LOAN AND SECURITY AGREEMENT
EXHIBIT
10.1
This
Loan
and Security Agreement (“Agreement”)
is
dated this 20TH
day of
September, 2007, by and among NEW
YORK HEALTH CARE, INC.
a New
York corporation (“NYH”),
and
such other Persons joined hereto as a Borrower from time to time (together
with
NYH, collectively, “Borrowers”
and each
individually a “Borrower”)
and
CIT
HEALTHCARE LLC,
a
Delaware limited liability company as lender (“Lender”).
BACKGROUND
A. Borrowers
have requested that Lender make available to them, on a joint and several basis,
a Credit Facility in the maximum amount of $5,000,000 which will be secured
by a
first priority perfected security interest in the Accounts and other Collateral
of Borrowers. Lender is willing to make the Credit Facility available to
Borrowers pursuant to the terms and provisions hereinafter set forth.
B. The
parties desire to set forth the terms and conditions of their relationship
to
writing.
NOW,
THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as
follows:
SECTION
1. DEFINITIONS
AND INTERPRETATION
1.1 Terms
Defined:
As
used
in this Agreement, the following terms have the following respective
meanings:
“Account(s)”
means
(a) all accounts, payment intangibles, instruments, chattel paper and all other
rights of Borrowers to receive payments including without limitation, the third
party reimbursable portion of accounts receivable owing to a Borrower arising
out of the delivery by such Borrower of medical, surgical, diagnostic, treatment
or other professional or medical or healthcare related services and/or the
supply of goods related to any of such services (whether such services are
supplied by a Borrower or a third party), including without limitation all
health-care-insurance-receivables and all other rights to reimbursement under
any agreements with an Obligor, (b) all accounts, general intangibles, rights,
remedies, guarantees, supporting obligations, letter of credit rights, and
security interests in respect of the foregoing and, all rights of enforcement
and collection, all books and records evidencing or related to the foregoing,
and all rights under this Agreement in respect of the foregoing, (c) all
information and data compiled or derived by such Borrower in respect of such
accounts receivable (other than any such information and data subject to legal
restrictions of patient confidentiality), and (d) all proceeds of any of the
foregoing.
“Accounts
Detail File”
has
the
meaning set forth in Section 2.2(b) hereof.
“Advance(s)”
means
any monies advanced or credit extended, including without limitation the Loans
to or for the benefit of Borrowers, or any of them by Lender, under the Credit
Facility.
“Advance
Rate”
means
85% or such other percentage(s) resulting from an adjustment pursuant to Section
2.1(d) below.
“Affiliate”
means
with respect to any Person (the “Specified
Person”),
(a)
any Person which directly or indirectly controls, or is controlled by, or is
under common control with, the Specified Person, and (b) any partner, director
or officer (or, in the case of a Person which is not a corporation, any
individual having analogous powers) of the Specified Person or of a Person
who
is an Affiliate of the Specified Person within the meaning of the preceding
clause (a). For purposes of the preceding sentence, “control” of a Person shall
mean the possession, directly or indirectly, of the power to direct or cause
the
direction of the management or policies of such Person, or direct or indirect
ownership (beneficially or of record) of, or direct or indirect power to vote,
10% or more of the outstanding shares of any class of capital stock of such
Person (or in the case of a Person that is not a corporation, 10% or more of
any
class of partnership or other equity interest).
“Authorized
Officer”
means
any officer, member or partner of a Borrower authorized by specific resolution
of Borrower to request Loans as set forth in the incumbency certificate referred
to in Section 4.1(d) of this Agreement.
“Billing
Date”
means
(a)
the
last Business Day of the week in which goods or the services giving rise to
the
corresponding Account were rendered or provided in the case of out patient
services and (b) the earlier of the discharge date or the regular monthly
billing date for billing the respective Obligor, or if none, the last business
day of a calendar month, in the case of inpatient services.
“BioBalance”
means
BioBalance Corp., a Delaware corporation and a wholly owned Subsidiary of the
Borrower.
“Borrowing
Base”
means,
at any date, an amount equal to the lesser of (a) the Revolving Loan Commitment,
or (b) the product of (i) the applicable Advance Rate then in effect, times
(ii)
the Estimated Net Value of all Eligible Accounts as of such date.
“Borrowing
Base Deficiency”
means,
as of any date, the amount, if any, by which (a) the aggregate amount of all
Advances outstanding as of such date exceeds (b) the Borrowing Base as of such
date.
“Borrowing
Base Excess”
means,
as of any date, the amount, if any, by which (a) the Borrowing Base as of such
date exceeds (b) the aggregate amount of all Advances outstanding as of such
date.
“Borrowing
Base Report”
has
the
meaning set forth in Section 2.2(b) hereof.
“Business
Associate Agreement”
means
that certain Business Associate Agreement among Borrowers and Lender of even
date herewith, as the same may be modified, amended, restated or replaced from
time to time.
“Business
Day”
means
any day other than a Saturday, Sunday or any day on which banking institutions
in Philadelphia, Pennsylvania or New York City, New York are permitted or
required by law, executive order or governmental decree to remain closed or
a
day on which Lender is closed for business.
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“CHAMPUS”
means
the Civilian Health and Medical Program of the Uniformed Service, a part of
TRICARE, a medical benefits program supervised by the U.S. Department of
Defense.
“Closing”
has
the
meaning set forth in Section 4.6 hereof.
“Closing
Date”
has
the
meaning set forth in Section 4.6 hereof.
“Collateral”
has
the
meaning set forth in Section 3.1 hereof.
“Collection
Days” shall
mean a period of three (3) Business Day(s) after the deposit of Collections
into
the Collection Account, for which interest may be charged on the aggregate
amount of such deposits at the rate provided for in Section 2.3 (a) (or Section
2.3(b) if applicable) hereof.
“Collections”
means
with respect to any Account, all cash collections on such Account.
“Collection
Account”
has
the
meaning set forth in Section 2.7(a) hereof.
“Commercial
Lockbox”
means
a
lockbox in the name of Lender (or a nominee of Lender) and maintained at the
Lockbox Bank, or such other bank as is acceptable to Lender, to which
Collections on all Accounts, other than Government Accounts, are
sent.
“Commitment
Fee”
has
the
meaning set forth in Section 2.8 hereof.
“Concentration
Limits”
means
the various financial tests, expressed as percentages of the then current ENV
of
all Eligible Accounts, described on Schedule
1
as in
effect from time to time.
“Contract”
means
an agreement by which an Obligor is obligated to pay for services rendered
to
patients of Borrower.
“Credit
Facility”
has
the
meaning set forth in Section 2.1(a) hereof.
“Default
Rate”
means
300 basis points above the interest rate otherwise applicable on the
Loans.
“Defaulted
Account”
means
an Account as to which (a) the initial ENV has not been received in full as
Collections within 150 days of the Billing Date, or (b) Lender reasonably deems
uncollectible because of the bankruptcy or insolvency of the Obligor or any
other reason.
“Depository
Agreement(s)”
means
those certain Depository Agreements entered into in connection with this
Agreement among Borrowers, Lender and the Lockbox Bank, relating to the
Commercial Lockbox and the Government Lockbox, as applicable.
“Distribution”
means
(a) dividends or other distributions on capital stock or partnership or other
equity interests of a Borrower; (b) the redemption, repurchase or acquisition
of
such stock or partnership or other equity interests or of warrants, rights
or
other options to purchase such stock or partnership or other equity interest;
and (c) loans made to any Shareholders, officers, directors and/or Affiliates
of
such Borrower.
3
“Download
Date”
has
the
meaning set forth in Section 2.2(b) hereof.
“EBITDA”
means
in any period, all earnings of the Borrowers for said period before all
interest, tax obligations and amortization and depreciation of the Borrowers
for
said period, determined in accordance with GAAP on a consistent basis with
the
latest audited financial statements of the Company, but excluding the effect
of
non-operating income and extraordinary or non-reoccurring gains or losses for
such period.
“Eligible
Account”
means
an Account of a Borrower:
(a) which
is
a liability of an Obligor which is (i) a commercial insurance company acceptable
to Lender, organized under the laws of any jurisdiction in the United States,
having its principal office in the United States, other than those listed on
Schedule
1
as
ineligible, (ii) a Blue Cross/Blue Shield Plan other than those listed on
Schedule
1
as
ineligible, (iii) CHAMPUS, Medicare or Medicaid, or (iv) a HMO, PPO, or an
institutional Obligor acceptable to Lender, or any other type of obligor, not
included in the categories of obligors listed in the foregoing clauses (i)
-
(iii), organized under the laws of any jurisdiction in the United States, having
its principal office in the United States, and is listed on Schedule
1 as
an
eligible Obligor,
(b) the
Obligor of which is not an
Affiliate of Borrower,
(c) the
Obligor of which has received a letter substantially in the form of Exhibit
4.2A,
(in the case of all Accounts other than Government Accounts), or a letter
substantially in the form of Exhibit
4.2B
(in the case of all Government Accounts),
(d) in
an aggregate amount, as relating to an individual Obligor, not more than
$300,000, denominated and payable in dollars in the United States; provided,
however,
that with
respect to an
Obligor which is (i) a commercial insurance company rated by S&P as AAA or
AA, or (ii) CHAMPUS, Medicare or Medicaid, the limitation set forth in this
subsection (d) shall not apply;
(e) as
to
which the representations and warranties of Section 5.21 hereof are true,
(f) the
Account has been billed;
(g) which
(i)
does not arise from the delivery of cosmetic surgery services and (ii) is not
a
workers’ compensation claim (unless
expressly approved by Lender)
and
(iii) does not arise from any services delivered for injury sustained in a
motor
vehicle accident (unless the Obligor on such Account is a type of Obligor
permitted pursuant to clause (a) of this definition) and (iv) is not an
Individual Payor Account,
(h) which
is
not outstanding more than 150 days past the Billing Date in the case of Accounts
that have been billed; provided
that in
no event may the Account be outstanding more than 195 days past the date the
corresponding services and/or goods were provided,
(i) the
Obligor on which does not have fifty percent (50%) or more of its Accounts
owing
to Borrowers constituting Defaulted Accounts,
4
(j) to
the
extent such Account does not include late charges or finance charges,
(k) which
complies with such other criteria and requirements as may be specified from
time
to time by Lender in its reasonable discretion, and
(l) the
Obligor of which is not HRA.
“Estimated
Net Value”
or
“ENV”
means
on any date of calculation with respect to any Account an amount equal to the
anticipated cash collections as calculated by Lender using the Value Track
System™ (which system periodically adjusts such amount to reflect Lender’s
evaluation of the performance of similar Accounts and to reflect payments
received with respect thereto), except that if Lender determines that all
Obligor payments with respect to an Account have been made or if an Account
has
become a Defaulted Account, the ENV of such Account shall be zero.
“Event
of Default”
has
the
meaning set forth in Section 8.1 hereof.
“Expenses”
has
the
meaning set forth in Section 9.5 hereof.
“Fixed
Charge Coverage Ratio”
means
for any period, the ratio of (a) EBITDA for such period to (b) Fixed Charges
paid during such period.
“Fixed
Charges”
means,
without duplication, for any period, (a) the aggregate of all cash interest
expense paid during such period, plus
(b)
scheduled payments of principal with respect to Indebtedness (including capital
lease obligations) payable during the next twelve (12) months, and plus
(c)
Distributions paid or payable during such period (other than Distributions
paid
to BioBalance as permitted in Section 7.10), and plus
(d)
income taxes paid or payable in cash with respect to such period.
“Funding
Date”
has
the
meaning set forth in Section 2.2(a) hereof.
“GAAP”
means
generally accepted accounting principles, consistently applied.
“Government
Accounts”
means
Accounts on which any federal or state governmental unit or any intermediary
for
federal or state governmental unit is the Obligor.
“Government
Lockbox”
means
a
lockbox and/or deposit account in the name of Borrower(s) maintained at the
Lockbox Bank, or such other bank as is acceptable to Lender, to which
Collections on all Government Accounts are sent.
“Hazardous
Substances”
means
any substances defined or designated as hazardous or toxic waste, hazardous
or
toxic material, hazardous or toxic substance or similar term, by any
environmental statute, rule or regulation of any governmental entity presently
in effect and applicable to such real property.
“HRA”
means
the New York City Human Resources Administration.
“Indebtedness”
of
a
Person at a particular date shall mean all liabilities and obligations of such
Person, including without limitation, those which in accordance with GAAP would
be classified upon a balance sheet as liabilities and all other indebtedness,
debt and other similar monetary obligations of such Person whether direct or
guaranteed, contingent or liquidated, matured or unmatured and all premiums,
if
any, due at the required prepayment dates of such any indebtedness, and all
indebtedness secured by a lien on assets owned by such Person, whether or not
such indebtedness actually shall have been created, assumed or incurred by
such
Person. Any indebtedness of such Person resulting from the acquisition by such
Person of any assets subject to any lien shall be deemed, for the purposes
hereof, to be the equivalent of the creation, assumption and incurring of the
indebtedness secured thereby, whether or not actually so created, assumed or
incurred.
5
“Individual
Payor Account”
means
an Account owing by an Obligor who is the individual patient or Person who
received the goods or services rendered.
“Initial
Term”
has
the
meaning set forth in Section 2.1(c).
“JCAHO”
means,
as the context requires, the Joint Commission for Accreditation of Healthcare
Organizations, the Community Health Accreditation Program, Inc., Accreditation
for Health Care, Inc., and/or any other organization (or any successor entity
or
entities charged with performing its/their functions) recognized by the Centers
for Medicare and Medicaid Services as having authority to provide accreditations
to providers of home health services and other healthcare services in which
the
Borrower may engage.
“Lender”
has
the
meaning ascribed thereto in the preamble to the Agreement.
“LIBOR”
means
the rate per annum equal to the rate (rounded up to the nearest one-sixteenth
of
one percent (1/16%)) determined by the Lender to be a rate at which Dollar
deposits are offered to major banks in the London interbank eurodollar market
for funds. “Loan(s)”
has
the
meaning set forth in Section 2.1(a) hereof.
“Loan
Documents”
means
this Agreement, the Revolving Credit Note, Depository Agreements and all
agreements relating to the Government Lockbox and the Commercial Lockbox, all
financing statements, the Subordination Agreement and any other agreements,
instruments, documents and certificates delivered in connection with this
Agreement.
“Loan
Request”
has
the
meaning set forth in Section 2.2(c) hereof.
“Lockbox
Bank”
means
North Fork Bank, a Division of Capital One, N.A. or such other bank that is
acceptable to Lender.
“Maturity
Date”
has
the
meaning set forth in Section 2.1(c).
