LOAN AND SECURITY AGREEMENT
---------------------------
by and among
HARBORSIDE HEALTHCARE CORPORATION, et al.
as Borrowers
and
XXXXXX HEALTHCARE FINANCE, INC.
as Agent and Lender
and
FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF
as Lenders
September 13 , 2002
TABLE OF CONTENTS
ARTICLE I DEFINITIONS ...............................................................................1
Section 1.1. Account........................................................................1
Section 1.2. Account Debtor.................................................................1
Section 1.3. Additional Commitment Amount...................................................1
Section 1.4. Adjusted Cash Flow.............................................................1
Section 1.5. Affiliate......................................................................2
Section 1.6. Agent's Concentration Account..................................................2
Section 1.7. Agreement......................................................................2
Section 1.8. Appraisal......................................................................2
Section 1.9. Approved Acquisition Transaction...............................................2
Section 1.10. Approved Capital Lease Indebtedness............................................2
Section 1.11. Approved Indebtedness..........................................................2
Section 1.12. Approved Insurer Account Debtors...............................................2
Section 1.13. Approved Lease Transaction.....................................................2
Section 1.14. Bank Letter of Credit..........................................................2
Section 1.15. Borrowed Money.................................................................2
Section 1.16. Borrower.......................................................................3
Section 1.17. Borrowing Base.................................................................3
Section 1.18. Business Day...................................................................3
Section 1.19. Cash Equivalents...............................................................3
Section 1.20. Census Amount..................................................................3
Section 1.21. Change in Control..............................................................3
Section 1.22. Charges........................................................................4
Section 1.23. Closing; Closing Date..........................................................4
Section 1.24. Collateral.....................................................................4
Section 1.25. Commitment Fee.................................................................4
Section 1.26. Consent Borrowing..............................................................4
Section 1.27. Controlled Group...............................................................4
Section 1.28. Copyrights.....................................................................4
Section 1.29. Daily Interest Amount..........................................................4
Section 1.30. Daily Interest Rate............................................................4
Section 1.31. Daily Loan Balance.............................................................4
Section 1.32. Debt Service Coverage Ratio....................................................4
Section 1.33. Default........................................................................4
Section 1.34. Default Rate...................................................................4
Section 1.35. Defaulted Amount...............................................................4
Section 1.36. Defaulting Lender..............................................................4
Section 1.37. Depository Banks...............................................................4
Section 1.38. Distributions..................................................................4
Section 1.39. Eligible Assignee..............................................................5
Section 1.40. ERISA..........................................................................5
Section 1.41. Escalated Amounts..............................................................5
Section 1.42. Event of Default...............................................................5
Section 1.43. Facilities.....................................................................5
Section 1.44. Facing Fee.....................................................................5
Section 1.45. Facility Deposit Accounts......................................................5
Section 1.46. Fixed Charge Coverage Ratio....................................................5
Section 1.47. Fixed Charges..................................................................5
Section 1.48. Fremont........................................................................5
Section 1.49. GAAP...........................................................................6
Section 1.50. Governmental Agency............................................................6
Section 1.51. Governmental Authority.........................................................6
Section 1.52. Healthcare Laws................................................................6
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Section 1.53. Hazardous Material.............................................................6
Section 1.54. Xxxxxx.........................................................................6
Section 1.55. HHLP Collecting Bank...........................................................6
Section 1.56. HHLP Concentration Account.....................................................6
Section 1.57. Highest Lawful Rate............................................................6
Section 1.58. HIPAA..........................................................................6
Section 1.59. HIPAA Compliance Date..........................................................6
Section 1.60. HIPAA Compliance Plan..........................................................6
Section 1.61. HIPAA Compliant................................................................6
Section 1.62. Indebtedness...................................................................6
Section 1.63. Indemnitee.....................................................................6
Section 1.64. Initial Period.................................................................6
Section 1.65. Initial Maximum Term Facility Amount...........................................6
Section 1.66. Insurer........................................................................6
Section 1.67. Intercreditor Agreement........................................................7
Section 1.68. Facility Collecting Banks......................................................7
Section 1.69. Intermediate Concentration Account.............................................7
Section 1.70. Intellectual Property..........................................................7
Section 1.71. Interest Period................................................................7
Section 1.72. Interest Ratio.................................................................7
