otherwise indicated in writing to Lender, with
respect to each Account:
(a) It is genuine and in all respects what it purports to be, and is
not evidenced by a judgment;
(b) It arises out of a completed, bona fide sale and delivery of goods
---- ----
or rendition of services by Borrower in the ordinary course of its business and
in accordance with the terms and conditions of all purchase orders, contracts,
certification, participation, certificate of need, or other documents relating
thereto and forming a part of the contract between Borrower and the Account
Debtor;
(c) It is for a liquidated amount maturing as stated in a duplicate
claim or invoice covering such sale or rendition of services, a copy of which
has been furnished or is available to Lender;
21
(d) Such Account, and Lender's security interest therein, is not, and
will not (by voluntary act or omission by Borrower), be in the future, subject
to any offset, lien, deduction, defense, dispute, counterclaim or any other
adverse condition, and each such Account is absolutely owing to Borrower and is
not contingent in any respect or for any reason;
(e) There are no facts, events or occurrences which in any way impair
the validity or enforceability of any Accounts or tend to reduce the amount
payable thereunder from the face amount of the claim or invoice and statements
delivered to Lender with respect thereto;
(f) To the best of Borrower's knowledge, (i) the Account Debtor
thereunder had the capacity to contract at the time any contract or other
document giving rise to the Account was executed and (ii) such Account Debtor is
solvent;
(g) To the best of Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against any Account Debtor thereunder
which might result in any material adverse change in such Account Debtor's
financial condition or the collectibility of such Account;
(h) It has been billed and forwarded to the Account Debtor for payment
in accordance with applicable laws and compliance and conformance with any and
requisite procedures, requirements and regulations governing payment by such
Account Debtor with respect to such Account, and such Account if due from a
Medicaid/Medicare Account Debtor is properly payable directly to Borrower; and
(i) Borrower has obtained and currently has all certificates of need,
Medicaid and Medicare provider numbers, licenses, permits and authorizations as
necessary in the generation of such Accounts.
Section 4.24. Solvency. Both before and after giving effect to the
---------
transactions contemplated by the terms and provisions of this Agreement, (i)
Borrower (taken as a whole) owns property whose fair saleable value is greater
than the amount required to pay all of Borrower's Indebtedness (including
contingent debts), (ii) Borrower (taken as a whole) was and is able to pay all
of its Indebtedness as such Indebtedness matures, and (iii) Borrower (taken as a
whole) had and has capital sufficient to carry on its business and transactions
and all business and transactions in which it about to engage. For purposes
hereof, the term "Indebtedness" means, without duplication (a) all items which
in accordance with GAAP would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Borrower as of the date
on which Indebtedness is to be determined, (b) all obligations of any other
person or entity which such Borrower has guaranteed, and (c) the Obligations.
Section 4.25. Borrowers. All of the entities which generate Accounts and
----------
which are owned, directly or indirectly, fifty percent (50%) or more by any
entity comprising Borrower, are identified as Borrowers under this Agreement.
22
ARTICLE V
CLOSING AND CONDITIONS OF LENDING
---------------------------------
Section 5.1. Conditions Precedent to Agreement. The obligation of
----------------------------------
Lender to enter into and perform this Agreement and to make Revolving Credit
Loans is subject to the following conditions precedent:
(a) Lender shall have received two (2) originals of this Agreement and
all other Loan Documents required to be executed and delivered at or prior to
Closing (other than the Note, as to which Lender shall receive only one
original), executed by Borrower and any other required Persons, as applicable.
(b) Lender shall have received all searches and good standing
certificates required by Section 3.5.
(c) Borrower shall have complied and shall then be in compliance with
all the terms, covenants and conditions of the Loan Documents.
(d) There shall have occurred no Event of Default and no event which,
with the giving of notice or the lapse of time, or both, could constitute such
an Event of Default.
(e) The representations and warranties contained in Article IV shall
be true and correct; provided, however, that with respect to the obligation of
-------- -------
Lender to make Revolving Credit Loans, 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).
(f) Lender shall have received copies of all board of directors
resolutions of Borrower, and other corporate action taken by Borrower to
authorize the execution, delivery and performance of the Loan Documents and the
borrowing of the Loan thereunder, as well as the names and signatures of the
officers of Borrower authorized to execute documents on its behalf in connection
herewith, all as also certified as of the date hereof by Borrower's chief
financial officer, and such other papers as Lender may require.
(g) Lender shall have received copies, certified as true, correct and
complete by a corporate officer of each Borrower, of the articles of
incorporation of each Borrower, with any amendments to any of the foregoing, and
all other documents necessary for performance of the obligations of Borrower
under this Agreement and the other Loan Documents.
23
(h) Lender shall have received a written opinion of counsel for
Borrower, dated the date hereof, in the form of Exhibit C.
---------
(i) Lender shall have received such financial statements, reports,
certifications, and other operational information required to be delivered
hereunder, including without limitation an initial borrowing base certificate
calculating the Borrowing Base.
(j) Lender shall have received the Commitment Fee.
(k) The Lockbox and the Concentration Account shall have been
established.
(l) Lender shall have received a certificate of Borrower's chief
financial officer, dated the Closing Date, certifying that all of the conditions
specified in this Section have been fulfilled.
Section 5.2. Conditions Precedent to Advances. Notwithstanding any
---------------------------------
other provision of this Agreement, no Loan proceeds, Revolving Credit Loans,
advances or other extensions of credit under the Loan shall be disbursed
hereunder unless the following conditions have been satisfied or waived
immediately prior to such disbursement:
(a) The representations and warranties on the part of Borrower
contained in Article IV of this Agreement shall be true and correct in all
respects at and as of the date of disbursement or advance, as though made on and
as of such date (except to the extent that such representations and warranties
expressly relate solely to an earlier date and except that the references in
Section 4.7 to financial statements shall be deemed to be a reference to the
then most recent annual and interim financial statements of Borrower furnished
to Lender pursuant to Section 6.1 hereof).
(b) No Event of Default or event which, with the giving of notice of
the lapse of time, or both, could become an Event of Default shall have occurred
and be continuing or would result from the making of the disbursement or
advance.
(c) No material adverse change in the condition (financial or
otherwise), properties, business, or operations of Borrower (taken as a whole)
shall have occurred and be continuing with respect to Borrower since the date
hereof.
Section 5.3. Closing. Subject to the conditions of this Article V, the
--------
Loan shall be made available on the date as is mutually agreed by the parties
(the "Closing Date") at such time as may be mutually agreeable to the parties
upon the execution hereof (the "Closing") at such place as may be requested by
Lender.
Section 5.4. Waiver of Rights. By completing the Closing hereunder,
-----------------
or by making advances under the Loan, Lender does not waive a breach of any
representation or warranty of
24
Borrower hereunder or under any other Loan Document, and all of Lender's claims
and rights resulting from any breach or misrepresentation by Borrower are
specifically reserved by Lender.
ARTICLE VI
AFFIRMATIVE COVENANTS
---------------------
Each entity constituting Borrower covenants and agrees that for so long as
Borrower may borrow hereunder and until payment in full of the Note and
performance of all other obligations of Borrower under the Loan Documents:
Section 6.1. Financial Statements and Collateral Reports. Borrower will
--------------------------------------------
furnish to Lender (i) a sales and collections report and accounts receivable
aging schedule on a form acceptable to Lender within twenty-five (25) days after
the end of each calendar month, which shall include, but not be limited to, a
report of sales, credits issued, and collections received; (ii) payable aging
schedules within twenty-five (25) days after the end of each calendar month;
(iii) internally prepared monthly financial statements for Borrower, certified
by the chief financial officer of Borrower, within forty-five (45) days of the
end of each calendar month (except that such financial statements for the month
ending December 31 shall be furnished to Lender within sixty (60) days of the
end of such calendar month), accompanied by management analysis and actual vs.
budget variance reports; (iv) to the extent prepared by Borrower, annual
projections, profit and loss statements, balance sheets, and cash flow reports
(prepared on a monthly basis) for the succeeding fiscal year within thirty (30)
days before the end of each of Borrower's fiscal years; (v) internally prepared
annual financial statements for Borrower within sixty (60) days after the end of
each of Borrower's fiscal years; (vi) annual audited financial statements for
Borrower prepared by Xxxxxx Xxxxxxxx L.L.P., or a firm of independent public
accountants satisfactory to Lender, within ninety (90) days after the end of
each of Borrower's fiscal years; (vii) promptly upon receipt thereof, copies of
any reports submitted to Borrower by the independent accountants in connection
with any interim audit of the books of Borrower and copies of each management
control letter provided to Borrower by independent accountants; (viii) as soon
as available, copies of all financial statements and notices provided by
Borrower to all of its stockholders; and (ix) such additional information,
reports or statements as Lender may from time to time request. Annual financial
statements shall set forth in comparative form figures for the corresponding
periods in the prior fiscal year. All financial statements shall include a
balance sheet and statement of earnings and shall be prepared in accordance with
GAAP.
Section 6.2. Payments Hereunder. Borrower will make all payments of
------------------
principal, interest, fees, and all other payments required hereunder, under the
Loan, and under any other agreements with Lender to which Borrower is a party,
as and when due.
25
Section 6.3. Existence, Good Standing, and Compliance with Laws.
--------------------------------------------------
Borrower will do or cause to be done all things necessary (a) to obtain and keep
in full force and effect all corporate existence, rights, licenses, privileges,
and franchises of Borrower necessary to the ownership of its property or the
conduct of its business, and comply with all applicable present and future laws,
ordinances, rules, regulations, orders and decrees of any Governmental Authority
having or claiming jurisdiction over Borrower where the failure to maintain such
rights, licenses, and franchises, or the failure to comply with any applicable
laws or regulations would have a Material Adverse Effect; and (b) to maintain
and protect the properties used or useful in the conduct of the operations of
Borrower, in a prudent manner, including without limitation the maintenance at
all times of such insurance upon its insurable property and operations as
required by law or by Section 6.7 hereof.