“Obligations”
means
all now existing or hereafter arising debts, obligations, covenants, and duties
of payment or performance of every kind, matured or unmatured, direct or
contingent, owing, arising, due, or payable to Lender, by or from Borrowers,
or
any of them, whether arising out of this Agreement or any other Loan Document
or
otherwise, including, without limitation, all obligations to repay principal
of
and interest on all the Loans, and to pay interest, fees, costs, charges,
expenses, professional fees, and all sums chargeable to Borrowers, or any of
them, under the Loan Documents, whether or not evidenced by any note or other
instrument.
6
“Obligor”
means
the party primarily obligated to pay an Account.
“Permitted
Liens”
means
the following: (a) security interests and liens granted to Lender; (b) liens
incurred in the ordinary course of business in connection with worker’s
compensation, unemployment insurance or other forms of governmental insurance
or
benefits, relating to employees, securing sums (i) not overdue or (ii) being
diligently contested in good faith provided that adequate reserves with respect
thereto are maintained on the books of the Borrower in conformity with GAAP;
(c)
liens for taxes (i) not yet due or (ii) being diligently contested in good
faith
by appropriate proceedings, provided that adequate reserves with respect thereto
are maintained on the books of the Borrower in conformity with GAAP; and which
have no effect on the priority of liens in favor of Lender.
“Person”
means
any individual, corporation, partnership, limited liability partnership, limited
liability company, association, trust, unincorporated organization, joint
venture, court or government or political subdivision or agency thereof, or
other entity.
“Property”
means
an interest of Borrowers, or any of them, in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
“Revolving
Credit Note”
has
the
meaning set forth in Section 2.1(b).
“Revolving
Loan Commitment”
means
an amount equal to Five
Million Dollars
($5,000,000).
“Securities”
has
the
meaning set forth in Section 6.14 hereof.
“Shareholder”
means,
as applicable, a shareholder, member or partner of Borrower.
“Subsidiary”
means
as to any Person, any corporation, partnership, joint venture, limited liability
company or other entity of which more than fifty percent (50%) of the
outstanding capital stock or other ownership interests having ordinary voting
power to elect a majority of the directors or other managers of such
corporation, partnership, joint venture, limited liability company or other
entity is at the time, directly or indirectly, owned by or the management is
otherwise controlled by such Person (irrespective of whether, at the time,
capital stock or other ownership interests of any other class or classes of
such
corporation, partnership, limited liability company or other entity shall have
or might have voting power by reason of the happening of any contingency).
Unless the context otherwise requires, each reference to a Subsidiary shall
be a
reference to a Subsidiary of the Borrowers.
“Subordinated
Debt”
means
debt or other obligations of a Borrower that is subordinated to the Obligations
of the Borrowers to Lender on terms and conditions that are satisfactory to
the
Lender in its sole discretion;
“Subordination
Agreement”
means,
collectively and individually as context may require, those certain
Subordination Agreements executed by the holders of the Subordinated Debt in
favor of Lender.
“Termination
Fee”
has
the
meaning set forth in Section 2.3(c).
7
“Total
Liquidity”
means
the aggregate amount of all cash reported on Borrower’s balance sheet plus any
Borrowing Base Excess, measured as of the most recent calendar month
end.
“TRICARE”
means
the medical program for active duty members, qualified family members, CHAMPUS
eligible retirees and their family members and survivors, of all uniformed
services.
“Uniform
Commercial Code”
or
“UCC”
means
the Uniform Commercial Code as in effect from time to time in the State of
New
York.
“Unmatured
Event of Default”
means
an event which with the passage of time, giving of notice or both, would become
an Event of Default.
“Unused
Line Fee”
has
the
meaning set forth in Section 2.3(d).
“Value
Track System™”
means
the proprietary business system used by Lender to value and record the status
of
Accounts.
1.2 Matters
of Construction:
The
terms
“herein,” “hereof” and “hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular section, paragraph or
subdivision. Any pronoun used shall be deemed to cover all genders. Wherever
appropriate in the context, terms used herein in the singular also include
the
plural and vice versa. All references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations.
Unless otherwise provided, all references to any instruments or agreements
to
which Lender and/or, where applicable, a Borrower, is a party, including,
without limitation, references to any of the Loan Documents, shall include
any
and all modifications or amendments thereto and any and all extensions or
renewals thereof.
1.3 Accounting
Principles:
Where
the
character or amount of any asset or liability or item of income or expense
is
required to be determined or any consolidation or other accounting computation
is required to be made for the purposes of this Agreement, this shall be done
in
accordance with GAAP, to the extent applicable, except as otherwise expressly
provided in this Agreement.
1.4 Fiscal
Quarters:
For
the
purposes hereof, “fiscal quarter” shall mean each quarterly accounting period
during any fiscal year; provided
that,
all references to the fiscal quarter ending March 31, June 30, September 30
or
December 31 shall mean the first, second, third or fourth fiscal quarter of
the
applicable fiscal year, respectively, irrespective of the actual date on which
such fiscal quarter may end.
SECTION
2. THE
LOANS
2.1 Credit
Facility - Description:
(a) Subject
to the terms and conditions of this Agreement, Lender hereby establishes for
the
joint and several benefit of Borrowers, a credit facility (“Credit
Facility”)
which
shall include Advances which may be extended by Lender to or for the benefit
of
Borrowers from time to time hereunder in the form of revolving credit loans
(“Loans”).
The
aggregate outstanding amount of all Advances, shall not at any time exceed
the
Borrowing Base. In no event shall the initial principal amount of any Loan
be
less than $25,000. Subject to such limitation, the outstanding balance of all
Advances may fluctuate from time to time, to be reduced by repayments made
by
Borrowers, to be increased by future Advances which may be made by Lender.
If
the aggregate outstanding amount of all Advances exceeds the Borrowing Base,
Borrowers shall immediately repay such excess in full.
Lender has the right at any time, and from time to time, in its reasonable
discretion (but without any obligation) to set aside reasonable reserves against
the Borrowing Base in such amounts as it may deem appropriate.
The
Obligations of Borrowers under the Credit Facility and this Agreement are joint
and several and shall at all times be absolute and unconditional.
8
(b) At
Closing, Borrowers shall execute and deliver a promissory note to Lender in
the
principal amount of FIVE MILLION DOLLARS ($5,000,000) (as may be amended,
modified or replaced from time to time, the “Revolving
Credit Note”).
The
Revolving Credit Note shall evidence Borrowers joint and several, absolute
and
unconditional obligation to repay Lender for all Loans made by Lender under
the
Credit Facility, with interest as herein and therein provided. Each and every
Loan under the Credit Facility shall be deemed evidenced by the Revolving Credit
Note, which is deemed incorporated herein by reference and made a part hereof.
The Revolving Credit Note shall be substantially in the form set forth in
Exhibit
2.1(b)
attached
hereto and made a part hereof.
(c) The
term
(“Initial
Term”)
of the
Credit Facility shall expire on September 19, 2010. All Loans shall be repaid
on
or before the earlier of the last day of the Initial Term or upon termination
of
the Credit Facility or termination of this Agreement (“Maturity
Date”).
After
the Maturity Date no further Loans shall be available from Lender.
(d) From
time
to time, upon not less than three (3) Business Days notice to Borrowers, Lender
may adjust the Advance Rate in order to reflect, in Lender’s reasonable
judgment, the experience with Borrowers (including by way of illustration,
to
adjust for any known or potential offsets by governmental healthcare programs
or
the agencies that administer them) or the aggregate amount or percentage of
the
Collections with respect to the Accounts.
2.2 Funding
Procedures:
(a) Subject
to the terms and conditions of this Agreement and so long as no Event of Default
or Unmatured Event of Default has occurred hereunder, Lender will make Loans
to
Borrowers as requested by Borrower, which may be on a daily basis if so
requested by Borrower, but not more than once each Business Day, each such
day
referred to herein as a “Funding
Date”.
(b) Not
later
than 11:00
A.M. (Eastern Time) on a mutually agreeable Business Day each calendar
week
(“Download
Date”),
Borrowers will deliver to Lender the computer file data associated with the
Accounts, which shall include without limitation, the information (including
changes in the Obligor reimbursement rates and changes in federal or state
laws
or regulations affecting payment for medical services) required by Lender to
enable Lender to process and value the outstanding Accounts of Borrowers on
Lender’s Value Track System™, as well as xxxx and collect such Accounts
following an Event of Default (“Accounts
Detail File”).
Upon
completion of the processing of the data with respect to such Accounts, Lender
will prepare and deliver to Borrowers by no later than 5:00 p.m. (Eastern Time)
on the first Business Day following the Download Date (or if such Accounts
Detail File is not delivered until after 11:00 A.M. (Eastern Time) on the
Download Date, the second Business Day following the Download Date), a report
regarding the Borrowing Base then in effect, which shall be substantially in
the
form of Exhibit
2.2(b)
(a
“Borrowing
Base Report”).
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(c) On
the
Funding Date, Borrowers will sign and return the Borrowing Base Report to
Lender. If Borrowers are requesting that a Loan be made on such Funding Date,
Borrowers shall also deliver to Lender, concurrently with the Borrowing Base
Report, a written request for such Loan substantially in the form of
Exhibit
2.2(c) (a
“Loan
Request”).
The
Borrowing Base Report and Loan Request may be delivered via telecopy and
Borrowers acknowledge that Lenders may rely on Borrowers signatures by
facsimile, which shall be legally binding upon Borrowers.
(d) Subject
to the terms and conditions of this Agreement, if the Borrowing Base Report
(if
applicable) and Loan Request are delivered to Lender before 11:00 A.M. on the
Funding Date, Lender will advance on the Funding Date (or the next Business
Day
if the Borrowing Base Report and Loan Request are delivered after 11:00 A.M.
(Eastern Time)) to Borrowers a Loan in the amount equal to the lesser of (i)
the
amount of the Loan requested by Borrowers in the Loan Request, or (ii) the
Borrowing Base Excess as of such date. Any Advances made by Lender hereunder
shall be treated for all purposes as, and shall accrue interest at the same
rate
applicable to, Loans.
(e) Lender’s
determination of the Estimated Net Value of the Eligible Accounts and other
amounts to be determined or calculated under this Agreement shall, in the
absence of manifest error, be binding and conclusive.
2.3 Interest
and Fees:
(a) Each
Loan
shall bear interest on the outstanding principal amount thereof from the date
made until such Loan is paid in full, at a rate per annum equal to 30-day LIBOR
plus three and one half percent (3.50%). The interest rate hereunder is variable
and adjusted monthly based on the 30-day LIBOR published in the Wall Street
Journal, Eastern Edition on the first day of each fiscal month.
(b) If
any
Event of Default shall occur and be continuing, the rate of interest applicable
to each Loan then outstanding shall be the Default Rate. The Default Rate shall
apply from the date of the Event of Default until the date such Event of Default
is waived, and interest accruing at the Default Rate shall be payable upon
demand.
(c) Should
the Credit Facility be terminated for any reason prior to the last day of the
Initial Term, in addition to repayment of all Obligations then outstanding
and
termination of Lender’s commitment hereunder, Borrowers shall unconditionally be
obligated to pay at the time of such termination, a fee (“Termination
Fee”)
in an amount equal to the following percentage of the Revolving Loan Commitment:
one and one half percent (1.50%), if such early termination occurs on or prior
to the first anniversary date of this Agreement; one percent (1.0%) if such
early termination occurs after the first anniversary date of this Agreement
but
on or before the second anniversary of this Agreement; and one half of one
percent (0.50%) if such early termination occurs after the second anniversary
of
the date of this Agreement but prior to the last day of the Initial
Term.
Borrowers acknowledge that the Termination Fee is an estimate of Lender’s
damages in the event of early termination and is not a penalty. In the event
of
termination of the Credit Facility, all of the Obligations shall be immediately
due and payable upon the termination date stated in any notice of termination.
All undertakings, agreements, covenants, warranties and representations of
Borrowers contained in the Loan Documents shall survive any such termination,
and Lender shall retain its security interests in the Collateral and all of
its
rights and remedies under the Loan Documents notwithstanding such termination
until Borrowers have paid the Obligations to Lender, in full, in immediately
available funds, together with the applicable Termination Fee, if any.
Notwithstanding the payment in full of the Obligations, Lender shall not be
required to terminate its security interests in the Collateral unless, with
respect to any loss or damage Lender may incur as a result of dishonored checks
or other items of payment received by Lender from Borrowers or any Obligor
and
applied to the Obligations, Lender shall, at its option, (i) have received
a
written agreement executed by Borrowers and by any Person whose loans or other
advances to Borrowers are used in whole or in part to satisfy the Obligations,
indemnifying Lender from any such loss or damage; or (ii) have retained such
monetary reserves and security interests on the Collateral for such period
of
time as Lender, in its reasonable discretion, may deem necessary to protect
Lender from any such loss or damage.
10
(d) Borrowers
shall unconditionally pay to Lender (i) a fee (“Unused
Line Fee”)
equal
to one half of one percent (0.50%) per annum of the unused portion of the Credit
Facility and (ii) a collateral management fee (“Collateral
Management Fee”),
equal
to one half of one percent (0.50%) per annum of the average daily outstanding
balance of the Loans during each month (or portion thereof). The unused portion
of the Credit Facility shall be the difference between the Revolving Loan
Commitment and the average daily outstanding balance of the Loans during each
month (or portion thereof). The Unused Line Fee and the Collateral Management
Fee shall be calculated and payable monthly, in arrears, and shall be due and
payable on the first Business Day of each calendar month.
2.4 Additional
Interest Provisions:
(a) Calculation
of Interest:
Interest on the Loans shall be based on a year of three hundred sixty (360)
days
and charged for the actual number of days elapsed.
(b) Continuation
of Interest Charges:
All
contractual rates of interest chargeable on outstanding Loans shall continue
to
accrue and be paid even after default, maturity, acceleration, termination
of
the Credit Facility, judgment, bankruptcy, insolvency proceedings of any kind
or
the happening of any event or occurrence similar or dissimilar.
(c) Applicable
Interest Limitations:
In no
contingency or event whatsoever shall the aggregate of all amounts deemed
interest hereunder and charged or collected pursuant to the terms of this
Agreement exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such court determines Lender has charged or received interest
hereunder in excess of the highest applicable rate, Lender shall, in its sole
discretion, apply and set off such excess interest received by Lender against
other Obligations due or to become due and such rate shall automatically be
reduced to the maximum rate permitted by such law.
11
2.5 Payments:
(a) All
accrued interest on the Loans, including interest charges for Collection Days,
shall be due and payable monthly on the first Business Day of each month. Any
Unused Line Fees or Collateral Management Fees shall be due and payable monthly
on the first Business Day of each month with respect to Unused Line Fees and
Collateral Management Fees which accrued during the prior month.
