1
EXHIBIT 10.6
LOAN AND SECURITY AGREEMENT
among
AMERICAN SHARED-CURACARE
and
CURACARE, INC.
Borrower,
AMERICAN SHARED HOSPITAL SERVICES
Guarantor,
XXXXXX X. XXXXX, M.D.
Individual Guarantor
and
DVI BUSINESS CREDIT CORPORATION
Lender
Dated as of May 17, 1995
2
TABLE OF CONTENTS
Page
----
SECTION 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. SPECIFIC DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
AND UNIFORM COMMERCIAL CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 1.3. CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2
LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.1. THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.2. REVOLVING NATURE OF THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.3. INTEGRAL AMOUNTS OF LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.4. NOTICE OF BORROWING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.5. REPAYMENT OF LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.6. PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.7. LENDER'S FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.8. INTEREST ON THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.9. CONDITIONS TO THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3
SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.1. GRANT OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4
SPECIFIC REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.1. NAME OF GUARANTOR; BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.2. MERGERS AND CONSOLIDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.3. PURCHASE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.4. CHANGE OF NAME OR IDENTITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.5. CORPORATE STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5
PROVISIONS CONCERNING ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.1. OFFICE AND RECORDS OF BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.2. REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
i
3
SECTION 5.3. RETURNS AND REPOSSESSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.4. BORROWING BASE REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.5. SCHEDULES OF ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.6. LENDER'S RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.7. DISCLAIMER OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.8. POST DEFAULT RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.9. ACCOUNTS OWED BY FEDERAL GOVERNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.10. BUSINESS ACTIVITY REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ii
4
SECTION 6
PROVISIONS CONCERNING GENERAL INTANGIBLES . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.1. CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 7
OTHER PROVISIONS CONCERNING COLLATERAL . . . . . . . . . . . . . . . . . . . . . 15
SECTION 7.1. TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 7.2. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 7.3. LENDER'S DUTY OF CARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 7.4. REINSTATEMENT OF LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 7.5. LENDER EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 7.6. INSPECTION OF RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 7.7. WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 8
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 8.1. CORPORATE STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 8.2. AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 8.3. NO BREACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 8.4. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 8.5. DEFERRED COMPENSATION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.6. LITIGATION AND PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.7. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.8. LAWS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.9. FINANCIAL CONDITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.10. HEALTH CARE LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.11. CUMULATIVE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 9
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 9.1. ENCUMBRANCE OF COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 9.2. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 9.3. CONDITION AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 9.4. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 9.5. ACCOUNTING SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 9.6. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 9.7. FURTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 9.8. ERISA COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
iii
5
SECTION 9.9. RESTRICTIONS ON MERGER, CONSOLIDATION,
SALE OF ASSETS, ISSUANCE OF STOCK, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 9.10. HEALTH CARE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 9.11. DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.12. SUBORDINATED OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.13. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.14. CAPITAL EXPENDITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.15. EQUIPMENT LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.16. LENDER CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
iv
6
SECTION 10
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 24
SECTION 11
REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 11.1. SPECIFIC REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 11.2. POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 11.3. EXPENSES SECURED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 11.4. EQUITABLE RELIEF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 11.5. REMEDIES ARE CUMULATIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 12
INDEMNITY . . . . . . . . . . . . . . . . . . . . . . 30
Section 12.1. General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 13
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 30
SECTION 13.1. DELAY AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 13.2. COMPLETE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 13.3. SEVERABILITY; HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 13.4. BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 13.5. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 13.6. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 13.7. JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 13.8. WAIVER OF TRIAL BY JURY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SCHEDULES
1.1. LIENS
3.1. GRANT OF SECURITY INTEREST
4.2. MERGERS AND CONSOLIDATIONS
4.3. PURCHASE OF ASSETS OUTSIDE ORDINARY COURSE OF BUSINESS
6.1. CONTRACTS
8.6. LITIGATION AND PROCEEDINGS
9.11 PERMITTED DISTRIBUTIONS
v
7
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is entered into as of
May 17, 1995 by and among DVI Business Credit Corporation, a Delaware
corporation ("Lender"), American Shared-CuraCare, a California general
partnership ("AS-CuraCare") and CuraCare, Inc., a Delaware corporation
("CuraCare") (AS-CuraCare and CuraCare, collectively and individually referred
to as "Borrower"), American Shared Hospital Services, a California corporation
("Guarantor") and Xxxxxx X. Xxxxx, M.D. ("Individual Guarantor").
SECTION 1
DEFINITIONS
SECTION 1.1. SPECIFIC DEFINITIONS. The following definitions
shall apply:
(a) "Account Debtors" shall mean Borrower's and its
Affiliates' customers and all other persons who are obligated or indebted to
Borrower or any Affiliate in any manner, whether directly or indirectly,
primarily or secondarily, contingently or otherwise, with respect to Accounts.
(b) "Accounts" shall mean all accounts, contract rights,
instruments, documents, chattel paper and obligations in any form owing to
Borrower or any Affiliate arising out of the sale or lease of goods or the
rendition of services by Borrower or any Affiliate whether or not earned by
performance; all credit insurance, guaranties, letters of credit, advises of
credit and other security for any of the above; all merchandise returned to or
reclaimed by Borrower or any Affiliate; and Borrower's Books relating to any of
the foregoing.
(c) "Advance" shall mean an advance of loan proceeds
constituting all or a part of the Loan.
(d) "Affiliate" shall mean with respect to any Person, any
other Person which directly or indirectly Controls, is Controlled by or is under
common Control with that Person.
1
8
(e) "Borrower's Books" shall mean all of Borrower's and its
Affiliates' books and records including but not limited to: minute books,
ledgers; records indicating, summarizing or evidencing Borrower's and its
Affiliates' assets, liabilities and the Accounts; all information relating to
Borrower's and its Affiliates business operations or financial condition; and
all computer programs, disk or tape files, printouts, runs and other
computer-prepared information and the equipment containing such information;
provided, however, that confidential patient records shall not be included
therein, except to the extent otherwise provided by law.
(f) "Base Rate" shall mean the rate of interest announced
publicly by Bank of America, NT&SA in San Francisco, California, from time to
time as its base rate.
(g) "Borrowing Base" shall mean, on the date of determination
thereof, an amount equal to the lesser of (i) the sum of seventy-five percent
(75%) of the Net Collectible Value for each type of Eligible Account, and (ii)
one hundred percent of Borrower's gross receipts from Institutional and Retail
Accounts during the preceding forty-five (45) day period; provided, however,
that workers compensation and personal injury claims may never exceed ten
percent (10%) of the Borrowing Base.
(h) "Closing Date" shall mean the date of the first Advance of
the Loan.
(i) "Collateral" shall have the meaning specified in Section
3.1 hereof.
(j) "Control" shall mean (i) the ownership of a majority of
the voting power of all classes of voting stock of a corporation, or (ii) the
ownership of a majority of the beneficial interest in income and capital of a
person other than a corporation.
(k) "Distribution" shall mean, with respect to any shares of
capital stock or any warrant or right to acquire shares of capital stock or any
other equity security, (i) the retirement, redemption, purchase or other
acquisition, directly or indirectly, for value by the issuer of any such
security, except to the extent that the consideration therefor consists of
shares of stock, (ii) the declaration or (without duplication) payment of any
2
9
dividend in cash, directly or indirectly, on or with respect to any such
security, (iii) any investment in the holder of five percent (5%) or more of any
such security if a purpose of such investment is to avoid characterization of
the transaction as a Distribution, and (iv) any other cash payment constituting
a distribution under applicable laws with respect to such security.
(l) "Eligible Accounts" shall mean Borrower's accounts
receivable from commercial insurance, Medicare, Medi-Cal, managed care
providers, workers' compensation and personal injury claims (collectively
referred to as "Retail Accounts"), which have been due and payable for 90 or
fewer days, and Borrower's account receivable under contracts with hospitals and
other similar health service providers (referred to as "Institutional Accounts")
which have been due and payable for 90 or fewer days.
(m) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and all references to sections thereof shall include such
sections and any predecessor provisions thereto, including any rules or
regulations issued in connection therewith.
(n) "ERISA Affiliate" shall mean each trade or business
(whether or not incorporated) that together with Borrower would be deemed a
"contributing sponsor" to a single employee plan within the meaning of Section
4001 of ERISA.
(o) "Event of Default" shall have the meaning specified in
Section 10 hereof.
(p) "Governmental Authority" shall mean any governmental or
political subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality thereof, or any court, tribunal, grand
jury or arbitrator, in any case whether foreign or domestic.
(q) "Guaranty" shall mean the Unconditional Continuing
Guaranty executed by Guarantor unconditionally guaranteeing Borrower's
Obligations under this Agreement.
(r) "Health Care Laws" shall mean all federal, state and local
laws specifically relating to health care providers and health care services,
including, but not limited to, Section
3
10
1877(a) of the Social Security Act as amended by the Omnibus Budget
Reconciliation Act of 1993, 42 USC Section 1395nn.