Section 1.73. Interest Settlement Date.......................................................7
Section 1.74. Investcorp.....................................................................7
Section 1.75. Issuing Lender.................................................................7
Section 1.76. Leases........................................................................7
Section 1.77. Lender.........................................................................7
Section 1.78. Lender Letter of Credit........................................................7
Section 1.79. Lessee Leases..................................................................7
Section 1.80. Letter of Credit Fee...........................................................7
Section 1.81. Letter of Credit Liability.....................................................7
Section 1.82. Letter of Credit Reserve.......................................................7
Section 1.83. LIBOR..........................................................................7
Section 1.84. Lien...........................................................................8
Section 1.85. Loans..........................................................................8
Section 1.86. Loan Documents.................................................................8
Section 1.87. Lockbox Agreements.............................................................8
Section 1.88. Material Adverse Effect........................................................8
Section 1.89. Maturity Date..................................................................8
Section 1.90. Maximum Revolving Facility Amount..............................................8
Section 1.91. Maximum Term Facility Amount...................................................8
Section 1.92. Mechanics Claims...............................................................8
Section 1.93. Medicaid/Medicare/TRICARE Account Debtor.......................................8
Section 1.94. Medical Services...............................................................8
Section 1.95. Minimum Census Amount..........................................................9
Section 1.96. Mortgage Borrowers.............................................................9
Section 1.97. Mortgaged Facilities...........................................................9
Section 1.98. Mortgages......................................................................9
Section 1.99. Net Operating Income...........................................................9
Section 1.100. Notes..........................................................................9
Section 1.101. Obligations....................................................................9
Section 1.101A. Participation Agreement........................................................9
Section 1.102. Patents........................................................................9
Section 1.103. Patient........................................................................9
Section 1.104. Permitted Liens...............................................................10
Section 1.105. Permitted Transaction Borrowing...............................................11
Section 1.106. Permits.......................................................................11
Section 1.107. Person........................................................................11
Section 1.108. Personal Property.............................................................11
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Section 1.109. Plan..........................................................................11
Section 1.110. Pledge Agreement..............................................................11
Section 1.111. Premises......................................................................11
Section 1.112. Prime Rate of Interest........................................................11
Section 1.113. Prohibited Transaction........................................................11
Section 1.114. Property......................................................................11
Section 1.115. Pro Forma Borrowing Base......................................................11
Section 1.116. Pro Rata Share................................................................11
Section 1.117. Qualified Account.............................................................11
Section 1.118. Rate Protection Agreement.....................................................12
Section 1.119. Real Property.................................................................12
Section 1.120. Real Property Collateral Fee..................................................12
Section 1.121. Register......................................................................12
Section 1.122. Reportable Event..............................................................12
Section 1.123. Requested Termination Date....................................................12
Section 1.124. Requisite Lenders.............................................................12
Section 1.125. Revolving Base Rate...........................................................12
Section 1.126. Revolving Base Rate Loan......................................................12
Section 1.127. Revolving Credit Loan.........................................................12
Section 1.128. Revolving Facility............................................................12
Section 1.129. Revolving Letter of Credit Reserve............................................12
Section 1.130. Revolving LIBOR Rate..........................................................13
Section 1.131. Revolving LIBOR Rate Loan.....................................................13
Section 1.132. Revolving Note................................................................13
Section 1.133. Sale Leaseback Transaction....................................................13
Section 1.133A. Security Documents............................................................13
Section 1.134. Settlement Date...............................................................13
Section 1.135. Specified Borrower............................................................13
Section 1.136. Stated Maturity Date..........................................................13
Section 1.137. Starting Census Amount........................................................13
Section 1.138. Subordinated Debt.............................................................13
Section 1.139. Subsidiary....................................................................13
Section 1.140. Sweep Event...................................................................13
Section 1.141. Sweep Event...................................................................13
Section 1.142. Term Facility.................................................................13
Section 1.143. Term Loan.....................................................................13
Section 1.144. Termination Notice Period.....................................................14
Section 1.145. Term Letter of Credit Reserve.................................................14
Section 1.146. Term LIBOR Rate...............................................................14
