LOAN AND SECURITY AGREEMENT
Loan No.: 00-00-000
Client Code: "CLI"
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is dated and effective as of
June 30, 1999 ("Effective Date") by and between DVI Business Credit Corporation,
a Delaware corporation ("Lender"), and Cardiovascular Laboratories, Inc. of PA,
a Pennsylvania corporation ("Borrower").
SECTION 1
DEFINITIONS
Section 1.1. Specific Definitions The following definitions shall apply:
(a) "Account Debtors" shall mean Borrower's customers and all other persons
who are obligated or indebted to Borrower in any manner, whether directly or
indirectly, primarily or secondarily, contingently or otherwise, with respect to
Accounts.
(b) "Accounts" means all accounts, accounts receivable, monies and debt
obligations in any form owing to Borrower (whether arising in connection with
contracts, contract rights, instruments, general intangibles or chattel paper)
arising out of the rendition of services by Borrower whether or not earned by
performance and all other amounts due under any contract listed on Schedule 6.1.
(c) "Advance" shall mean an advance of loan proceeds constituting all or a
part of the Loan.
(d) "Borrower's Books" shall mean all of Borrower's books and records
including but not limited to: minute books, ledgers; records indicating,
summarizing or evidencing Borrower's assets, liabilities and the Accounts; all
information relating to Borrower's 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.
(e) "Borrowing Base" shall mean, on the date of determination thereof, an
amount equal to the sum of eighty percent (80%) of the Net Collectible Value for
each type of Eligible Account.
(f) "Closing Date" shall mean the date of the first Advance of the Loan.
(g) "Collateral" shall have the meaning specified in Section 3.1 hereof.
(h) "Commitment Amount" shall have the meaning set forth in Section 2.1.
(i) "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 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.
(j) "Eligible Accounts" shall mean Borrower's accounts receivable from
commercial insurance, Medicare, Medicaid, HMO/PPO payors, and industrial
authorized (collectively referred to as "Retail Accounts"), which have been due
and payable for one hundred twenty (120) or fewer days from the date of service,
and Borrower's accounts receivable under contracts with hospitals, nursing homes
and other similar health service providers (referred to as "Institutional
Accounts") which have been due and payable for one hundred twenty (120) or fewer
days from the date of service.
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(k) "Eligible Payor" shall mean the obligor of an Eligible Account.
(l) "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.
(m) "Event of Default" shall have the meaning specified in Section 10
hereof.
(n) "GAAP" means generally accepted accounting principles set forth in the
opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants and/or in statements of the Financial Accounting
Standards Board, consistently applied.
(o) "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.
(p) "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 1877(a) of the Social Security Act as
amended by the Omnibus Budget Reconciliation Act of 1993, 42 USC ss. 1395nn.
(q) "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 GAAP, 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 GAAP 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 than 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.
(r) "Lender Expenses" shall mean (i) all costs or expenses (including,
without limitation, taxes and insurance premiums) required to be paid by
Borrower 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 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) costs and expenses incurred by Lender to convert any
data submitted to Lender by Borrower 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 Loan Documents or any portion thereof, irrespective of whether
suit is brought.
(s) "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.
(t) "Lien Receivable" shall mean an Eligible Receivable arising out of a
worker's compensation or personal injury claim as to which the liability of a
commercial insurance company which is an Eligible Payor is being disputed,
litigated or contested and which will be payable by such Eligible Payor if the
outcome of the dispute, litigation or contest upholds the liability of such
Eligible Payor.
(u) "Loan" shall mean each loan or any other loan or loans made by Lender
to Borrower pursuant to this Agreement.
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(v) "Loan Availability" shall mean the lesser of (a) the Commitment Amount
or (b) the Borrowing Base minus the aggregate Advances and other Obligations
outstanding under this Agreement.
(w) "Loan Documents" shall mean (i) this Agreement; (ii) the Note; (iii)
any other agreements or documents hereafter delivered to secure repayment of the
Loan; (iv) the Lock Box Agreement and (v) any other certificates, documents,
instruments, or financing statements delivered by Borrower to Lender pursuant to
the terms of this Agreement.
(x) "Lock Box Agreement" shall mean those certain Lock Box Agreements
between Borrower and lock box servicer(s) ("Servicer(s)") chosen by Lender and
Borrower and the letter of instructions with respect thereto among Lender,
Borrower and Servicer.
(y) "Net Collectible Percentage" shall mean the percentages described on
Exhibit A attached hereto. The Net Collectible Percentage may change from time
to time in Lender's sole and absolute discretion, written notification of which
shall be given to Borrower by Lender.