(s) "Indebtedness" of a Person shall mean (i) all items
(except items of capital stock, capital or paid-in surplus or of retained
earnings) which, in accordance with generally accepted accounting principles,
would be included in determining total liabilities as shown on the liability
side of the balance sheet of such Person as of the date as of which Indebtedness
is to be determined, including any lease which, in accordance with generally
accepted accounting principles would constitute indebtedness; (ii) all
indebtedness secured by any mortgage, pledge, security, lien or conditional sale
or other title retention agreement to which any property or asset owned or held
by such Person is subject, whether or not the indebtedness secured thereby shall
have been assumed; and (iii) all indebtedness of others which such Person has
directly or indirectly guaranteed, endorsed (otherwise then for the collection
or deposit in the ordinary course of business), discounted or sold with recourse
or agreed (contingently or otherwise) to purchase or repurchase or otherwise
acquire, or in respect of which such Person has agreed to supply or advance
funds (whether by way of loan, stock or equity purchase, capital contribution or
otherwise) or otherwise to become directly or indirectly liable.
(t) "Individual Guaranty" shall mean the Unconditional
Continuing Guaranty executed by Individual Guarantor unconditionally
guaranteeing Borrower's Obligations under this Agreement.
(u) "Intercreditor Agreement" shall mean that certain
Intercreditor Agreement dated on or about the date hereof among Guarantor,
AS-CuraCare, CuraCare, Lender, DVI Financial Services Inc. ("DVIFS") and General
Electric Company, a New York corporation acting through GE Medical Systems
("GE").
(v) "Lender Expenses" shall mean (i) all costs or expenses
(including, without limitation, taxes and insurance premiums) required to be
paid by Borrower or its Affiliates under this Agreement or under any of the
other Loan Documents that are paid or advanced by Lender; (ii) filing,
recording, publication and search fees paid or incurred by Lender in connection
with Lender's transactions with Borrower; (iii) costs and expenses incurred by
Lender to correct any Event of Default or enforce any provision of
4
11
the Loan Documents or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, and preparing for sale or advertising to
sell the Collateral, whether or not a sale is consummated, after the occurrence
of an Event of Default; (iv) costs and expenses of suit incurred by Lender in
enforcing or defending the Loan Documents or any portion thereof; (v) all costs
or expenses incurred by Lender to convert any data submitted to Lender by
Borrower or Guarantor to an acceptable form; and (vi) Lender's reasonable
attorney fees and expenses incurred (before or after execution of this
Agreement) in advising Lender with respect to, or in structuring, drafting,
reviewing, negotiating, amending, terminating, enforcing, defending or otherwise
concerning, the Security Documents or any portion thereof, irrespective of
whether suit is brought.
(w) "Lien" shall mean any security interest, mortgage, pledge,
assignment, lien or other encumbrance of any kind, including any interest of a
vendor under a conditional sale contract or consignment and any interest of a
lessor under a capital lease.
(x) "Loan" shall mean each loan or any other loan or loans
made by Lender to Borrower pursuant to this Agreement.
(y) "Loan Documents" shall mean (i) this Agreement; (ii) the
Note; (iii) the Security Documents; (iv) any other agreements or documents
hereafter delivered to secure repayment of the Loan; (v) the Lock Box Agreement
and (vi) any other certificates, documents or instruments delivered by Borrower
to Lender pursuant to the terms of this Agreement.
(z) "Lock Box Agreement" shall mean the letter of direction
with respect to those certain Lock Box Agreements between Borrower and First
Interstate Bank of California and between Borrower and Bank of America NT & SA.
(aa) "Net Collectible Percentage" shall mean seventy percent
(70%) with respect to Retail Accounts and ninety-five percent (95%) with respect
to Institutional Accounts.
(bb) "Net Collectible Value" shall mean, for each type of
Eligible Account, the Net Collectible Percentage times the aggregate current
outstanding amount for such type of Eligible Account.
5
12
(cc) "Note" shall mean the Secured Promissory Note executed by
Borrower pursuant to the terms of this Agreement.
(dd) "Obligations" shall mean (i) the due and punctual payment
of all amounts due or become due under the Note; (ii) the performance of all
obligations of Borrower under this Agreement, the Note and all other Loan
Documents (iii) all extensions, renewals, modifications, amendments and
refinancings of any of the foregoing; (iv) all Lender Expenses; (v) all loans,
advances, indebtedness and other obligations owed by Borrower to Lender of every
description whether now existing or hereafter arising (including those owed by
Borrower to others and acquired by Lender by purchase, assignment, or otherwise)
and whether direct or indirect, primary or as guarantor or surety, absolute or
contingent, liquidated or unliquidated, matured or unmatured, whether or not
secured by additional collateral; and (vi) all loans, advances, indebtedness and
other obligations owed by Borrower to Lender under the Other Loan Document of
every description whether now existing or hereafter arising (including those
owed by Borrower to others and acquired by Lender by purchase, assignment or
otherwise) and whether direct or indirect, primary or as guarantor or surety,
absolute or contingent, liquidated or unliquidated, matured or unmatured,
whether or not secured by additional collateral.
(ee) "Other Loan Document" shall mean that certain Loan and
Security Agreement dated on or about the date hereof among Borrower, Guarantor,
Individual Guarantor and DVIFS.
(ff) "Permitted Liens" shall mean (i) Liens for property taxes
and assessments or governmental charges or levies and Liens securing claims or
demands of mechanics and materialmen, provided that payment thereof is not yet
due or is being contested as permitted in this Agreement; (ii) Liens of or
resulting from any judgment or award, the time for the appeal or petition for
rehearing of which has not expired, or in respect of which Borrower is in good
faith prosecuting an appeal or proceeding for a review and in respect of which a
stay of execution pending such appeal or proceeding for review has been secured;
(iii) Liens and priority claims incidental to the conduct of business or the
ownership of properties and assets (including warehouse's and attorney's Liens
and statutory landlord's Liens); deposits, pledges or Liens to secure the
performance of bids, tenders, or trade contracts, or to secure statutory
obligations; and surety or appeal bonds or other
6
13
Liens of like general nature incurred in the ordinary course of business and not
in connection with the borrowing of money; provided that in each case the
obligation secured is not overdue or, if overdue, is being contested in good
faith by appropriate actions or proceedings; and further provided that any such
warehouse's or statutory landlord's Liens have been subordinated to the Liens of
Lender in a manner satisfactory to Lender; and (iv) Liens existing on the date
of this Agreement that secure indebtedness outstanding on such date and that are
disclosed on Schedule 1.1 hereto;
(gg) "Person" shall mean an individual, corporation,
partnership, limited liability company, trust, unincorporated association, joint
venture, joint-stock company, government (including political subdivisions),
Governmental Authority or any other entity.
(hh) "Proceeds" shall mean all proceeds and products of
Collateral and all additions and accessions to, replacements of, insurance or
condemnation proceeds of, and documents covering Collateral; all property
received wholly or partly in trade or exchange for Collateral; all claims
against third parties arising out of damage, destruction or decrease in value of
the Collateral; all leases of Collateral; and all rents, revenues, issues,
profits and proceeds arising from the sale, lease, license, encumbrance,
collection or any other temporary or permanent disposition of the Collateral or
any interest therein.
(ii) "Security Documents" shall mean the Guaranty, the
Individual Guaranty and any agreement or instrument entered into between
Borrower and Lender or executed by Borrower, Guarantor or Individual Guarantor
and delivered to Lender in connection with this Agreement.
(jj) "Senior-Subordinated Notes" shall mean Guarantor's 16
1/2% Senior Subordinated Exchangeable Notes Due 1996 and Borrower's 14 3/4%
Senior Subordinated Notes Due 1996.
(kk) "Termination Date" shall mean May 31, 1997.
(ll) "Unmatured Default" shall mean any event or condition
that, with notice, passage of time, or a determination by Lender or any
combination of the foregoing would constitute an Event of Default.
7
14
SECTION 1.2. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
UNIFORM COMMERCIAL CODE. All financial terms used in this Agreement, other than
those defined in this Section 1, have the meanings accorded to them under
generally accepted accounting principles. All other terms used in this
Agreement, other than those defined in this Section 1, have the meanings
accorded to them in the Uniform Commercial Code as enacted in any applicable
jurisdiction.
SECTION 1.3. CONSTRUCTION.
(a) Unless the context of this Agreement clearly requires
otherwise, the plural includes the singular, the singular includes the plural,
the part includes the whole, "including" is not limiting, and "or" has the
inclusive meaning of the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder" and other similar terms in this Agreement refer to this
Agreement as a whole and not exclusively to any particular provision of this
Agreement.
(b) Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against Lender or Borrower, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by each of the parties and its counsel and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish the purposes and intentions of all parties hereto fairly.
SECTION 2
LOAN
SECTION 2.1. THE LOAN. Subject to the terms and conditions and
relying on the representations and warranties set forth herein, Lender agrees to
advance to Borrower, individually or collectively, from time to time and
Borrower agrees to borrow from Lender, revolving loans in an amount not to
exceed the lesser of (i) Four Million Dollars ($4,000,000) (the "Commitment
Amount"), and (ii) the Borrowing Base, which shall be evidenced by a Note.
Notwithstanding the above, the parties hereto acknowledge that the initial
Borrowing Base is, and shall remain for a period of ten business days,
$3,000,000. The proceeds of the Loan shall be used by Borrower to fund a
Distribution to Borrower's corporate parent,
8
15
Guarantor, for the purpose of repaying a portion of the Senior-Subordinated
Notes and as a part of Borrower's working capital. The Borrowing Base shall be
calculated on a daily basis on the reports delivered to Lender pursuant to
Section 5.4.