(b) If
at any
time the aggregate principal amount of all Advances outstanding exceeds the
Borrowing Base then in effect, Borrowers shall immediately make such principal
prepayments of the Loans (subject to the terms of Sections 2.3(c) and 2.3(d)),
as is necessary to eliminate such excess.
(c) The
entire principal balance of all of the Advances, together with all unpaid
accrued interest thereon and the Termination Fee, if any, and any unpaid Unused
Line Fees, shall be due and payable on the Maturity Date.
(d) Subject
to the terms of Sections 2.3(c) and 2.3(d) above, Borrowers may prepay the
principal of the Loans on any Funding Date by giving Lender written notice
of
the proposed prepayment two Business Days’ prior to such Funding
Date.
(e) All
payments and prepayments shall be applied first to any unpaid interest and
fees
and thereafter to the principal of the Loans and to other amounts due Lender.
Except as otherwise provided herein, all payments of principal, interest, fees,
or other amounts payable by Borrowers hereunder shall be remitted to Lender
in
immediately available funds not later than 11:00 a.m. (Eastern Time) on the
day
due. Whenever any payment is stated as due on a day which is not a Business
Day,
the maturity of such payment shall be extended to the next succeeding Business
Day and interest shall continue to accrue during such extension.
(f) The
Borrowers hereby authorize the Lender, without notice to the Borrowers, to
charge the Loans with all payments and expenses due under Sections 2.3, 2.5,
6.9
and 9.5 hereof as such amounts become due. The Borrowers confirm that any
charges which Lender may make to the Loans as provided herein will be made
as an
accommodation to the Borrowers and solely at the Lender’s
discretion.
2.6 Use
of
Proceeds:
The
Borrowers shall use the extensions of credit under and proceeds of the Credit
Facility to pay off in its entirety any of Borrower’s obligations giving rise to
a lien on the Collateral described herein and to pay the costs of closing.
Thereafter, the Borrower shall use the extensions of credit under and proceeds
of the Credit Facility for working capital and general business purposes of
the
Borrowers and may not be used for the benefit of any Affiliate or Subsidiary
that is not a Borrower hereunder, including without limitation, BioBalance.
2.7 Lockboxes
and Collections:
(a) Borrowers
will enter into lockbox agreements in respect of the Government Lockbox and
Commercial Lockbox in such form and with the Lockbox Bank or such other bank
as
is reasonably acceptable to Lender. Borrowers shall instruct the Lockbox Bank
maintaining the Government Lockbox that all collections sent to the Government
Lockbox shall be deposited into a bank account at the Lockbox Bank in which
Lender has a first priority perfected security interest and all Collections
sent
to the Commercial Lockbox shall be deposited into a bank account at the Lockbox
Bank in the name of Lender. Borrower shall also instruct the Lockbox Bank to
initiate, or accept an initiation from Lender which effectuates, a daily
transfer of all available funds to an account of Lender to be designated by
Lender (“Collection
Account”).
12
(b) Borrowers
will cause all Collections with respect to all of the Accounts, other than
Government Accounts, to be sent directly to the Commercial Lockbox, and will
cause all Collections with respect to all of the Government Accounts to be
sent
directly to the Government Lockbox (which may be effectuated by electronic
transfer directly to the Government Lockbox). In the event that a Borrower
receives any Collections that should have been sent to the Commercial Lockbox
or
the Government Lockbox, such Borrower will, promptly upon receipt and in any
event within one Business Day of receipt, forward such Collections directly
to
the Commercial Lockbox or Government Lockbox, as applicable, in the form
received, and if requested by Lender, promptly notify Lender of such event.
Until so forwarded, such Collections not generated from Government Accounts
shall be held in trust for the benefit of Lender.
(c) No
Borrower shall withdraw any amounts from the accounts into which the Collections
remitted to the Commercial Lockbox are deposited nor shall any Borrower change
the procedures under the agreements governing the Commercial Lockbox and related
accounts.
(d) Borrowers
will cooperate with Lender in the identification and reconciliation on a daily
basis of all amounts received in the Commercial Lockbox and the Government
Lockbox. If more than ten percent (10%) of the Collections since the most recent
Funding Date is not identified or reconciled to the satisfaction of Lender
within ten (10) Business Days of receipt, Lender shall not be obligated to
make
further Loans until such amount is identified or is reconciled to the reasonable
satisfaction of Lender, as the case may be.
In
addition, if any such amount cannot be identified or reconciled to the
satisfaction of Lender, Lender may utilize its own staff or, if it deems
necessary, engage an outside auditor, in either case at Borrowers’ expense
(which in the case of Lender’s own staff shall be in accordance with Lender’s
then prevailing customary charges (plus expenses), to make such examination
and
report as may be necessary to identify and reconcile such amount.
(e) No
Borrower will send to or deposit in the Commercial Lockbox or the Government
Lockbox any funds other than payments made with respect to
Accounts.
(f) Subject
to charges for Collections Days, all amounts received from a Government Lockbox
or Commercial Lockbox and any other proceeds of the Collateral deposited into
the Collection Account will, for the purposes of calculating the Borrowing
Base
and interest, be credited to the aggregate outstanding amount of the Loans
on
the date of deposit in the Collection Account. No checks, drafts or other
instruments received by Lender shall constitute final payment to Lender unless
and until such instruments have actually been collected.
2.8 Application
of Proceeds of Collateral:
(a) Unless
this Agreement expressly provides otherwise, so long as no Event of Default
shall have occurred and remain outstanding, Lender agrees to apply (i) all
Collections to the aggregate outstanding amount of the Loans and (ii) any other
payment received by Lender with respect to the Obligations, in such order and
manner as Lender shall elect in the exercise of its reasonable business
judgment.
13
(b) If
an
Event of Default shall have occurred and remain outstanding, Lender may apply
Collections, any other proceeds of Collateral and all other payments received
by
Lender to the payment of the Obligations in such manner and in such order as
CIT
may elect in its sole discretion.
2.9 Fees:
Lender
has fully earned a non-refundable commitment fee (“Commitment
Fee”)
equal
to Fifty Thousand Dollars ($50,000). Lender acknowledges receipt of Fifteen
Thousand Dollars ($15,000) of the Commitment Fee and a deposit of Ten Thousand
Dollars ($10,000) towards the amount required to be paid by the Borrowers
pursuant to Section 9.5(a) for the fees and expenses of legal counsel for
Lender. Borrowers agree and acknowledge that the balance of the Commitment
Fee
($35,000) is due and payable on or before Closing.
SECTION
3. COLLATERAL
3.1 Description:
To
secure
the payment, promptly when due, and the punctual performance, of all of the
Obligations, each Borrower assigns to Lender, and grants to it a security
interest in all of its right, title and interest in and to the following
property of such Borrower: (i) all accounts, payment intangibles, instruments
and other rights to receive payments of Borrower (including without limitation
the Accounts), whether now existing or hereafter arising or acquired, (ii)
all
general intangibles (including without limitation, contract rights and
intellectual property), chattel paper, documents, supporting obligations, letter
of credit rights, commercial tort claims, investment property, rights, remedies,
guarantees and collateral evidencing, securing or otherwise relating to or
associated with the foregoing, including without limitation all rights of
enforcement and collection, (iii) all Commercial Lockboxes, all Government
Lockboxes, all Collection Accounts and other deposit accounts into which any
of
the Collections or Advances are deposited, all funds received thereby or
deposited therein, and any checks or instruments from time to time representing
or evidencing the same, (iv) all books and records of Borrower evidencing or
relating to or associated with any of the foregoing, (v) all information and
data compiled or derived by Borrower with respect to any of the foregoing (other
than any such information and data subject to legal restrictions of patient
confidentiality), and (vi) all collections, receipts and other proceeds (cash
and noncash) derived from any of the foregoing (collectively, the “Collateral”).
For
the avoidance of doubt, Collateral does not include any assets or property
of
BioBalance.
3.2 Lien
Documents:
At
Closing and thereafter as Lender deems necessary, each Borrower shall execute
(if required) and deliver to Lender, or shall have executed (if required) and
delivered (all in form and substance reasonably satisfactory to Lender):
(a) Financing
Statements
-
Financing statements pursuant to the UCC, which Lender may file in the
jurisdiction where such Borrower is organized and in any other jurisdiction
that
Lender deems appropriate; and
(b) Other
Agreements
- Any
other agreements, documents, instruments and writings, including, without
limitation, security agreements, deposit account control agreements, deeds
of
trust, mortgages, and assignment agreements, reasonably required by Lender
to
evidence, perfect or protect Lender’s liens and security interest in the
Collateral or as Lender may reasonably request from time to time, including,
without limitation, a waiver agreement from each landlord with respect to any
real property of Borrower, in form and substance satisfactory to
Lender.
14
3.3 Other
Actions:
(a) In
addition to the foregoing, each Borrower shall do anything further that may
be
lawfully and reasonably required by Lender to perfect its security interests
and
to effectuate the intentions and objectives of this Agreement, including, but
not limited to, the execution (if required) and delivery of continuation
statements, amendments to financing statements, security agreements, contracts
and any other documents required hereunder. At Lender’s request, each Borrower
shall also immediately deliver (with execution by such Borrower of all necessary
documents or forms to reflect Lender’s security interest therein) to Lender, all
items for which Lender must or may receive possession to obtain a perfected
security interest.
(b) Lender
is
hereby authorized to file financing statements naming Borrower as debtor, in
accordance with the Uniform Commercial Code, and if necessary, to the extent
applicable, to otherwise file financing statements without Borrower’s signature
if permitted by law. Each Borrower hereby authorizes Lender to file all
financing statements and amendments to financing statements describing the
Collateral in any filing office as Lender, in its sole discretion may determine,
including financing statements describing the Collateral and containing language
indicating that the acquisition by a third party of any right, title or interest
in or to the Collateral without Lender’s consent shall be a violation of
Lender’s rights. Borrowers agree to comply with the requirements of all federal
and state laws and requests of Lender in order for Lender to have and maintain
a
valid and perfected first priority security interest in the Collateral
including, without limitation, executing and causing any other Person to execute
such documents as Lender may require to obtain Control (as defined in the UCC)
over all deposit accounts, electronic chattel paper, letter-of-credit rights
and
investment property.
3.4 Searches:
Lender
shall, prior to or at Closing, and thereafter as Lender may reasonably request
from time to time, at Borrowers’ expense, obtain the following searches (the
results of which are to be consistent with the warranties made by Borrowers
in
this Agreement):
(a) UCC
Searches:
With
respect to each Borrower, UCC searches with the Secretary of State and local
filing office of each state where such Borrower maintains its chief executive
office, its jurisdiction of organization and/or a place of business or assets;
(b) Judgments,
Etc.:
Judgment, federal tax lien and corporate tax lien searches against each
Borrower, in all applicable filing offices of each state searched under
subparagraph (a) above.
3.5 Good
Standing Certificates:
Borrowers
shall, prior to or at Closing and at its expense, obtain and deliver to Lender
good standing or equivalent certificates showing each Borrower to be in good
standing in its state of incorporation or organization and authorized to
transact business as a foreign corporation or entity in each other state or
foreign country in which it is doing and presently intends to do business for
which such Borrower's failure to be so qualified might have material adverse
effect on such Borrower's business, financial condition, Property or Lender's
rights hereunder.
3.6 Filing
Security Agreement:
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.
15
3.7 Power
of Attorney:
Each
of
the officers of Lender is hereby irrevocably made, constituted and appointed
the
true and lawful attorney for each Borrower (without requiring any of them to
act
as such) with full power of substitution to do the following (such power to
be
deemed coupled with an interest): (1) endorse the name of such Borrower upon
any
and all checks, drafts, money orders and other instruments for the payment
of
monies that are payable to such Borrower and constitute collections on the
Collateral; (2) execute in the name of such Borrower any financing statements,
schedules, assignments, instruments, documents and statements that such Borrower
is obligated to give Lender hereunder or is necessary to perfect Lender’s
security interest or lien in the Collateral; (3) to verify validity, amount
or
any other matter relating to the Collateral by mail, telephone, telecopy or
otherwise; and (4) do such other and further acts and deeds in the name of
such Borrower that Lender may reasonably deem necessary or desirable to enforce
its right with respect to any Collateral.
SECTION
4. CLOSING
AND CONDITIONS PRECEDENT TO ADVANCES
Closing
under this Agreement and the making of each Loan are subject to the following
conditions precedent (all documents to be in form and substance satisfactory
to
Lender and Lender’s counsel):
4.1 Resolutions,
Opinions, and Other Documents:
Prior
to
the Closing, Borrowers shall have delivered to Lender the following:
(a) this
Agreement and the Revolving Credit Note, each properly executed;
(b) each
document and agreement required to be executed under any provision of this
Agreement or any of the other Loan Documents;
(c) certified
copies of (i) resolutions of each Borrower’s board of directors, or manager, as
applicable authorizing the execution of this Agreement, the Revolving Credit
Note, and each other document to which it is a party, required to be delivered
by any Section hereof and (ii) each Borrower’s Articles of Incorporation and By
laws or certificate of organization and operating agreement (as applicable);
(d) incumbency
certificates identifying all Authorized Officers of each Borrower, with specimen
signatures;
(e) a
written
opinion of Borrowers’ independent counsel addressed to Lender in the form
attached hereto as Exhibit
4.1,
which
shall include without limitation, an opinion that Lender has a perfected
security interest in the Collateral;
(f) payment
by Borrowers of all Expenses associated with the Credit Facility incurred to
the
Closing Date and the Commitment Fee;
(g) the
Business Associate Agreement properly executed;
(h) the
Lockbox Agreements required pursuant to Section 2.7 hereof;
(i) Uniform
Commercial Code, judgment, federal and state tax lien searches pursuant to
Section 3.4 above;
16
(j) to
the
extent applicable, payoff letter and Lender shall have received releases from
all Persons having a security interest or other interest in the Collateral,
together with all UCC-3 terminations or partial releases necessary to terminate
such Persons’ interests in the Collateral;
(k) certification
by Borrowers that all past due payroll and unemployment taxes have been paid
in
full and that Borrowers remain current on such taxes;
(l) copies
of
each of the accreditations, licenses, certifications required by Section 5.3
below, and all Contracts requested by Lender;
(m) the
fully
executed Subordination Agreements;
(n) monthly
and year to date consolidated and consolidating financial statements for the
most recent month end prior to Closing (within 15 days prior to closing or
such
shorter period as Lender may determine);
(o) background
checks on the senior management of Borrowers;
(p) Landlord
Waivers with respect to the location of Borrowers’ chief executive office and
each other location where any books and records of Borrowers may be kept;
and
(q) all
other
documents, information and reports reasonably required or requested to be
executed and/or delivered by Borrowers under any provision of this Agreement
or
any of the Loan Documents.