Section 6.4. Legality. The making of the Loan and each disbursement or
---------
advance under the Loan shall not be subject to any penalty or special tax, shall
not be prohibited by any governmental order or regulation applicable to
Borrower, and shall not violate any rule or regulation of any Governmental
Authority, and necessary consents, approvals and authorizations of any
Governmental Authority to or of any such disbursement or advance shall have been
obtained.
Section 6.5. Lender's Satisfaction. All instruments and legal documents
----------------------
and proceedings in connection with the transactions contemplated by this
Agreement shall be satisfactory in form and substance to Lender and its counsel,
and Lender shall have received all documents, including records of corporate
proceedings and opinions of counsel, which Lender may have requested in
connection therewith.
Section 6.6. Taxes and Charges. Borrower will timely file all tax
------------------
reports and pay and discharge all taxes, assessments and governmental charges or
levies imposed upon Borrower, or its income or profits or upon its properties or
any part thereof, before the same shall be in default and prior to the date on
which penalties attach thereto, as well as all lawful claims for labor,
material, supplies or otherwise which, if unpaid, might become a lien or charge
upon the properties or any part thereof of Borrower; provided, however, that
-------- -------
Borrower shall not be required to pay and discharge or cause to be paid and
discharged any such tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith and by appropriate
proceedings by Borrower, and Borrower shall have set aside on their books
adequate reserve therefor; and provided further, that such deferment of payment
-------- -------
is permissible only so long as Borrower's title to, and its right to use, the
Collateral is not adversely affected thereby and Lender's lien and priority on
the Collateral are not adversely affected, altered or impaired thereby.
Section 6.7. Insurance. Borrower will carry adequate public liability
----------
and professional liability insurance with responsible companies satisfactory to
Lender in such amounts and against such risks as is customarily maintained by
similar businesses and by owners of similar property in the same general area.
26
Section 6.8. General Information. Borrower will furnish to Lender such
--------------------
information as Lender may, from time to time, request with respect to the
business or financial affairs of Borrower, and permit any officer, employee or
agent of Lender to visit and inspect any of the properties, to examine the
minute books, books of account and other records, including management letters
prepared by Borrower's auditors, of Borrower, and make copies thereof or
extracts therefrom, and to discuss its and their business affairs, finances and
accounts with, and be advised as to the same by, the accountants and officers of
Borrower, all at such times and as often as Lender may require.
Section 6.9. Maintenance of Property. Except as would not have a
------------------------
Material Adverse Effect, Borrower will maintain, keep and preserve all of its
properties in good repair, working order and condition and from time to time
make all needful and proper repairs, renewals, replacements, betterments and
improvements thereto, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times.
Section 6.10. Notification of Events of Default and Adverse
---------------------------------------------
Developments. Borrower promptly will notify Lender upon the occurrence of: (i)
------------
any Event of Default; (ii) any event which, with the giving of notice or lapse
of time, or both, could constitute an Event of Default; (iii) any event,
development or circumstance whereby the financial statements previously
furnished to Lender fail in any material respect to present fairly, in
accordance with GAAP, the financial condition and operational results of
Borrower; (iv) any judicial, administrative or arbitration proceeding pending
against Borrower, and any judicial or administrative proceeding known by
Borrower to be threatened against it which could reasonably be expected to have
a Material Adverse Effect or which may expose Borrower to uninsured liability of
$100,000.00 or more; (v) any default claimed by any other creditor for Borrowed
Money of Borrower other than Lender where the unpaid balance of such Borrowed
Money exceeds $100,000.00; and (vi) any other development in the business or
affairs of Borrower which may be adverse; in each case describing the nature
thereof and (in the case of notification under clauses (i) and (ii)) the action
Borrower proposes to take with respect thereto.
Section 6.11. Employee Benefit Plans. Borrower will (i) comply with the
-----------------------
funding requirements of ERISA with respect to the Plans for its employees, or
will promptly satisfy any accumulated funding deficiency that arises under
Section 302 of ERISA; (ii) furnish Lender, promptly after filing the same, with
copies of all reports or other statements filed with the United States
Department of Labor, the Pension Benefit Guaranty Corporation, or the Internal
Revenue Service with respect to all Plans, or which Borrower, or any member of a
Controlled Group, may receive from such Governmental Authority with respect to
any such Plans, and (iii) promptly advise Lender of the occurrence of any
Reportable Event or Prohibited Transaction with respect to any such Plan and the
action which Borrower proposes to take with respect thereto. Borrower will make
all contributions when due with respect to any multi-employer pension plan in
which it participates and will promptly advise Lender: (i) upon its receipt of
notice of the assertion against Borrower of a claim for withdrawal liability;
(ii) upon the
27
occurrence of any event which could trigger the assertion of a claim for
withdrawal liability against Borrower; and (iii) upon the occurrence of any
event which would place Borrower in a Controlled Group as a result of which any
member (including Borrower) thereof may be subject to a claim for withdrawal
liability, whether liquidated or contingent.
Section 6.12. Financing Statements. Borrower shall provide to Lender
---------------------
evidence satisfactory to Lender as to the due recording of termination
statements, releases of collateral, and Forms UCC-3, and shall cause to be
recorded financing statements on Form UCC-1, duly executed by Borrower and
Lender, in all places necessary to release all existing security interests and
other liens in the Collateral (other than as permitted hereby) and to perfect
and protect Lender's first priority lien and security interest in the
Collateral, as Lender may request.
Section 6.13. Financial Records. Borrower shall keep current and
------------------
accurate books of records and accounts in which full and correct entries will be
made of all of its business transactions, and will reflect in its financial
statements adequate accruals and appropriations to reserves, all in accordance
with GAAP.
Section 6.14. Collection of Accounts. Borrower shall continue to collect
-----------------------
its Accounts in the ordinary course of business.
Section 6.15. Places of Business. Borrower shall give thirty (30) days'
-------------------
prior written notice to Lender of any change in the location of any of its
places of business, of the places where its records concerning its Accounts are
kept, of the places where the Collateral is kept, or of the establishment of any
new, or the discontinuance of any existing, places of business.
Section 6.16. Business Conducted. Borrower shall continue in the
-------------------
business presently conducted by it using its best efforts to maintain its
customers and goodwill. Borrower shall not engage, directly or indirectly, in
any line of business substantially different from the business conducted by it
immediately prior to the Closing Date, or engage in business or lines of
business which are not reasonably related thereto.
Section 6.17. Litigation and Other Proceedings. Borrower shall give
---------------------------------
prompt notice to Lender of any litigation, arbitration, or other proceeding
before any Governmental Authority against or affecting Borrower if the amount
claimed is more than $60,000.00.
Section 6.18. Bank Accounts. Borrower shall assign all of its depository
--------------
and disbursement accounts to Lender.
Section 6.19. Submission of Collateral Documents. Subject to applicable
-----------------------------------
patient confidentiality laws, Borrower will, on demand of Lender, make available
to Lender copies of shipping and delivery receipts evidencing the shipment of
goods that gave rise to an Account, medical records, insurance verification
forms, assignment of benefits, in-take forms or other proof of the satisfactory
performance of services that gave rise to an Account, a copy of the claim or
invoice for each Account and copies of any written contract or order from which
the Account
28
arose. Borrower shall promptly notify Lender if an Account becomes evidenced or
secured by an instrument or chattel paper and upon request of Lender, will
promptly deliver any such instrument or chattel paper to Lender.
Section 6.20. Licensure; Medicaid/Medicare Cost Reports. Borrower will
------------------------------------------
maintain all certificates of need, provider numbers and licenses necessary to
conduct its business as presently conducted, and take any steps required to
comply with any such new or additional requirements that may be imposed on
providers of medical products and services. If required, all Medicaid/Medicare
cost reports will be properly filed.
Section 6.21. Officer's Certificates. Together with the monthly
-----------------------
financial statements delivered pursuant to clause (iii) of Section 6.1, and
together with the audited annual financial statements delivered pursuant to
clause (vi) of that Section, Borrower shall deliver to Lender a certificate of
its chief financial officer, in form and substance satisfactory to Lender:
(a) Setting forth the information (including detailed calculations)
required to establish whether Borrower is in compliance with the requirements of
Articles VI and VII as of the end of the period covered by the financial
statements then being furnished; and
(b) Stating that the signer has reviewed the relevant terms of this
Agreement, and has made (or caused to be made under his supervision) a review of
the transactions and conditions of Borrower from the beginning of the accounting
period covered by the income statements being delivered to the date of the
certificate, and that such review has not disclosed the existence during such
period of any condition or event which constitutes an Event of Default or which
is then, or with the passage of time or giving of notice or both, could become
an Event of Default, and if any such condition or event existed during such
period or now exists, specifying the nature and period of existence thereof and
what action Borrower has taken or proposes to take with respect thereto.
Section 6.22. Visits and Inspections. Borrower agrees to permit
-----------------------
representatives of Lender, from time to time, as often as may be reasonably
requested, but only during normal business hours, to visit and inspect the
properties of Borrower, and to inspect, audit and make extracts from its books
and records, and discuss with its officers and employees, as authorized by its
officers, and its independent accountants, Borrower's business, assets,
liabilities, financial condition, business prospects and results of operations.