SECTION 2.2. REVOLVING NATURE OF THE LOAN. On a daily basis
the Borrowing Base will be recalculated by adding daily xxxxxxxx to the prior
week's Eligible Accounts and subtracting deposits and adjustments, if applicable
and then multiplying this amount by the Net Collectable Percentage. The Loan may
be repaid or prepaid pursuant to Sections 2.5 or 2.6 and shall be mandatorily
prepaid pursuant to Section 2.6 by the Borrower. Subject to the provisions of
this Agreement, any amounts repaid may be reborrowed, up to the amounts
available under Section 2.1 at the time of such Borrowing, until prepaid the
business day immediately preceding the Termination Date. Lender's commitments to
make Advances shall expire, and the amount of Loan then outstanding shall mature
and be repaid by Borrower, without further action on the part of Lender, on the
Termination Date.
SECTION 2.3. INTEGRAL AMOUNTS OF LOANS. Advances may be of any
minimum amount.
SECTION 2.4. NOTICE OF BORROWING. Whenever Borrower desires to
borrow under Section 2.1, Borrower shall deliver to Lender a Drawdown Request
Form, in a form reasonably satisfactory to Lender, signed by an authorized
officer no later than 11:00 a.m. at least one (1) business day in advance of the
proposed funding date. The Drawdown Request Form shall specify (i) the funding
date (which shall be a business day) with respect to the requested Loan and (ii)
the amount of the proposed Advance.
SECTION 2.5. REPAYMENT OF LOAN. All receipts from Borrower's
and its Affiliates' accounts receivable shall be deposited on a daily basis in a
bank depository lock box in accordance with the terms of the Lock Box Agreement.
Lender will debit the lock box account at the end of each day in payment of (i)
Lender's fees then due and payable in accordance with Section 2.7, (ii) amounts
then due and payable under the Other Loan Document, and (iii) on the first day
of each month with respect to interest accrued on the Loan during the preceding
month. Excess receipts remaining in the lock box account after the payment of
fees and interest shall be applied to the principal amount of the Loan on a
daily basis. Lender will credit Borrower's account in
9
16
accordance with the foregoing priorities with respect to all funds debited net
of fees from the lock box account on a daily basis. Notwithstanding the
foregoing, after the occurrence and during the continuance of an Event of
Default, receipts in the lock box will be distributed in accordance with the
relative priorities set forth in and the terms and conditions of the
Intercreditor Agreement.
SECTION 2.6. PREPAYMENT. The Loan shall be subject to
prepayment or redemption in whole or in part at the end of any month prior to
the Termination Date. This Loan Agreement may not be terminated, and will not be
terminated by any prepayment, without payment of the termination fee required
pursuant to Section 2.7. If any aging report or Borrowing Base report delivered
to Lender pursuant to Section 5.4 indicates that the outstanding Loan amount
exceeds the Borrowing Base, Borrower shall immediately prepay a portion of the
outstanding Loan amount such that after such prepayment the Borrowing Base
equals or exceeds the outstanding Loan amount.
SECTION 2.7. LENDER'S FEES. Upon the execution of this
Agreement, Borrower shall pay to Lender a loan origination fee of Eighty
Thousand Dollars ($80,000). On or before the anniversary date of the effective
date of this Agreement, Borrower shall pay Lender a renewal fee of Forty
Thousand Dollars ($40,000). On or before the first day of each month Borrower
shall pay Lender a monthly maintenance fee of Two Thousand Five Hundred Dollars
($2,500). On or before the first day of each month Borrower shall pay Lender an
unutilized loan fee of equal to one-half of one percent (0.5%) of the difference
between the Commitment Amount and the outstanding Loan amount as of the
immediately previous month-end. If Borrower elects to terminate this Agreement
at any time before the Termination Date, Borrower shall pay Lender a termination
fee of Eighty Thousand Dollars ($80,000) if terminated prior to the anniversary
date of this Agreement and Forty Thousand Dollars ($40,000) thereafter. Lender's
fees will be deducted, when due, directly from receipts from accounts receivable
deposited in accordance with Section 2.5.
SECTION 2.8. INTEREST ON THE LOANS. All Advances shall bear
interest on the unpaid principal amount thereof from the date made until paid in
full at a fluctuating rate equal to the Base Rate plus five percent (5.0%). The
outstanding principal balance of all other Obligations shall bear interest from
the date such Obligations are due until paid in full at a fluctuating rate equal
10
17
to the Base Rate plus five percent (5.0%). Interest accrued but not paid
pursuant to Section 2.5 shall be treated as an Advance if not otherwise paid
within five (5) days of the end of the month in which it accrues.
SECTION 2.9. CONDITIONS TO THE CLOSING. The obligation of
Lender to make Advances under this Agreement is subject to Lender's
determination that Borrower as of the date of the Advance has satisfied, and
continues to satisfy, the following conditions:
(a) The representations and warranties set forth in this
Agreement and in the Other Loan Document shall be true and correct on and as of
the date hereof and shall be true and correct in all material respects as of the
date of the Advance and Borrower shall have performed all obligations which were
to have been performed by it hereunder.
(b) Borrower shall have executed and delivered to Lender (or
shall cause to be executed and delivered to Lender by the appropriate Persons)
the following:
(i) this Agreement;
(ii) the Note;
(iii) UCC-1 Financing Statements;
(iv) the Guaranty;
(v) the Individual Guaranty;
(vi) the Intercreditor Agreement;
(vii) the Lock Box Agreement;
(viii) evidence satisfactory to Lender that each of
CuraCare, Guarantor and the general partners of AS-CuraCare is a corporation
duly formed, validly existing and in good standing in the state in which it was
formed and in each state in which it is authorized to do business;
(ix) pay-off letters, UCC Termination Statements
and Lien Releases as required to grant Lender a first priority security
11
18
interest other than Permitted Liens in Collateral pledged as security for
repayment of the Loan;
(x) repayment of the Senior-Subordinated Notes on
terms and conditions satisfactory to Lender;
(xi) certified copies of resolutions of the Board of
Directors of CuraCare, Guarantor and the general partners of AS-CuraCare
authorizing the execution and delivery of Loan Documents to be executed by
Borrower and Guarantor;
(xii) copies of the Articles of Incorporation of each
of CuraCare, Guarantor and the general partners of AS-Curacare, certified by the
Secretary of State;
(xiii) copies of the Bylaws of each of CuraCare,
Guarantor and the general partners of AS-CuraCare certified by an officer
thereof;
(xiv) a copy of the Partnership Agreement of CuraCare
certified by a general partner;
(xv) the written opinion of counsel to Borrower
issued on the Closing Date and satisfactory to Lender in scope and substance;
and
(xvi) a certificate from an officer of Borrower
indicating that the representations and warranties contained herein are true and
correct as of the Closing Date.
(c) Borrower shall have paid closing fees to Lender including
Lender's legal fees incurred by Lender for the negotiation and preparation of
the Loan Documents.
(d) Neither an Event of Default nor an Unmatured Default shall
have occurred and be continuing.
(e) None of Borrower, Guarantor or Individual Guarantor shall
not have suffered a material or adverse change in its business, operations or
financial condition from that reflected in the Financial Statements of Borrower,
Guarantor and Individual Guarantor delivered to Lender or otherwise.
12
19
(f) Lender shall have received such additional supporting
documents, certificates and assurances as Lender shall reasonably request which
shall be satisfactory to Lender in form and substance.
SECTION 3
SECURITY INTEREST
SECTION 3.1. GRANT OF SECURITY INTEREST. In order to secure
prompt payment and performance of all Obligations, Borrower hereby grants to
Lender a continuing first-priority pledge and security interest in the following
property of Borrower, subject to terms of the Intercreditor Agreement (the
"Collateral"), whether now owned or existing or hereafter acquired or arising
and regardless of where located subject only to Permitted Liens. This security
interest in the Collateral shall attach to all Collateral without further action
on the part of Lender or Borrower.
The Collateral shall consist of the following, subject in each
case only to Permitted Liens and the terms and conditions of the Intercreditor
Agreement, together with such third-party consents, lien waivers and estoppel
certificates as Lender shall reasonably require:
(a) all of Borrower's presently existing and hereafter arising
Accounts, contract rights, instruments, notes, drafts, documents, chattel paper
and all other forms of obligations owing to Borrower arising out of the sale or
lease of goods or the rendition of services, whether or not earned by
performance, and any and all credit insurance, guarantees and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower and
all of Borrower's Books relating to any of the foregoing, and the Proceeds of
any of the foregoing, including the pledge to it of the Accounts, cash and
non-cash Proceeds subject only to Permitted Liens;
(b) all of Borrower's equipment and machinery listed on
Schedule 3.1 and all machine tools, motors, tools, parts, attachments,
accessories, accessions, replacements, upgrades, substitutions, additions and
improvements related thereto, wherever located, and the Proceeds of any of the
foregoing, including cash and non-cash Proceeds.
13
20
(c) all of Borrower's presently existing and hereafter
acquired general intangibles (including, without limitation, any and all choses
or things in action, goodwill, patents, trade names, trademarks, blueprints,
drawings, purchase orders, computer programs, computer discs, computer tapes,
literature, reports, catalogues, deposit accounts and tax refunds) other than
goods and accounts, as well as all of Borrower's Books relating to any of the
foregoing, and the Proceeds of any of the foregoing, including cash and non-cash
Proceeds;
(d) all of Borrower's presently existing and hereafter
acquired inventory including, without limitation, goods held for sale or lease
or to be furnished under a contract of service, wherever located, and any
documents of title representing any of the above, and the Proceeds of any of the
foregoing, including cash and non-cash Proceeds;
provided, however, anything in the foregoing notwithstanding the Collateral does
not include, and Lender takes no security interest in, equipment leased by GE or
any other equipment lessor to Borrower or Borrower's leasehold interest in such
equipment.