Section 1.147. Term Note.....................................................................14
Section 1.148. Trademarks....................................................................14
Section 1.149. Transfer Events...............................................................14
Section 1.150. TRICARE.......................................................................14
Section 1.151. UCC...........................................................................14
Section 1.152. Underwriting EBITDA[R]........................................................14
Section 1.153. Unrestricted Borrowings.......................................................14
Section 1.154. Unused Revolver Line Fee......................................................14
Section 1.155 Unused Term Line Fee..........................................................14
ARTICLE II AMOUNT AND TERMS OF CREDIT.....................................................................15
Section 2.1A. Revolving Facility............................................................15
Section 2.1B. Term Facility.................................................................18
Section 2.2. Loan Administration...........................................................20
Section 2.3. Collections, Disbursements, Borrowing Availability,
and Lockbox Account......................................................22
Section 2.4. Fees..........................................................................24
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Section 2.5. Payments......................................................................25
Section 2.6. Use of Proceeds...............................................................26
Section 2.7. Interest Rate Limitation......................................................26
Section 2.8. Maturity Date; Termination of Agreement; Termination Fee......................27
Section 2.9. Prepayment....................................................................27
Section 2.10. Joint and Several Liability; Binding Obligations..............................28
ARTICLE III COLLATERAL ..............................................................................28
Section 3.1. Generally.....................................................................28
Section 3.2. Lien Documents................................................................30
Section 3.3. Personal Property Collateral Administration...................................30
Section 3.4. Other Actions.................................................................30
Section 3.5. Searches......................................................................31
Section 3.6. Power of Attorney.............................................................31
Section 3.7. New Mortgage Borrowers........................................................32
Section 3.8. No Liens and Encumbrances; No Disposition of the
Personal Property or Real Property.........................................32
ARTICLE IV REPRESENTATIONS AND WARRANTIES.......................................................................33
Section 4.1. Subsidiaries..................................................................33
Section 4.2. Organization and Good Standing................................................33
Section 4.3. Authority.....................................................................34
Section 4.4. Binding Agreement.............................................................34
Section 4.5. Litigation....................................................................34
Section 4.6. No Conflicts..................................................................34
Section 4.7. Financial Condition...........................................................34
Section 4.8. No Default....................................................................34
Section 4.9. Title to Properties...........................................................35
Section 4.10. Taxes.........................................................................35
Section 4.11. Securities and Banking Laws and Regulations...................................35
Section 4.12. ERISA.........................................................................35
Section 4.13. Compliance with Laws..........................................................35
Section 4.14. Environmental Matters.........................................................36
Section 4.15. Places of Business............................................................36
Section 4.16. Intellectual Property.........................................................36
Section 4.17. Capitalization................................................................36
Section 4.18. Material Facts................................................................37
Section 4.19. Investments, Guarantees, and Certain Contracts................................37
Section 4.20. Business Interruptions........................................................37
Section 4.21. Names.........................................................................37
Section 4.22. Joint Ventures................................................................37
Section 4.23. Accounts......................................................................37
Section 4.24. Solvency......................................................................38
Section 4.25. Recoupments...................................................................38
Section 4.26. Reports.......................................................................38
Section 4.27. Compliance With Health Care Laws..............................................38
Section 4.28. Funds from Restricted Grants..................................................39
Section 4.29. Participation Agreements......................................................39
Section 4.30. HIPAA Compliance..............................................................39
Section 4.31. Medicaid/Medicare Programs....................................................39
Section 4.32. Certificate of Need...........................................................40
Section 4.33. Intentionally Left Blank......................................................40
Section 4.34. Xxxx Xxxxxx Act...............................................................40
Section 4.35. Government Contracts..........................................................40
Section 4.36. Leases........................................................................40
Section 4.37. Condemnation..................................................................41
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Section 4.38. Intentionally Left Blank.....................................................41
Section 4.39. Compliance....................................................................41
Section 4.40. Unrecorded Contracts..........................................................41
Section 4.41. Tax Lot.......................................................................41
Section 4.42. Flood Plain...................................................................41
Section 4.43. Real Property.................................................................41
Section 4.44. Insurance.....................................................................41