(z) "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.
(aa) "Note" shall mean the Secured Promissory Note executed by Borrower
pursuant to the terms of this Agreement.
(bb) "Obligations" means (i) all obligations (monetary or otherwise) of
Borrower arising under or in connection with this Agreement, the Note and all
other Loan Documents.
(cc) "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 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 of Borrower outstanding on such date and that are
disclosed on Schedule 1.1 hereto;
(dd) "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.
(ee) "Proceeds" shall mean all proceeds and products of Collateral 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.
(ff) "Reference Rate" means the variable rate of interest, per annum,
published by The Wall Street Journal as the "Prime Rate". The Reference Rate is
nothing more nor less than an index for determining the interest rate payable
under the terms of this Agreement. The Reference Rate is not necessarily the
lowest or best rate actually charged by Lender to any customer. In the event The
Wall Street Journal ceases to publish the "Prime Rate", Lender may substitute
any similar index for the Reference Rate.
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(gg) "Subordinate Obligations" shall mean all Indebtedness of Borrower
subordinated to the Obligations pursuant to subordination and/or intercreditor
agreements in form satisfactory to Lender.
(hh) "Termination Date" shall mean the last day of any term as to which a
written notice of nonrenewal pursuant to Section 2.7 has been received.
(ii) "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.
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 GAAP. 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 ("UCC").
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 make
Advances to Borrower from time to time in an aggregate amount not to exceed the
lesser of (i) One Million Dollars ($ 1,000,000) (the "Commitment Amount"), or
(ii) the Borrowing Base. Within the limits of the Loan Availability, Borrower
may borrow, make repayments pursuant to Section 2.4 and reborrow. If, at any
time, the aggregate Advances and other Obligations outstanding exceed the then
Loan Availability, then Borrower shall pay to Lender a sum sufficient to reduce
the Advances and other Obligations outstanding to an amount not greater than the
Loan Availability. Lender's commitment to make Advances shall expire, and the
amount of the Loan then outstanding shall mature and be repaid by Borrower,
without further action on the part of Lender, on the Termination Date.
Section 2.2. Note All Loans made by the Lender under this Agreement shall
be evidenced by, and repaid with interest in accordance with, a single
promissory note of Borrower in substantially the form of Exhibit B duly
completed, in the original principal amount equal to the initial Commitment
Amount, dated the Effective Date, payable to the Lender and maturing as to
principal on the Termination Date (the "Note"). The amount of each Advance and
payment of principal amount received by the Lender shall be recorded in the
books and records of the Lender, which books and records shall, in the absence
of manifest error, be conclusive as to the outstanding balance of and other
information related to the Loan. Lender shall be entitled at any time to endorse
on a schedule attached to the Note the amount and type of each Advance and
information relating thereto.
Section 2.3. The Borrowing Base On a weekly basis the Borrowing Base will
be recalculated by adding weekly xxxxxxxx to the prior week's Eligible Accounts
and subtracting deposits and adjustments, if applicable, and then multiplying
this amount by the Net Collectible Percentage. The Borrowing Base shall be
calculated on the basis of the reports delivered to Lender pursuant to Section
5.4.
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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
2:00 p.m. Pacific Standard Time 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. Use of Proceeds The proceeds of the Loan shall be used by
Borrower to payoff an existing debt with Prime Bank and to provide working
capital.
Section 2.6. Loan Repayment Via Lock Box/Servicer Account. Upon the
execution hereof, Borrower shall become a party to the Lock Box Agreement which
provides for the receipt and processing of Account payments. Borrower shall
irrevocably direct: (i) all nongovernment payors to remit payment to the
Servicer's post office box in Lender's name and control, and (ii) all government
payors to remit payment to a second post office box of such Servicer in
Borrower's name. Prior to funding and upon receipt of the lock box post office
box number(s), Borrower shall provide Lender re-direct letters (in a form
satisfactory to Lender) to all of Borrower's payors on Borrower's letterhead,
including envelopes for Lender to process and mail (Lender will add postage
which shall be charged to Borrower). The Lock Box Agreement provides for the
Servicer to deposit daily all receipts of the post office boxes into deposit
accounts, with non-government payor receipts paid into an account subject to
Lender's control and, government payor receipts paid into an account in
Borrower's name; such accounts shall be (i) at a financial institution
acceptable to Lender, and (ii) governed by terms and conditions acceptable to
Lender. Borrower agrees and acknowledges that all government payor receipts will
be immediately transferred to an account in the name and control of Lender. Upon
collectibility, deposits (net of fees) shall be applied to reduce the Loan
balance including Advances, interest, fees, all charges and other payments, if
applicable. Deposits/receipts will reduce the Borrowing Base in accordance with
Section 2.3 above. Any receipts (net of such Servicer's fees) remaining after
all such payments to Lender will be paid to Borrower within 24 hours of
availability. Borrower shall bear all charges for establishing and maintaining
the post office box accounts and all bank charges for such deposit accounts.