SECTION 4
SPECIFIC REPRESENTATIONS
SECTION 4.1. NAME OF GUARANTOR; BORROWER.
(a) The exact corporate name of Guarantor is American
Shared Hospital Services. Guarantor was incorporated under the laws of the State
of California. The following are all previous legal names of Guarantor: None.
Guarantor uses the following trade names: None. The following are all other
trade names used by Guarantor in the past: None.
(b) The exact corporate name of CuraCare is CuraCare,
Inc. CuraCare was incorporated under the laws of the State of Delaware. The
following are all previous legal names of CuraCare: None. CuraCare uses the
following trade names: None. The following are all other trade names used by
CuraCare in the past: None.
(c) The exact name of AS-CuraCare is American
Shared-CuraCare. AS-CuraCare was formed under the laws of the
14
21
State of California. The following are all previous legal names of AS-CuraCare:
None. AS-CuraCare uses the following trade names: None. The following are all
other trade names used by AS-CuraCare in the past: None.
SECTION 4.2. MERGERS AND CONSOLIDATIONS. Except as disclosed
on Schedule 4.2, no entity has merged into any of Borrower or its Affiliates or
been consolidated with Borrower or any Affiliate.
SECTION 4.3. PURCHASE OF ASSETS. Except as disclosed on
Schedule 4.3 no entity has sold substantially all of its assets to Borrower or
any Affiliate or sold assets to Borrower or any Affiliate outside the ordinary
course of such seller's business at any time in the past.
SECTION 4.4. CHANGE OF NAME OR IDENTITY. Borrower shall not
change its or its Affiliates' name, business structure or identity or use or
permit any Affiliate to use any new trade name with prior notifications of
Lender or merge or permit any Affiliate to merge into or consolidate with any
other entity.
SECTION 4.5. CORPORATE STRUCTURE. Guarantor is the direct or
indirect holder of one hundred percent (100%) of the ownership interests,
whether stock or partnership interests, of CuraCare and AS-CuraCare. Individual
Guarantor is the holder of twenty-five percent (25%) or more of the common stock
of Guarantor. Such common stock is the sole authorized class of stock in
Guarantor.
SECTION 5
PROVISIONS CONCERNING ACCOUNTS
SECTION 5.1. OFFICE AND RECORDS OF BORROWER. Borrower's and
Guarantor's chief executive offices are located at: Four Xxxxxxxxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000. Borrower and Guarantor maintain all
of their records with respect to Accounts at 0000 Xxxx Xxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxx 00000. Borrower and Guarantor have not at any time within the past
four (4) months maintained their chief executive office or their records with
respect to Accounts at any other location and shall not do so hereafter except
with the prior written consent of Lender.
15
22
SECTION 5.2. REPRESENTATIONS. Borrower and Guarantor represent
and warrant that each Account at the time of its assignment to Lender (a) will
be owned solely by Borrower, (b) will be for a liquidated amount maturing as
stated in Borrower's Books; (c) will be a bona fide existing obligation created
by the rendition of services to Account Debtors or their insured by Borrower in
the ordinary course of its business; and (d) will not be subject to any known
deduction, offset, counterclaim, return privilege, or other condition, except as
reflected on Borrower's Books. Borrower and Guarantor shall neither redate any
invoices nor reissue new invoices in full or partial satisfaction of old
invoices nor permit an Affiliate to do so. Allowances, if any, as between
Borrower and its customers will be on the same basis and in accordance with the
usual customary practices of Borrower as they exist on the date of this
Agreement.
SECTION 5.3. RETURNS AND REPOSSESSIONS. Borrower shall notify
Lender within five (5) business days of occurrence of all material claims
asserted by Account Debtors.
SECTION 5.4. BORROWING BASE REPORTS. Borrower shall on a
weekly basis execute and deliver to Lender, in a form satisfactory to Lender,
(i) a Borrowing Base report; (ii) a detailed aging of Accounts; and (iii) a
charges, collections and adjustment summary for the week. Borrower shall on a
daily basis execute and deliver to Lender an updated Borrowing Base report
reflecting additional daily xxxxxxxx, writeoffs and deposits and all of
Borrower's accounts receivable data in a computer disc or tape format acceptable
to Lender. Lender shall periodically review Borrower's actual adjustments to
cash receipts and writeoffs, as well as Borrower's payor profile. To the extent
Borrower's adjustments, writeoffs and payor profile materially changes, Lender
may, in its sole discretion, change the Net Collectible Percentage attributable
to each type of account by written notice to Borrower of such change.
SECTION 5.5. SCHEDULES OF ACCOUNTS. From time to time,
Borrower shall provide Lender with schedules describing in the aggregate all
Accounts created or acquired by Borrower; provided, however, that Borrower's
failure to execute and deliver such schedules or assignments shall not affect or
limit Lender's security interests and other rights in and to the Accounts.
16
23
Together with each schedule, Borrower shall, if requested by Lender, furnish
Lender with copies of Borrower's sales journals or invoices, customer purchase
orders or the equivalent, and original shipping or delivery receipts for all
goods sold, and Borrower warrants the genuineness thereof.
SECTION 5.6. LENDER'S RIGHTS. Any officer, employee or agent
of Lender shall have the right, at any time or times hereafter, in the name of
Lender or its nominee (including Borrower), with prior notice to Borrower, to
verify the validity, amount or any other matter relating to any Accounts by
mail, telephone or otherwise; and all reasonable costs thereof shall be payable
by Borrower to Lender. Lender, or its designee may at any time after default by
Borrower hereunder notify customers or Account Debtors that Accounts have been
assigned to Lender or of Lender's security interest therein and after default by
Borrower hereunder collect the same directly and charge all reasonable
collection costs and expenses to Borrower's account.
SECTION 5.7. DISCLAIMER OF LIABILITY. Lender shall not be
liable to Borrower or any third person for the correctness, validity or
genuineness of any instruments or documents released or endorsed to Borrower by
Lender (which shall automatically be deemed to be without recourse to Lender in
any event) or for the existence, character, quantity, quality, condition, value
or delivery of any goods purporting to be represented by any such documents; and
Lender, by accepting a Lien on the Collateral or by releasing any Collateral to
Borrower, shall not be deemed to have assumed any obligation or liability to any
supplier or creditor of Borrower or to any other third party. Borrower agrees to
indemnify and defend Lender and hold it harmless in respect to any claim or
proceeding arising out of any matter referred to in this Section 5.7.
SECTION 5.8. POST DEFAULT RIGHTS. If an Event of Default has
occurred and is continuing hereunder, no discount, credit or allowance shall be
granted or permitted by Borrower to any Account Debtor. Lender may, after
default by Borrower, settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms that Lender considers advisable, and in such
cases, Lender will credit Borrower's account with only the net amounts received
by Lender in payment of such disputed Accounts, after deducting all Lender
Expenses incurred in connection therewith.
17
24
SECTION 5.9. ACCOUNTS OWED BY FEDERAL GOVERNMENT. If any
Accounts shall arise out of a contract with the United States of America or any
department, agency, subdivision or instrumentality thereof, Borrower shall
promptly notify Lender thereof in writing and take all other action requested by
Lender to protect Lender's Lien on such Accounts under the provisions of the
federal laws on assignment of claims.
SECTION 5.10. BUSINESS ACTIVITY REPORTS. Borrower and its
Affiliates have filed and shall file all legally required notices and reports of
its business activities with the California taxing authorities and the
appropriate Governmental Authority of each other jurisdiction in which Borrower
or an Affiliate is legally required to file such a notice or report.
SECTION 6
PROVISIONS CONCERNING GENERAL INTANGIBLES
SECTION 6.1. CONTRACTS.
(a) Schedule 6.1. is a true and complete list of all material
contracts and agreements to which Borrower or any Affiliate is a party.
(b) Neither Borrower nor any of its Affiliates shall amend,
modify or supplement any contract or agreement included in the Collateral or
waive any provision thereof other than in accordance with Borrower's standard
business practice, nor shall such standard business practice be materially
changed without Lender's consent, which shall not be unreasonably withheld.
(c) Borrower and its Affiliates shall remain liable to perform
all of its duties and obligations under any contracts and agreements included in
the Collateral to the same extent as if this Agreement had not been executed;
and Lender shall not have any obligation or liability under such contracts and
agreements by reason of this Agreement or otherwise.
(d) Borrower and its Affiliates need not pay any amount due
under any contract or agreement listed on Schedule 6.1, nor otherwise perform
any action required under the terms of any such contract or agreement, if such
payment or performance is being
18
25
contested in good faith by appropriate proceedings promptly initiated and
diligently conducted, if Lender is notified in advance of such contest, and if
Borrower or an Affiliate establishes any reserve or other appropriate provision
required by generally accepted accounting principles and deposits with Lender
cash or an acceptable bond reasonably requested by Lender.