Section 4.45. Utilities.....................................................................42
Section 4.46. Streets.......................................................................42
Section 4.47. Other Liens...................................................................42
Section 4.48. Title and Ownership...........................................................42
Section 4.49. Restricted Use................................................................42
Section 4.50. Indebtedness to HHLP Collecting Bank, Intermediate
Collecting Bank or Depository Banks.......................................42
Section 4.51. Indebtedness Allocable to Rhode Island Facilities.............................42
ARTICLE V CLOSING AND CONDITIONS OF LENDING..............................................................43
Section 5.1. Conditions Precedent to Agreement.............................................43
Section 5.2. Conditions Precedent to Advances..............................................45
Section 5.3. Closing.......................................................................45
Section 5.4. Waiver of Rights..............................................................45
ARTICLE VI AFFIRMATIVE COVENANTS..........................................................................45
Section 6.1. Financial Statements and Collateral Reports...................................45
Section 6.2. Payments Under this Agreement.................................................46
Section 6.3. Existence, Good Standing, and Compliance with Laws............................46
Section 6.4. Legality......................................................................46
Section 6.6. Taxes and Charges.............................................................47
Section 6.7. Insurance.....................................................................47
Section 6.8. Information; Visits and Inspections...........................................47
Section 6.9. Preservation and Maintenance of Facilities and Property.......................47
Section 6.10. Notification of Events of Default and Adverse Developments....................48
Section 6.11. Employee Benefit Plans........................................................49
Section 6.12. Financing Statements..........................................................49
Section 6.13. Financial Records.............................................................49
Section 6.14. Collection of Accounts........................................................49
Section 6.15. Intentionally Left Blank......................................................49
Section 6.16. Business Conducted............................................................49
Section 6.17. Litigation and Other Proceedings..............................................49
Section 6.18. Bank Accounts.................................................................49
Section 6.19. Submission of Personal Property Documents.....................................49
Section 6.20. Licensure; Medicaid/Medicare/TRICARE Cost Reports.............................50
Section 6.21. Officer's Certificates........................................................50
Section 6.22. Financial Covenants...........................................................50
Section 6.23. Census........................................................................51
Section 6.24. Post-Closing Obligations......................................................51
Section 6.25. Capital Adequacy and Other Adjustments........................................51
Section 6.26. Taxes.........................................................................51
Section 6.27. Further Documentation; Loss of Notes..........................................52
Section 6.28. Intentionally Deleted.........................................................52
Section 6.29. Termination/Default of Contracts..............................................52
Section 6.30. Reserves and Escrows..........................................................52
Section 6.31. Rhode Island Facilities.......................................................53
ARTICLE VII NEGATIVE COVENANTS.............................................................................54
Section 7.1. Borrowing.....................................................................54
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Section 7.2. Joint Ventures................................................................55
Section 7.3. Intentionally Deleted.........................................................55
Section 7.4. No Change in Ownership, Operation or Control..................................55
Section 7.5. Sale and Leaseback............................................................56
Section 7.6. Distributions and Management Fees.............................................56
Section 7.7. Loans.........................................................................57
Section 7.8. Contingent Liabilities........................................................58
Section 7.9. Subsidiaries..................................................................58
Section 7.10. Compliance with ERISA.........................................................59
Section 7.11. Certificates of Need..........................................................59
Section 7.12. Transactions with Affiliates..................................................59
Section 7.13. Intentionally Left Blank......................................................59
Section 7.14. Intentionally Left Blank......................................................59
Section 7.15. Contracts and Agreements......................................................59
Section 7.16. Margin Stock..................................................................60
Section 7.17. Truth of Statements and Certificates..........................................60
Section 7.18. Intentionally Left Blank......................................................60
Section 7.19. Certain Fundamental, Tax Designation and Fiscal Year Changes..................60
Section 7.20. Leases of Real Property.......................................................60
Section 7.21. Conduct of Business...........................................................61
Section 7.22. Bank Accounts.................................................................61
Section 7.23. IRS Form 8821.................................................................61
ARTICLE VIII EVENTS OF DEFAULT61
Section 8.1. Events of Default.............................................................61
Section 8.2. Acceleration..................................................................63
Section 8.3. Remedies......................................................................63
Section 8.4. Nature of Remedies............................................................64
Section 8.5. Appointment of Attorney-in-Fact...............................................65
Section 8.6. Limitation on Duty of Agent and Lenders with Respect to Collateral............65
Section 8.7. Application of Proceeds.......................................................65
Section 8.8. License of Intellectual Property..............................................66
ARTICLE IX AGENT ..............................................................................66