Lender shall deduct from the deposit accounts all sums Borrower owes to it
hereunder, including fees, interest, reimbursements and principal payments. Any
Obligations not paid by such deduction shall be satisfied by direct payment to
Lender at 0000 XxxXxxxxx Xxxx., Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000. Any
amounts hereunder not paid as agreed shall be assessed a late payment penalty of
five percent (5%).
Section 2.7. Term of Agreement. The term of this Agreement is two (2) years
from the Effective Date ("Initial Term") and is non-cancelable. This Agreement
shall be renewed for consecutive one (1) year terms ("Additional Term") unless
this Agreement is terminated, effective as of the last day of a term, by written
notice by Lender or Borrower no later than thirty (30) days before the
expiration of such term. All of Lender's obligations, responsibilities and
duties shall cease upon the date of termination of this Agreement, except for
its obligation to remit excess receipts from the lock box deposit accounts in
accordance with the terms of this Agreement. To the extent this Agreement is
renewed after the Initial Term, regardless of the length of the renewal period,
Borrower shall pay Lender a renewal fee equal to one percent (1.0%) of the
Commitment Amount at the time of the renewal.
Section 2.8. Lender's Fees Upon execution hereof, Lender shall be entitled
to an origination fee equal to one percent (1.0%) of the Commitment Amount, less
$7,500 currently on deposit. Increases to the Commitment Amount during the term
will be charged on the incremental increase at the same origination percentage.
On or before the first day of each month following the Effective Date, Borrower
shall pay Lender a monthly maintenance fee of Eight Hundred Fifty Dollars
($850). Increases to the Commitment Amount during the term will be charged an
incremental increase in the monthly maintenance fee proportionate to the
percentage increase in the Commitment Amount, On or before the first day of each
month following the Effective Date, Borrower shall pay Lender an unutilized loan
fee equal to one half of one percent (.50%) of the difference between the
Commitment Amount and the average outstanding Loan amount as of the previous
month. Lender's fees will be deducted, when due, directly from receipts
deposited accordance with Section 2.6. Unutilized loan fee equal to .50% per
year.
Section 2.9 Audit Fees. Borrower shall pay Lender an audit fee in an amount
equal to Five Hundred Dollars ($500) per auditor per day plus out of pocket
expenses for each audit of Borrower performed by Lender subsequent to the
Closing Date hereunder.
Section 2.10. 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 Reference Rate plus three percent (3.0%) per
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annum. Interest shall be payable monthly in arrears on the first day of each
month for the preceding month. Interest shall be calculated on the basis of a
year of 360 days, but for the actual number of days elapsed. Interest accrued
but not paid pursuant to Section 2.6 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 2.11. Conditions to the Closing Lender's obligation to make the
initial Advance hereunder on the Closing Date 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 Documents 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 Closing Date
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 Lock Box Agreement;
(v) Payor redirect letters;
(vi) pay-off letters, UCC Termination Statements and Lien Releases
as required to grant Lender a first priority security interest other than
Permitted Liens in Collateral pledged as security for repayment of the Loan;
(vii) certified copies of resolutions of the Board of Directors of
Borrower authorizing the execution and delivery of Loan Documents to be executed
by Borrower;
(viii) copies of the Articles of Incorporation of Borrower certified
by the Secretary of State of the applicable issuing state;
(ix) a certificate from an officer of Borrower indicating that the
representations and warranties contained herein are true and correct as of the
Closing Date;
(x) the Healthcare Technology Solutions Inc. Financial Control
System Windows NT Version Host System Questionnaire;
(xi) copies of Borrower's March, 1999 internal financial statement
and Borrower's final fiscal year end December, 1998 financial statement audited
by a certified public accounting firm showing an unqualified opinion;
(xii) original fully executed Lien Subordination and Intercreditor
Agreement among Rockford Industries, Inc., Chase Bank of Texas, N.A., and
Lender, acceptable to Lender;
(xiii) a Subordination Agreement executed by Xxxxx X. Xxxxxx, Xx.