SECTION 7
OTHER PROVISIONS CONCERNING COLLATERAL
SECTION 7.1. TITLE. Borrower has good and marketable title to
the Collateral, and the Liens granted to Lender pursuant to this Agreement are
fully perfected first-priority Liens, subject only to the terms of the
Intercreditor Agreement and the proper filing of any financing statement or
notice necessary to provide notice to third parties of the existence of such
Liens, in and to the Collateral with priority over the rights of every person in
the Collateral is free, clear, and unencumbered by any Liens in favor of any
person other than Lender except for Permitted Liens.
SECTION 7.2. FURTHER ASSURANCES. Borrower shall execute and
deliver to Lender, concurrent with Borrower's execution of this Agreement and at
any time or times hereafter at the request of Lender, all financing statements,
continuation financing statements, security agreements, chattel mortgages,
assignments, endorsements of certificates of title, applications for titles,
affidavits, reports, notices, schedules of accounts, letters of authority and
all other documents Lender may reasonably request, in form satisfactory to
Lender, to perfect and maintain perfected Lender's Liens in the Collateral and
in order to consummate fully all of the transactions contemplated under the Loan
Documents. Borrower and Guarantor hereby irrevocably make, constitute and
appoint Lender (and any of Lender's officers, employees or agents designated by
Lender) as Borrower's and its Affiliates' true and lawful attorney with power to
sign the name of Borrower and its Affiliates on any of the above-described
documents or on any other similar documents that need to be executed, recorded
or filed in order to perfect or continue perfected Lender's Liens in the
Collateral. The appointment of Lender as Borrower's and its Affiliates' attorney
is irrevocable as long as any Obligations are outstanding. Any person dealing
with Lender shall be entitled to
19
26
rely conclusively on any written or oral statement of Lender that this power of
attorney is in effect.
SECTION 7.3. LENDER'S DUTY OF CARE. Lender shall have no duty
of care with respect to the Collateral except that Lender shall exercise
reasonable care with respect to the Collateral in Lender's custody. Lender shall
be deemed to have exercised reasonable care if such property is accorded
treatment substantially equal to that which Lender accords its own property or
if Lender takes such action with respect to the Collateral as the Borrower shall
request or agree to in writing provided that no failure to comply with any such
request nor any omission to do any such act requested by the Borrower shall be
deemed a failure to exercise reasonable care. Lender's failure to take steps to
preserve rights against any parties or property shall not be deemed to be
failure to exercise reasonable care with respect to the Collateral in Lender's
custody. All risk, loss, damage or destruction of the Collateral shall be borne
by Borrower.
SECTION 7.4. REINSTATEMENT OF LIENS. If, at any time after
payment in full by Borrower of all Obligations and termination of Lender's
Liens, any payments on Obligations previously made by Borrower or any other
Person must be disgorged by Lender for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy, or reorganization of Borrower or such
other Person), this Agreement and Lender's Liens granted hereunder shall be
reinstated as to all disgorged payments as though such payments had not been
made, and Borrower shall sign and deliver to Lender all documents and things
necessary to perfect all terminated Liens.
SECTION 7.5. LENDER EXPENSES. If Borrower or an Affiliate
fails to pay any moneys (whether taxes, assessments, insurance premiums or
otherwise) due to third persons or entities, fails to make any deposits or
furnish any required proof of payment or deposit or fails to discharge any Lien
not permitted hereby, all as required under the terms of this Agreement, then
Lender may, to the extent that it determines that such failure by Borrower or
its Affiliates could have a material adverse effect on Lender's interests in the
Collateral, in its discretion and without prior notice to Borrower, make payment
of the same or any part thereof. Any amounts paid or deposited by Lender shall
constitute Lender Expenses, shall become part of the Obligations, shall bear
interest at the rate of eighteen percent (18%) per annum, and shall be
20
27
secured by the Collateral. Any payments made by Lender shall not constitute (a)
an agreement by Lender to make similar payments in the future or (b) a waiver by
Lender of any Event of Default under this Agreement. Lender need not inquire as
to, or contest the validity of, any such expense, tax, security interest,
encumbrance or Lien and the receipt of the usual official notice for the payment
of moneys to a governmental entity shall be conclusive evidence that the same
was validly due and owing.
Borrower shall immediately and without demand reimburse Lender
for all sums expended by Lender that constitute Lender Expenses, and Borrower
hereby authorizes and approves all advances and payments by Lender for items
constituting Lender Expenses.
SECTION 7.6. INSPECTION OF RECORDS. During usual business
hours, Lender shall have the right to inspect and verify Borrower's Books in
order to verify the amount or condition of, or any other matter relating to, the
Collateral and Guarantor's and Borrower's financial condition and Borrower
agrees to reimburse Lender for its costs and expenses in doing so and to copy
and make extracts therefrom. Guarantor and Borrower waive the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Lender pursuant
to this Agreement and agrees that Lender may directly contact any such
accounting firm or service bureau in order to obtain such information.
SECTION 7.7. WAIVERS. Except as specifically provided for
herein, Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, documents, instruments, chattel paper and guaranties
at any time held by Lender on which Borrower may in any way be liable.
SECTION 8
REPRESENTATIONS AND WARRANTIES
As of the date hereof Guarantor and Borrower each hereby
warrants and represents to Lender the following:
21
28
SECTION 8.1. CORPORATE STATUS. Each of CuraCare, Guarantor and
AS-CuraCare's general partners is a corporation validly existing and in good
standing under the laws of the state of its incorporation; AS-CuraCare is a
general partnership validly existing under the laws of the State of California;
and each of such entities is qualified and licensed to do business and is in
good standing in any state in which the conduct of its business or its ownership
of property requires that it be so qualified or licensed, and has the power and
authority (corporate and otherwise) to execute and carry out the terms of the
Loan Documents to which it is a party, to own its assets and to carry on its
business as currently conducted.
SECTION 8.2. AUTHORIZATION. The execution, delivery, and
performance by Borrower and Guarantor of this Agreement and each Loan Document
have been duly authorized by all necessary corporate or partnership action.
Borrower, Guarantor and Individual Guarantor have duly executed and delivered
this Agreement and each Loan Document to which they are a party, and each of
them constitutes a valid and binding obligation of Borrower, Guarantor and
Individual Guarantor, as applicable, enforceable according to its terms except
as limited by equitable principles and by bankruptcy, insolvency or similar laws
affecting the rights of creditors generally.
SECTION 8.3. NO BREACH. The execution, delivery and
performance by Borrower, Guarantor and Individual Guarantor of this Agreement
and each Loan Document to which they or an Affiliate is a party (a) will not
contravene any law or any governmental rule or order binding on Collateral; (b)
will not violate any provision of the articles of incorporation, bylaws or
partnership agreement, as applicable, of Borrower or its Affiliates; (c) will
not violate any agreement or instrument by which Borrower, its Affiliates or
Individual Guarantor, as applicable, is bound; (d) do not require any notice to
consent by any governmental body; and (e) will not result in the creation of a
Lien on any assets of Borrower or its Affiliates except the Lien to Lender
granted herein.
SECTION 8.4. TAXES. All assessments and taxes, whether real,
personal or otherwise, due or payable by or imposed, levied or assessed against
Borrower, its Affiliates or any of their property have been paid in full before
delinquency or before the expiration of any extension period; and Borrower and
its Affiliates have made due and timely payment or deposit of all federal,
state,
22
29
and local taxes, assessments or contributions required of it by law, except only
for items that Borrower or its Affiliates are currently contesting diligently
and in good faith and that have been fully disclosed in writing to Lender.
SECTION 8.5. DEFERRED COMPENSATION PLANS. Borrower and each
ERISA Affiliate have made all required contributions to all deferred
compensation plans to which such person is required to contribute, and neither
Borrower nor any ERISA Affiliate has any liability for any unfunded benefits of
any single-employer or multi-employer plans. Neither Borrower nor any ERISA
Affiliate is or at any time has been a sponsor of, provided, or maintained for
any employees any defined benefit plan.
SECTION 8.6. LITIGATION AND PROCEEDINGS. Except as set forth
on Schedule 8.6 attached hereto, there are no outstanding judgments against
Borrower, its Affiliates or any of their assets and there are no actions or
proceedings pending by or against Borrower or its Affiliates before any court or
administrative agency. Borrower has no knowledge or belief of any pending,
threatened, or imminent litigation, governmental investigations, or claims,
complaints, actions, or prosecutions involving Borrower or its Affiliates,
except for ongoing collection matters in which Borrower or its Affiliates are
the plaintiff and except as set forth in Schedule 8.6 hereto.
SECTION 8.7. BUSINESS. Borrower and its Affiliates have all
franchises, authorizations, patents, trademarks, copyrights and other rights
necessary to advantageously conduct their business. They are all in full force
and effect and are not in known conflict with the rights of others. Neither
Borrower nor any of its Affiliates is a party to or subject to any agreement or
restriction that is so unusual or burdensome that it might have a material
adverse effect on Borrower's or its Affiliates' business, properties or
prospects.
SECTION 8.8. LAWS AND AGREEMENTS. Borrower and its Affiliates
are in compliance with all material agreements applicable to it, including
obligations to contribute to any employee benefit plan or pension plan regulated
by ERISA. Borrower and its Affiliates are in material compliance with all laws
applicable to it. For purposes of this Section 8.8, compliance with the GE
Affected Debt (as defined in the Intercreditor Agreement) shall mean that an
"Event of Default", as such term is
23
30
defined with respect to the GE Affected Debt, has not occurred and is continuing
with respect thereto.