Section 9.1. Agent.........................................................................66
Section 9.2. Notice of Default.............................................................69
Section 9.3. Action by Agent...............................................................69
Section 9.4. Amendments, Waivers and Consents..............................................70
Section 9.5. Assignments and Participations in Loans.......................................70
Section 9.6. Set Off and Sharing of Payments...............................................72
Section 9.7. Disbursement of Funds.........................................................72
Section 9.8. Settlements, Payments and Information.........................................72
Section 9.9. Discretionary Advances........................................................74
ARTICLE X MISCELLANEOUS 74
Section 10.1. Expenses and Taxes............................................................74
Section 10.2. Entire Agreement; Amendments.................................................74
Section 10.3. No Waiver; Cumulative Rights..................................................75
Section 10.4. Notices.......................................................................75
Section 10.5. Severability..................................................................76
Section 10.6. Successors and Assigns........................................................76
Section 10.7. Counterparts..................................................................76
Section 10.8. Interpretation................................................................76
Section 10.9. Survival of Terms.............................................................76
Section 10.10. Release of Agent and Lenders..................................................77
Section 10.11. Time..........................................................................77
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Section 10.12. Commissions...................................................................77
Section 10.13. Third Parties.................................................................77
Section 10.14. Discharge of Borrowers' Obligations...........................................77
Section 10.15. Information to Participants...................................................77
Section 10.16. Indemnity.....................................................................77
Section 10.17. Appointment of Agent under this Agreement.....................................78
Section 10.18. Lenders Approvals............................................................78
Section 10.19. Further Assurances............................................................78
Section 10.20. Choice of Law; Written Consent to Jurisdiction................................78
Section 10.21. Waiver of Trial by Jury.......................................................78
Section 10.22. Harborside of Rhode Island....................................................79
ARTICLE XI JOINT AND SEVERAL LIABILITY AND SURETYSHIP WAIVERS.............................................79
Section 11.1. Independent Obligations; Subrogation..........................................79
Section 11.2. Authority to Modify Obligations and Security..................................79
Section 11.3. Waiver of Defenses............................................................80
Section 11.4. Exercise of Lender's Rights...................................................80
Section 11.5. Additional Waivers............................................................80
Section 11.6. Additional Indebtedness.......................................................80
Section 11.7. Subordination.................................................................80
Section 11.8. Revival.......................................................................81
Section 11.9. Understanding of Waivers......................................................81
List of Exhibits
List of Schedules
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LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of September 13, 2002, by and among
HARBORSIDE HEALTHCARE CORPORATION, a Delaware corporation (the "Company") and each direct or indirect Subsidiary
of the Company identified on the signature pages of this Agreement (collectively, "Borrowers"), the financial
institutions(s) listed on the signature pages hereof, and their respective successors and Eligible Assignees
(individually, "Lender" and, collectively, "Lenders") and XXXXXX HEALTHCARE FINANCE, INC., a Delaware corporation
(in its capacity as the agent for the Lenders, "Agent").
RECITALS
--------
A........Borrowers desire to establish certain financing arrangements with and borrow funds from
Lenders, and Lenders are willing to establish such arrangements for and make loans and extensions of credit to
Borrowers, on the terms and conditions set forth below.
B........The parties desire to define the terms and conditions of their relationship and to reduce their
agreements to writing.
NOW, THEREFORE, in consideration of the promises and covenants contained in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
covenant and agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, unless otherwise specified, all references to "Sections" shall be deemed to
refer to Sections of this Agreement. The definitions in this Agreement shall apply equally to singular and
plural forms of the defined terms and, whenever the context may require, any pronoun shall include the
corresponding masculine feminine and neuter forms. Accounting terms not otherwise defined herein shall have the
meanings ascribed to them in accordance with GAAP. The following terms used in this Agreement shall have the
respective meanings provided for in the UCC: "Chattel Paper", "Deposit Account", "Documents", "Equipment",
"Fixtures", General Intangibles", "Goods", "Instruments", "Inventory", "Letter of Credit", "Proceeds".
The following terms shall have the meanings set forth below:
Section 1.1. .....Account. "Account" means any right to payment of a monetary obligation, whether or
--------
not earned by performance, including, but not limited to, the right to payment of management fees. Without
limiting the generality of the foregoing, the term "Account" shall further include any "account" (as that term is
defined in the Uniform Commercial Code now or hereafter in effect), any accounts receivable, any
"health-care-insurance receivables" (as that term is defined in the Uniform Commercial Code now or hereafter in
effect), any "payment intangibles" (as that term is defined in the Uniform Commercial Code now or hereafter in
effect) and all other rights to payment of every kind and description, whether or not earned by performance.
Section 1.2. .....Account Debtor. "Account Debtor" means any Person obligated on any Account of
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Borrower (other than Specified Borrowers), including without limitation, any Insurer and any
Medicaid/Medicare/TRICARE Account Debtor.
Section 1.3.......Additional Commitment Amount. "Additional Commitment Amount" means the Maximum Term
-------------------------------
Facility Amount less the Initial Maximum Term Facility Amount.
