EXHIBIT 10.3
[COMERICA LOGO] ADVANCE FORMULA AGREEMENT
As of February 18, 2005, this Agreement is made by TRINITY HEALTHCARE OF
WINSTON-SALEM, INC., a Georgia corporation ("Debtor"), unto COMERICA BANK, a
Michigan banking corporation ("Bank").
For and in consideration of the loans and other credit which Debtor may now or
hereafter obtain or request from Bank which are secured pursuant to a Security
Agreement dated February __, 2005, executed and delivered by Debtor unto Bank
(the "Security Agreement"), and for other good and valuable consideration,
Debtor agrees as follows:
1. FORMULA LOANS. The credit which Bank may now or hereafter extend to Debtor
subject to the limitations of this Agreement and to the conditions and
limitations of any other agreement between Debtor and Bank is identified
as follows:
$2,000,000 demand line of credit
and any extensions, renewals or substitutions thereof, whether in a
greater or lesser amount, including any letters of credit issued
thereunder ("Formula Loans").
2. ADVANCE FORMULA. Debtor warrants and agrees that Debtor's indebtedness to
Bank for the Formula Loans shall never exceed the sum of:
(a) the Applicable Percentage of its Eligible Accounts, as hereinafter
defined; plus
(b) thirty percent (30%) of its Eligible Inventory, as hereinafter
defined.
3. FORMULA COMPLIANCE. If the limitations in paragraph 2, above, are exceeded
at any time, Debtor shall immediately pay Bank sums sufficient to reduce
the Formula Loans by the amount of such excess.
4. ELIGIBLE ACCOUNT. "Eligible Account" shall mean an Account (as hereinafter
defined) arising in the ordinary course of Debtor's business which meets
each of the following requirements:
(a) it is not owing more than one hundred twenty (120) days after the
date of the original invoice or other writing evidencing such
Account;
(b) it is not owing by an Account Debtor (as hereinafter defined) who
has failed to pay fifty percent (50%) or more of the aggregate
amount of its Accounts owing to Debtor within one hundred twenty
(120) days after the date of the respective invoices or other
writings evidencing such Accounts;
(c) it is not owing by an Account Debtor who is the patient to whom the
goods or services were provided that gave rise to such Account, or
portion of such Account;
(d) it arises from the sale or lease of goods and such goods have been
shipped or delivered to the Account Debtor under such Account; or it
arises from services rendered and such services have been performed;
(e) it is evidenced by an invoice, dated not later than the date of
shipment or performance, rendered to such Account Debtor or some
other evidence of billing acceptable to Bank;
(f) it is not evidenced by any note, trade acceptance, draft or other
negotiable instrument or by any chattel paper, unless such note or
other document or instrument previously has been endorsed and
delivered by Debtor to Bank;
(g) it is a valid, legally enforceable obligation of the Account Debtor
thereunder, and is not subject to any offset, counterclaim or other
defense on the part of such Account Debtor or to any claim on the
part of such Account Debtor denying liability thereunder in whole or
in part;
(h) it is subject to a first priority, properly perfected security
interest in favor of Bank, and it is not subject to any sale of
accounts, any rights of offset, assignment, lien or security
interest whatsoever other than to Bank;
(i) it is not owing by a subsidiary or affiliate of Debtor;
(j) it is not owing by an Account Debtor which (i) does not maintain its
chief executive office in the United States of America or Canada,
(ii) is not organized under the laws of the United States of America
or Canada, or any state or province thereof, as applicable, or (iii)
is the government of any foreign country or sovereign state, or of
any state, province, municipality or other instrumentality thereof;
(k) unless it is an Account owing from Medicare, Medicaid or any other
federal or state department or agency approved in writing by Bank,
it is not an Account owing by the United States of America or any
state or political subdivision thereof, or by any department,
agency, public body corporate or other instrumentality of any of the
foregoing, unless all necessary steps are taken to comply with the
Federal Assignment of Claims Act of 1940, as amended, or with any
comparable state law, if applicable, and all other necessary steps
are taken to perfect Bank's security interest in such Account;
(l) it is not owing by an Account Debtor for which Debtor has received a
notice of (i) the death of the Account Debtor or any partner of the
Account Debtor, (ii) the dissolution, liquidation, termination of
existence, insolvency or business failure of the Account Debtor,
(iii) the appointment of a receiver for any part of the property of
the Account Debtor, or (iv) an assignment for the benefit of
creditors, the filing of a petition in bankruptcy, or the
commencement of any proceeding under any bankruptcy or insolvency
laws by or against the Account Debtor;
(m) it is not an Account billed in advance, payable on delivery, for
consigned goods, for guaranteed sales, for unbilled sales, for
progress xxxxxxxx, payable at a future date in accordance with its
terms, subject to a retainage or holdback by the Account Debtor or
insured by a surety company; and
(n) it is not owing by any Account Debtor whose obligations Bank, acting
in its sole discretion, shall have notified Debtor are not deemed to
constitute Eligible Accounts.