SECTION 8.9. FINANCIAL CONDITION. All financial statements and
information relating to Borrower and its Affiliates that have been or may
hereafter be delivered by Borrower to Lender are accurate and complete and have
been prepared in accordance with generally accepted accounting principles
consistently applied. Borrower and its Affiliates have no material obligations
or liabilities of any kind not disclosed in that financial information, and
there has been no material adverse change in the financial condition of Borrower
or its Affiliates since the date of the most recent financial statements
submitted to Lender.
SECTION 8.10. HEALTH CARE LAWS.
(a) Borrower and its Affiliates have obtained all permits,
licenses and other authorizations that are required under Health Care Laws
applicable to Borrower and such Affiliates are in compliance in all material
respects with all terms and conditions of the required permits, licenses and
authorizations, and are also in compliance in all material respects with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in such Health
Care Laws.
(b) Borrower is not aware of, and has not received notice of,
any past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans that may interfere with or prevent
compliance or continued compliance in any material respect with Health Care
Laws.
(c) There is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice or demand letter, notice of violation,
investigation or proceeding pending or threatened against Borrower or its
Affiliates, relating in any way to Health Care Laws.
SECTION 8.11. CUMULATIVE REPRESENTATIONS. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements that
Borrower shall give, or cause to be given, to Lender, either now or hereafter.
24
31
SECTION 9
COVENANTS
SECTION 9.1. ENCUMBRANCE OF COLLATERAL. Borrower shall not
create, incur, assume or permit to exist any Lien on any Collateral now owned or
hereafter acquired by Borrower or its Affiliates, except for Liens to Lender and
Permitted Liens.
SECTION 9.2. BUSINESS. Borrower and its Affiliates shall
engage primarily in business of the same general character as that now conducted
by Borrower and its Affiliates.
SECTION 9.3. CONDITION AND REPAIR. Borrower and its Affiliates
shall maintain in good repair and working order all properties used in their
business and from time to time shall make all appropriate repairs and
replacements thereof.
SECTION 9.4. TAXES. Borrower and its Affiliates shall pay all
taxes, assessments and other governmental charges imposed upon it or any of its
assets or in respect of any of its franchises, business, income or profits
before any penalty or interest accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or might become a Lien or
charge upon any of its assets, provided that (unless any material item or
property would be lost, forfeited or materially impaired as a result thereof) no
such charge or claim need be paid if it is being contested in good faith by
appropriate proceedings promptly initiated and diligently conducted, if Lender
is notified in advance of such contest, and if Borrower or an Affiliate
establishes any reserve or other appropriate provision required by generally
accepted accounting principles with Lender and deposits cash or an acceptable
bond in an amount equal to twice the amount of such charge or claim. Borrower
and its Affiliates shall make timely payment or deposit of all FICA payments and
withholding taxes required of it by applicable laws and will, upon request,
furnish Lender with proof satisfactory to Lender indicating that Borrower or an
Affiliate has made such payments or deposits.
SECTION 9.5. ACCOUNTING SYSTEM. Borrower and its Affiliates at
all times hereafter shall maintain a standard and
25
32
modern system of accounting in accordance with generally accepted accounting
principles consistently applied, with ledger and account cards or computer
tapes, disks, printouts and records that contain information pertaining to the
Collateral that may from time to time be requested by Lender. Borrower shall not
modify or change its method of accounting or enter into any agreement hereafter
with any third-party accounting firm or service bureau for the preparation or
storage of Borrower's accounting records without said accounting firm's or
service bureau's agreeing to provide to Lender information regarding the
Collateral and Borrower's financial condition.
SECTION 9.6. FINANCIAL STATEMENTS. Guarantor shall submit
monthly financial statements, showing a comparison of actual expenditures to
budgeted amounts, with respect to Guarantor on a consolidated basis, to Lender
as soon as available, and in any event within twenty (20) days of the end of
each month. Guarantor shall provide Lender with copies of all reports filed by
it with the Securities and Exchange Commission. Additionally, Guarantor will
submit audited financial statements with respect to Guarantor on a consolidated
basis to Lender as soon as available, and in any event within ninety (90) days
of the end of each fiscal year. With all financial statements, Guarantor will
also deliver a certificate of its chief financial officer attesting that no
Event of Default or Unmatured Default under the Agreement has occurred and is
continuing.
SECTION 9.7. FURTHER INFORMATION. Guarantor or Borrower shall
promptly supply Lender with such other information concerning its affairs as
Lender may reasonably request from time to time hereafter and shall promptly
notify Lender of any material adverse change in Borrower's financial condition
and any condition or event that constitutes a breach of or event that
constitutes an Event of Default under this Agreement. In addition, Borrower and
Guarantor authorize Lender to contact credit reporting agencies concerning
Guarantor's, Borrower's and its Affiliates' credit standing.
SECTION 9.8. ERISA COVENANTS. Guarantor and Borrower shall,
and shall cause each ERISA Affiliate to, comply with all applicable provisions
of ERISA and all other laws applicable to any deferred compensation plans with
which Guarantor, Borrower or any ERISA Affiliate is associated, and shall
promptly notify Lender of the occurrence of any event that could result in any
material
26
33
liability of Borrower to any person to any person whatsoever with respect to any
such plan.
SECTION 9.9. RESTRICTIONS ON MERGER, CONSOLIDATION, SALE OF
ASSETS, ISSUANCE OF STOCK, ETC. Unless authorized by Lender, Guarantor and
Borrower shall not, nor shall they permit any Affiliate, to:
(a) merge or consolidate with any Person;
(b) sell, lease or otherwise dispose of its assets in any
transaction or series of related transactions (other than sales in the ordinary
course of business);
(c) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction;
(d) acquire interests in excess of Two Hundred Forty Thousand
Dollars ($240,000) in the aggregate in any calendar year in any business
(whether by purchase of assets, purchase of stock, merger or otherwise);
(e) become subject to any agreement or instrument which by its
terms would restrict Guarantor's or Borrower's right or ability to perform any
of its obligations to Lender pursuant to the terms of the Loan Documents (Lender
acknowledges that compliance with the terms of the Intercreditor Agreement shall
not constitute a breach of this clause 9.9(e)); or
(f) authorize or issue any additional stock or equity interest
other than the issuance by Guarantor of its common stock.
SECTION 9.10. HEALTH CARE COVENANTS.
(a) Borrower and its Affiliates shall comply in all material
respects with, and will obtain all permits required by all Health Care Laws
applicable to Borrower and such Affiliates.
(b) Borrower shall promptly furnish to Lender a copy of any
communication from any governmental authority concerning any possible violation
of any Health Care Laws or any occurrence of which Borrower or an Affiliate
would be required to notify any governmental authority with jurisdiction over
Health Care Laws.
27
34
SECTION 9.11. DISTRIBUTIONS. Except as set forth on Schedule
9.11 hereto, Guarantor shall not make any Distributions and shall prohibit its
Affiliates that are not directly or indirectly wholly-owned by Guarantor from
making any Distributions.
SECTION 9.12. SUBORDINATED OBLIGATIONS. Neither Borrower nor
any Affiliate shall voluntarily prepay any principal (including the making of
any sinking fund payment), interest or any other amount in respect of any
obligations that are subordinate to Borrower's Obligations to Lender, including
without limitation, its Obligations to GE pursuant to the Deferral Note issued
pursuant to that certain Agreement dated November 1, 1994 among GE and Guarantor
and its Affiliates ("Subordinate Obligations"). Notwithstanding the foregoing,
Guarantor shall be permitted to prepay or repurchase any Senior-Subordinated
Notes upon receipt by Lender of prior notice of such Prepayment or repurchase
and certification by Guarantor that such prepayment or repurchase will not
impair Borrower's ability to perform its obligations under this Agreement.
SECTION 9.13. AMENDMENTS. Neither Borrower nor its Affiliates
shall amend any provision of any Subordinate Obligation if such amendment would
(i) affect any of the subordination provisions thereof, (ii) advance the date of
any required payment or prepayment thereunder, (iii) make covenants therein more
burdensome, when considered in their entirety, to Borrower or its Affiliates, or
(iv) reduce any default or grace period therein provided, or (v) otherwise have
a material adverse effect on the interests of Lender.
SECTION 9.14. CAPITAL EXPENDITURES. Neither Borrower nor its
Affiliates shall make capital expenditures (excluding for purposes of this
Section 9.14 expenditures permitted pursuant to Section 9.15) in excess of Two
Hundred Forty Thousand Dollars ($240,000) in any transaction (or group of
related transactions) or One Million Dollars ($1,000,000) in the aggregate in
any calendar year.
SECTION 9.15. EQUIPMENT LEASES. Neither Borrower nor its
Affiliates shall become the lessee under any operating or capital lease (or
series of operating or capital leases with respect to assets that are related to
the operation of a unit of equipment (including, without limitation, the unit,
associated van or modular building, and related component parts)), if the
28
35
aggregate payments thereunder during any one calendar year exceed Two Hundred
Forty Thousand Dollars ($240,000) with respect to such unit of equipment and
assets that are related to the operation of such unit of equipment; provided,
however, that Borrower and its Affiliates are expressly permitted to remain
lessee under, and make all payments required by, any leases with GE, entered
into on or about or prior to the date of this Agreement, subject in each case to
the terms of the Intercreditor Agreement of applicable; provided, further,
Borrower notifies Lender of the existence of such leases on or prior to the
Closing Date.