Section 1.4.......Adjusted Cash Flow. "Adjusted Cash Flow" means for the then most recent preceding
--------------------
twelve (12) month period, Net Operating Income of the Mortgage Borrowers less the greater of (a) $300 per bed at
the Mortgaged Facilities capital replacement reserve or (b) Agent's engineer's estimate of the cost of necessary
or appropriate capital replacements at the Mortgaged Facilities; such calculation of Adjusted Cash Flow is
subject to further adjustment by Agent for pro forma revenue and expense changes, and otherwise, in Agent's
reasonable credit judgment consistent with Agent's general business practices, including, without limitation,
reductions arising from Medicare rate expirations and/or pro forma general liability insurance expense
adjustments.
Section 1.5. .....Affiliate. "Affiliate" means, as to any Person (a) any other Person which, directly
----------
or indirectly, is in control of, is controlled by, or is under common control with such Person, or (b) any other
Person who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any
Person described in clause (a) above. For purposes of this definition, control of a Person shall mean the power,
direct or indirect, (x) to vote 25% or more of the securities having ordinary voting power for the election of
directors of such person, whether by ownership of securities, contract, proxy or otherwise, or (y) to direct or
cause to direction of the management and policies of such Person, whether by ownership of securities, contract,
proxy or otherwise.
Section 1.6. .....Agent's Concentration Account. "Agent's Concentration Account" has the meaning set
--------------------------------
forth in Section 2.3(c).
Section 1.7. .....Agreement. "Agreement" means this Loan and Security Agreement, as it may be amended
----------
or supplemented from time to time, together with all attachments, exhibits, schedules, riders and addenda, all of
which are incorporated herein by this reference and made a part hereof.
Section 1.8.......Appraisal. "Appraisal" means an appraisal report in form and content acceptable to
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Lender, prepared by an independent MAI appraiser in accordance with the Financial Institutions Reform, Recovery
and Enforcement Act ("FIRREA") and the regulations promulgated pursuant to such act.
Section 1.9.......Approved Acquisition Transaction. "Approved Acquisition Transaction" has the meaning
----------------------------------
set forth in Exhibit X.
Section 1.10......Approved Capital Lease Indebtedness. "Approved Capital Lease Indebtedness" has the
--------------------------------------
meaning set forth in Exhibit X.
Section 1.11......Approved Indebtedness. "Approved Indebtedness" has the meaning set forth in
------------------------
Exhibit X.
Section 1.12......Approved Insurer Account Debtors. "Approved Insurer Account Debtors" has the meaning
-----------------------------------
set forth in Section 2.3(a).
Section 1.13......Approved Lease Transaction. "Approved Lease Transaction" has the meaning set forth
-----------------------------
in Exhibit X.
Section 1.14......Bank Letter of Credit. "Bank Letter of Credit" means each Letter of Credit issued by
----------------------
a bank acceptable to and approved by Agent for the account of Borrowers and supported by a risk participation
agreement issued by Agent.
Section 1.15. ....Borrowed Money. "Borrowed Money" means, with respect to any Person, without
----------------
duplication (a) all indebtedness for borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) that portion
of obligations with respect to capital leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (d) any obligations of such Person issued or assumed as the deferred purchase price of
property or services purchased by such Person (other than trade debt incurred and accrued expenses payable in the
ordinary course of business and due within six (6) months of the incurrence thereof or evidenced by a note or
other instrument or, if overdue for more than 6 months, as to which a dispute exists and adequate reserves in
conformity with GAAP have been established on the books of such Person), (e) all Borrowed Money of others secured
by (or for which the holder of such Borrowed Money has an existing right, contingent or otherwise, to be secured
by) any Lien on, or payable out of the proceeds of production from, any property or asset owned, held or acquired
by such Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or
2
is nonrecourse to the credit of that Person, (f) all guaranty obligations of such Person in respect of any
Borrowed Money of any other Person, (g) the maximum amount of all standby letters of credit issued or bankers'
acceptances facilities created for the account of such Person and, without duplication, all drafts drawn
thereunder (to the extent unreimbursed), (h) the principal balance outstanding under any synthetic lease, tax
retention operating lease, off-balance sheet loan or similar off-balance sheet financing product plus any accrued
----
interest thereon, and (i) the Borrowed Money of any partnership or unincorporated joint venture in which such
Person is a general partner or joint venturer; but excluding letters of credit supporting the purchase of goods
in the ordinary course of business and expiring no more than six months from the date of issuance; provided that
(x) obligations in respect of Rate Protection Agreements, and (y) obligations relating to Bowie Center L.P. shall
not be included in this definition at any time and (z) interest expense in respect of the obligations described
in clause (y) shall be excluded from all calculations of financial tests under this Agreement.