("Xxxxxx"), acceptable to Lender, which subordinates the promissory note dated
March 30, 1998, between Cardiovascular Laboratories, Inc. and Xxxxxx and in the
amount of $50,000;
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(xiv) a Subordination Agreement executed by Anchor Investment
Partnership, Ltd. ("Anchor"), acceptable to Lender, which subordinates the
promissory note dated March 30, 1998, between Cardiovascular Laboratories, Inc.
and Anchor in the amount of $50,000;
(xv) a Subordination Agreement executed by F. Xxxxxxx Xxxxx ("Xxxxx"),
acceptable to Lender, which subordinates the promissory note dated March 30,
1998, between Cardiovascular Laboratories, Inc. and Xxxxx in the amount of
$25,000;
(xvi) the Unconditional Continuing Guaranty of Cardiovascular
Laboratories, Inc. ("Guarantor") the parent corporation of Borrower; and
(xvii) TRW reports on all key officers and owners of Borrower.
(c) Neither an Event of Default nor an Unmatured Default shall have
occurred and be continuing as of the Closing Date.
(d) Borrower or Guarantor shall not have suffered a material adverse change
in its business, operations or financial condition from that reflected in the
financial statements of Borrower or Guarantor delivered to Lender or otherwise.
(e) 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 2.12. Additional Conditions to Advances Lender's obligation to make
any Advance hereunder after the Closing Date is subject to Lender's
determination that neither an Event of Default nor an Unmatured Default shall
have occurred and be continuing as of the date of such Advance.
Section 2.13. Post Closing Not later than thirty (30) days after the
Effective Date hereof, Borrower shall have established an interface,
satisfactory to Lender, with DVI Healthcare Technology Solutions ("HTS") (the
Accounts data maintenance service of Lender).
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 all of Borrower's:
(i) present and future Accounts, contracts, contract rights, chattel paper,
instruments, documents, security agreements, and general intangibles;
(ii) deposit accounts, credit insurance, guaranties, and letters of credit;
(iii) deposits, reserves, Medicare or Medicaid pools, cost report settlements,
prospective payments, adjustments and incentive payments of any kind;
(iv) inventory, equipment and fixtures; (v) attachments, accessories,
accessions, returns, repossessions, exchanges, substitutions and replacements
thereto; (vi) Borrower's Books related to the foregoing; and (vii) any Proceeds
thereof and any and all security for any of the foregoing; all whether now owned
or existing or hereafter acquired or arising and regardless of where located
(collectively, the "Collateral"). This security interest in the Collateral shall
attach to all Collateral without further action on the part of Lender or
Borrower.
SECTION 4
SPECIFIC REPRESENTATIONS
Section 4.1. Name of Borrower
(a) The exact name of Borrower is Cardiovascular Laboratories, Inc. of
PA. Borrower was organized under the laws of the State of Pennsylvania. The
following are all previous legal names of Borrower:
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Borrower uses the following trade names: See attached Schedule 4. 1. The
following are all other trade names used by Borrower in the past:
Section 4.2. Mergers and Consolidations Except as disclosed on Schedule
4.2, no entity has merged into any of Borrower or been consolidated with
Borrower.
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 sold assets to
Borrower 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 name,
business structure or identity or use a new trade name without prior
notification to Lender or merge into or consolidate with any other entity.
SECTION 5
PROVISIONS CONCERNING ACCOUNTS
Section 5.1. Office and Records of Borrower Borrower's chief executive
offices are located at: 000 Xxx Xxxxx Xxxxxx Xx., Xxx 000, Xxxxx XX 00000
Borrower maintains all of its records with respect to Accounts at 000 Xxx Xxxxx
Xxxxxx Xx., Xxx 000, Xxxxx XX 00000. Borrower has 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.
Section 5.2. Representations Borrower represents and warrants 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; (d) will not have been satisfied, subordinated or rescinded;
(e) except for Lien Receivables, will be the primary liability of an Eligible
Payor and will be recognized by the Eligible Payor as its primary liability; (f)
will be payable only in lawful currency of the United States; (g) will not be
subject to any known deduction, offset, counterclaim, return privilege, or other
condition, except as reflected on Borrower's Books; and (h) will be an "account"
within the meaning of the UCC and will not be evidenced by an "instrument"
within the meaning of the UCC. Borrower represents and warrants that at the time
of its assignment of each Account to Lender, Borrower has no knowledge of any
fact which should lead it to expect that the Net Collectible Value of such
Eligible Account would not be paid in full. Borrower shall neither redate any
invoices nor reissue new invoices in full or partial satisfaction of old
invoices. 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
deliver to Lender by Internet E-Mail or in a computer disc or tape format
acceptable to Lender, in form and content satisfactory to Lender (i) a Borrowing
Base report updated to reflect xxxxxxxx, adjustments and deposits; (ii) a
summary by payor class aging of Accounts; (iii) a charges, collections and
adjustment summary for the week; and (iv) all of Borrower's accounts receivable
data in a computer disc or tape format acceptable to Lender. On a monthly basis,
and no later than the 10th day of each month, Borrower shall submit by Internet
E-Mail or in a computer disc or tape format acceptable to Lender, and in form
and content satisfactory to Lender (i) a month-end Borrowing Base Report; (ii) a
detailed accounts receivable aging report as of the last day of the preceding
month; (iii) charges, collections and adjustments summary for the preceding
month; and (iv) a payor concentration schedule. Lender shall periodically review
Borrower's actual xxxxxxxx, adjustments and cash receipts, as well as Borrower's
payor profile. To the extent Borrower's method of handling xxxxxxxx, collections
and adjustments changes and/or Borrower's 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.