An Account which is at any time an Eligible Account, but which
subsequently fails to meet any of the foregoing requirements, shall
forthwith cease to be an Eligible Account.
For purposes of this Agreement, an "Account" shall mean any right of
Debtor to payment for goods sold or leased or for services rendered, but
shall not include interest or service charges; and "Account Debtor" shall
mean the person who is obligated on or under an Account.
5. ELIGIBLE INVENTORY. Unless stated otherwise in paragraph 13 below,
"Eligible Inventory" (a) shall be valued at the lesser of (i) the lesser
of the cost or present market value of Debtor's Inventory (as defined in
the Michigan Uniform Commercial Code, as amended and in effect from time
to time) determined in accordance with generally accepted accounting
principles, consistently applied ("GAAP"), or (ii) n/a percent (___%) of
the net orderly liquidation value of Debtor's Inventory, as determined by
Bank; and (b) shall mean all of Debtor's Inventory which is in good and
merchantable condition, which is not obsolete or discontinued, which would
be properly classified as "raw materials" or as "finished goods inventory"
under and in accordance with GAAP, which is subject to a first priority,
properly perfected security interest in favor of Bank and which is located
at one of the facilities identified on Schedule 1 annexed hereto (provided
that if Debtor is not the fee owner of such facility, Bank has received a
satisfactory landlord waiver or bailment and lien waiver executed by the
fee owner of such facility), but excluding (1) Debtor's work-in-process
inventory, consigned goods, inventory located outside the United States of
America or Canada, (2) Inventory covered by or subject to a seller's right
to repurchase, or any consensual or nonconsensual lien or security
interest (including, without limitation, purchase money security
interests) other than in favor of Bank, whether senior or junior to Bank's
security interest, and (3) Inventory that Bank, acting in its sole
discretion, after having notified Debtor, excludes. Inventory which is at
any time Eligible Inventory, but which subsequently fails to meet any of
the foregoing requirements, shall forthwith cease to be Eligible
Inventory.
6. CERTIFICATES, SCHEDULES AND REPORTS. Debtor will, within ten (10) days
after and as of the end of each month, deliver to Bank agings of the
Accounts and a schedule identifying each Eligible Account (not previously
so identified) and reports as to the amount of Eligible Inventory. Debtor
will from time to time deliver to Bank such additional schedules,
certificates and reports respecting all or any of the Collateral (as
defined in the Security Agreement), the items or amounts received by
Debtor in full or partial payment of any of the Collateral, and any goods
(the sale or lease of which by Debtor shall have given rise to any of the
Collateral) possession of which has
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been obtained by Debtor, all and as to such extent as Bank may request.
Any such schedule, certificate or report shall be executed by a duly
authorized officer of Debtor and shall be in such form and detail as Bank
may specify. Any such schedule identifying any Eligible Account shall be
accompanied (if Bank so requests) by a true and correct copy of the
invoice evidencing such Eligible Account and by evidence of shipment or
performance.