Section 1.16......Borrower. "Borrower" has the meaning set forth in the Preamble.
---------
Section 1.17. ....Borrowing Base. "Borrowing Base" has the meaning set forth in Section 2.1A(d).
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Section 1.18. ....Business Day. "Business Day" means any day on which financial institutions are open
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for business in the State of New York, excluding Saturdays and Sundays.
Section 1.19......Cash Equivalents. "Cash Equivalents" means: (a) marketable direct obligations issued
----------------
or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the
full faith and credit of the United States, in each case maturing within one (1) year from the date of
acquisition thereof; (b) readily marketable direct obligations issued by any state of the United States or any
political subdivision thereof having one of the two highest rating categories obtainable from Standard and Poor's
Corporation ("S&P") or Xxxxx'x Investors Service, Inc. ("Moody's"), (c) commercial paper maturing no more than
one (1) year from the date issued and, at the time of acquisition, having a rating of at least A-1 from S&P or at
least A-2 or higher from Moody's; (d) certificates of deposit or bankers' acceptances maturing within one (1)
year from the date of issuance thereof issued by, or overnight reverse repurchase agreements from any depository
institution organized under the laws of the United States of America, or any state thereof or the District of
Columbia, having combined capital and surplus of not less than $250,000,000 and not subject to setoff rights in
favor of such bank for debt for Borrowed Money and (e) investment property held in any investment fund investing
95% of its assets in securities of the type described in clauses (a) through (d) above.
Section 1.20......Census Amount. "Census Amount" means the number of beds for which services are billed
---------------
for all Facilities, other than Facilities added after the Closing Date that are only managed by a Borrower, and
are neither owned nor leased by a Borrower.
Section 1.21......Change in Control. "Change in Control" means the occurrence of any of the following
------------------
events: (a) at any time prior to an IPO by the Company, (i) Investcorp and its Affiliates and any Person that is
a member of the senior management of the Company, or any entity the majority of the equity ownership interests of
which is owned by such senior management of the Company, shall cease to own, directly or indirectly, in the
aggregate, at least fifty one percent (51%) of the issued and outstanding voting stock of the Company, free and
clear of all Liens or (ii) at any time individuals who, as of the Closing Date, were members of the board of
directors of the Company (together with any new director whose election by the Company's board of directors or
whose nomination for election by the Company's shareholders were approved by a vote of at least a majority of the
directors then in office who themselves were either directors as of the Closing Date or whose election or
nomination for election was previously so approved) cease for any reason to constitute at least a majority of the
members of the board of directors of the Company then in office or (b) at any time after an IPO by the Company
(i) any Person, other than Investcorp and its Affiliates shall own, directly or indirectly, in the aggregate
thirty percent (30%) or more of the outstanding voting stock of the Company (ii) at any time individuals who, as
of the Closing Date, were members of the board of directors of the Company (together with any new director whose
election by the Company's board of directors or whose nomination for election by the Company's shareholders were
approved by a vote of at least a majority of the directors then in office who themselves were either directors as
of the Closing Date or whose election or nomination for election was previously so approved) cease for any reason
to constitute at least a majority of the members of the board of directors of the Company then in office.
3
Section 1.22. ....Charges. "Charges" has the meaning set forth in Section 6.6.
--------
Section 1.23. ....Closing; Closing Date. "Closing" and "Closing Date" have the meanings set forth in
------------------------
Section 5.3.
Section 1.24. ....Collateral. "Collateral" means, collectively, the Personal Property and the Real
----------
Property. Collateral shall not include (a) any assets (including Accounts and real property) or capital stock of
any Specified Borrower, or (b) any permits or licenses in which a landlord under a Lessee Lease entered into
following the date hereof has requested a security interest from its Borrower tenant, to the extent permitted by
Section 3.1(a)(vi).
Section 1.25. ....Commitment Fee. "Commitment Fee" has the meaning set forth in Section 2.4(a).
---------------
Section 1.26. ....Consent Borrowing. "Consent Borrowing" has the meaning set forth in Section 2.2(a).
------------------
Section 1.27. ....Controlled Group. "Controlled Group" means all businesses that would be treated as a
------------------
single employer under Section 4001(b) of ERISA.
Section 1.28. ....Copyrights. "Copyrights" means collectively all of the following (a) all U.S.