SECTION 9.16. LENDER CONSENTS. Borrower or Guarantor may
request that Lender consent to any action prohibited by Sections 9.9 and 9.11
through 9.15 by delivering a written request which specifies in reasonable
detail the nature of the proposed action. Lender agrees to consider such request
in a timely fashion and will provide Borrower or Guarantor with a written
response to such request. Nothing in this Section 9.16 shall be construed to
require Lender to approve any such request.
SECTION 10
EVENTS OF DEFAULT
An Event of Default shall be deemed to exist if any of the
following events shall have occurred and be continuing:
(a) Borrower fails to make any payment of principal or
interest or any other payment on the Note or any other Obligation when due and
payable, by acceleration or otherwise, and such failure shall continue for five
(5) business days after the payment is due;
(b) Borrower fails to observe or perform any covenant,
condition or agreement to be observed or performed pursuant to the terms hereof
or any Loan Document to which it is a party and such failure is not cured as
soon as reasonably practicable and in any event within thirty (30) days after
written notice thereof by Lender; provided, however, that if such failure can
not be cured within such thirty (30) day period, Borrower shall not be in
default if the cure is commenced within such thirty (30) day period and
thereafter such cure is diligently pursued to completion;
29
36
(c) A court enters a decree or order for relief in respect of
Borrower or an Affiliate in an involuntary case under any applicable bankruptcy,
insolvency, or other similar law then in effect, or appoints a receiver,
liquidator, assignee, custodian, trustee, or sequestrator (or other similar
official) of Borrower or an Affiliate or for any substantial part of their
property, or orders the windup or liquidation of Borrower's or an Affiliate's
affairs; or a petition initiating an involuntary case under any such bankruptcy,
insolvency, or similar law is filed against Borrower or an Affiliate and is
pending for sixty (60) days without dismissal;
(d) Borrower or an Affiliate commences a voluntary case under
any applicable bankruptcy, insolvency or other similar law then in effect, makes
any general assignment for the benefit of creditors, fails generally to pay its
debts as such debts become due, or takes corporate action in furtherance of any
of the foregoing;
(e) Final judgment for the payment of money on any claim in
excess of $100,000 is rendered against Borrower or an Affiliate and remains
undischarged for twenty (20) days during which execution is not effectively
stayed;
(f) Guarantor or Individual Guarantor revoke or attempt to
revoke their guaranty of any of the Obligations, or becomes the subject of an
insolvency proceeding of the type described in clauses (c) or (d) above with
respect to Borrower or fails to observe or perform any covenant, condition or
agreement to be performed under any Loan Document to which it is a party;
(g) Borrower or an Affiliate makes any payment on account of
any Subordinate Obligations, other than payments specifically permitted by the
terms of such subordination or this Agreement;
(h) Any person holding any Subordinate Obligations becomes the
subject of any proceeding resulting in the termination of the subordination
arrangement, terminates the subordination arrangement or asserts that it is
terminated.
(i) Any Collateral or any part thereof is sold, agreed to be
sold, conveyed or allocated by operation of law or otherwise;
30
37
(j) Borrower or an Affiliate defaults under the terms of any
Indebtedness or lease involving total payment obligations of Borrower or an
Affiliate in excess of $100,000 and such default is not cured within the time
period permitted pursuant to the terms and conditions of such Indebtedness or
lease, or an event occurs that gives any creditor or lessor the right to
accelerate the maturity of any such indebtedness or lease payments; provided,
however, with respect to any default under the GE Affected Debt (as defined in
the Intercreditor Agreement) an Event of Default shall not be deemed to exist
under this Agreement until such default constitutes an "Event of Default", as
such term is defined with respect to the GE Affected Debt;
(k) Demand is made for payment of any Indebtedness in excess
of $100,000 that was not originally payable upon demand when incurred but the
terms of which were later changed to provide for payment upon demand;
(l) Borrower or an Affiliate is enjoined, restrained or in any
way prevented by court order from continuing to conduct all or any material part
of its business affairs;
(m) A judgment or other claim in excess of $100,000 becomes a
Lien upon any or all of Borrower's or its Affiliates' assets, other than a
Permitted Lien;
(n) A notice of Lien, levy or assessment in excess of $100,000
is filed of record with respect to any or all of Borrower's or its Affiliates'
assets by the United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal or other Government
Agency; or any tax or debt owing at any time hereafter to any one or more of
such entities becomes a Lien upon any or all of Borrower's or its Affiliates'
assets and the same is not paid on the payment date thereof, except to the
extent such tax or debt is being contested by Borrower or an Affiliate as
permitted in Section 8.4;
(o) There is a material impairment of the value of the
Collateral or priority of Lender's Liens on the Collateral;
(p) Any of Borrower's or its Affiliates' assets in excess of
$100,000 or any Collateral are seized, subjected to a distress warrant, levied
upon or come into the possession of any judicial officer;
31
38
(q) Any representation or warranty made in writing to Lender
by any officer of Borrower in connection with the transaction contemplated in
this Agreement is materially incorrect when made;
(r) Guarantor shall be in default with respect to any of its
Obligations to Lender and such default is not cured within the time provided
permitted pursuant to the terms and conditions of such Obligation;
(s) Borrower shall be in default with respect to any of its
Obligations to Lender or an Event of Default or an Unmatured Default occurs
under the Other Loan Document;
(t) If the aggregate dollar value of all judgments, defaults,
demands, claims and notices of Liens under clauses (e), (j), (k), (m) and (n)
hereof exceeds $250,000; or
(u) Borrower shall fail to direct all receipts from Accounts
to the Lock Box.
SECTION 11
REMEDIES
SECTION 11.1. SPECIFIC REMEDIES. Upon the occurrence of any
Event of Default, subject in each case to the terms of the Intercreditor
Agreement:
(a) Lender may cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement, under the Other Loan Document,
or under any other agreement between Borrower and Lender.
(b) Lender may declare all Obligations to be due and payable
immediately, whereupon they shall immediately become due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by Borrower.
(c) Lender may set off against the Obligations all Collateral,
balances, credits, deposits, accounts, or moneys of Borrower or its Affiliates
then or thereafter held with Lender, including amounts represented by
certificates of deposit.
32
39
(d) Lender may enter any premises of Borrower or its
Affiliates, with or without judicial process, and take possession of the
Collateral; provided however, that Lender may only exercise such remedy if it
may do so without a breach of the peace. Lender may remove the Collateral and
may remove or copy all records pertaining thereto, or Lender may remain on such
premises and use the premises for the purpose of collecting, preparing and
disposing of the Collateral, without any liability for rent or occupancy
charges. Borrower shall, upon request of Lender, assemble the Collateral and any
records pertaining thereto and make them available at a place designated by
Lender that is reasonably convenient to both parties.
(e) Lender may dispose of the Collateral in its then-existing
condition or, at its election, may take such measures as it deems necessary or
advisable to improve, process, finish, operation, demonstrate and prepare for
sale the Collateral, and may store, ship, reclaim, recover, protect, advertise
for sale or lease and insure the Collateral. Lender may use and operate
equipment of Borrower or its Affiliates in order to process or finish inventory
included in the Collateral. If any Collateral consists of documents, Lender may
proceed either as to the documents or as to the goods represented thereby.
(f) Lender may pay, purchase, contest or compromise any
encumbrance, charge or Lien that, in the opinion of Lender, appears to be prior
or superior to its Lien and pay all reasonable expenses incurred in connection
therewith.
(g) Lender may (i) notify Account Debtors to make payment on
Accounts directly to Lender; (ii) settle, adjust, compromise, extend or renew
Accounts, whether before or after legal proceedings to collect such Accounts
have commenced; (iii) prepare and file any bankruptcy proofs of claim or similar
documents against any Account Debtor; (iv) prepare and file any notice,
assignment, satisfaction, or release of Lien, UCC termination statement or any
similar document; (v) sell or assign Accounts, individually or in bulk, upon
such terms, for such amounts, and at such time or times as Lender deems
advisable; (vi) complete the performance required of Borrower or its Affiliates
under any contract or agreement to which Borrower or an Affiliate is a party and
out of which Accounts arise or may arise.
33
40
(h) Lender may (i) endorse Borrower's or its Affiliates' name
on all checks, notes, drafts, money orders or other forms of payment of or
security for Accounts or other Collateral; (ii) sign Borrower's or its
Affiliates' name on drafts drawn on Account Debtors or issuers of letters of
credit; and (iii) notify the postal authorities in Borrower's or its Affiliates'
name to change the address for delivery of Borrower's or its Affiliates' mail to
an address designated by Lender, receive and open all mail addressed to Borrower
or an Affiliate, copy all mail, return all mail relating to Collateral, and hold
all other mail available for pickup by Borrower or an Affiliate.
(i) Lender may sell the Collateral at public or private sale
and is not required to repossess Collateral before selling it. Any requirement
of reasonable notice of any disposition of the Collateral shall be satisfied if
such notice is sent to Borrower, ten (10) days prior to such disposition by any
of the methods provided in Section 13.5 hereof. Borrower shall be credited with
the net proceeds of such sale only when they are actually received by Lender,
and Borrower shall continue to be liable for any deficiency remaining after the
Collateral is sold or collected.
(j) If the sale is to be a public sale, Lender shall also give
notice of the time and place by publishing a notice one time at least five (5)
days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be held.
(k) To the maximum extent permitted by applicable law, Lender
may be the purchaser of any or all of the Collateral at any public sale and
shall be entitled, for the purpose of bidding and making settlement or payment
of the purchase price for all or any portion of the Collateral sold at any
public sale, to use and apply all or any part of the Obligations as a credit on
account of the purchase price of any Collateral payable by Lender at such sale.