7. INSPECTIONS; COMPLIANCE. Debtor shall permit Bank and its designees from
time to time to make such inspections and audits, and to obtain such
confirmations or other information, with respect to any of the Collateral
or any Account Debtor as Bank is entitled to make or obtain under the
Security Agreement, and shall reimburse Bank on demand for all costs and
expenses incurred by Bank in connection with such inspections and audits.
Debtor shall further comply with all of the other terms and conditions of
the Security Agreement.
8. DEFAULT. Any failure by Debtor to comply with this Agreement shall
constitute a default under the Formula Loans and under the Security
Agreement and the Indebtedness, as defined therein.
9. AMENDMENTS; WAIVERS. This Agreement may be amended, modified or terminated
only in writing duly executed by Debtor and Bank. No delay by Bank in
requiring Debtor's compliance herewith shall constitute a waiver of such
right. The rights granted to Bank hereunder are cumulative, and in
addition to any other rights Bank may have by agreement or under
applicable law. This Agreement shall supersede and replace in their
entirety any prior advance formula agreements in effect between Bank and
Debtor. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Michigan, without regard to
conflict of laws principles.
10. DEMAND BASIS FORMULA LOANS. Notwithstanding anything to the contrary set
forth in this Agreement, in the event that the Formula Loans are at any
time on a demand basis, Debtor hereby acknowledges and agrees that the
formula set forth in paragraph 2 hereof is merely for advisory and
guidance purposes and Bank shall not be obligated to make any loans or
advances under the Formula Loans, and, notwithstanding the terms of
paragraph 3 above, Bank may at any time, at its option, demand payment of
any or all of the Formula Loans, whereupon the same shall become due and
payable.
11. DILUTION OF ACCOUNTS. In the event that Bank, at any time in its sole
discretion, determines that the dollar amount of Eligible Accounts
collectable by Debtor is reduced or diluted as a result of discounts or
rebates granted by Debtor to the respective Account Debtor(s), returned or
rejected Inventory or services, or such other reasons or factors as Bank
deems applicable, Bank may, in its sole discretion, upon five (5) business
days' prior written notice to Debtor, reduce or otherwise modify the
percentage of Eligible Accounts included within the Advance Formula under
paragraph 2(a) above and/or reduce the dollar amount of Debtor's Eligible
Accounts by an amount determined by Bank in its sole discretion.
12. JURY WAIVER. DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT
WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE
PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR
THE INDEBTEDNESS.
13. SPECIAL PROVISIONS:
"Applicable Percentage" shall mean eighty percent (80%) less the Dilution
Reserve.
"Dilution Reserve" means a number of percentage points determined in good
faith by Bank to reflect from time to time the number of percentage points
by which Dilution exceeds ten percent (10%). The Dilution Reserve shall be
determined on a rolling 12-month basis, adjusted upon receipt by Bank of
any collateral audit.
"Dilution" means a percentage derived by dividing (i) the aggregate amount
of credits, returned goods, adjustments, deductions, setoffs and
recoupments granted by Debtor or taken by all of Debtor's Account Debtors
in any calendar month by (ii) the aggregate amount of Debtor's sales
during the calendar month.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.
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DEBTOR:
Debtor's Chief Executive Office Address: TRINITY HEALTHCARE OF WINSTON-SALEM,
INC.
0000 Xxxx Xxxxx Xxxxxxxxx
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000 By: _______________________________
SIGNATURE OF LAKSHU SUNDARAM
Accepted and Approved:
Its: Vice President of Finance
COMERICA BANK
By: ____________________________________
SIGNATURE OF
Its: ____________________________________
TITLE
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SCHEDULE 1
1. 0000 Xxxx Xxxxx Xxxxxxxxx, Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
2. 000 Xxxx 00xx Xxxxxx, Xxxxxxxx, Xxxxxxx 00000
3. 000 Xxxxxxxx Xxxxxxx 000, Xxxxxxxx, Xxxxxxx
4. Xxxxx 000, the Xxxxxxx Building, 9801 West Kincey Avenue, Huntersville
Business Park, Xxxxxxxxxxxx, Xxxxx Xxxxxxxx 00000
5. _________________________________________________--