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Section 5.5. Compliance Certificate. With each final month-end Borrowing
Base report which Borrower delivers to Lender, Borrower also shall deliver to
Lender a Compliance Certificate in the form of Exhibit C attached hereto, which
Compliance Certificate shall be completed and signed by an officer of Borrower.
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), 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; provided, however, that,
notwithstanding the existence of an Event of Default, (i) Borrower may continue
to invoice and xxxx Account Debtors under discount, credit and allowance
arrangements that Borrower maintained in the ordinary course of business prior
to such Event of Default occurring, and (ii) Account Debtors may, during the
continuance of an Event of Default, utilize discount, credit and allowance
arrangements that Borrower extended to them in the ordinary course of business.
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.
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 has filed and shall file
all legally required notices and reports of its business activities with all the
appropriate taxing authorities and the appropriate Governmental Authority of
each jurisdiction in which Borrower is legally required to file such a notice or
report.
Section 5.11. Servicing Borrower shall be responsible for the complete
processing and maintenance of records for the Accounts including the following:
(a) the preparation of claims for submission to Eligible Payors; (b) the
submission of claims to Eligible Payors; and (c) follow-up with all Eligible
Payors.
SECTION 6
PROVISIONS CONCERNING CONTRACTS
Section 6.1. Contracts
(a) Schedule 6.1. is a true and complete list of all material contracts and
agreements to which Borrower is a party.
(b) Borrower shall not amend, modify or supplement any contract or
agreement included in the
9
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 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 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
contested in good faith by appropriate proceedings promptly initiated and
diligently conducted, if Lender is notified in advance of such contest, and if
Borrower establishes any reserve or other appropriate provision required by GAAP
and deposits with Lender cash or an acceptable bond reasonably requested by
Lender.
SECTION 7
OTHER PROVISIONS CONCERNING COLLATERAL
Section 7.1. 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 hereby irrevocably makes, constitutes and appoints Lender
(and any of Lender's officers, employees or agents designated by Lender) as
Borrower's true and lawful attorney with power to sign the name of Borrower 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 to be
perfected Lender's Liens in the Collateral.
Section 7.2. 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 Borrower shall request or agree to in
writing provided that neither failure to comply with any such request nor any
omission to do any such act requested by 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 7.3. 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 other items necessary to
perfect all terminated Liens.
Section 7.4. Lender Expenses If Borrower fails, as required by the terms
hereof, (i) to pay any moneys (whether taxes, assessments, insurance premiums or
otherwise) due to third persons or entities, (ii) to make any deposits or
furnish any required proof of payment or deposit or (iii) to discharge any Lien
not permitted hereby, then Lender may, to the extent that it determines that
such failure by Borrower 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 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
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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 7.5. Inspection of Records During usual business hours, Lender
shall have the right to inspect Borrower's Books and records in order to verify
the amount or condition of, or any other matter relating to, the Collateral and
Borrower's financial condition and to copy and make extracts therefrom. Borrower
waives 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 7.6. 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 Borrower hereby warrants and represents to Lender the
following:
Section 8.1. Corporate Status Borrower is a corporation validly existing
and in good standing under the laws of the state of its incorporation; and 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 of this Agreement and each other Loan Document have been duly
authorized by all necessary corporate or partnership action. Borrower, has duly
executed and delivered this Agreement and each other Loan Document to which it
is a party, and each of them constitutes a valid and binding obligation of
Borrower, as applicable, enforceable according to its terms except as such
enforceability may be 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
of this Agreement and each other Loan Document to which they are 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; (c) will not
violate any agreement or instrument by which Borrower, as applicable, is bound;
(d) do not require any notice to consent by any Governmental Authority; and (e)
will not result in the creation of a Lien on any assets of Borrower 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 or
any of its property have been paid in full before delinquency or before the
expiration of any extension period; and Borrower has made due and timely payment
or deposit of all federal, state, and local taxes, assessments or contributions
required of it by law, except only for items that Borrower is currently
contesting diligently and in good faith and that have been fully disclosed in
writing to Lender.