Section 6.23. EBITDA. For each of the six months commencing with the
-------
month ending October 31, 1998, and through the month ending March 31, 1999, and
quarterly thereafter, Borrower shall have positive earnings before interest,
taxes, depreciation and amortization (AEBITDA@).
29
Section 6.24. Minimum Loan Amount. Borrower will maintain at all times
--------------------
outstanding Revolving Credit Loans in the aggregate principal amount of at least
the Minimum Loan Amount.
ARTICLE VII
NEGATIVE COVENANTS
------------------
Each entity constituting Borrower covenants and agrees that so long as
Borrower may borrow hereunder and until payment in full of the Note and
performance of all other obligations of Borrower under the Loan Documents:
Section 7.1. Borrowing. Borrower will not create, incur, assume or
---------
suffer to exist any liability for Borrowed Money except: (i) indebtedness to
Lender; (ii) indebtedness of Borrower secured by mortgages, encumbrances or
liens expressly permitted by Section 7.3 hereof; (iii) accounts payable to trade
creditors and current operating expenses (other than for borrowed money) which
are not aged more than one hundred twenty (120) days from the billing date or
more than 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; (iv) borrowings incurred in the ordinary course of its business and
not exceeding $10,000.00 in the aggregate outstanding at any one time; and (v)
borrowings described on Schedule 7.1. Borrower will not make prepayments on any
existing or future indebtedness for Borrowed Money to any Person (other than
Lender, to the extent permitted by this Agreement or any subsequent agreement
between Borrower and Lender).
Section 7.2. Joint Ventures. Borrower will not invest directly or
--------------
indirectly in any joint venture for any purpose without the prior written notice
to, and the express written consent of, Lender, which consent may be withheld in
Lender's reasonable discretion.
Section 7.3. Liens and Encumbrances. Borrower will not create, incur,
----------------------
assume or suffer to exist any mortgage, pledge, lien or other encumbrance of any
kind (including the charge upon property purchased under a conditional sale or
other title retention agreement) upon, or any security interest in, any of its
Collateral, whether now owned or hereafter acquired, except for Permitted Liens.
Section 7.4. Merger, Acquisition, or Sale of Assets. Borrower will not
---------------------------------------
enter into any merger or consolidation with or acquire all or substantially all
of the assets of any Person, and will not sell, lease, or otherwise dispose of
any of its assets except in the ordinary course of its business. Consistent
with the foregoing, until the Obligations are repaid in full none of the
entities comprising Borrower shall transfer, assign, convey or grant to any
other Person the right
30
to operate or control any of the nursing homes listed on Schedule 4.15, whether
-------------
by lease, sublease, management agreement, joint venture agreement or otherwise.
Section 7.5. Sale and Leaseback. Borrower will not, directly or
-------------------
indirectly, enter into any arrangement whereby Borrower sells or transfers all
or any part of its assets and thereupon and within one year thereafter rents or
leases the assets so sold or transferred without the prior written notice to,
and the express written consent of, Lender, which consent may be withheld in
Lender's sole discretion.
Section 7.6. Dividends, Distributions and Management Fees. During the
---------------------------------------------
existence of an Event of Default hereunder, Borrower will not declare or pay any
dividends or other distributions with respect to, purchase, redeem or otherwise
acquire for value any of its outstanding stock now or hereafter outstanding, or
return any capital of its stockholders, nor shall Borrower pay management fees
or fees of a similar nature to any Person.
Section 7.7. Loans. Borrower will not make loans or advances to any
------
Person, other than (i) trade credit extended in the ordinary course of its
business, and (ii) advances for business travel and similar temporary advances
in the ordinary course of business to officers, stockholders, directors, and
employees.
Section 7.8. Contingent Liabilities. Borrower will not assume,
-----------------------
guarantee, endorse, contingently agree to purchase or otherwise become liable
upon the obligation of any Person, except by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.
Section 7.9. Subsidiaries. Borrower will not form any subsidiary, or
-------------
make any investment in or any loan in the nature of an investment to, any other
Person.
Section 7.10. Compliance with ERISA. Borrower will not permit with
----------------------
respect to any Plan covered by Title IV of ERISA any Prohibited Transaction or
any Reportable Event.
Section 7.11. Certificates of Need. Borrower will not amend, alter or
---------------------
suspend or terminate or make provisional in any material way, any certificate of
need or provider number without the prior written consent of Lender.
Section 7.12. Transactions with Affiliates. Borrower will not enter into
-----------------------------
any transaction, including without limitation the purchase, sale, or exchange of
property, or the loaning or giving of funds to any Affiliate or subsidiary that
is not an entity comprising Borrower, except in the ordinary course of business
and pursuant to the reasonable requirements of Borrower's business and upon
terms substantially the same and not materially less favorable to Borrower as it
would obtain in a comparable arm's length transaction with any Person not an
Affiliate or subsidiary that is not an entity comprising Borrower, and so long
as the transaction is
31
not otherwise prohibited hereunder. For purposes of the foregoing, Lender
consents to the transactions described on Schedule 7.12.
-------------
Section 7.13. Use of Lender's Name. Borrower will not use Lender's name
---------------------
(or the name of any of Lender's affiliates) in connection with any of its
business operations. Borrower may disclose to third parties that Borrower has a
borrowing relationship with Lender. Nothing herein contained is intended to
permit or authorize Borrower to make any contract on behalf of Lender.
Section 7.14. Change of Control. There shall occur no Change of Control.
------------------
Section 7.15. Contracts and Agreements. Borrower will not become or be a
-------------------------
party to any contract or agreement which would breach this Agreement, or breach
any other instrument, agreement, or document to which Borrower is a party or by
which it is or may be bound.
Section 7.16. Margin Stock. Borrower will not carry or purchase any
-------------
"margin security" within the meaning of Regulations U, G, T or X of the Board of
Governors of the Federal Reserve System.
Section 7.17. Truth of Statements and Certificates. Borrower will not
-------------------------------------
furnish to Lender any certificate or other document that contains any untrue
statement of a material fact or that omits to state a material fact necessary to
make it not misleading in light of the circumstances under which it was
furnished.
ARTICLE VIII
EVENTS OF DEFAULT
-----------------
Section 8.1. Events of Default. Each of the following (individually, an
------------------
"Event of Default" and collectively, the "Events of Default") shall constitute
an event of default hereunder:
(a) A default in the payment of any installment of principal of, or
interest upon, the Note when due and payable, whether at maturity or otherwise,
or any breach of Section 2.3 of this Agreement, which default or breach, as
applicable, shall have continued unremedied for a period of 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;
32
(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 twenty (20) days after written notice from Lender;
(e) If any obligation of Borrower (other than its Obligations
hereunder) for the payment of Borrowed Money in excess of $100,000.00 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, arrangement,
readjustment or debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or there is commenced against
Borrower any such proceeding which remains undismissed for a period of sixty
(60) days, or any Borrower by any act indicates its consent to, approval of, or
acquiescence in, any such proceeding or the appointment of any receiver of or
any trustee for a Borrower or any substantial part of its property, or suffers
any such receivership or trusteeship to continue undischarged for a period of
sixty (60) days;
(h) If one or more final judgments against Borrower or attachments
against its property in excess of $100,000.00 not fully and unconditionally
covered by insurance shall be rendered by a court of record and shall remain
unpaid, unstayed on appeal, undischarged, unbonded and undismissed for a period
of thirty (30) days;
(i) A Reportable Event which might constitute grounds for termination
of any Plan covered by Title IV of ERISA or for the appointment by the
appropriate United States District Court of a trustee to administer any such
Plan or for the entry of a lien or encumbrance to secure any deficiency, has
occurred and is continuing thirty (30) days after its occurrence, or any such
Plan is terminated, or a trustee is appointed by an appropriate United States
District Court to administer any such Plan, or the Pension Benefit Guaranty
Corporation institutes proceedings to
33
terminate any such Plan or to appoint a trustee to administer any such Plan, or
a lien or encumbrance is entered to secure any deficiency or claim;
(j) If there shall occur a Change of Control;
(k) If there shall occur any uninsured damage to or loss, theft or
destruction of any portion of the Collateral in excess of $100,000.00;
(l) If Borrower breaches or violates the terms of, or if a default or
an event which could, whether with notice or the passage of time, or both,
constitute a default, occurs under any other existing or future agreement
(related or unrelated) between Borrower and Lender;
(m) Upon the issuance of any execution or distraint process against
Borrower or any of its property or assets involving in excess of $100,000.00;
(n) If Borrower ceases any material portion of its business operations
as presently conducted;
(o) If any indication or evidence is received by Lender that Borrower
may have directly or indirectly been engaged in any type of activity which, in
Lender's discretion, might result in the forfeiture of any property of Borrower
with a fair market value in excess of $100,000.00 to any Governmental Authority,
which default shall have continued unremedied for a period of thirty (30) days
after written notice from Lender;
(p) Borrower or any Affiliate of Borrower, shall challenge or contest,
in any action, suit or proceeding, the validity or enforceability of this
Agreement, or any of the other Loan Documents, the legality or the
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Lender;
(q) Borrower shall be criminally indicted or convicted under any law
that could lead to a forfeiture of any Collateral in excess of $100,000.00;
(r) There shall occur a material adverse change in the financial
condition or business prospects of Borrower (taken as a whole), or if Lender in
good xxxxx xxxxx itself insecure as a result of acts or events bearing upon the
financial condition of Borrower or the repayment of the Note, which default
shall have continued unremedied for a period of fifteen (15) days after written
notice from Lender.
Section 8.2. Acceleration. Upon the occurrence of any of the foregoing
------------
Events of Default, the Note shall become and be immediately due and payable upon
declaration to that effect delivered by Lender to Borrower; provided that, upon
the happening of any event specified
34
in Section 8.1(g) hereof, the Note shall be immediately due and payable without
declaration or other notice to Borrower.