4.2 Additional
Preconditions to Loans:
Lender’s
obligation to make the initial Loan and each subsequent Loan shall be subject
to
the satisfaction of each of the following conditions:
(a) After
giving effect to each such Loan:
(i) the
aggregate principal amount of all Advances outstanding shall not exceed the
Borrowing Base then in effect; and
(ii) the
ENV
of all Eligible Accounts shall not exceed any of the Concentration
Limits.
(b) All
representations and warranties of Borrowers shall be deemed reaffirmed as of
the
making of such Loan and shall be true both before and after giving effect to
such Loan, and no Event of Default or Unmatured Event of Default shall have
occurred and be continuing, Borrowers shall be in compliance with this Agreement
and the other Loan Documents, and Borrowers shall have certified such matters
to
Lender.
(c) Each
Borrower shall have signed and delivered to Lender notices, in the form of
Exhibit
4.2A,
directing the Obligors (other than Obligors with respect to Government Accounts)
to make payment to the Commercial Lockbox; and, in the form of Exhibit
4.2B,
directing the Obligors with respect to Government Accounts to make payment
to
the Government Lockbox.
17
(d) Borrowers
shall have taken all actions necessary to permit Lender to record all of the
Eligible Accounts in Lender’s Value Track System™.
(e) The
lockbox arrangements required by Section 2.7 hereof shall be in effect, and
the
amounts received in the lockboxes shall have been identified or reconciled
to
Lender’s satisfaction, as required by Section 2.7(d) hereof.
(f) Borrowers
shall have taken such other actions, including the delivery of documents and
opinions as Lender may reasonably request.
4.3 Absence
of Certain Events:
As
of the
Closing Date and prior to each Loan, no Event of Default or Unmatured Event
of
Default hereunder shall have occurred and be continuing.
4.4 Compliance
with this Agreement:
Borrowers
shall have performed and complied with all agreements, covenants and conditions
contained herein including, without limitation, the provisions of Sections
6 and
7 hereof, which are required to be performed or complied with by Borrowers
before or at the Closing Date and as of the date of each Loan.
4.5 Closing
Certificate:
Lender
shall have received a certificate dated the Closing Date and signed by the
chief
executive officer of Borrowers certifying that all of the conditions specified
in this Section have been fulfilled and that there has not occurred any material
adverse change in the operations and conditions (financial or otherwise) of
Borrowers since May 31, 2007.
4.6 Closing: Subject
to the conditions of this Section 4, the Credit Facility shall be made available
on the date (“Closing
Date”)
this
Agreement is executed and all of the conditions contained in Section 4.1 hereof
are completed (“Closing”).
4.7 Non-Waiver
of Rights:
By
completing the Closing hereunder, or by making Advances hereunder, Lender does
not thereby waive a breach of any warranty, representation or covenant made
by
Borrowers hereunder or under any agreement, document, or instrument delivered
to
Lender or otherwise referred to herein, and any claims and rights of Lender
resulting from any breach or misrepresentation by Borrowers are specifically
reserved by Lender.
4.8 Additional
Closing Date Precondition: After
considering all closing fees and expenses and other current obligations,
Borrower shall have a Borrowing Base Excess in an amount not less than One
Million Five Hundred Thousand Dollars ($1,500,000). This requirement shall
apply
only to Lender’s obligation to make the initial Loan and shall not apply to each
subsequent Loan after the Closing Date.
SECTION
5. REPRESENTATIONS
AND WARRANTIES
To
induce
Lender to complete the Closing and make the Loans under the Credit Facility
to
Borrowers, Borrowers warrant and represent to Lender that:
5.1 Organization
and Validity:
(a) Each
Borrower is duly organized as either a partnership, corporation or limited
liability company and validly existing under the laws of its state of
organization, incorporation or formation, is duly qualified, is validly existing
and, to the extent applicable, in good standing and has lawful power and
authority to engage in the business it conducts in each state and other
jurisdiction where the nature and extent of its business requires qualification,
except where the failure to so qualify would not have a material adverse effect
on such Borrower’s business, financial condition, Property or prospects. A list
of all states and other jurisdictions where each Borrower is qualified to do
business is attached hereto as Schedule
2
and made
a part hereof.
18
(b) The
making and performance of this Agreement and related agreements, and each
document required by any Section hereof will not violate any law, government
rule or regulation, or the charter, minutes, partnership agreement, operating
agreement or bylaw provisions of any Borrower violate or result in a default
(immediately or with the passage of time) under any contract, agreement or
instrument to which Borrower is a party, or by which a Borrower is bound. No
Borrower is in violation of nor has knowingly caused any Person to violate
any
term of any agreement or instrument to which it or such Person is a party or
by
which it may be bound or of its charter, minutes, partnership agreement,
operating agreement or bylaws, which violation could have a material adverse
effect on any Borrower’s business, financial condition, Property or
prospects.
(c) Each
Borrower has all requisite power and authority to enter into and perform this
Agreement and the other Loan Documents and to incur the obligations herein
provided for, and has taken all proper and necessary action to authorize the
execution, delivery and performance of this Agreement and the other Loan
Documents.
(d) This
Agreement, the Revolving Credit Note and the other Loan Documents required
to be
executed and delivered by any Borrower(s) hereunder, when delivered, will be
valid and binding upon all such Borrowers a party thereto and enforceable in
accordance with their respective terms.
5.2 Places
of Business:
Each
Borrower’s jurisdiction of organization is as set forth in Schedule
2
and each
Borrower’s chief executive office and the only other places of business of each
such Borrower are located at the corresponding addresses set forth on
Schedule
2.
Except
as disclosed on Schedule
2:
(i) no
Borrower has been organized in any other jurisdiction nor changed any such
location in the last five years, (ii) no Borrower has changed its name in the
last five years, and (iii) during such period no Borrower used, nor does any
Borrower now use, any fictitious or trade name.
5.3 Operation
of Facilities:
Each
Borrower provides health care services and (a) maintains Medicare and Medicaid
provider status and is the holder of the provider identification numbers
identified on Schedule
2
hereto,
all of which are current and valid and such Borrower has not allowed, permitted,
authorized or caused any other Person to use any such provider identification
number, (b) has obtained all material licenses, accreditations, certificates
of
need and approvals of governmental authorities and all other Persons necessary
for such Borrower to own its assets, to carry on its business, to execute,
deliver and perform the Loan Documents, and to receive payments from the
Obligors and, if organized as a not-for-profit entity, has and maintains its
status, if any, as an organization exempt from federal taxation under Section
501(c)(3) of the Internal Revenue Code, and (c) only employs and engages
certified health care aides or nurses aides who (i) have received appropriate
certification through a training program licensed by the Department of Health
or
the State Education Department, and (ii) such certification is current and
in
good standing with any required governmental authority, including the Department
of Health or the State Education Department. No Borrower has been notified
by
any such governmental authority or other Person during the immediately preceding
24 month period that such party has rescinded or not renewed, or intends to
rescind or not renew, any such license or approval.
19
5.4 Pending
Litigation:
There
are
no judgments or judicial or administrative orders, subpoenas, proceedings or
investigations (civil or criminal) pending, or to the knowledge of any Borrower,
threatened, against any Borrower in any court or before any governmental
authority or arbitration board or tribunal, other than as set forth on
Schedule
2
hereto,
none of which, if adversely determined would have a material adverse effect
on
such Borrower. No Borrower is in default with respect to any order of any court,
governmental authority, regulatory agency or arbitration board or tribunal.
No
Shareholder or executive officer of any Borrower has been indicted or convicted
in connection with or is engaging in any criminal conduct, or is currently
subject to any lawsuit or proceeding or under investigation in connection with
any anti-racketeering or other criminal conduct or activity.
5.5 Medicaid
and Medicare Cost Reporting:
The
Medicaid and Medicare cost reports of each Borrower for all cost reporting
periods have been submitted when and as required to (i) as to Medicaid, the
state agency, or other CMS-designated agent or agent of such state agency,
charged with such responsibility or (ii) as to Medicare, the Medicare
intermediary or other CMS-designated agent charged with such responsibility.
No
audit conducted after the Closing Date has resulted in any determination that
any Borrower was overpaid for Medicaid and Medicare by $300,000 or more in
any
single year covered by such audit (the “Overpayment
Representation”);
provided,
however,
that so
long as (1) an Unmatured Event of Default or Event of Default has not occurred
and is continuing, and (2) Total Liquidity has been greater than $1,000,000
for
the previous six (6) consecutive calendar months and after giving effect to
any
amount determined to be an overpayment by such audit, the Borrower shall not
be
obligated to make the Overpayment Representation.
5.6 Title
to Collateral:
Each
Borrower has good and marketable title to all the Collateral it respectively
purports to own, free from liens, claims and encumbrances, except those of
Lender, Permitted Liens and those other liens listed on Schedule
2
hereto.
5.7 Governmental
Consent:
Neither
the nature of any Borrower or of any Borrower’s business or Property, nor any
relationship between any Borrower and any other Person, nor any circumstance
affecting any Borrower in connection with the execution, issuance and/or
delivery of this Agreement or the Revolving Credit Note is such as to require
a
consent, approval or authorization of, or filing, registration or qualification
with, any governmental authority on the part of any such Borrower in connection
with the execution and delivery of this Agreement or the issuance or delivery
of
the Revolving Credit Note or other Loan Documents.
5.8 Taxes:
All
tax
returns required to be filed by Borrowers, or any of them, in any jurisdiction
have in fact been filed, and all taxes, assessments, fees and other governmental
charges upon Borrowers, or any of them, or upon any of their respective
Property, income or franchises, which are shown to be due and payable on such
returns have been paid, except for those taxes being contested in good faith
with due diligence by appropriate proceedings and for which appropriate reserves
have been maintained under GAAP. No Borrower is aware of any proposed additional
tax assessment or tax to be assessed against or applicable to any Borrower
that
might have a material adverse effect on such Borrower’s business, financial
condition, Property or prospects.
20
5.9 Financial
Statements:
Borrowers’
annual audited consolidated and consolidating balance sheet as of December
31,
2006, accompanied by reports thereon from Borrowers’ independent certified
public accountants, and the quarterly consolidated balance sheet as of June
30,
2007 and the related income statements and statements of cash flows as of such
dates (complete copies of which have been delivered to Lender), have been
prepared in accordance with GAAP and present fairly, accurately and completely
the financial position of Borrowers as of such dates and the results of their
operations for such periods. The fiscal year for each Borrower currently ends
on
the date set forth on Schedule
2
hereto.
Each Borrower’s federal tax identification number and organization number are as
set forth on Schedule
2
hereto.
5.10 Full
Disclosure:
Neither
the financial statements referred to in Section 5.9, nor this Agreement or
related agreements and documents or any written statement furnished by any
Borrower to Lender in connection with the negotiation of the Credit Facility
and
contained in any financial statements or documents relating to any Borrower
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein not
misleading.
5.11 Guarantees,
Contracts, etc.:
(a) No
Borrower owns nor holds partnership interests or equity or long term debt
investments in, has any outstanding advances to, or serves as guarantor, surety
or accommodation maker for the obligations of, or has any outstanding borrowings
from, any Person except as described in Schedule
2
hereto.
(b) No
Borrower is a party to any contract or agreement, or subject to any charter
or
other entity restriction, which materially and adversely affects its business,
financial condition, Property or prospects.
(c) Except
as
otherwise specifically provided in this Agreement, no Borrower has agreed or
consented to cause or permit any of the Collateral whether now owned or
hereafter acquired to be subject in the future (upon the happening of a
contingency or otherwise) to a lien or encumbrance not permitted by this
Agreement.
5.12 Compliance
with Laws:
(a) No
Borrower is in violation of, has received written notice that it is in violation
of, or has knowingly caused any Person to violate, any applicable statute,
regulation or ordinance of the United States of America, or of any state, city,
town, municipality, county or of any other jurisdiction, or of any agency,
or
department thereof, (including without limitation, environmental laws and
regulations), which may materially and adversely affect its business, financial
condition, Property or prospects.
(b) Each
Borrower is current with all reports and documents required to be filed with
any
state or federal securities commission (if any) or similar agency and is in
full
compliance in all material respects with all applicable rules and regulations
of
such commissions.
5.13 Other
Associations:
No
Borrower is engaged in nor has an interest in any joint venture or partnership
with any other Person or has any subsidiaries or Affiliates, except as described
on Schedule
2
hereto.
21
5.14 Environmental
Matters:
Except
as
disclosed on Schedule
2
hereto,
no Borrower has knowledge:
(a) of
the
presence of any Hazardous Substances on any of the real property where any
Borrower maintains operations or has its personal property, or
(b) of
any
on-site spills, releases, discharges, disposal or storage of Hazardous
Substances that have occurred or are presently occurring on any of such real
property where any Collateral is located, or
(c) of
any
spills, releases, discharges or disposal of Hazardous Substances that have
occurred, are presently occurring on any other real property as a result of
the
conduct, action or activities of any Borrower.
5.15 Capital
Stock and Equity Interests:
The
authorized and outstanding shares of capital stock and other equity interests
of
(a) the officers and directors of each Borrower and (b) to the best of
Borrower’s knowledge based upon any and all Schedule 13-D documents filed under
the Securities Exchange Act of 1934, any Person owning an amount equal to or
more than 5% of the authorized and outstanding shares of capital stock and
other
equity interests any Borrower is as set forth on Schedule
2
hereto.
All of the capital stock and equity interests of each Borrower have been duly
and validly authorized and issued and is fully paid and non-assessable and
have
been sold and delivered to the holders thereof in compliance with, or under
valid exemption from, all Federal and state laws and the rules and regulations
of all regulatory bodies thereof governing the sale and delivery of securities.
Except for the rights and obligations set forth in Schedule
2,
there
are no subscriptions, warrants, options, calls, commitments, rights or
agreements by which any Borrower or any of the Shareholders of any Borrower
is
bound relating to the issuance, transfer, voting or redemption of shares of
its
capital stock, membership units or any pre-emptive rights held by any Person
with respect to the shares of capital stock or membership units of any such
Borrower. Except as set forth in Schedule
2,
no
Borrower has issued any securities convertible into or exchangeable for shares
of its capital stock or membership units or any options, warrants or other
rights to acquire such shares or membership units or securities convertible
into
or exchangeable for such shares.