Section 8.5. Deferred Compensation Plans Borrower has made all required
contributions to all deferred compensation plans to which it is required to
contribute, and Borrower has no liability for any unfunded benefits of any
single-employer or multi-employer plans. Borrower is not and at no time has been
a sponsor of, provided, or maintained for any employees any defined benefit
plan.
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Section 8.6. Litigation and Proceedings Except as set forth on Schedule 8.6
attached hereto, there are no outstanding judgments against Borrower or any of
its assets and there are no actions or proceedings pending by or against
Borrower 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, except for ongoing collection matters in which Borrower is the
plaintiff and except as set forth in Schedule 8.6 hereto.
Section 8.7. Business Borrower has all franchises, authorizations, patents,
trademarks, copyrights and other rights necessary to advantageously conduct its
business. They are all in full force and effect and are not in known conflict
with the rights of others. Borrower is not 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 business, properties or prospects.
Section 8.8. Laws and. Agreements Borrower is 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 is in
material compliance with all laws applicable to it.
Section 8.9. Ownership of Accounts Prior to the Lender making any Loan as
set forth herein, the Borrower will be the sole owner of, and have good and
marketable title to the Accounts pledged as security for such Loan.
Section 8.10. No conflict The granting of a security interest in the
pledged Accounts to the Lender will not violate the terms or provisions of any
loan document or any other agreement to which the Borrower then is a party or by
which it is bound.
Section 8.11. Security Interest After giving effect to each Loan
contemplated by this Agreement, the Lender will be the holder of a valid
perfected first priority security interest in the pledged Accounts. Accounts
pledged to the lender in connection with any Loan will be free and clear of all
liens.
Section 8:12. No Defaults As of the date on which an Account is pledged to
the Lender pursuant to the terms hereof there shall have been no default under
such Account.
Section 8.13. Origination Each Account will have been originated by the
Borrower in the ordinary course of its business in accordance with the
Borrower's regular credit approval process and does not contravene any laws,
rules or regulations applicable thereto. Borrower has submitted to each Eligible
Payor all necessary documentation and information for payment of such Eligible
Receivable and has fulfilled all of its other obligations in respect thereof,
including verification of the eligibility of the Eligible Receivable for payment
by such Eligible Payor. No pledged Account will have been selected on any basis
which would have any adverse effect on the Lender.
Section 8.14. Legality No pledged Account will have been originated in, or
be subject to the laws of, any jurisdiction whose laws would make the terms
hereof or any transaction contemplated hereby unlawful.
Section 8.15. Consents No consent or approval is required for the pledging
of any Accounts to the Lender pursuant to the terms of this Agreement, except
for such consents or approvals as have been obtained.
Section 8.16. Financial Condition All financial statements and information
relating to Borrower that have been or may hereafter be delivered by Borrower to
Lender are accurate and complete and have been prepared in accordance with GAAP.
Borrower has 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 since the date of the most recent financial
statements submitted to Lender.
Section 8.17. Health Care Laws
(a) Borrower has obtained all permits, licenses and other authorizations
that are required under Health Care Laws applicable to Borrower and it is in
compliance in all material respects with all terms and conditions of the
required permits, licenses and authorizations, and is 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.
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(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, relating in any way to Health
Care Laws.
Section 8.18. 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.
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, except for Liens to Lender and Permitted Liens.
Section 9.2. Business Borrower shall engage primarily in business of the
same general character as that now conducted by Borrower.
Section 9.3. Condition and Repair Borrower 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 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 establishes any reserve or other appropriate
provision required by GAAP. Borrower 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 has made such payments or deposits.
Section 9.5. Accounting System Borrower at all times hereafter shall
maintain a standard and modem system of accounting in accordance with GAAP, 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. Quarterly Financial Statements. Borrower shall furnish Lender
as soon as practicable but in no event later than forty-five (45) days after the
end of each of the first three quarterly fiscal periods of each fiscal year with
unaudited quarterly financial statements in form and substance as required by
Lender, including a balance sheet, an income statement and a statement of cash
flows, prepared in accordance with GAAP together with a certificate executed by
the chief financial officer of Borrower stating that the financial statements
fairly present the financial condition of Borrower as of the date and for the
periods covered and that as of the date of such certificate there has not been
any violation of any provision of this Agreement or the happening of any Event
of Default or Unmatured Default hereunder.