SECTION 11.2. POWER OF ATTORNEY. Guarantor and Borrower hereby
appoints Lender (and any of Lender's officers, employees, or agents designated
by Lender) as Guarantor's and Borrower's attorney, with power whether before or
after the occurrence of an Event of Default: (a) to endorse Borrower's or its
Affiliates' name on any checks, notes, acceptances, money orders, drafts or
other forms of payment or security that may come into Lender's possession; (b)
to sign Borrower's or its Affiliates' name on
34
41
drafts against Account Debtors, on schedules and assignments of Accounts, on
verifications of Accounts, and on notices to Account Debtors; (c) to notify the
post office authorities to change the address for delivery of Borrower's or its
Affiliates' mail to an address designated by Lender, to receive and open all
mail addressed to Borrower or an Affiliate and to retain all mail relating to
the Collateral and forward all other mail to Borrower or an Affiliate; (d) to
send requests for verification of Accounts; (e) to execute UCC Financing
Statements; and (f) to do all things necessary to carry out this Agreement. The
appointment of Lender as Borrower's attorney and each and every one of Lender's
rights and powers, being coupled with an interest, are irrevocable as long as
any Obligations are outstanding. Lender agrees not to exercise the power granted
in clauses 11.2(a) through 11.2(c) prior to the occurrence of an Event of
Default and agrees not to exercise the power granted in clause 11.2(d) prior to
notification of Borrower of its intent to do so, but such limitations do not
limit the effectiveness of such power of attorney at any time. Any person
dealing with Lender shall be entitled to rely conclusively on any written or
oral statement of Lender that this power of attorney is in effect. Lender may
also use Borrower's stationery in connection with exercising its rights and
remedies and performing the Obligations of Borrower.
SECTION 11.3. EXPENSES SECURED. All expenses, including
attorney fees, incurred by Lender in the exercise of its rights and remedies
provided in this Agreement, in the Other Loan Document or by law shall be
payable by Borrower to Lender, shall be part of the Obligations, and shall be
secured by the Collateral.
SECTION 11.4. EQUITABLE RELIEF. Borrower recognizes that in
the event Borrower fails to perform, observe, or discharge any of its
Obligations or liabilities under this Agreement, no remedy of law will provide
adequate relief to Lender, and Borrower agrees that Lender shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
SECTION 11.5. REMEDIES ARE CUMULATIVE. No remedy set forth
herein is exclusive of any other available remedy or remedies, but each is
cumulative and in addition to every other right or remedy given under this
Agreement or under any other agreement between Lender and Borrower or Guarantor
or now or hereafter existing at law or in equity or by statute. Lender may
35
42
pursue its rights and remedies concurrently or in any sequence, and no exercise
of one right or remedy shall be deemed to be an election. No delay by Lender
shall constitute a waiver, election or acquiescence by it. Borrower on its
behalf waives any rights to require Lender to (i) proceed against Guarantor or
any other party; or (ii) proceed against or exhaust any security held from
Guarantor. Lender may at any time and from time to time, without notice to, or
consent of, Borrower, and without affecting or impairing the obligation of
Borrower hereunder do any of the following: (i) renew or extend any Obligations
of Guarantor, or of any other party at any time directly or contingently liable
for payment of any of the Obligations of Guarantor; (ii) accept partial payments
of the Obligations of Guarantor; (iii) settle, release (by operation of law or
otherwise), compound, compromise, collect or liquidate any of the Obligations of
Guarantor and the security therefor in any manner; (iv) consent to the transfer
or sale of any security or bid and purchase at any sale of any security of
Guarantor. Borrower expressly agrees that the validity of this Agreement and the
Obligations of Borrower shall not be terminated, affected or impaired by reason
of the waiving, delaying, exercising or non-exercising, of any of Lender's
rights against Guarantor or as a result of the substitution, release,
repossession, sale, disposition or destruction of any Collateral securing any
Obligations of Guarantor. Lender shall not be released or discharged, either in
whole or in part, by Lender's failure or delay to perfect or continue the
perfection of any security interest in any Collateral which secures the
Obligations of Guarantor or to protect the property covered by such security
interest.
SECTION 12
INDEMNITY
SECTION 12.1. GENERAL INDEMNITY. Borrower shall protect,
indemnify and defend and save harmless Lender and its directors, officers,
agents and employees from and against any and all loss, cost, liability
(including negligence, tort and strict liability), expense, damage, suits or
demands (including fees and disbursements of counsel) on account of any suit or
proceeding before any Governmental Authority which arises from the transactions
contemplated in this Agreement or otherwise arising in connection with or
relating to the Loan and any security therefor,
36
43
unless such suit, claim or damages are caused by the negligence or intentional
malfeasance of Lender or its directors, officer, agents or employees. Upon
receiving knowledge of any suit, claim or demand asserted by a third-party that
Lender believes is covered by this indemnity, Lender shall give Borrower timely
notice of the matter and an opportunity to defend it, at Borrower's sole cost
and expense, with legal counsel acceptable to Lender. Lender may, at its option,
also require Borrower to so defend the matter. This obligation on the part of
Borrower shall survive the termination of this Agreement and the repayment of
the Note.
SECTION 13
MISCELLANEOUS
SECTION 13.1. DELAY AND WAIVER. No delay or omission to
exercise any right shall impair any such right or be a waiver thereof, but any
such right may be exercised from time to time and as often as may be deemed
expedient. A waiver on one occasion shall be limited to that particular
occasion.
SECTION 13.2. COMPLETE AGREEMENT. This Agreement and the
Schedules are the complete agreement of the parties hereto and supersede all
previous understandings relating to the subject matter hereof. This Agreement
may be amended only by an instrument in writing that explicitly states that it
amends this Agreement and is signed by the party against whom enforcement of the
amendment is sought. This Agreement may be executed in counterparts, each of
which will be an original and all of which will constitute a single agreement.
SECTION 13.3. SEVERABILITY; HEADINGS. If any part of this
Agreement or the application thereof to any person or circumstance is held
invalid, the remainder of this Agreement shall not be affected thereby. The
section headings herein are included for convenience only and shall not be
deemed to be a part of this Agreement.
SECTION 13.4. BINDING EFFECT. This Agreement shall be binding
upon and inure to the benefit of the respective legal representatives,
successors and assigns of the parties hereto; however, Borrower may not assign
any of its rights or delegate any of its Obligations hereunder. Lender (and any
subsequent assignee)
37
44
may transfer and assign this Agreement and deliver the Collateral to the
assignee, who shall thereupon have all of the rights of Lender; and Lender (or
such subsequent assignee who in turn assigns as aforesaid) shall then be
relieved and discharged of any responsibility or liability with respect to this
Agreement and said Collateral.
SECTION 13.5. NOTICES. Any notices under or pursuant to this
Agreement shall be deemed duly sent when delivered in hand or when mailed by
registered or certified mail, return receipt requested, or when delivered by
courier or when transmitted by telex, telecopy, or similar electronic medium to
the following addresses:
To Borrower: American Shared Hospital Services
Xxxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, M.D.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
To Lender: DVI Business Credit
x/x XXX Financial Services Inc.
0000 XxxXxxxxx Xxx.
Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Executive Vice President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Copies to: Xxxxxxx X. Xxxx, Esq.
Xxxxxx, White & Xxxxxx
000 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
38
45
Either party may change such address by sending notice of the change to
the other party; such change of address shall be effective only upon actual
receipt of the notice by the other party.
SECTION 13.6. GOVERNING LAW. ALL ACTS AND TRANSACTIONS
HEREUNDER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE
GOVERNED, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF CALIFORNIA.
SECTION 13.7. JURISDICTION. Borrower agrees that the state and
federal courts in Orange County, California or any other court in which Lender
initiates proceedings have jurisdiction over all matters arising out of this
Agreement and that service of process in any such proceeding shall be effective
if mailed to Borrower at its address described in the Notices section of this
Agreement. Borrower waives any right it may have to assert the defense of forum
non conveniens or to object to such venue and hereby consents to any
court-ordered relief.
SECTION 13.8. WAIVER OF TRIAL BY JURY. LENDER, GUARANTOR AND
BORROWER HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF
THIS AGREEMENT OR ANY OF THE SECURITY DOCUMENTS OR THE CONDUCT OF THE
RELATIONSHIP BETWEEN LENDER, GUARANTOR AND BORROWER.
39
46
IN WITNESS WHEREOF, Borrower, Guarantor and Lender have executed this
Agreement by their duly authorized officers as of the date first above written.
BORROWER: LENDER:
CURACARE, INC. DVI BUSINESS CREDIT CORPORATION
By:____________________________________ By:_______________________________
Xxxxxx X. Xxxxx, M.D. Xxxxxxx Xxxxx
President Executive Vice President
AMERICAN SHARED-CURACARE
By: American Shared Hospital
Services, general partner
By:___________________________
Xxxxxx X. Xxxxx, M.D.
President
By: MMRI, Inc., general partner
By:___________________________
Xxxxxx X. Xxxxx, M.D.
President
GUARANTOR:
AMERICAN SHARED HOSPITAL SERVICES
By:____________________________________
Xxxxxx X. Xxxxx, M.D.
President
40
47
INDIVIDUAL GUARANTOR:
_________________________________
XXXXXX X. XXXXX, M.D.
41