5.16 Lockboxes:
The
Government Lockbox and the Commercial Lockbox are the only lockbox accounts
maintained by Borrowers, and each Obligor of an Eligible Account has been
directed by the notice attached as Exhibit
4.2A
to this
Agreement, and is required to, remit all payments with respect to such Account
for deposit in the Commercial Lockbox (other than the Obligors of Government
Accounts which have been directed by the notice attached as Exhibit
4.2B
to this
Agreement to remit all payments with respect to such Accounts for deposit in
the
Government Lockbox).
5.17 Borrowing
Base Reports:
Each
Borrowing Base Report signed by Borrowers, on behalf of Borrowers, contains
and
will contain an accurate summary of all Eligible Accounts of Borrowers contained
in the Borrowing Base as of its date.
5.18 Security
Interest:
Each
Borrower has granted to Lender a valid, perfected first priority and only
security interest in the Accounts and the other Collateral subject to no other
liens, claims or encumbrances, other than Permitted Liens.
22
5.19 Accounts:
(a) No
Borrower has done nor shall do anything to interfere with the collection of
the
Accounts and no Borrower shall amend or waive the terms or conditions of any
Account or any related Contract in any materially adverse manner without
Lender’s prior written consent.
(b) Each
Borrower has made and will continue to make all payments to Obligors necessary
to prevent any Obligor from offsetting any earlier overpayment to such Borrower
against any amounts such Obligor owes on an Account, except for bona fide
disputes being diligently contested in good faith by Borrower provided that
(i)
Borrower has provided written notice to Lender, (ii) Lender
has had the opportunity to set aside reasonable reserves against the Borrowing
Base in such amounts as it may deem appropriate with respect to such disputes,
and (iii) such bona fide disputes are
in an
aggregate amount less than $300,000 in any single year or $900,000 over any
three year period.
5.20 Pension
Plans:
Each
pension or profit sharing plan, if any, to which any Borrower is a party has
been and will be funded in accordance with the obligations of such Borrower(s)
set forth in such plan.
5.21 Representations
and Warranties for each Loan:
As
of
each date that Borrowers shall request any Loan, each Borrower shall be deemed
to make, with respect to each Eligible Account included in the Borrowing Base,
each of the following representations and warranties:
(a) Such
Account satisfies each of the conditions of an Eligible Account.
(b) All
information relating to such Account that has been delivered to Lender is true
and correct in all material respects. With respect to each such Account that
has
been billed, the corresponding Borrower has delivered to the Obligor all
requested supporting claim documents and all information set forth in the xxxx
and supporting claim documents is true, complete and correct in all material
respects.
(c) There
is
no lien or adverse claim in favor of any third party, nor any filing against
any
Borrower, as debtor, covering or purporting to cover any interest in such
Account.
(d) Such
Account is (i) payable in an amount not less than its Estimated Net Value by
the
Obligor identified by Borrowers as being obligated to do so, and is recognized
as such by the Obligor, (ii) the legally enforceable obligation of such Obligor,
and (iii) an account receivable or general intangible within the meaning of
the
UCC of the state in which the corresponding Borrower has its chief executive
office, or is a right to payment under a policy of insurance or proceeds
thereof, and is not evidenced by any instrument or chattel paper. There is
no
payor other than the Obligor identified by Borrowers as the payor primarily
liable on such Account.
(e) No
such
Account (i) requires the approval of any third person for such Account to be
assigned to Lender hereunder, (ii) is subject to any legal action, proceeding
or
investigation (pending or threatened), dispute, set-off, counterclaim, defense,
abatement, suspension, deferment, deductible, reduction or termination by the
Obligor, or (iii) is past, or within 180 days of, the statutory limit for
collection applicable to the Obligor.
23
(f) Such
Borrower does not have any guaranty of, letter of credit support for, or
collateral security for, such Account, other than any such guaranty, letter
of
credit or collateral security as has been assigned to Lender.
(g) The
services constituting the basis of such Account (i) were medically necessary
for
the patient and (ii) at the time such services were rendered, were fully covered
by the insurance policy or Contract obligating the applicable Obligor to make
payment with respect to such Account (and the corresponding Borrower has
verified such determination), and (iii) the patient received such services
in
the ordinary course of such Borrower’s business.
(h) The
fees
and charges charged for the services constituting the basis for such Account
were when rendered and are currently consistent with (i) the usual, customary
and reasonable fees charged by Borrowers or (ii) pursuant to negotiated fee
contracts, or imposed fee schedules, with or by the applicable
Obligors.
(i) The
Obligor with respect to such Account is located in the United States, and is
(i)
a party which in the ordinary course of its business or activities agrees to
pay
for healthcare services received by individuals, including, commercial insurance
companies and non-profit insurance companies issuing health, or other types
of
insurance, employers or unions, self-insured healthcare organizations, preferred
provider organizations, and health insured, prepaid maintenance organizations,
(ii) a state, an agency or instrumentality of a state or a political subdivision
of a state, or (iii) the United States or an agency or instrumentality of the
United States.
(j) The
insurance policy or Contract obligating an Obligor to make payment (i) does
not
prohibit the transfer of such payment obligation from the patient to the
corresponding Borrower and (ii) is and was in full force and effect and
applicable to the patient at the time the services constituting the basis for
such Account were performed.
(k) The
representations and warranties made by Borrowers in the Loan Documents and
all
financial or other information delivered to Lender with respect to Borrowers
and
such Account do not contain any untrue statement of material fact or omit to
state a material fact necessary to make the statement made not
misleading.
(l) If
requested by Lender, a copy of each related Contract to which each Borrower
is a
party has been delivered to Lender unless any such Borrower shall have, prior
to
the related Funding Date, certified in an Officer’s Certificate that such
delivery is prohibited by the terms of the Contract or by law, and the
circumstances of such prohibition.
(m) If
such
Account has not been billed, the services giving rise to such Account have
been
properly recorded in the corresponding Borrower’s accounting
system.
(n) Such
Account was (or if unbilled, will be) in any event billed no later than 45
days
after the date the services or goods giving rise to such Account were rendered
as provided, as applicable, and each xxxx contains an express direction
requiring the Obligor to remit payments to either the Government Lockbox or
Commercial Lockbox, as applicable.
(o) Such
Account has an Estimated Net Value which, when added to the Estimated Net Value
of all other Accounts owing by the same Obligor and which constitute Eligible
Accounts hereunder, does not exceed any applicable Concentration
Limit.
24
(p) Neither
such Account nor the related Contract contravenes any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and regulations
relating to usury, consumer protection, truth-in-lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection practices
and privacy) and no party to such related Contract is in violation of any such
law, rule or regulation in connection with such Contract.
(q) As
of the
applicable Funding Date, to the best of Borrowers’ knowledge, no Obligor on such
Account is bankrupt, insolvent, or is unable to make payment of its obligations
when due, and no other fact exists which would cause any Borrower reasonably
to
expect that the amount billed to the related Obligor for such Account will
not
be paid in full when due.
5.22 Interrelatedness
of Borrowers:
The
business operations of each Borrower are interrelated and complement one
another, and such companies have a common business purpose, with intercompany
bookkeeping and accounting adjustments used to separate their respective
Properties, liabilities and transactions. To permit their uninterrupted and
continuous operation, such companies now require and will from time to time
hereafter require funds for general business purposes. The proceeds of Advances
under the Credit Facility will directly or indirectly benefit each Borrower
hereunder severally and jointly, regardless of which Borrower requests or
receives part or all of the proceeds of such Loan.
5.23 Commercial
Tort Claims:
Borrowers
have no commercial tort claims against any third parties, except as shown on
Schedule
2
hereto.
5.24 Letter
of Credit Rights:
Borrowers
have no letter of credit rights except as shown on Schedule 2
hereto.
5.25 Intellectual
Property:
Except
as
shown on Schedule
2
attached
hereto and made part hereof, (i) Borrowers do not require any copyrights,
patents, trademarks or other intellectual property, or any license(s) to use
any
patents, trademarks or other intellectual property in order to provide services
to their customers or to xxxx Obligors and collect therefrom, in the ordinary
course of business, and (ii) Lender will not require any copyrights, patents,
trademarks or other intellectual property or any licenses to use the same in
order to provide such services or xxxx and collect the Accounts, after the
occurrence of an Event of Default.
5.26 Solvency:
On
the
Closing Date, and immediately prior to and after giving effect to each borrowing
hereunder and the use of the proceeds thereof, with respect to each Borrower
(a)
the fair value of its assets is greater than the amount of its liabilities
(including disputed, contingent and unliquidated liabilities) as such value
is
established and liabilities evaluated, (b) the present fair saleable value
of
its assets is not less than the amount that will be required to pay the probable
liability on its debts as they become absolute and matured, (c) it is able
to
realize upon its assets and pay its debts and other liabilities (including
disputed, contingent and unliquidated liabilities) as they mature in the normal
course of business, (d) it does not intend to, and does not believe that it
will, incur debts or liabilities beyond its ability to pay as such debts and
liabilities mature, and (e) it is not engaged in business or a transaction,
and
is not about to engage in business or a transaction, for which its property
would constitute unreasonably small capital.
25
SECTION
6. BORROWER’S
AFFIRMATIVE COVENANTS
Each
Borrower covenants that until all of Borrowers’ Obligations to Lender are paid
and satisfied in full and the Credit Facility has been terminated:
6.1 Payment
of Taxes and Claims:
Each
Borrower shall pay, before they become delinquent, all taxes, assessments and
governmental charges or levies imposed upon it or upon such Borrower’s Property,
except for those being contested in good faith with due diligence by appropriate
proceedings and for which appropriate reserves have been maintained under
GAAP.
6.2 Maintenance
of Insurance, Financial Records and Existence:
(a) Property
Insurance
-
Borrowers shall maintain or cause to be maintained insurance on its Property
against fire, flood, casualty and such other hazards in such amounts, with
such
deductibles and with such insurers as are customarily used by companies
operating in the same industry as Borrowers The policies of all such casualty
insurance shall contain standard Lender Loss Payable and additional insured
clauses issued in favor of Lender pursuant to which all losses thereunder shall
be paid to Lender as Lender’s interests may appear. Such policies shall
expressly provide that the requisite insurance cannot be altered or canceled
without thirty (30) days prior written notice to Lender and shall insure Lender
notwithstanding the act or neglect of the insured. At or prior to Closing,
Borrowers shall furnish Lender with insurance certificates certified as true
and
correct and being in full force and effect as of the Closing Date or such other
evidence of insurance as Lender may require. In the event Borrowers fail to
procure or cause to be procured any such insurance or to timely pay or cause
to
be paid the premium(s) on any such insurance, Lender may do so for Borrowers,
but Borrowers shall continue to be liable for the same. Borrowers further
covenant that all insurance premiums owing under its current casualty policy
have been paid. Borrowers also agree to notify Lender, promptly, upon Borrowers’
receipt of a notice of termination, cancellation or non-renewal from its
insurance company of any such policy. Each Borrower hereby appoints Lender
as
its attorney-in-fact, exercisable at Lender’s option, to endorse any check which
may be payable to such Borrower in order to collect the proceeds of such
insurance.
(b) Public
Liability and Business Interruption Insurance
-
Borrowers shall maintain, and shall deliver to Lender upon Lender’s request
evidence of public liability and business interruption insurance in such amounts
as is customary for companies in the same or similar businesses located in
the
same or similar area.
(c) Financial
Records
-
Borrowers 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. No Borrower shall change its respective
fiscal year end date without the prior written notice to Lender.
(d) Existence
and Rights
- Each
Borrower shall do (or cause to be done) all things necessary to preserve and
keep in full force and effect its legal existence, good standing, rights and
franchises.
26
(e) Compliance
with Laws
- Each
Borrower shall be in material compliance with any and all laws, ordinances,
governmental rules and regulations, and court or administrative orders or
decrees to which it is subject, whether federal, state or local (including
without limitation all environmental or environmental-related laws, statutes,
ordinances, rules, regulations and notices), and shall obtain and maintain
any
and all licenses, permits, franchises, certificates of need or other
governmental authorizations necessary to the ownership of its Property or to
the
conduct of its businesses, which violation or failure to obtain may materially
adversely affect the business, Property, financial conditions or prospects
of
such Borrower, the Collateral, or Lender’s rights with respect to the
Collateral.
6.3 Business
Conducted:
Each
Borrower shall continue in the business presently operated by it using its
best
efforts to maintain its customers. No Borrower shall engage, directly or
indirectly, in any material respect in any line of business substantially
different from the businesses conducted by it immediately prior to the Closing
Date.
6.4 Litigation:
Borrowers
shall give prompt notice to Lender of any (a) litigation claiming in excess
of
$50,000 from Borrowers, or any of them, or which may otherwise have a material
adverse effect on the business, financial condition, Property or prospects
of
Borrowers, or any of them, and (b) subpoena received by any Borrower from any
governmental authority, including the Office of the Inspector General, the
Department of Justice or the Centers for Medicare and Medicaid
Services.
6.5 Taxes:
Borrowers
shall pay all taxes (other than taxes based upon or measured by Lender’s income
or revenues), if any, in connection with the Loans and/or the recording of
any
financing statements or other Loan Documents. The Obligations of Borrowers
under
this section shall survive the payment of Borrowers’ Obligations under this
Agreement and the termination of this Agreement.
6.6 Financial
Covenants:
Borrowers
shall perform and comply with each of the following financial covenants as
reflected and computed from their financial statements, it being acknowledged
and agreed that such financial covenants shall be calculated solely on the
financial results of NYH, and shall exclude the financial results of
BioBalance:
(a) Fixed
Charge Coverage Ratio.
Borrowers shall maintain at all times a Fixed Charge Coverage Ratio of not
less
than 1.25 to 1.00, measured on a trailing four quarter basis commencing with
the
fiscal quarter ending September 30, 2007 and measured on the last day of each
fiscal quarter thereafter.
(b) Minimum
EBITDA.
Borrowers shall maintain at all times EBITDA in an amount not less than
$750,000, measured on a trailing four quarter basis commencing with the fiscal
quarter ending September 30, 2007 and measured on the last day of each fiscal
quarter thereafter.