Section 8.3. Remedies.
---------
(a) In addition to all other rights, options, and remedies granted to
Lender under this Agreement, upon the occurrence of an Event of Default Lender
may (i) terminate the Loan, whereupon all outstanding Obligations shall be
immediately due and payable, (ii) exercise all other rights granted to it
hereunder and all rights under the Uniform Commercial Code in effect in the
applicable jurisdiction(s) and under any other applicable law, and (iii)
exercise all rights and remedies under all Loan Documents now or hereafter in
effect, including the following rights and remedies (which list is given by way
of example and is not intended to be an exhaustive list of all such rights and
remedies):
(i) The right to take possession of, send notices regarding,
and collect directly the Collateral, with or without judicial process, and to
exercise all rights and remedies available to Lender with respect to the
Collateral under the Uniform Commercial Code in effect in the jurisdiction(s) in
which such Collateral is located;
(ii) The right to (by its own means or with judicial
assistance) enter any of Borrower's premises and take possession of the
Collateral, or render it unusable, or dispose of the Collateral on such premises
in compliance with subsection (b), without any liability for rent, storage,
utilities, or other sums, and Borrower shall not resist or interfere with such
action;
(iii) The right to require Borrower at Borrower's expense to
assemble all or any part of the Collateral and make it available to Lender at
any place designated by Lender;
(iv) The right to reduce the Maximum Loan Amount or to use the
Collateral and/or funds in the Concentration Account in amounts up to the
Maximum Loan Amount for any reason; and
(v) The right to relinquish or abandon any Collateral or any
security interest therein.
(b) Borrower agrees that a notice received by it at least ten (10)
days before the time of any intended public sale, or the time after which any
private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted
by applicable law, any perishable Collateral which threatens to speedily decline
in value or which is sold on a recognized marked may be sold immediately by
Lender without prior notice to Borrower. At any sale or disposition of
Collateral, Lender may (to the extent permitted by applicable law) purchase all
or any part of the Collateral, free from any right
35
of redemption by Borrower, which right is hereby waived and released. Borrower
covenants and agrees not to interfere with or impose any obstacle to Lender's
exercise of its rights and remedies with respect to the Collateral.
Section 8.4. Nature of Remedies. Lender shall have the right to proceed
-------------------
against all or any portion of the Collateral to satisfy the liabilities and
Obligations of Borrower to Lender in any order. All rights and remedies granted
Lender hereunder and under any agreement referred to herein, or otherwise
available at law or in equity, shall be deemed concurrent and cumulative, and
not alternative remedies, and Lender may proceed with any number of remedies at
the same time until the Loans, and all other existing and future liabilities and
obligations of Borrower to Lender, are satisfied in full. The exercise of any
one right or remedy shall not be deemed a waiver or release of any other right
or remedy, and Lender, upon the occurrence of an Event of Default, may proceed
against Borrower, and/or the Collateral, at any time, under any agreement, with
any available remedy and in any order.
ARTICLE IX
MISCELLANEOUS
-------------
Section 9.1. Expenses and Taxes.
-------------------
(a) Borrower agrees to pay, whether or not the Closing occurs, a
reasonable documentation preparation fee, together with actual audit and
appraisal fees and all other out-of-pocket charges and expenses incurred by
Lender in connection with the negotiation, preparation and execution of each of
the Loan Documents and preparation for Closing. In addition, Borrower shall
pay all fees associated with any amendments to the Loan Documents following
Closing. Borrower also agrees to pay all out-of-pocket charges and expenses
incurred by Lender (including the fees and expenses of Lender's counsel) in
connection with the enforcement, protection or preservation of any right or
claim of Lender and the collection of any amounts due under the Loan Documents.
(b) Borrower shall pay all taxes (other than taxes based upon or
measured by Lender's income or revenues or any personal property tax), if any,
in connection with the issuance of the Note and the recording of the security
documents therefor. The obligations of Borrower under this clause (b) shall
survive the payment of Borrower's indebtedness hereunder and the termination of
this Agreement.
Section 9.2. Entire Agreement; Amendments. This Agreement and the other
-----------------------------
Loan Documents constitute the full and entire understanding and agreement among
the parties with regard to their subject matter and supersede all prior written
or oral agreements, understandings, representations and warranties made with
respect thereto. No amendment, supplement or
36
modification of this Agreement nor any waiver of any provision thereof shall be
made except in writing executed by the party against whom enforcement is sought.
Section 9.3. No Waiver; Cumulative Rights. No waiver by any party
-----------------------------
hereto of any one or more defaults by the other party in the performance of any
of the provisions of this Agreement shall operate or be construed as a waiver of
any future default or defaults, whether of a like or different nature. No
failure or delay on the part of any party in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to any party hereto at law, in equity or
otherwise.
Section 9.4. Notices. Any notice or other communication required or
--------
permitted hereunder shall be in writing and personally delivered, mailed by
registered or certified mail (return receipt requested and postage prepaid),
sent by telecopier (with a confirming copy sent by regular mail), or sent by
prepaid overnight courier service, and addressed to the relevant party at its
address set forth below, or at such other address as such party may, by written
notice, designate as its address for purposes of notice hereunder:
(a) If to Lender, at:
HCFP Funding, Inc.
0 Xxxxxxxxx Xxxxxx, 0xx xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(b) If to Borrower, at:
HealthCor, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx, CFO
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.
37
Section 9.5. Severability. If any term, covenant or condition of this
-------------
Agreement, or the application of such term, covenant or condition to any party
or circumstance shall be found by a court of competent jurisdiction to be, to
any extent, invalid or unenforceable, the remainder of this Agreement and the
application of such term, covenant, or condition to parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition shall be valid and
enforced to the fullest extent permitted by law. Upon determination that any
such term is invalid, illegal or unenforceable, the parties hereto shall amend
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner.
Section 9.6. Successors and Assigns. This Agreement, the Note, and the
-----------------------
other Loan Documents shall be binding upon and inure to the benefit of Borrower
and Lender and their respective successors and assigns. Notwithstanding the
foregoing, Borrower may not assign any of its rights or delegate any of its
obligations hereunder without the prior written consent of Lender, which may be
withheld in its sole discretion. Lender may sell, assign, transfer, or
participate any or all of its rights or obligations hereunder without notice to
or consent of Borrower.
Section 9.7. Counterparts. This Agreement may be executed in any number
-------------
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one instrument.
Section 9.8. Interpretation. No provision of this Agreement or any
---------------
other Loan Document shall be interpreted or construed against any party because
that party or its legal representative drafted that provision. The titles of the
paragraphs of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement. Any pronoun used in this
Agreement shall be deemed to include singular and plural and masculine, feminine
and neuter gender as the case may be. The words "herein," "hereof," and
"hereunder" shall be deemed to refer to this entire Agreement, except as the
context otherwise requires.
Section 9.9. Survival of Terms. All covenants, agreements,
------------------
representations and warranties made in this Agreement, any other Loan Document,
and in any certificates and other instruments delivered in connection therewith
shall be considered to have been relied upon by Lender and shall survive the
making by Lender of the Loans herein contemplated and the execution and delivery
to Lender of the Note, and shall continue in full force and effect until all
liabilities and obligations of Borrower to Lender are satisfied in full.
Section 9.10. Release of Lender. Borrower releases Lender, its officers,
------------------
employees, and agents, of and from any claims for loss or damage resulting from
acts or conduct of any or all of them, unless caused by Lender's recklessness,
gross negligence, or willful misconduct.
Section 9.11. Time. Whenever Borrower is required to make any payment or
-----
perform any act on a Saturday, Sunday, or a legal holiday under the laws of the
State of Maryland (or
38
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 during an Event of Default, and
from time to time, after prior notice to Borrower if Borrower fails to do so,
to: (i) obtain insurance covering any of the Collateral as required hereunder;
(ii) pay for the performance of any of Borrower's obligations hereunder; (iii)
discharge taxes, liens, security interests, or other encumbrances at any time
levied or placed on any of the Collateral in violation of this Agreement unless
Borrower is in good faith with due diligence by appropriate proceedings
contesting those items; and (iv) pay for the maintenance and preservation of any
of the Collateral. Expenses and advances shall be added to the Loan, until
reimbursed to Lender and shall be secured by the Collateral. Any such payments
and advances by Lender shall not be construed as a waiver by Lender of an Event
of Default.
Section 9.15. Information to Participants. Lender may divulge to any
----------------------------
participant it may obtain in the Loan, or any portion thereof, all information,
and furnish to such participant copies of reports, financial statements,
certificates, and documents obtained under any provision of this Agreement or
any other Loan Document.
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
39
hereof. In addition, Borrower shall defend Indemnitee against and save it
harmless from all claims of any Person with respect to the Collateral.
Notwithstanding any contrary provision in this Agreement, the obligation of
Borrower under this Section 9.16 shall survive the payment in full of the
Obligations and the termination of this Agreement.
Section 9.17. Choice of Law; Consent to Jurisdiction. THIS AGREEMENT AND
---------------------------------------
THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF
CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS AGREEMENT OR THE NOTE IS
COMMENCED BY LENDER IN THE STATE COURTS OF THE STATE OF MARYLAND OR IN THE U.S.
DISTRICT COURT FOR THE DISTRICT OF MARYLAND, BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN
THE STATE OF MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF
MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS DESCRIBED
IN SECTION 9.4 HEREOF.