Section 9.7. Annual Financial Statements. Borrower shall furnish Lender as
soon as practicable but
13
in no event later than ninety (90) days after the close of each fiscal year with
audited annual financial statements, which financial statements shall be
prepared in accordance with GAAP and shall be certified without qualification by
an independent certified public accounting firm satisfactory to Lender. With all
financial statements, Borrower 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 9.8. Semi-Annual Financial Statements of Guarantor. Borrower or
Guarantor shall furnish Lender during the term of the Loan with current
financial statements of Guarantor semi-annually.
Section 9.9. Borrower shall maintain at all times during the term hereof
the following financial covenants, measured in accordance with GAAP: (i) minimum
Tangible Net Worth of $N/A, (ii) Debt to Equity Ratio of not greater than N/A to
1.0, (iii) Interest Expense Coverage of not less than N/A to 1.0, and (iv)
Current Ratio of not less than NA to 1.0.
Section 9.10. Further Information 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 authorizes Lender to contact credit
reporting agencies concerning, Borrower's credit standing. Borrower also
authorizes Lender to utilize Borrower's name in Lender's marketing materials.
Section 9.11. ERISA Covenants Guarantor or Borrower shall comply with all
applicable provisions of ERISA and all other laws applicable to any deferred
compensation plans with which Guarantor or Borrower is associated, and shall
promptly notify Lender of the occurrence of any event that could result in any
material liability of Borrower to any person to any person whatsoever with
respect to any such plan.
Section 9.12. Restrictions on Merger, Consolidation, Sale of Assets,
Issuance of Stock, etc. Without prior written consent of Lender, Borrower shall
not:
(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 of any business in excess of Two Hundred Fifty
Thousand Dollars ($250,000) 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 Borrower's right or ability to perform any of its obligations to Lender
pursuant to the terms of the Loan Documents; or
(f) authorize or issue any additional stock or equity interest.
Section 9.13. Health Care Covenants
(a) Borrower shall comply in all material respects with, and shall obtain
all permits required by, all Health Care Laws applicable to Borrower.
(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 would be required to notify any
Governmental Authority with jurisdiction over Health Care Laws.
Section 9.14. Distributions Borrower shall not make any Distributions
except as (i) set forth on Schedule 9.14 hereto, and (ii) authorized by Lender,
upon Borrower's request, which authorization shall not be
14
unreasonably withheld and which authorization shall not be deemed to authorize
any Distributions while an Event of Default is continuing or if such
Distribution would cause an Event of Default to occur.
Section 9.15. Subordinate Obligations Borrower shall not voluntarily prepay
any principal (including the making of any sinking fund payment), interest or
any other amount in respect of Subordinate Obligations.
Section 9.16. Amendments Borrower shall not 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, (iv) reduce any default or grace
period therein provided, or (v) otherwise have a material adverse effect on the
interests of Lender.
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 other
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;
(c) A court enters a decree or order for relief in respect of Borrower 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
for any substantial part of its property, or orders the windup or liquidation of
Borrower's affairs; or a petition initiating an involuntary case under any such
bankruptcy, insolvency, or similar law is filed against Borrower and is pending
for sixty (60) days without dismissal;
(d) Borrower 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
$50,000 is rendered against Borrower and remains undischarged for twenty (20)
days during which execution is not effectively stayed;
(f) Any guarantor of the Obligations revokes or attempts to revoke its
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 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;
15
(j) Borrower defaults under the terms of any indebtedness or lease
involving total payment obligations of Borrower in excess of $50,000 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;
(k) Demand is made for payment of any Indebtedness in excess of $50,000
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 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 $50,000 becomes a Lien upon any
or all of Borrower's assets, other than a Permitted Lien;
(n) A notice of Lien, levy or assessment in excess of $50,000 is filed of
record with respect to any or all of Borrower's assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal or other Governmental Authority, or any tax or debt
owning at any time hereafter to any one or more of such entities becomes a Lien
upon any or all of Borrower's 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 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) Lender believes in good faith that the prospect of payment of
performance of the Obligations by Borrower has been impaired; and there has been
a material adverse change in the financial and/or business condition of the
Borrower;
(q) Any of Borrower's assets in excess of $50,000 or any Collateral are
seized, subjected to a distress warrant, levied upon or come into the possession
of any judicial officer;
(r) Any representation or warranty made in writing to Lender by any officer
of Borrower in connection with the transactions contemplated in this Agreement
is materially incorrect when made;
(s) 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 $100,000; or
(t) Borrower shall fail to direct all receipts for Accounts to the Lock
Box.