6.7 Financial
and Business Information:
Borrowers
shall deliver to Lender the following (all to be in form and substance
satisfactory to Lender):
(a) Financial
Statements and Collateral Reports:
(i) as
soon
as available but in any event, within one hundred and twenty (120)
days
after the end of each fiscal year of Borrowers, deliver financial statements
of
Borrowers for such year which present fairly Borrowers’ financial condition
including the balance sheet of Borrowers as at the end of such fiscal year
and a
statement of cash flows and income statement for such fiscal year, all on a
consolidated and consolidating basis, setting forth in the consolidated
statements in comparative form, the corresponding figures as at the end of
and
for the previous fiscal year, all in reasonable detail, including all supporting
schedules, and audited by independent public accountants of recognized standing,
selected by Borrowers and reasonably satisfactory to Lender, and prepared in
accordance with GAAP;
27
(ii) as
soon
as available but in any event within forty-five (45) days
after the end of each calendar month, deliver to Lender Borrowers’ internally
prepared monthly consolidated and consolidating financial statements, along
with
year to date information, including a balance sheet, income statement and
statement of cash flows with respect to the periods measured;
(iii) promptly
upon request, deliver such other information concerning Borrowers as Lender
may
from time to time request, including Medicare and Medicaid cost reports and
audits, annual reports, security law filings and reports to any security
holders; and
(iv) at
least
thirty (30) days after the first day of each fiscal year, annual consolidated
and consolidating projections for Borrowers for such year, including a balance
sheet, income statement and statement of cash flow and a Borrowing Base
Availability projections, all prepared on a monthly basis; and
(v) contemporaneously
with delivery of the annual financial statements referred to in clause (i)
above, census data for each Borrower and a good standing certificate from each
Borrower’s jurisdiction of organization evidencing that such Borrower remain in
good standing in, and continue to be organized under the laws of, such
jurisdiction; and
(vi) as
soon
as available, copies of: (A) all financial statements, reports, notices and
proxy statements made publicly available by any Borrower to its security
holders; (B) all regular and periodic reports and all registration statements
and prospectuses, if any, filed by any Borrower with any securities exchange
or
with the Securities and Exchange Commission or any governmental or private
regulatory authority; and (C) all press releases and other statements made
available by any Borrower to the public concerning material changes or
developments in the business of such Borrower or its Subsidiaries or
Affiliates.
(vii) such
other data, reports, statements and information (financial or otherwise), as
Lender may reasonably request.
(b) Notice
of Event of Default
-
promptly upon becoming aware of the existence of any condition or event which
constitutes a default or an Event of Default or Unmatured Event of Default
under
this Agreement, a written notice specifying the nature and period of existence
thereof and what action Borrowers are taking (and propose to take) with respect
thereto;
(c) Notice
of Claimed Default
-
promptly upon receipt by any Borrower, notice of default, oral or written,
given
to such Borrower by any creditor for borrowed money in excess of $50,000.
28
(d) Notice
of Sales of Capital Stock or Equity Interest
-
promptly upon becoming aware of the sale of capital stock and other equity
interests of any Borrower by (a) any officer or director who is a Shareholder,
(b) any Person owning an amount equal to or more than 5% of the authorized
and
outstanding shares of capital stock and other equity interests of any Borrower,
(c) any Person who acquires any classes of capital stock or other equity
interests of such Borrower which requires such purchaser to file a Schedule
13-D
under the Securities Exchange Act of 1934 or (d) any Person set forth on
Schedule 2.
6.8 Officers’
Certificates:
Along
with the set of financial statements delivered to Lender at the end of each
fiscal quarter and fiscal year pursuant to Section 6.7(a) hereof, deliver to
Lender a certificate (in the form of Exhibit
6.8
attached
hereto and made a part hereof) from the chief financial officer of Borrowers
setting forth:
(a) Covenant
Compliance
- the
information (including detailed calculations) required in order to establish
whether Borrowers are in compliance with the requirements of Sections 6.6 as
of
the end of the period covered by the financial statements then being furnished
(and any exhibits appended thereto) under Section 6.7; and
(b) Event
of Default
- that
the signer in his capacity as an officer of Borrowers 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 Borrowers from
the
beginning of the accounting period covered by the financial statements being
delivered therewith 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 Unmatured Event of Default or if any such
condition or event existed or exists, specifying the nature and period of
existence thereof and what action Borrowers have taken or propose to take with
respect thereto.
6.9 Inspection:
Borrowers
will permit any of Lender’s officers or other representatives to visit and
inspect any Borrowers’ location(s) or where any Collateral is kept during
regular business hours to examine and audit all of such Borrower’s books of
account, records, reports and other papers, to make copies and extracts
therefrom and to discuss its affairs, finances and accounts with its officers,
employees and independent certified public accountants and attorneys (each
an
“Audit”).
Borrowers shall pay to Lender all reasonable fees based on standard rates for
each Audit; provided,
however,
that
Borrowers shall only be obligated to pay such fees (a) two times during each
twelve (12) month period, so long as (1) an Unmatured Event of Default or Event
of Default has not occurred and is continuing, and (2) Total Liquidity has
been
greater than $1,750,000 for the previous six (6) consecutive calendar months,
or
(b) four times during each twelve (12) month period, so long as (1) an Unmatured
Event of Default or Event of Default has not occurred and is continuing, and
(2)
Total Liquidity is less than $1,750,000; provided,
further,
that
any reimbursements made by the Borrower pursuant to subsection (b) shall not
count towards the Borrowers' reimbursement obligations under subsection (a).
6.10 Tax
Returns and Reports:
At
Lender’s request from time to time, Borrowers shall promptly furnish Lender with
copies of the annual federal and state income tax returns of Borrowers.
6.11 Material
Adverse Developments:
Each
Borrower agrees that immediately upon it or any of its officers becoming aware
of any development or other information which would reasonably be expected
to
materially and adversely affect the businesses, financial condition, Property,
prospects of a Borrower or a Borrowers’ ability to perform under this Agreement,
it shall give to Lender telephonic or facsimile notice specifying the nature
of
such development or information and such anticipated effect. In addition, such
verbal communication shall be confirmed by written notice thereof to Lender
on
the next Business Day after such verbal notice is given.
29
6.12 Places
of Business: Each
Borrower shall give thirty (30) days prior written notice to Lender of any
changes (a) its jurisdiction of organization, (b) in the location of any of
its
chief executive office or any other places of business, or the establishment
of
any new, or the discontinuance of any existing place of business, and (c) its
name.
6.13 Notice
of Action:
Each
Borrower will promptly notify Lender in the event of any legal action, dispute,
setoff, counterclaim, defense or reduction in excess of $100,000 that is or
may
be asserted by an Obligor with respect to any Account that may have a material
adverse effect on the collectibility of such Account or all Accounts
collectively.
6.14 Verification
of Information:
At
the
request of Lender, Borrowers will promptly provide and verify the accuracy
of
information concerning Borrowers and their Affiliates of the type provided
to
Lender in connection with Lender’s decision to enter into this Agreement and
such other information concerning Borrowers and their Affiliates as Lender
may
reasonably request in connection with any offering documents with respect to
the
contemplated securitization of, and sale of securities backed by, the Eligible
Accounts (the “Securities”),
including, without limitation, all information necessary to provide full and
complete disclosure of all material facts pertaining to an investment in the
Securities in compliance with federal and state securities and blue sky laws,
and such information may be published in such offering documents and relied
upon
by Lender and any party arranging the offering of such Securities by Lender
or
its assignee. Such information will be true and complete in all material
respects and will not omit to state a material fact necessary to make the
statements contained in such information, in light of the circumstances under
which they were made, not misleading.
6.15 Value
Track System™:
Borrowers
shall permit Lender to interface its Value Track System™ to Borrowers’ data
files and will assist Lender in completing and maintaining such interface such
that the interface can interpret, track and reconcile the Accounts Detail File
provided by Borrowers.
6.16 Commercial
Tort Claim:
Borrowers
shall provide written notice to Lender of any commercial tort claim in excess
of
$100,000 to which a Borrower is or becomes a party or which otherwise inures
to
the benefit of a Borrower. Such notice shall contain a sufficient description
of
such commercial tort claim including the parties, the court in which the claim
was commenced (if applicable), the docket number assigned to the case (if
applicable), and a detailed explanation of the events giving rise to such claim.
Borrowers shall grant Lender a security interest in such commercial tort claim
to secure payment of the Obligations. Borrowers shall execute and deliver such
instruments, documents and agreements as Lender may require in order to obtain
and perfect such security interest including, without limitation, a security
agreement or amendment to this Agreement all in form and substance satisfactory
to Lender. Each Borrower authorizes Lender to file (without such Borrower’s
signature) financing statements or amendments to existing financing statements
as Lender deems necessary to perfect the security interest in such commercial
tort claim.
30
6.17 Post-Closing
Covenants:
(a)
The
Borrowers agree to
(a) close
for
deposit all bank accounts other than those maintained at Lockbox Bank by no
later than 90 days after the Closing Date; provided,
however,
that
Borrowers may keep such bank accounts open for the limited purpose of permitting
the clearance of checks that were issued by the Borrowers prior to the Closing
Date;
(b) on
or
before the 60th
day
following the Closing Date, use best efforts to obtain executed landlord waivers
in form and substance satisfactory to the Lender for any location where any
books and records of Borrowers may be kept.
SECTION
7. BORROWERS’
NEGATIVE COVENANTS
Each
Borrower covenants that until all of Borrowers’ Obligations to Lender are paid
and satisfied in full and the Credit Facility has been terminated,
that:
7.1 Merger,
Consolidation, Dissolution or Liquidation:
(a) No
Borrower shall sell, lease, license, transfer or otherwise dispose of its
Property other than inventory sold in the ordinary course or ordinary operation
of such Borrower’s business, without Lender’s prior written consent.
(b) No
Borrower shall merge or consolidate with, or acquire, any other Person or
commence a dissolution or liquidation, other than through a merger with another
Borrower, without Lender’s prior written consent.
(c) For
the
avoidance of doubt, the restrictions set forth in this Section 7.1 shall not
apply to any assets or property of Borrowers’ Subsidiary, BioBalance or the
capital stock of BioBalance; provided,
however,
that
under no circumstance shall NYH be permitted to merge or consolidate with or
into, or acquire any of the assets of BioBalance.
7.2 Liens
and Encumbrances:
No
Borrower shall: (i) execute a negative pledge agreement with any Person covering
any of the Collateral, or (ii) cause or permit or agree or consent to cause
or
permit in the future (upon the happening of a contingency or otherwise) the
Collateral, whether now owned or hereafter acquired, to be subject to any lien,
claim or encumbrance other than those of Lender and Permitted Liens.
7.3 Negative
Pledge:
No
Borrower shall permit a lien or security interest to exist on its common stock,
partnership interests or membership units nor shall any such Borrower permit,
pledge or xxxxx x xxxx or security interest to exist on the common stock,
partnership interests or membership units of its subsidiaries and/or
Affiliates.
7.4 Transactions
With Affiliates or Subsidiaries:
(a) No
Borrower shall enter into any transaction with any Subsidiary or other Affiliate
(other than another Borrower) including, without limitation, the purchase,
sale,
lease or exchange of Property, or the loaning, capitalization or giving of
funds
to any such Affiliate or any Subsidiary, unless (i) such Subsidiary or Affiliate
is engaged in a business substantially related to the business conducted by
such
Borrower, (ii) the transaction is in the ordinary course of and pursuant to
the
reasonable requirements of such Borrower’s business and upon terms substantially
the same and no less favorable to such Borrower as it would obtain in a
comparable arm’s-length transactions with any Person not an Affiliate or a
subsidiary and (iii) such transaction is not prohibited hereunder.
31
(b) Notwithstanding
anything contained in Section 7.4(a), Borrowers may loan, capitalize or give
funds to BioBalance so long as (i) an Unmatured Event of Default or Event of
Default has not occurred, (ii) such transaction is not otherwise prohibited
hereunder, and (iii) Total Liquidity as of the end of the most recent calendar
month has been not less than One Million Seven Hundred Fifty Thousand Dollars
($1,750,000).
(c) Subject
in any event to the limitations of Section 7.4(a) above and except with the
prior written consent of Lender, no Borrower shall create or acquire any
Subsidiary unless such Subsidiary engages in a business substantially related
to
the business of such Borrower as conducted immediately prior to the Closing
Date, and if required by Lender, such Subsidiary becomes a Borrower
hereunder.
7.5 Guarantees:
No
Borrower shall become or be liable, directly or indirectly, primarily or
secondarily, matured or contingent, in any manner, whether as guarantor, surety,
accommodation maker, or otherwise, for the existing or future indebtedness
of
any kind of any other Person, except endorsements in the ordinary course of
business of negotiable instruments for deposit or collection.
7.6 Indebtedness:
Without
Lender’s prior written consent, no Borrower shall create, incur, assume or
suffer to exist any Indebtedness (exclusive of trade debt) except (subject
to
compliance with Section 6.6 hereof):
(a) Indebtedness
to Lender,
(b) Indebtedness
specifically identified on Schedule
2
hereto
and any refinancings, refundings, renewals, or extensions thereof;
(c) Indebtedness
constituting purchase money indebtedness for the financing of capital
expenditures in an aggregate principal amount not to exceed $250,000, so long
as
(i) such Indebtedness is secured only by a security interest in the equipment
being financed, (ii) the terms of such Indebtedness are reasonably satisfactory
to Lender, and (iii) such Indebtedness does not cause, or result in, an Event
of
Default or Unmatured Event of Default; and
(d) Indebtedness
of any Borrower to any other Borrower.
7.7 Loans
to Other Persons:
No
Borrower shall make or be permitted to have outstanding any loans, advances
or
extensions of credit to any Person (other than another Borrower).
7.8 Change
in Ownership/Management:
No
Borrower, unless consented to in writing by Lender, shall permit any current
or
future Shareholder together with any Affiliate of such Shareholder, to own
an
aggregate amount greater than 15% of all of the outstanding capital stock or
other equity interests of such Borrower. In addition, unless consented to by
Lender, or if a replacement acceptable to Lender is employed within 90 days
of
any terminations (such consent not to be unreasonably withheld) current senior
management shall continue as senior management of Borrowers actively involved
in
the date to day management of such Borrowers.
32
7.9 Subordinated
Debt Payments:
No
Borrower shall make any payment in contravention of the terms and conditions
of
the Subordination Agreements.
7.10 Distributions:
Borrowers
shall not declare or pay or make any forms of Distributions to its Shareholders,
Subsidiaries, Affiliates, officers or directors or their respective successors
or assigns; provided,
however,
that
Borrowers shall be permitted to make Distributions or capital contributions
to
BioBalance so long as an Unmatured Event of Default or Event of Default has
not
occurred and Total Liquidity, as of the end of the most recent calendar month
and after giving effect to such Distribution, is not less than One Million
Seven
Hundred Fifty Thousand Dollars ($1,750,000).