Section 9.18. Waiver of Trial by Jury. BORROWER HEREBY (A) COVENANTS AND
------------------------
AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND
(B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT
SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY BORROWER, AND THIS WAIVER IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND
REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE
SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF
BORROWER'S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, BORROWER HEREBY
CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING LENDER'S COUNSEL)
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER WILL NOT SEEK
TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
Section 9.19. Confession of Judgment. BORROWER AUTHORIZES ANY ATTORNEY
----------------------
ADMITTED TO PRACTICE BEFORE ANY COURT OF RECORD IN THE UNITED STATES OR THE
CLERK OF SUCH COURT TO APPEAR ON BEHALF OF BORROWER IN ANY COURT IN ONE OR MORE
PROCEEDINGS, OR BEFORE ANY CLERK THEREOF OF PROTHONOTARY OR OTHER COURT
OFFICIAL, AND TO CONFESS JUDGMENT AGAINST BORROWER IN FAVOR OF LENDER IN THE
FULL AMOUNT DUE ON THIS AGREEMENT (INCLUDING PRINCIPAL, ACCRUED INTEREST AND ANY
AND ALL CHARGES, FEES AND COSTS) PLUS ATTORNEYS'
40
FEES EQUAL TO FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, PLUS COURT COSTS, ALL
WITHOUT PRIOR NOTICE OR OPPORTUNITY OF BORROWER FOR PRIOR HEARING. BORROWER
AGREES AND CONSENTS THAT VENUE AND JURISDICTION SHALL BE PROPER IN THE CIRCUIT
COURT OF ANY COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE CITY, MARYLAND, OR
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND. BORROWER
WAIVES THE BENEFIT OF ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF COURT 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.
41
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
BORROWER:
ATTEST: HEALTHCOR, INC.
a Delaware corporation
By:________________________ By:__________________________ [SEAL]
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HEALTHCOR HOLDINGS, INC.
a Delaware corporation
By:________________________ By:__________________________ [SEAL]
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HEALTHCOR OXYGEN & MEDICAL
EQUIPMENT, INC.
a Texas corporation
By:________________________ By:__________________________ [SEAL]
Name:
Title:
ATTEST: HEALTHCOR PHARMACY, INC.
a Texas corporation
By:________________________ By:__________________________ [SEAL]
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: PHHN, INC.
42
a Texas corporation
By:________________________ By:__________________________ [SEAL]
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HEALTHCOR REHABILITATION
SERVICES, INC.
a Texas corporation
By:________________________ By:__________________________ [SEAL]
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HC PERSONNEL RESOURCES, INC.
a Texas corporation
By:________________________ By:__________________________ [SEAL]
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: CARENETWORK, INC.
an Arkansas corporation
By:________________________ By:__________________________ [SEAL]
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
43-A
43
LENDER:
ATTEST: HCFP FUNDING, INC.
a Delaware corporation
By:________________________ By:__________________________
Name:
Title:
43-B
44
LIST OF EXHIBITS
----------------
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Lockbox Agreement
Exhibit C - Form of Legal Opinion
43-B
45
LIST OF SCHEDULES
-----------------
Schedule 1.36 - Permitted Liens
Schedule 4.1 - Subsidiaries
Schedule 4.5 - Litigation
Schedule 4.7 - Tax Identification Numbers
Schedule 4.13 - Non-Compliance with Law
Schedule 4.14 - Environmental Matters
Schedule 4.15 - Places of Business
Schedule 4.16 - Licenses
Schedule 4.17 - Stock Ownership
Schedule 4.19 - Borrowings and Guarantees
Schedule 4.21 - Trade Names
Schedule 4.22 - Joint Ventures
Schedule 7.12 - Transactions with Affiliates
43-B
46
$20,000,000.00
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
-----------------------------------------------
dated May 19, 1998
by and among
HEALTHCOR, INC.
HEALTHCOR HOLDINGS, INC.
HEALTHCOR OXYGEN & MEDICAL EQUIPMENT, INC.
HEALTHCOR PHARMACY, INC.
PHHN, INC.
HEALTHCOR REHABILITATION SERVICES, INC.
HC PERSONNEL RESOURCES, INC.
CARENETWORK, INC.
(collectively, "Borrower")
and
HCFP FUNDING, INC.
September 14 , 1998
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
THIS AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (This "Amendment") is
made as of this 14th day of September, 1998, by and among HEALTHCOR, INC., a
Delaware corporation, HEALTHCOR HOLDINGS, INC., a Delaware corporation
("Holdings"), HEALTHCOR OXYGEN & MEDICAL EQUIPMENT, INC., a Texas corporation,
----------
HEALTHCOR PHARMACY, INC. a Texas corporation, PHHN, INC. a Texas corporation,
HEALTHCOR REHABILITATION SERVICES, INC. a Texas corporation, HC PERSONNEL
RESOURCES, INC., a Texas corporation, CARENETWORK, INC., an Arkansas corporation
(collectively, "Borrower"), and HCFP FUNDING, INC., a Delaware corporation
--------
("Lender"). Capitalized terms used but not defined in this Amendment shall have
--------
the meanings that are set forth in the Loan Agreement (as defined below).
RECITALS
--------
A. Pursuant to that certain Loan and Security Agreement dated as of May
19, 1998 by and between Borrower and Lender (the "Loan Agreement"), the parties
--------------
have established certain financing arrangements under a master credit facility
that allows Borrower to borrow funds from Lender in accordance with the terms
and conditions set forth in the Loan Agreement.
2. Borrower's consistent cash flow losses and significant Medicare offset
exposure constitute a "material adverse change" as contemplated by Section
8.1(r) of the Loan Agreement, and have resulted in the absence of further
availability for Borrower to receive additional Revolving Credit Loans in
accordance with the Borrowing Base. Consequently, as specified in Section 5.2 of
the Loan Agreement, Lender is not obligated or required to advance any
additional funds to Borrower and Lender is entitled to exercise all of its
rights and remedies against Borrower and the Collateral as provided in the Loan
Agreement.
C. Notwithstanding the foregoing, Lender has agreed to make an additional
advance (the "Overline Loan") under the Loan Agreement in the maximum aggregate
------------------
principal amount of Two Million and No/100 Dollars ($2,000,000.00) (the
"Principal Sum").
--------------
4. Lender has agreed to forbear from exercising its rights and remedies
under the Loan Agreement for so long as no Event of Default arises after the
date hereof (the "Limited Forbearance").
-------------------
5. The Overline Loan from Lender provides the Borrower with a significant
benefit
in the form of additional funds which the Borrower could not otherwise obtain.
6. Lender's Limited Forbearance provides Borrower with a substantial
additional benefit. In the absence of Lender's Limited Forbearance, Lender is
entitled to exercise immediately its rights and remedies under the Loan
Agreement against the Borrower and against the Collateral.
7. Borrower's agreements stated in Section 1.04 are a material inducement
to Lender to enter into the Limited Forbearance and to provide the additional
financing pursuant to the Overline Loan. Borrower has consulted with counsel in
making the agreements stated in Section 1.04. Borrower has been advised by its
counsel of and understands the rights under the Bankruptcy Code that is agreeing
to waive or modify pursuant to this Section 1.04. Borrower acknowledges and
confirms that this Amendment, including its agreements in Section 1.04 are in
the best interests of Borrower.
8. Lender is willing to make the Overline Loan and to provide the Limited
Forbearance but only upon the condition, among others, that Borrower shall have
executed and delivered to Lender this Amendment.
9. The parties now desire to amend the Loan Agreement to state the terms
of the Overline Loan and to make certain other changes in the Loan Agreement, in
accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained in this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender and Borrower hereby agree as follows:
1.01 The Overline Loan
-----------------
a. Except as expressly modified by this Amendment, the Overline Loan
will be treated for all purposes as a Revolving Credit Loan under the Loan
Agreement and the Note, and all principal, interest, fees and other costs and
expenses relating thereto shall be treated as additional Obligations under the
Loan Agreement and the other Loan Documents.
b. If not sooner repaid, Borrower promises to pay to Lender the
entire Principal Sum on March 10, 1999 (the "Maturity Date"). The failure to
-------------
make such repayment shall constitute an immediate Event of Default under Section
8.1(a) of the Loan Agreement.
c. In addition to the repayment of the Principal Sum, Borrower
promises to pay to Lender interest on the Principal Sum on a monthly basis from
the date of this Amendment until the Maturity Date. Interest shall be at a
fluctuating rate per annum (on the basis of the actual number of days elapsed
over a year of 360 days) equal to the Prime Rate of Interest plus four percent
(Prime plus 4.0%) (the "Overline Base Rate"), provided that during an Event of
------------------
Default such rate shall be equal to the Overline Base Rate plus five percent
(5%), but in no event in excess of the Highest Lawful Rate. Accrued interest
shall be payable monthly in arrears on the last Business Day (as defined below)
of each month from September 30, 1998 and continuing through and including the
Maturity Date. Lender shall be entitled to apply amounts transferred to the
Concentration Account pursuant to Section 2.3 of the Loan Agreement in
satisfaction of Borrower's obligations with respect to the Overline Loan.
d. Borrower shall pay Lender a overline fee of Twenty Thousand and
No/100 Dollars ($20,000.00) (the "Overline Fee"), which fee shall be deducted
from the advance by Lender so that the net amount to be advanced by Lender with
respect to the Overline Loan shall be One Million Nine Hundred Eighty Thousand
and No/100 Dollars ($1,980,000.00).
e. Upon a Sale Event (as defined below), Borrower shall prepay all of
the Principal Sum outstanding (and, if applicable, the Success Fee), together
with all interest accrued on the Principal Sum and all other sums that are
payable pursuant to this Amendment.
f. The Maximum Loan Amount under the Loan Agreement shall be
inclusive of the Overline Loan.
g. Subject to the terms and conditions of this Amendment, Lender
shall make available to Borrower the Principal Sum in immediately available
funds not later than 12:00 Noon (Maryland time) on the Business Day on which the
following conditions precedent are satisfied: (i) Borrower shall have executed
and delivered to Lender this Amendment, and all financing statements and other
documents, certificates and agreements reasonably deemed necessary or
appropriate by Lender to effectuate the Overline Loan; (ii) Lender shall have
received the Stock Pledge Agreement of Healthcor Holdings, Inc. in favor of
Lender dated even date herewith (the "Stock Pledge Agreement"), the related
----------------------
Irrevocable Stock Power and the certificates evidencing the stock that is the
subject of the Stock Pledge Agreement; (iii) Lender shall have received a letter
from S. Xxxxx Xxxxxx, Chief Executive Officer of HC (as defined below), stating
that after giving effect to the Overline Loan, HC will be solvent; and (iv)
Lender shall have received a legal opinion in form and substance satisfactory to
Lender.