SECTION 11
REMEDIES
Section 11.1. Specific Remedies. Upon the occurrence of any Event of
Default;
(a) Lender may cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any 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 then or thereafter held with
Lender, including amounts represented by certificates of deposit.
16
(d) 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.
(e) 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; and (vi) complete the performance required of Borrower under any
contract or agreement to which Borrower is a party and out of which Accounts
arise or may arise.
(f) Lender may (i) endorse Borrower's 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 name on drafts drawn on Account Debtors or
issuers of letters of credit; and (iii) notify the postal authorities in
Borrower's name to change the address for delivery of Borrower's mail to an
address designated by Lender, receive and open all mail addressed to Borrower,
copy all mail, return all mail relating to Collateral, and hold all other mail
available for pickup by Borrower.
Section 11.2. Power of Attorney Borrower hereby appoints Lender (and any of
Lender's officers, employees, or agents designated by Lender) as Borrower's
attorney, with power whether before or after the occurrence of an Event of
Default; (a) to endorse Borrower's 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 name on 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 mail to an address designated by Lender,
to receive and open all mail addressed to Borrower and to retain all mail
relating to the Collateral and forward all other mail to Borrower; (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
clause 11.2(b) 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 no 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 Documents 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, 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 now or hereafter existing at
law or in equity or by statute. Lender may 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.
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
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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, 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)
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: Cardiovascular Laboratories, Inc. of PA
000 Xxx Xxxxx Xxxxxx Xxxx
Xxxxx, XX 00000
Attention: Xxxxx Xxxxx, Chief Financial Officer
Telephone: (000) 000-0000; Telecopier: (000) 000-0000
To Lender: DVI Business Credit Corporation
0000 XxxXxxxxx Xxxx., Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Executive Vice President
Telephone: (000) 000-0000; Telecopier: (000) 000-0000
Copies to: DVI Business Credit Corporation
000 Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esquire
General Counsel
Telephone: (000) 000-0000; Telecopier: (000) 000-0000
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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, WITHOUT GIVING EFFECT TO
CONFLICTS OF LAW PRINCIPLES.
Section 13.7. Waiver of Trial by Jury LENDER AND BORROWER HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR THE RELATIONSHIP BETWEEN LENDER AND BORROWER.
Section 13.8. Submission to Jurisdiction. (a) BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY CALIFORNIA OR FEDERAL COURT SITTING IN ORANGE
COUNTY, CALIFORNIA, OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT. BORROWER HEREBY AGREES THAT SERVICE OF COPIES OF SUMMONS AND
COMPLAINTS AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY ACTION OR PROCEEDING
ARISING HEREUNDER MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS SET
FORTH AT SECTION 13.5.
(b) NOTHING IN THIS PARAGRAPH 13.8 SHALL AFFECT THE RIGHT OF LENDER TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ANY OF ITS
PROPERTIES IN THE COURTS OF OTHER JURISDICTIONS TO THE EXTENT OTHERWISE
PERMITTED BY LAW.
(c) TO THE EXTENT THAT BORROWER HAS OR HEREAFTER MAY ACQUIRE (i) ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OF CALIFORNIA OR ANY FEDERAL COURT
SITTING IN ORANGE COUNTY, CALIFORNIA OR FROM ANY LEGAL PROCESS OUT OF ANY SUCH
COURT (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF
OR ITS PROPERTY, OR (ii) ANY OBJECTION TO THE LAYING OF THE VENUE OR OF AN
INCONVENIENT FORUM OF ANY SUIT, ACTION OR PROCEEDING, IF BROUGHT IN CALIFORNIA
OR FEDERAL COURT SITTING IN ORANGE COUNTY, CALIFORNIA UNDER PROCESS SERVED IN
ACCORDANCE WITH SUBPARAGRAPH (a) ABOVE, BORROWER HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY OR OBJECTION IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE LOANS.
THIS AGREEMENT SHALL BECOME EFFECTIVE ONLY UPON WRITTEN ACCEPTANCE BY LENDER.
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement by
their duly authorized officers as of the date first above written.
BORROWER: LENDER:
CARDIOVASCULAR LABORATORIES, INC. OF PA DVI BUSINESS CREDIT CORPORATION
By: Xxxxx X. Xxxxx By:
----------------------------------- -----------------------------
Print Name: Xxxxx X. Xxxxx Print Name:
--------------------------- ---------------------
Title: Chief Financial Officer Title:
-------------------------------- --------------------------
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