SECTION
8. DEFAULT
8.1 Events
of Default:
Each
of
the following events shall constitute an event of default (“Event
of Default”)
and
Lender shall thereupon have the option to declare the Obligations immediately
due and payable, all without demand, notice, presentment or protest or further
action of any kind (it also being understood that the occurrence of any of
the
events or conditions set forth in subparagraphs (j), (k), (l) or (r) shall
automatically cause an acceleration of the Obligations without notice or
demand):
(a) Payments
- if
Borrowers fail to make any payment of principal or interest on the date when
such payment is due and payable and such failure continues for a period of
one
(1) Business Day; provided,
however,
that
the one
(1) Business Day grace period
shall
not be applicable if such payments are due and payable due to maturity,
acceleration or demand, whether following an Event of Default or otherwise;
or
(b) Other
Charges
- if
Borrowers fail to pay any other charges, fees, Expenses or other monetary
obligations owing to Lender, arising out of or incurred in connection with
this
Agreement on the date when such payment is due and payable, whether upon
maturity, acceleration, demand or otherwise and such failure continues for
a
period of
five (5) Business Days
after
the earlier of a Borrower becoming aware of such failure or a Borrower receiving
written notice of such failure; provided,
however,
that
the five (5) Business Day grace period shall not be applicable if such payments
are due and payable due to maturity, acceleration or demand, whether following
an Event of Default, or otherwise; or
(c) Particular
Covenant Defaults
- if any
Borrower fails to perform, comply with or observe any covenant or undertaking
contained in this Agreement not otherwise described in this Section 8.1, and
such failure continues for a period of
five (5) Business Days
after
the earlier of a Borrower becoming aware of such failure or a Borrower receiving
written notice of such failure; or
(d) Financial
Information
- if any
statement, report, financial statement, or certificate made or delivered by
a
Borrower or any of their officers, employees or agents, to Lender is not true
and correct, in all material respects, when made; or
(e) Uninsured
Loss
- if
there shall occur any uninsured damage to or loss, theft, or destruction in
excess of $100,000
with
respect to any portion of any Borrower’s Property; or
33
(f) Warranties
or Representations
- if any
warranty, representation or other statement by or on behalf of Borrowers, or
any
of them, contained in or pursuant to this Agreement, or in any document,
agreement or instrument furnished in compliance with, relating to, or in
reference to this Agreement, is false, erroneous, or misleading in any material
respect when made; or
(g) Agreements
with Others
- if
Borrowers, or any of them, shall default beyond any grace period under any
agreement with respect to any Indebtedness not to exceed $250,000 in the
aggregate and (i) such default consists of the failure to pay any principal,
premium or interest with respect to such Indebtedness for borrowed money or
(ii)
such default consists of the failure to perform any covenant or agreement with
respect to such Indebtedness for borrowed money, if the effect of such default
is to cause or permit such Indebtedness to become due prior to its maturity
date
or prior to its regularly scheduled date of payment;
(h) Other
Agreements with Lender
- if
Borrowers, or any of them, breach or violate the terms of, or if a default
or an
event of default, occurs under, any other existing or future agreement (related
or unrelated) between or among Borrowers, or any of them and Lender, including
without limitation, any lease agreements or finance agreements with any
affiliate of Lender; or
(i) Judgments
- if any
final judgment for the payment of money in excess of $50,000
shall be
rendered against Borrowers, or any of them, which is not fully and
unconditionally covered by insurance or an appeal bond, or for which such Person
has not established a cash or cash equivalent reserve in the amount of such
judgment;
(j) Assignment
for Benefit of Creditors, etc.
- if
Borrowers, or any of them, make or propose an assignment for the benefit of
creditors generally, 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
owned or conducted by any Borrower which might materially and adversely affect
such Person; or
(k) Bankruptcy,
Dissolution, etc.
- upon
the commencement of any action for the dissolution or liquidation of Borrowers,
or any of them, or the commencement of any proceeding to avoid any transaction
entered into by Borrowers, or any of them, or the commencement of any case
or
proceeding for reorganization or liquidation of Borrowers’, or any of their
debts under the Bankruptcy Code or any other state or federal law, now or
hereafter enacted for the relief of debtors, whether instituted by or against
any Borrower; provided, however, that Borrowers shall have forty-five (45)
days
to obtain the dismissal or discharge of involuntary proceedings filed against
a
Borrower, it being understood that during such forty-five (45) day period,
Lender shall be not obligated to make Advances hereunder and Lender may seek
adequate protection in any bankruptcy proceeding; or
(l) Receiver
- upon
the appointment of a receiver, liquidator, custodian, trustee or similar
official or fiduciary for Borrowers, or any of them, or for any of any such
Borrower’s Property; or
34
(m) Execution
Process, Seizure, etc.
- the
issuance of any execution or distraint process against any Borrower, or any
of
them, or any Property of any such Borrower is seized by any governmental entity,
federal, state or local; or
(n) Termination
of Business
- if
Borrowers, or any of them, cease any material portion of their business
operations as presently conducted; or
(o) Pension
Benefits, etc.
- if
Borrowers, or any of them, fail to comply with ERISA, so that grounds exist
to
permit the appointment of a trustee under ERISA to administer Borrower’s
employee plans or to allow the Pension Benefit Guaranty Corporation to institute
proceedings to appoint a trustee to administer such plan(s), or to permit the
entry of a Lien to secure any deficiency or claim; or
(p) Investigations
- any
indication or evidence received by Lender that reasonably leads it to believe
Borrowers, or any of them, may have directly or indirectly been engaged in
any
type of activity which would be reasonably likely to result in the forfeiture
of
any Property of Borrowers, or any of them, to any governmental entity, federal,
state or local; or
(q) Material
Adverse Events
-
(i) Lender
reasonably determines that an event which adversely affects the collectibility
of a material portion of the Accounts has occurred; or
(ii) a
material adverse change occurs in the business or condition of Borrowers, or
any
of them.
(r) Lockbox
Instructions
- any
instruction or agreement regarding the Commercial Lockbox or the Government
Lockbox or the bank accounts related thereto is amended or terminated without
the written consent of Lender, or if any Borrower fails, within one Business
Day
of receipt, to forward Collections it receives with respect to any Accounts
to
the Commercial Lockbox or the Government Lockbox, as the case may
be.
8.2 Cure:
Nothing
contained in this Agreement or the Loan Documents shall be deemed to compel
Lender to accept a cure of any Event of Default hereunder.
8.3 Rights
and Remedies on Default:
(a) In
addition to all other rights, options and remedies granted or available to
Lender under this Agreement or the Loan Documents, or otherwise available at
law
or in equity, upon or at any time after the occurrence and during the
continuance of an Event of Default or Unmatured Event of Default, Lender may,
in
its discretion, withhold or cease making Advances under the Credit
Facility.
(b) In
addition to all other rights, options and remedies granted or available to
Lender under this Agreement or the Loan Documents (each of which is also then
exercisable by Lender), Lender may, in its discretion, upon or at any time
after
the occurrence of an Event of Default, terminate the Credit Facility (it also
being understood that the occurrence of any of the events or conditions set
forth in subparagraphs (j), (k) or (l) of Section 8.1 hereof shall automatically
cause a termination of the Credit Facility without notice or demand).
35
(c) In
addition to all other rights, options and remedies granted or available to
Lender under this Agreement or the Loan Documents (each of which is also then
exercisable by Lender), Lender may, upon or at any time after the occurrence
of
an Event of Default, exercise all rights under the UCC and any other applicable
law or in equity, and under all Loan Documents permitted to be exercised after
the occurrence of an Event of Default, 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) Subject
to all applicable laws and regulations governing payment of Medicare and
Medicaid receivables, the right to “take possession” of the Collateral, and
notify all Obligors of Lender’s security interest in the Collateral and require
payment under the Accounts to be made directly to Lender and Lender may, in
its
own name or in the name of the applicable Borrower, exercise all rights of
a
secured party with respect to the Collateral and collect, xxx for and receive
payment on all Accounts, and settle, compromise and adjust the same on any
terms
as may be satisfactory to Lender, in its sole and absolute discretion for any
reason or without reason and Lender may do all of the foregoing with or without
judicial process (including without limitation notifying the United States
postal authorities to redirect mail addressed to Borrowers, or any of them,
to
an address designated by Lender); or
(ii) Require
Borrowers at Borrowers’ expense, to assemble all or any part of the Collateral
and make it available to Lender at any place designated by Lender, which may
include providing Lender or any entity designated by Lender with access (either
remote or direct) to Borrowers’ information system for purposes of monitoring,
posting payments and rebilling Accounts to the extent deemed desirable by Lender
in its sole discretion; or
(iii) The
right
to reduce or modify the Revolving Loan Commitment, Borrowing Base or any portion
thereof or the Advance Rates or to modify the terms and conditions upon which
Lender may be willing to consider making Advances under the Credit Facility
or
to take additional reserves in the Borrowing Base for any reason.
(d) Borrowers
hereby agree that a notice received by them at least ten (10) days before the
time of any intended public sale or of 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 Collateral which threatens to speedily decline in value or which is
sold on a recognized market may be sold immediately by Lender without prior
notice to Borrowers. Each 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.
(e) Lender
is
hereby granted, until the Obligations are paid in full and all obligations
of
Lender hereunder are terminated, a worldwide license to use, after the
occurrence and during the continuance of an Event of Default and without charge,
all of Borrowers’ labels, trademarks (and associated goodwill), copyrights,
patents and advertising matter, as they pertain to the Collateral, in completing
production of, advertising for sale and selling of any Collateral.
8.4 Nature
of Remedies:
All
rights and remedies granted Lender hereunder and under the Loan Documents,
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 all Obligations 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 or at any time after the occurrence
of an Event of Default, may proceed against Borrowers, or any of them, at any
time, under any agreement, with any available remedy and in any order.
36
8.5 Set-Off:
If
any
bank account or other Property held by or with Lender, or any Affiliate of
Lender, or any participant is attached or otherwise liened or levied upon by
any
third party, Lender (and such participant) shall have and be deemed to have,
without notice to Borrowers, the immediate right of set-off and may apply the
funds or other amounts or property thus set off against any of Borrowers’
Obligations hereunder.
SECTION
9. MISCELLANEOUS
9.1 GOVERNING
LAW:
THIS
AGREEMENT, AND ALL MATTERS ARISING OUT OF OR RELATING TO THIS AGREEMENT, SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
THE
PROVISIONS OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL OTHER AGREEMENTS
AND DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY
OR UNENFORCEABILITY OF ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING
PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT.
9.2 Integrated
Agreement:
The
Revolving Credit Note, the other Loan Documents, all related agreements, and
this Agreement shall be construed as integrated and complementary of each other,
and as augmenting and not restricting Lender’s rights and remedies. If, after
applying the foregoing, an inconsistency still exists, the provisions of this
Agreement shall constitute an amendment thereto and shall control.
9.3 Waiver
and Indemnity:
(a) No
omission or delay by Lender in exercising any right or power under this
Agreement or any related agreements and documents will impair such right or
power or be construed to be a waiver of any default, or Event of Default or
an
acquiescence therein, and any single or partial exercise of any such right
or
power will not preclude other or further exercise thereof or the exercise of
any
other right, and as to any Borrower no waiver will be valid unless in writing
and signed by Lender and then only to the extent specified.
(b) Each
Borrower releases and shall indemnify, defend and hold harmless Lender, and
its
respective officers, employees and agents, of and from any claims, demands,
liabilities, obligations, judgments, injuries, losses, damages and costs and
expenses (including, without limitation, reasonable legal fees) resulting from
(i) acts or conduct of a Borrower under, pursuant or related to this Agreement
and the other Loan Documents, (ii) any Borrower’s breach, or alleged breach, or
violation of any representation, warranty, covenant or undertaking contained
in
this Agreement or the other Loan Documents, and (iii) any Borrower’s failure, or
alleged failure, to comply with any or all laws, statutes, ordinances,
governmental rules, regulations or standards, whether federal, state or local,
or court or administrative orders or decrees (including without limitation
environmental laws, etc.), and all costs, expenses, fines, penalties or other
damages resulting therefrom, unless resulting from acts or conduct of Lender
constituting willful misconduct or gross negligence.
37
(c) Lender
shall not be liable for, and Borrowers hereby agree that Lender’s liability in
the event of a breach by Lender of this Agreement shall be limited to Borrowers’
direct damages suffered and shall not extend to, any consequential or incidental
damages. In the event Borrowers bring suit against Lender in connection with
the
transactions contemplated hereunder, and Lender is found not to be liable,
Borrowers shall indemnify and hold Lender harmless from all costs and expenses,
including reasonable attorneys’ fees, incurred by Lender in connection with such
suit.
9.4 Time:
Whenever
Borrowers, or any of them, shall be required to make any payment, or perform
any
act, on a day which is not a Business Day, such payment may be made, or such
act
may be performed, on the next succeeding Business Day. Time is of the essence
in
Borrowers’ performance under all provisions of this Agreement and all related
agreements and documents.
9.5 Expenses
of Lender:
(a) At
Closing and from time to time thereafter, Borrowers will pay all reasonable
expenses of Lender on demand and in no event later than three (3) days after
such demand is made (including, without limitation, search costs, audit fees,
appraisal fees, and the fees and expenses of legal counsel for Lender) relating
to this Agreement, and all related agreements and documents, including, without
limitation, expenses incurred in the analysis, negotiation, preparation,
closing, administration and enforcement of this Agreement and the other Loan
Documents, the enforcement, protection and defense of the rights of Lender
in
and to the Loans and Collateral or otherwise hereunder, and any reasonable
expenses relating to extensions, amendments, waivers or consents pursuant to
the
provisions hereof, or any related agreements and documents or relating to
agreements with other creditors, or termination of this Agreement (collectively,
the “Expenses”).
Any
Expenses not paid upon demand by Lender shall bear interest at the highest
per
annum rate of interest applicable to the Loans.
(b) In
addition, at any time following the date of this Agreement, Borrowers effect
any
changes which results in a change in the format or sequence of Borrowers’ data,
Borrowers shall pay to Lender its reasonable charge for implementing such
changes as are necessary to accommodate the changes in the format or sequence
of
the data such that the Value Track System™ is capable of importing such data,
including an hourly fee of $125.
9.6 Confidentiality:
Except
as
provided in Section 9.19 hereof or to the extent required by law or applicable
regulations, Borrowers and Lender agree to maintain the confidentiality of
this
Agreement and not to disclose the contents hereof or provide a copy hereof
to
any third party, except (i) accountants, lawyers and financial advisers of
the
parties who are informed of and agree to be bound by this Section 9.6, and
(ii)
that copies hereof may be provided to any assignee or participant (or potential
assignee or participant) of Lender’s interests herein, any investors or
prospective investors who acquire or may acquire Securities backed by Accounts
and any parties which facilitate the issuance of such Securities, including
rating agencies, guarantors and insurers. Lender agrees to maintain the
confidentiality of patient information obtained as a result of its interests
in,
or duties with respect to, the Accounts and as otherwise may be required
pursuant to the Business Associate Agreement.