1.02. Section 2.4 of the Loan Agreement is hereby amended to include a new
Subsection 2.4(f) as follows:
"(a) If such is greater than zero, Borrower shall pay to Lender a fee
(the "Success Fee") upon the consummation of (i) a transaction of merger or
consolidation involving HC
3
Personnel Resources, Inc. ("HC"), or (ii) HC's conveyance, sale, lease,
sublease, transfer or other disposition of, in one transaction or a series of
transactions, all or substantially all of its assets, whether now or hereafter
acquired, or the capital stock of HC (any such transaction described in clause
(i) or (ii) above, a "Sale Event"). The Success Fee shall be based on the
aggregate consideration paid (net of applicable commissions, and other
reasonable expenses of the Sale Event transaction) to HC or any other entity
comprising Borrower in connection with the Sale Event (the "Sale
Consideration"), whether such consideration is in the form of cash, securities,
indebtedness or otherwise, and shall be computed and paid as follows:
The Success Fee shall equal (i) five Percent (5.0%) of the Excess Proceeds
if the Sale Event occurs within sixty (60) days from the date of this Amendment,
(ii) eight percent (8%) of the Excess Proceeds, if the Sale Event occurs between
sixty-one (61) and ninety (90) days from the date of this Amendment, (iii)
eleven and one half percent (11.5%) of the Excess Proceeds, if the Sale Event
occurs between ninety-one (91) and one hundred twenty (120) days from the date
of this Amendment, (iv) fifteen and one half percent (15.5%) of the Excess
Proceeds, if the Sale Event occurs between one hundred twenty-one (121) and one
hundred fifty (150) days from the date of this Amendment, and (v) twenty percent
(20.0%) of the Excess Proceeds, if the Sale Event occurs above 150 days from the
date of this Amendment. "Excess Proceeds" shall mean the Sale Consideration up
---------------
to Three Million Five Hundred Thousand Dollars ($3,500,000.00) (with any noncash
consideration included therein to be valued at the fair market value thereof as
determined by the Board of Directors of Holdings) minus the sum of the Principal
Sum plus all interest thereon and other Obligations directly related to the
Overline Loan.
1.03 Subection 3.1(j) of the Loan Agreement is deleted in its entirety and
replaced as follows:
(j) other than property pledged to secure the L/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
1.04. Article VIII of the Loan Agreement (Events of Default) is hereby
amended to add a new Section 8.5 of the Loan Agreement as follows:
"Section 8.5. Agreement to Waive the Protections of the Automatic
----------------------------------------------------------------
Stay and to Take Certain Other Action in the Event of a Bankruptcy Proceeding.
------------------------------------------------------------------------------
Borrower hereby agrees that if during the Term, a voluntary or
involuntary petition(s) is filed commencing a proceeding under any Chapter of
the United States Bankruptcy Code (Title 11, United States Code) relating to any
or all of the entities comprising Borrower (such entity or entities,
individually and/or collectively referred to for the purpose of this Section 8.5
as the "Debtor"):
Debtor waives the protections of any stay or injunction in the
Debtor's
4
bankruptcy proceeding, including the automatic stay of Bankruptcy Code
(S)362(a), 11 U.S.C. (S)362, that may arise through the filing of a bankruptcy
proceeding regarding the Debtor and the Debtor will consent to and not oppose
any motion by Lender seeking relief from any such stays and injunctions in the
bankruptcy proceeding in order to allow Lender to exercise all of its rights and
remedies with respect to the Collateral under this Agreement, the other Loan
Documents and/or any applicable non-bankruptcy law, including without
limitation, the Uniform Commercial Code. In addition, the Debtor acknowledges
that in any bankruptcy proceeding regarding the Debtor, Lender will be entitled
to immediate stay relief under Bankruptcy Code (S)362(d)(1), 11
U.S.C.(S)362(d)(1), "for cause", such "cause" being (in addition to anything
else Lender may present) the filing of the bankruptcy case and the agreement
stated in this paragraph and the impact the bankruptcy filing will create on the
Debtor's business and the Collateral; and
Debtor will discuss and cooperate with Lender in good faith to permit
Lender to provide debtor-in-possession financing on terms and conditions
mutually agreeable to the parties ("Mutually Agreeable DIP Financing"), and
Debtor will petition the applicable bankruptcy court to request that Lender be
authorized (if Lender consents and agrees) to provide Mutually Agreeable DIP
Financing and senior priming liens to Debtor pursuant to, without limitation,
Bankruptcy Code (S)364, 11 U.S.C. (S)364. If after such discussion and
cooperation in good faith, Borrower and Lender do not agree to a Mutually
Agreeable DIP Financing, Lender shall subsequently have the right of first
refusal to provide debtor-in-possession financing and senior priming liens to
Debtor pursuant to, without limitation, Bankruptcy Code (S)364, 11 U.S.C.
(S)364, on the same terms and conditions as may be offered by any other third-
party lender (and Debtor shall so petition the bankruptcy court to request that
Lender be approved to provide such debtor-in-possession financing if it
exercises its right of first refusal).
[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
5
1.05. Reference to the Effect on the Loan Agreement.
---------------------------------------------
(a) Upon the effectiveness of this Amendment, each reference in the
Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
similar import shall mean and be a reference to the Loan Agreement as amended by
this Amendment.
(b) Except as specifically amended above, the Loan Agreement, and all
other Loan Documents, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided in this Amendment, operate as a waiver of any
right, power or remedy of Lender, nor constitute a waiver of any provision of
the Loan Agreement, or any other documents, instruments and agreements executed
or delivered in connection with the Loan Agreement.
2. Governing Law. This Amendment shall be governed by and construed in
-------------
accordance with the laws of the State of Maryland.
3. Headings. Section headings in this Amendment are included for
--------
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
4. Counterparts. This Amendment may be executed in counterparts, and both
------------
counterparts taken together shall be deemed to constitute one and the same
instrument.
[SIGNATURES TO FOLLOW]
6
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the date first written above.
LENDER:
ATTEST: HCFP FUNDING, INC.
a Delaware corporation
By:________________________ By:_________________________________
Name: Name:
Title: Title:
BORROWER:
ATTEST: HEALTHCOR, INC.
a Delaware corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HEALTHCOR HOLDINGS, INC.
a Delaware corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HEALTHCOR OXYGEN & MEDICAL
EQUIPMENT, INC.
a Texas corporation
By:________________________ By:__________________________
Name:
Title:
[ADDITIONAL SIGNATURES FOLLOW]
7
ATTEST: HEALTHCOR PHARMACY, INC.
a Texas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: PHHN, INC.
a Texas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HEALTHCOR REHABILITATION
SERVICES, INC.
a Texas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HC PERSONNEL RESOURCES, INC.
a Texas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: CARENETWORK, INC.
An Arkansas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
8
$20,000,000.00
AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
originally dated May 19, 1998
by and among
HEALTHCOR, INC.
HEALTHCOR HOLDINGS, INC.
HEALTHCOR OXYGEN & MEDICAL EQUIPMENT, INC.
HEALTHCOR PHARMACY, INC.
PHHN, INC.
HEALTHCOR REHABILITATION SERVICES, INC.
HC PERSONNEL RESOURCES, INC.
CARENETWORK, INC.
(collectively, "Borrower")
and
HCFP FUNDING, INC.
Amended as of November 16, 1998
AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
THIS AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made as of this 16th day of November, 1998, by and among HEALTHCOR, INC., a
Delaware corporation, HEALTHCOR HOLDINGS, INC., a Delaware corporation
("Holdings"), HEALTHCOR OXYGEN & MEDICAL EQUIPMENT, INC., a Texas corporation,
--------
HEALTHCOR PHARMACY, INC. a Texas corporation, PHHN, INC. a Texas corporation,
HEALTHCOR REHABILITATION SERVICES, INC. a Texas corporation, HC PERSONNEL
RESOURCES, INC., a Texas corporation and CARENETWORK, INC., an Arkansas
corporation (collectively, "Borrower"), and HCFP FUNDING, INC., a Delaware
--------
corporation ("Lender"). Capitalized terms used but not defined in this
------
Amendment shall have the meanings that are set forth in the Loan Agreement (as
defined below).
RECITALS
--------
A. Pursuant to that certain Loan and Security Agreement dated as of May
19, 1998 by and between Borrower and Lender (as amended, restated, modified or
supplemented from time to time, the "Loan Agreement"), the parties have
--------------
established certain financing arrangements under a master credit facility that
allows Borrower to borrow funds from Lender in accordance with the terms and
conditions set forth in the Loan Agreement.