38
9.7 Notices:
(a) Any
notices or consents required or permitted by this Agreement shall be in writing
and shall be deemed given if delivered in person or if sent by telecopy or
by
nationally recognized overnight courier, or via first class, Certified or
Registered mail, postage prepaid, to the address of such party set forth on
the
signature pages hereof, unless such address is changed by written notice
hereunder.
(b) Any
notice sent by Lender or Borrowers, or any of them, by any of the above methods
shall be deemed to be given when so received.
(c) Lender
shall be fully entitled to rely upon any facsimile transmission or other writing
purported to be sent by any Authorized Officer (whether requesting an Advance
or
otherwise) as being genuine and authorized.
9.8 Brokerage: Borrowers
represent that Borrowers have 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,
each Borrower hereby indemnifies, defends and saves Lender harmless against
such
claim and further will defend, with counsel satisfactory to Lender, any action
or actions to recover on such claim, at Borrowers’ own cost and expense,
including Lender’s reasonable counsel fees. Each Borrower further agrees that
until any such claim or demand is adjudicated in Lender’s favor, the amount
demanded shall be deemed an Obligation of Borrowers under this
Agreement.
9.9 Headings:
The
headings of any paragraph or Section of this Agreement are for convenience
only
and shall not be used to interpret any provision of this Agreement.
9.10 Survival:
All
warranties, representations, and covenants made by any or all Borrowers
and/herein, or in any agreement referred to herein or on any certificate,
document or other instrument delivered by it or on its behalf under this
Agreement, shall be considered to have been relied upon by Lender, and shall
survive the delivery to Lender of the Revolving Credit Note, regardless of
any
investigation made by Lender or on its behalf. All statements in any such
certificate or other instrument prepared and/or delivered for the benefit of
Lender shall constitute warranties and representations by Borrowers hereunder.
Except as otherwise expressly provided herein, all covenants made by any or
all
Borrowers hereunder or under any other agreement or instrument shall be deemed
continuing until all Obligations are satisfied in full.
9.11 Successors
and Assigns: This
Agreement shall inure to the benefit of and be binding upon the successors
and
assigns of each of the parties. No Borrower may transfer, assign or delegate
any
of its duties or obligations hereunder.
9.12 Duplicate
Originals:
Two
or
more duplicate originals of this Agreement may be signed by the parties, each
of
which shall be an original but all of which together shall constitute one and
the same instrument. This Agreement may be executed in counterparts, all of
which counterparts taken together shall constitute one completed fully executed
document.
9.13 Modification:
No
modification hereof or any agreement referred to herein shall be binding or
enforceable unless in writing and signed by Borrowers and Lender.
39
9.14 Signatories:
Each
individual signatory hereto represents and warrants that he is duly authorized
to execute this Agreement on behalf of his principal and that he executes the
Agreement in such capacity and not as a party.
9.15 Third
Parties:
No
rights
are intended to be created hereunder, or under any related agreements or
documents for the benefit of any third party donee, creditor or incidental
beneficiary of any Borrower. Nothing contained in this Agreement shall be
construed as a delegation to Lender of any Borrower’s duty of performance,
including, without limitation, such Borrower’s duties under any account or
contract with any other Person.
9.16 Waivers:
(a) Borrowers
each hereby irrevocably, unconditionally and fully subordinate in favor of
Lender, any and all rights they or any of them, may have at any time (whether
arising directly or indirectly, by operation of law or contract) to assert
or
receive payment on any claim against each other or any of them, on account
of
payments made under this Agreement, including without limitation, any and all
rights of subrogation, reimbursement, exoneration, contribution or indemnity.
Each Borrower waives any event or circumstances which might constitute a legal
or equitable defense of, or discharge of, such Borrower. Furthermore, each
Borrower agrees that if any payment on the Obligations is recovered from or
repaid by Lender in whole or in part in any bankruptcy, insolvency or similar
proceeding instituted by or against any Borrower, the remaining Borrowers
and/shall be obligated to the same extent as if the recovered or repaid payment
had never been originally made on such Obligation. Each Borrower consents and
agrees that Lender shall be under no obligation to marshal any assets or
Collateral in favor of such Borrower or against or in payment of any or all
of
the Obligations.
(b) Each
Borrower hereby consents and agrees that Lender, at any time or from time to
time in its discretion may: (i) settle, compromise or grant releases for
liabilities of other Borrowers, and/or any other Person or Persons liable for
any Obligations, (ii) exchange, release, surrender, sell, subordinate or
compromise any Collateral of any party now or hereafter securing any of the
Obligations, and (iii) following an Event of Default, apply any and all payments
received at any time against the Obligations in any order as Lender may
determine; all of the foregoing in such manner and upon such terms as Lender
may
see fit, without notice to or further consent from such Borrower who hereby
agrees and shall remain bound upon this Agreement notwithstanding any such
action on Lender’s part.
(c) The
liability of each Borrower hereunder is absolute and unconditional and shall
not
be reduced, impaired or affected in any way by reason of (i) any failure to
obtain, retain or preserve, or the lack of prior enforcement of, any rights
against any Person or Persons (including other Borrowers), or in any Property,
(ii) the invalidity or unenforceability of any Obligations or rights in any
Collateral, (iii) any delay in making demand upon other Borrowers or any delay
in enforcing, or any failure to enforce, any rights against other Borrowers
or
in any Collateral even if such rights are thereby lost, (iv) any failure,
neglect or omission to obtain, perfect or retain any lien upon, protect,
exercise rights against, or realize on, any Property of any Borrower, or any
other party securing the Obligations, (v) the existence or non-existence of
any
defenses which may be available to the other Borrowers with respect to the
Obligations, or (vi) the commencement of any bankruptcy, reorganization,
liquidation, dissolution or receivership proceeding or case filed by or against
any of Borrowers.
40
9.17 CONSENT
TO JURISDICTION:
EACH
BORROWER AND LENDER HEREBY IRREVOCABLY CONSENT TO THE NON-EXCLUSIVE JURISDICTION
OF ANY STATE OR FEDERAL COURT LOCATED IN THE STATE OF NEW YORK IN ANY AND ALL
ACTIONS AND PROCEEDINGS WHETHER ARISING HEREUNDER OR UNDER ANY OTHER AGREEMENT
OR UNDERTAKING. BORROWERS WAIVE ANY OBJECTION TO IMPROPER VENUE AND FORUM
NON-CONVENIENS TO PROCEEDINGS IN ANY SUCH COURT AND ALL RIGHTS TO TRANSFER
FOR
ANY REASON. EACH BORROWER IRREVOCABLY AGREES TO SERVICE OF PROCESS BY CERTIFIED
MAIL, RETURN RECEIPT REQUESTED TO THE ADDRESS OF THE APPROPRIATE PARTY SET
FORTH
HEREIN.
9.18 WAIVER
OF JURY TRIAL:
EACH
BORROWER AND LENDER HEREBY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL
IN CONNECTION WITH ANY LITIGATION COMMENCED BY OR AGAINST LENDER WITH RESPECT
TO
RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS,
WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE.
9.19 Publication:
Borrowers
grant Lender the right to publish and/or advertise information to the effect
that this transaction has closed, which information may include, without limit,
(i) the names of Borrowers and Lender, (ii) the size of the transaction and
(iii) those items of information commonly included within a “tombstone
advertisement” of the type customarily published in financial or business
periodicals.
9.20 Discharge
of Taxes, Borrower’s Obligations, Etc.: Lender,
in its sole discretion, shall have the right at any time, and from time to
time,
with prior notice to Borrowers, if Borrowers fail to do so five (5) Business
Days after requested in writing to do so by Lender, to: (a) pay for the
performance of any of Borrowers’ obligations hereunder, and (b) discharge taxes
or liens, at any time levied or placed on any of Borrowers’ Property in
violation of this Agreement unless Borrowers are in good faith with due
diligence by appropriate proceedings contesting such taxes or liens and have
established appropriate reserves therefore under GAAP. Expenses and advances
shall be deemed Advances hereunder and shall be deemed Advances hereunder and
shall bear interest at the highest rate applied to the Loans until reimbursed
to
Lender. Such payments and advances made by Lender shall not be construed as
a
waiver by Lender of an Event of Default under this Agreement.
9.21 Injunctive
Relief:
The
parties acknowledge and agree that, in the event of a breach or threatened
breach of any party’s obligations hereunder, may have no adequate remedy in
money damages and, accordingly, shall be entitled to an injunction (including
without limitation, a temporary restraining order, preliminary injunction,
writ
of attachment, or order compelling an audit) against such breach or threatened
breach, including without limitation, maintaining the cash management and
collection procedure described herein. However, no specification in this
Agreement of a specific legal or equitable remedy shall be construed as a waiver
or prohibition against any other legal or equitable remedies in the event of
a
breach or threatened breach of any provision of this Agreement.
41
SECTION
10. SPECIAL
INTER-BORROWER AND GUARANTOR PROVISIONS
10.1 Certain
Borrower Acknowledgments and Agreements:
(a) Each
Borrower acknowledges that it will enjoy significant benefits from the business
conducted by the other Borrowers because of, inter alia,
their
combined ability to bargain with other Persons including without limitation
their ability to receive the Credit Facility on favorable terms granted by
this
Agreement and other Loan Documents which would not have been available to an
individual Borrower acting alone. Each Borrower has determined that it is in
its
best interest to procure the Credit Facility which each Borrower may utilize
directly and which receive the credit support of the other Borrowers as
contemplated by this Agreement and the other Loan Documents.
(b) Lender
has advised Borrowers that it is unwilling to enter into this Agreement and
the
other Loan Documents and make available the Credit Facility extended hereby
to
any Borrower unless each Borrower agrees, among other things, to be jointly
and
severally liable for the due and proper payment of the Obligations of each
Borrower under this Agreement and other Loan Documents. Each Borrower has
determined that it is in its best interest and in pursuit of its purposes that
it so induce Lender to extend credit pursuant to this Agreement and the other
documents executed in connection herewith (i) because of the desirability to
each Borrower of the Credit Facility, the interest rates and the modes of
borrowing available hereunder, (ii) because each Borrower may engage in
transactions jointly with other Borrowers and (iii) because each Borrower may
require, from time to time, access to funds under this Agreement for the
purposes herein set forth.
(c) Each
Borrower has determined that it has and, after giving effect to the transactions
contemplated by this Agreement and the other Loan Documents (including, without
limitation, the inter-Borrower arrangement set forth in this Section 10.1)
will
have, assets having a fair saleable value in excess of the amount required
to
pay its probable liability on its existing debts as they fall due for payment
and that the sum of its debts is not and will not then be greater than all
of
its Property at a fair valuation, that such Borrower has, and will have, access
to adequate capital for the conduct of its business and the ability to pay
its
debts from time to time incurred in connection therewith as such debts mature
and that the value of the benefits to be derived by such Borrower from the
access to funds under this Agreement (including, without limitation, the
inter-Borrower arrangement set forth in this Section 10.1) is reasonably
equivalent to the obligations undertaken pursuant hereto.
(d) NYH
(on
behalf of each Borrower) shall maintain records specifying (a) all Obligations
incurred by each Borrower, (b) the date of such incurrence, (c) the date and
amount of any payments made in respect of such Obligations and (d) all
inter-Borrower obligations pursuant to this Section 10. NYH shall make copies
of
such records available to Lender, upon request.
10.2 Maximum
Amount Of Joint and Several Liability:
To
the
extent that applicable law otherwise would render the full amount of the joint
and several obligations of any Borrower hereunder and under the other Loan
Documents invalid or unenforceable, such Borrower’s obligations hereunder and
under the other Loan Documents shall be limited to the maximum amount which
does
not result in such invalidity or unenforceability, provided,
however, that each Borrower’s obligations hereunder and under the other Loan
Documents shall be presumptively valid and enforceable to their fullest extent
in accordance with the terms hereof or thereof, as if this Section 10.2 were
not
a part of this Agreement.
42
10.3 Authorization
of NYH_by Borrowers:
(a) Each
of
Borrowers hereby irrevocably authorizes NYH to give notices, make requests,
make
payments, receive payments and notices, give receipts and execute agreements,
make agreements or take any other action whatever on behalf of such Borrower
under and with respect to any Loan Document and each Borrower shall be bound
thereby. This authorization is coupled with an interest and shall be
irrevocable, and Lender may rely on any notice, request, information supplied
by
NYH every document executed by NYH every agreement made by NYH or other action
taken by NYH in respect of Borrowers or any thereof as if the same were
supplied, made or taken by any or all Borrowers. Without limiting the generality
of the foregoing, the failure of one or more Borrowers to join in the execution
of any writing in connection herewith shall not, unless the context clearly
requires, relieve any such Borrower from obligations in respect of such
writing.
(b) Borrowers
acknowledge that the credit provided hereunder is on terms more favorable than
any Borrower acting alone would receive and that each Borrower benefits directly
and indirectly from all Advances hereunder. Each of Borrowers, shall be jointly
and severally liable for all Obligations, regardless of, inter alia,
which
Borrower requested (or received the proceeds of) a particular
Advance.
10.4 Single
Borrower.
Notwithstanding
anything to the contrary contained in this Agreement, as of the Closing Date
the
parties contemplate a single Borrower, namely, NYH, which shall be liable in
all
respects for all Obligations. In the event one or more additional Borrowers
join
this Agreement and become liable for the Obligations hereunder, the plural
term
“Borrowers” shall be applicable in all respects and all Borrowers shall be
jointly and severally liable for all Obligations as otherwise provided
herein.
[Remainder
of Page Intentionally Left Blank]
43
IN
WITNESS WHEREOF,
this
Agreement has been duly executed as of the day and year first above written.
| BORROWER: |
NEW
YORK HEALTH CARE, INC.
|
|
| Address for notices to Borrowers: | |
|
| 0000 XxXxxxxx Xxxxxx | By: | /s/ Xxxxx Xxxxxxx |
| Xxx Xxxx, XX 00000 Attn: Xxxxx Xxxxxxx |
Name: |
Xxxxx Xxxxxxx |
|
Fax:
000-000-0000
|
Title: |
Chief
Executive Officer
|
| LENDER: |
CIT
HEALTHCARE LLC
|
|
|
Address
for notices to Lender:
|
|
|
| CIT Healthcare LLC | By: | /s/ Xxxxxx X. Xxxxx |
| 000 Xxxxxxxxxx Xxxx, Xxxxx 000 Xxxxx Xxxxxx, XX 00000 |
Name: |
Xxxxxx X. Xxxxx |
|
Attention:
Portfolio Manager
|
Title: |
Vice
President
|
|
Facsimile:
000-000-0000
|
||
44