2. Pursuant to that certain Asset Purchase Agreement by and among
HealthCor Oxygen & Medical Equipment, Inc. ("HealthCor Equipment"), HealthCor
-------------------
Holdings, Inc. ("Holdings") and Home Care Supply, Inc. ("Home Care"), HealthCor
-------- ---------
Equipment and Holdings have agreed to sell (the "SMM Sale") to Home Care
--------
substantially all of the assets of the Southern Medical Mart division of
HealthCor Equipment (the "Transferred Assets"), other than Accounts generated by
------------------
such Southern Medical Mart division and proceeds from such Accounts (such
Accounts and related proceeds, the "SMM Accounts").
------------
C. Lender is willing to release the Transferred Assets as Collateral
under the Loan Agreement upon the condition, among others, that Borrower shall
have executed and delivered to Lender this Amendment.
4. The parties now desire to amend the Loan Agreement, in accordance with
the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained in this Amendment, and other good and valuable
consideration, the receipt
and sufficiency of which are hereby acknowledged, Lender and Borrower have
agreed to the following amendments to the Loan Agreement. Capitalized terms used
but not defined in this Amendment shall have the meanings that are set forth in
the Loan Agreement.
1. Maximum Availability.
---------------------
As of the closing date of the SMM Sale (the "SMM Closing Date"), the
maximum availability under the Borrowing Base for advances under the Loan (the
"Maximum Availability for Advances"), exclusive of that certain Overline Loan in
the maximum principal amount of $2,000,000.00 made to Borrower in accordance
with the terms of Amendment No. 1 to the Loan Agreement dated as of September
14, 1998, shall equal $8,137,500.00. Subsequent to the SMM Closing Date, the
Maximum Availability for Advances shall be reduced by the aggregate dollar
amount of collections from SMM Accounts as they liquidate. Borrower shall
account for such collections monthly in connection with its monthly aging, but
in no event later than the fifteenth day of each month, by providing Lender with
documentation sufficient in Lender's reasonable discretion to verify such
collections. Notwithstanding anything herein to the contrary, the Maximum
Availability for Advances shall be equal to $7,775,000.00 by the sixtieth (60th)
day following the SMM Closing Date.
2. Reference to the Effect on the Loan Agreement.
---------------------------------------------
(a) Upon the effectiveness of this Amendment, each reference in the
Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
similar import shall mean and be a reference to the Loan Agreement as amended by
this Amendment.
(b) Except as specifically amended above, the Loan Agreement, and all
other Loan Documents, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided in this Amendment, operate as a waiver of any
right, power or remedy of Lender, nor constitute a waiver of any provision of
the Loan Agreement, or any other documents, instruments and agreements executed
or delivered in connection with the Loan Agreement.
3. Governing Law. This Amendment shall be governed by and construed in
-------------
accordance with the laws of the State of Maryland.
4. Headings. Section headings in this Amendment are included for
--------
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
5. Counterparts. This Amendment may be executed in counterparts, and
------------
both counterparts taken together shall be deemed to constitute one and the same
instrument.
[SIGNATURES TO FOLLOW]
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the date first written above.
LENDER:
ATTEST: HCFP FUNDING, INC.
a Delaware corporation
By:________________________ By:_________________________________
Name: Name:
Title: Title:
BORROWER:
ATTEST: HEALTHCOR, INC.
a Delaware corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HEALTHCOR HOLDINGS, INC.
a Delaware corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HEALTHCOR OXYGEN & MEDICAL
EQUIPMENT, INC.
a Texas corporation
By:________________________ By:__________________________
Name:
Title:
3
[ADDITIONAL SIGNATURES FOLLOW]
4
ATTEST: HEALTHCOR PHARMACY, INC.
a Texas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: PHHN, INC.
a Texas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HEALTHCOR REHABILITATION
SERVICES, INC.
a Texas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HC PERSONNEL RESOURCES, INC.
a Texas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: CARENETWORK, INC.
an Arkansas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
5
$20,000,000.00
AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
originally dated May 19, 1998
by and among
HEALTHCOR, INC.
HEALTHCOR HOLDINGS, INC.
HEALTHCOR OXYGEN & MEDICAL EQUIPMENT, INC.
HEALTHCOR PHARMACY, INC.
PHHN, INC.
HEALTHCOR REHABILITATION SERVICES, INC.
HC PERSONNEL RESOURCES, INC.
CARENETWORK, INC.
(collectively, "Borrower")
and
HCFP FUNDING, INC.
Amended as of January 5, 1999
AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
THIS AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made as of this 5th day of January, 1999, by and among HEALTHCOR, INC., a
Delaware corporation, HEALTHCOR HOLDINGS, INC., a Delaware corporation
("Holdings"), HEALTHCOR OXYGEN & MEDICAL EQUIPMENT, INC., a Texas corporation,
----------
HEALTHCOR PHARMACY, INC. a Texas corporation, PHHN, INC. a Texas corporation,
HEALTHCOR REHABILITATION SERVICES, INC. a Texas corporation, HC PERSONNEL
RESOURCES, INC., a Texas corporation and CARENETWORK, INC., an Arkansas
corporation (collectively, "Borrower"), and HCFP FUNDING, INC., a Delaware
--------
corporation ("Lender"). Capitalized terms used but not defined in this
------
Amendment shall have the meanings that are set forth in the Loan Agreement (as
defined below).
RECITALS
--------
A. Pursuant to that certain Loan and Security Agreement dated as of May
19, 1998 by and between Borrower and Lender (as amended, restated, modified or
supplemented from time to time, the "Loan Agreement"), the parties have
--------------
established certain financing arrangements under a master credit facility that
allows Borrower to borrow funds from Lender in accordance with the terms and
conditions set forth in the Loan Agreement.
2. Pursuant to that certain Asset Purchase Agreement by and among
HealthCor, Inc. ("HealthCor") and Addus HealthCare, Inc. ("Addus"), HealthCor
---------
has agreed to sell (the "VNS Sale") to Addus substantially all of the assets of
--------
the New Mexico Medicaid Waiver program business (the "Business") of HealthCor
--------
(the "Transferred Assets"), other than Accounts generated by such Business and
------------------
proceeds from such Accounts for services rendered prior to January 1, 1999 (such
Accounts and related proceeds, the "VNS Accounts").
------------
C. Lender is willing to release the Transferred Assets as Collateral
under the Loan Agreement upon the condition, among others, that Borrower shall
have executed and delivered to Lender this Amendment.
4. The parties now desire to amend the Loan Agreement, in accordance with
the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained in this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender and Borrower have agreed to the
following amendments to the Loan Agreement. Capitalized terms used but not
defined in this Amendment shall have the meanings that are set forth in the Loan
Agreement.
1. Maximum Availability.
---------------------
As of the closing date of the VNS Sale (the "VNS Closing Date"), and at all
----------------
times hereafter until all Obligations under the Loan Agreement have been paid,
the maximum availability under the Borrowing Base for advances under the Loan
(the "Maximum Availability for Advances"), exclusive of that certain Overline
-------------------- ------------
Loan in the maximum principal amount of $2,000,000.00 made to Borrower in
accordance with the terms of Amendment No. 2 to the Loan Agreement dated as of
November 16, 1998, shall equal $7,532,000.00.
2. Reference to the Effect on the Loan Agreement.
---------------------------------------------
(a) Upon the effectiveness of this Amendment, each reference in the
Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
similar import shall mean and be a reference to the Loan Agreement as amended by
this Amendment.
(b) Except as specifically amended above, the Loan Agreement, and all
other Loan Documents, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided in this Amendment, operate as a waiver of any
right, power or remedy of Lender, nor constitute a waiver of any provision of
the Loan Agreement, or any other documents, instruments and agreements executed
or delivered in connection with the Loan Agreement.
3. Governing Law. This Amendment shall be governed by and construed in
-------------
accordance with the laws of the State of Maryland.
4. Headings. Section headings in this Amendment are included for
--------
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
5. Counterparts. This Amendment may be executed in counterparts, and
------------
both counterparts taken together shall be deemed to constitute one and the same
instrument.
[SIGNATURES TO FOLLOW]
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the date first written above.
LENDER:
ATTEST: HCFP FUNDING, INC.
a Delaware corporation
By:________________________ By:_________________________________
Name: Name:
Title: Title:
BORROWER:
ATTEST: HEALTHCOR, INC.
a Delaware corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HEALTHCOR HOLDINGS, INC.
a Delaware corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HEALTHCOR OXYGEN & MEDICAL EQUIPMENT, INC.
a Texas corporation
By:________________________ By:__________________________
Name:
Title:
[ADDITIONAL SIGNATURES FOLLOW]
ATTEST: HEALTHCOR PHARMACY, INC.
a Texas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: PHHN, INC.
a Texas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HEALTHCOR REHABILITATION SERVICES, INC.
a Texas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: HC PERSONNEL RESOURCES, INC.
a Texas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
ATTEST: CARENETWORK, INC.
an Arkansas corporation
By:________________________ By:__________________________
Name: S. Xxxxx Xxxxxx
Title: Chief Executive Officer and Secretary
$20,000,000.00
AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
dated May 19, 1998
by and among
HEALTHCOR, INC.
HEALTHCOR HOLDINGS, INC.
HEALTHCOR OXYGEN & MEDICAL EQUIPMENT, INC.
HEALTHCOR PHARMACY, INC.
PHHN, INC.
HEALTHCOR REHABILITATION SERVICES, INC.
HC PERSONNEL RESOURCES, INC.
CARENETWORK, INC.
(collectively, "Borrower")
and
HCFP FUNDING, INC.
March 1, 1999
AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
THIS AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT (This "Amendment") is
made as of this 1st day of March, 1999, by and among HEALTHCOR, INC., a Delaware
corporation, HEALTHCOR HOLDINGS, INC., a Delaware corporation ("Holdings"),
--------
HEALTHCOR OXYGEN & MEDICAL EQUIPMENT, INC., a Texas corporation, HEALTHCOR
PHARMACY, INC. a Texas corporation, PHHN, INC. a Texas corporation, HEALTHCOR
REHABILITATION SERVICES, INC. a Texas corporation, HC PERSONNEL RESOURCES, INC.,
a Texas corporation, CARENETWORK, INC., an Arkansas corporation (collectively,
"Borrower"), and HCFP FUNDING, INC., a Delaware corporation ("Lender").
--------- ------
Capitalized terms used but not defined in this Amendment shall have the meanings
that are set forth in the Loan Agreement (as defined below).
RECITALS
--------
A. Pursuant to that certain Loan and Security Agreement dated as of May
19, 1998 by and between Borrower and Lender (as amended, restated, modified or
supplemented from time to time, the "Loan Agreement"), the parties have
--------------
established certain financing arrangements under a master credit facility that
allows Borrower to borrow funds from Lender in accordance with the terms and
conditions set forth in the Loan Agreement.
B. Pursuant to that certain Amendment No. 1 to Loan and Security Agreement
dated as of September 14, 1998 by and between Borrower and Lender (the "First
-----
Amendment"), Lender has made an Overline Loan (as defined in the First Amendment
---------
and referred to herein as the "September Overline Loan") to Borrower. The
-----------------------
outstanding amount of the September Overline Loan, after taking into account
interest that has been charged to the September Overline Loan to date and all
other fees applicable thereto, equals Two Million Three Hundred Thousand and
00/100 Dollars ($2,300,000.00).
C. Borrower has paid the September Overline Loan in full concurrently with
the execution of this Amendment.
D. Lender has agreed to make an additional advance (the "March Overline
--------------
Loan") under the Loan Agreement in the maximum aggregate principal amount of Two
----
Million Four Hundred Fifty Thousand and 00/100 Dollars ($2,450,000.00) (the
"Principal Sum").
--------------
E. Lender is willing to make the March Overline Loan but only upon the
condition, among others, that Borrower shall have executed and delivered to
Lender this Amendment.
F. Healthcor Holdings, Inc. ("Holdings") is a party to that certain
--------
Convertible Loan Agreement dated as of December 23, 1998 (as the same may be
amended from time to time, the
"Convertible Loan Agreement") entered into with Credit Suisse First Boston
--------------------------
Management Corporation, as agent (the "Agent") and the several lenders from
-----
time to time parties thereto (collectively, the "Convertible Loan Lenders").
------------------------
The Convertible Loan Lenders' lien on certain assets of Borrower and its
subsidiaries have been subordinated to the Lender's lien on Borrower's assets
pursuant to that certain Intercreditor and Subordination Agreement dated as of
December 23, 1998 between Borrower, the Lender and the Agent (the "Intercreditor
-------------
Agreement"). The Convertible Loan Lenders currently intend to advance additional
----------
funds to Borrower.
G. Borrower is a party to that certain Indenture dated as of December 1,
1997 (as the same may be amended from time to time, the "Indenture") entered
---------
into with Norwest Bank Minnesota, N.A., as trustee (together with its successors
and assigns, "Trustee").
-------
H. The parties now desire to amend the Loan Agreement to state the terms
of the March Overline Loan and to make certain other changes in the Loan
Agreement, in accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained in this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender and Borrower hereby agree as follows:
1.01 The September Overline Loan.
---------------------------
Borrower and Lender hereby acknowledge that the September Overline
Loan has been paid in full through the payment of the sum of Two Million Three
Hundred Thousand and No/100 ($2,300,000.00) on the date hereof.
1.02 The March Overline Loan
-----------------------
a. Except as expressly modified by this Amendment, the March Overline
Loan will be treated for all purposes as a Revolving Credit Loan under the Loan
Agreement and the Note, and all principal, interest, fees and other costs and
expenses relating thereto shall be treated as additional Obligations under the
Loan Agreement and the other Loan Documents.
b. If not sooner repaid, Borrower promises to pay to Lender the
entire Principal Sum on April 30, 1999 (as such date may be extended pursuant to
the terms of this Amendment, the "Maturity Date"). Notwithstanding the
-------------
foregoing, if Borrower does not repay the entire Principal sum on April 30,
1999, upon payment by Borrower of an extension fee of Twenty Five Thousand and
No/100 Dollars ($25,000.00), the Maturity Date shall be automatically extended
to May 31, 1999. The failure to make such repayment on the Maturity Date shall
constitute an immediate Event of Default under Section 8.1(a) of the Loan
Agreement.
2
c. In addition to the repayment of the Principal Sum, Borrower
promises to pay to Lender interest on the Principal Sum on a monthly basis from
the date of this Amendment until the Maturity Date. Interest shall be at a
fluctuating rate per annum (on the basis of the actual number of days elapsed
over a year of 360 days) equal to the Prime Rate of Interest plus four percent
(Prime plus 4.0%) (the "Overline Base Rate"), provided that during an Event of
------------------
Default such rate shall be equal to the Overline Base Rate plus five percent
(5%), but in no event in excess of the Highest Lawful Rate. Accrued interest
shall be payable monthly in arrears on the last Business Day (as defined below)
of each month from March 31, 1999 and continuing through and including the
Maturity Date. Lender shall be entitled to apply amounts transferred to the
Concentration Account pursuant to Section 2.3 of the Loan Agreement in
satisfaction of Borrower's obligations with respect to the March Overline Loan.
d. Borrower shall pay Lender a overline fee of One Hundred and Fifty
Thousand and No/100 Dollars ($150,000.00) (the "Overline Fee"), which fee shall
be deducted from the advance by Lender so that the net amount to be advanced by
Lender with respect to the Overline Loan shall be Two Million Three Hundred
Thousand and No/100 Dollars ($2,300,000.00).
e. The Maximum Loan Amount under the Loan Agreement shall be
inclusive of the March Overline Loan.
f. Subject to the terms and conditions of this Amendment, Lender
shall make available to Borrower the Principal Sum in immediately available
funds not later than 12:00 Noon (Maryland time) on the Business Day on which
Borrower shall have executed and delivered to Lender this Amendment, and all
financing statements and other documents, certificates and agreements reasonably
deemed necessary or appropriate by Lender to effectuate the March Overline Loan.
1.03 Stock Pledge Agreement.
----------------------
Borrower hereby confirms that the security interest granted Lender pursuant
to the Stock Pledge Agreement (as defined in the First Amendment) secures
Borrower's obligations for the March Overline Loan.
1.04 Convertible Loan.
----------------
Lender hereby acknowledges and consents to the advance of additional funds by
the Convertible Loan Lenders to Borrower pursuant to the terms of the
Convertible Loan Agreement or any amendment or supplement thereto, which
additional funds shall be secured by a lien subordinate to Lender's lien on
Borrower's assets, in accordance with the terms of the Intercreditor Agreement
in all respects.
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1.05 Indenture.
---------
Lender hereby acknowledges and consents to the grant of a third lien
on the assets (including stock) of the Borrower and its subsidiaries to the
Trustee under the Indenture on terms substantially identical to the
Intercreditor Agreement.
1.06. Reference to the Effect on the Loan Agreement.
---------------------------------------------
(a) Upon the effectiveness of this Amendment, each reference in the
Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
similar import shall mean and be a reference to the Loan Agreement as amended by
this Amendment.
(b) Except as specifically amended above, the Loan Agreement, and all
other Loan Documents, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided in this Amendment, operate as a waiver of any
right, power or remedy of Lender, nor constitute a waiver of any provision of
the Loan Agreement, or any other documents, instruments and agreements executed
or delivered in connection with the Loan Agreement and Lender expressly reserves
any and all rights and remedies available to it under the Loan Agreement the
other Loan documents.
2. Governing Law. This Amendment shall be governed by and construed in
-------------
accordance with the laws of the State of Maryland.
3. Headings. Section headings in this Amendment are included for
--------
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
4. Counterparts. This Amendment may be executed in counterparts, and both
------------
counterparts taken together shall be deemed to constitute one and the same
instrument.
[SIGNATURES TO FOLLOW]
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IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the date first written above.
LENDER:
ATTEST: HCFP FUNDING, INC.
a Delaware corporation
By:________________________ By:_________________________________
Name: Name:
Title: Title:
BORROWER:
ATTEST: HEALTHCOR, INC.
a Delaware corporation
By:________________________ By:__________________________
Name:
Title:
ATTEST: HEALTHCOR HOLDINGS, INC.
a Delaware corporation
By:________________________ By:__________________________
Name:
Title:
ATTEST: HEALTHCOR OXYGEN & MEDICAL
EQUIPMENT, INC.
a Texas corporation
By:________________________ By:__________________________
Name:
Title:
[ADDITIONAL SIGNATURES FOLLOW]
5
ATTEST: HEALTHCOR PHARMACY, INC.
a Texas corporation
By:________________________ By:__________________________
Name:
Title:
ATTEST: PHHN, INC.
a Texas corporation
By:________________________ By:__________________________
Name:
Title:
ATTEST: HEALTHCOR REHABILITATION
SERVICES, INC.
a Texas corporation
By:________________________ By:__________________________
Name:
Title:
ATTEST: HC PERSONNEL RESOURCES, INC.
a Texas corporation
By:________________________ By:__________________________
Name:
Title:
ATTEST: CARENETWORK, INC.
an Arkansas corporation
By:________________________ By:__________________________
Name:
Title:
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