----------
copyrights, rights and interests in copyrights, works protectable by copyright, copyright registrations and
copyright applications, (b) all renewals of any of the foregoing; (c) all income, royalties, damages and payments
now or hereafter due and/or payable under any of the foregoing or with respect to any of the foregoing, including
damages or payments for past, present or future infringements of any of the foregoing; (d) the right to xxx for
past, present and future infringements of any of the foregoing; and (e) all rights corresponding to any of the
foregoing throughout the world.
Section 1.29. ....Daily Interest Amount. "Daily Interest Amount" has the meaning set forth in
-------------------------
Section 9.8(a)(3).
Section 1.30. ....Daily Interest Rate. "Daily Interest Rate" has the meaning set forth in
------------------------
Section 9.8(a)(3)
Section 1.31. ....Daily Loan Balance. "Daily Loan Balance" has the meaning set forth in
-----------------------
Section 9.8(a)(3).
Section 1.32......Debt Service Coverage Ratio. "Debt Service Coverage Ratio" has the meaning set
----------------------------
forth in Section 6.22.
Section 1.33......Default. "Default" means any event, condition or circumstance that with the giving of
--------
notice, the lapse of time, or both, would become an Event of Default.
Section 1.34......Default Rate. "Default Rate" means a rate per annum equal to two percent (2%) per
-------------
annum above the then applicable rate at which interest accrues in respect of the applicable Obligations under
this Agreement prior to the occurrence of an Event of Default.
Section 1.35......Defaulted Amount. "Defaulted Amount" means, with respect to any Lender at any time,
------------------
any amount required to be paid hereunder or under any other Loan Document by such Lender to the Agent or any
other Lender that has not been so paid.
Section 1.36......Defaulting Lender. "Defaulting Lender" means, at any time, any Lender that owes a
-------------------
Defaulted Amount.
Section 1.37......Depository Banks. "Depository Banks" has the meaning set forth in Section 2.3(a).
-----------------
Section 1.38......Distributions. "Distributions" has the meaning set forth in Section 7.6.
--------------
4
Section 1.39......Eligible Assignee. "Eligible Assignee" shall mean (a) a commercial bank organized
-------------------
under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least
$100,000,000 (or $250,000,000 in the case of an assignment of a Revolving Facility commitment); (b) a commercial
bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation
and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and
surplus of at least $100,000,000 (or $250,000,000 in the case of an assignment of a Revolving Facility
commitment), provided that such bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (c) any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which extends credit or buys loans as one of its
businesses, including but not limited to, insurance companies, mutual funds and lease financing companies, (d) a
Related Fund (as such term is defined in Section 9.5(d)), and (e) a Person that is primarily engaged in the
business of lending that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a
Subsidiary, or (iii) a Person of which a Lender is a Subsidiary; provided, however, that no Affiliate of any
-------- -------
Borrower shall be an Eligible Assignee.
Section 1.40. ....ERISA. "ERISA" has the meaning set forth in Section 4.12.
------
Section 1.41......Escalated Amounts. "Escalated Amounts" has the meaning set forth in Section 2.4(c).
------------------
Section 1.42. ....Event of Default. "Event of Default" and "Events of Default" have the meanings set
-----------------
forth in Section 8.1.
Section 1.43......Facilities. "Facilities" means all hospitals, outpatient clinics, long term care
-----------
facilities, nursing homes, rehabilitation facilities, assisted living facilities, independent living facilities,
hospice facilities, medical office buildings or other healthcare facilities owned, leased, managed or operated by
Borrowers or their direct or indirect wholly-owned Subsidiaries. "Facility" means any given healthcare facility
operated by any Borrower or its direct or indirect Subsidiaries.
Section 1.44......Facing Fee. "Facing Fee" has the meaning set forth in Section 2.4(c).
-----------
Section 1.45......Facility Deposit Accounts. "Facility Deposit Accounts" has the meaning set forth in
----------------------------
Section 2.3(a).
Section 1.46......Fixed Charge Coverage Ratio. "Fixed Charge Coverage Ratio" has the meaning set forth
------------------------------
in Section 6.22.
Section 1.47......Fixed Charges. "Fixed Charges" means, during any period, with respect to Borrowers,
----------------
on a consolidated basis, the sum of (a) Lease Expenses paid directly to the relevant landlord (including base
rent and additional rent but excluding any property taxes), (b) Interest Expense (excluding any interest which
accrues, but is not paid currently), (c) scheduled amortization payments of principal with regard to all Borrowed
Money (excluding (i) any final maturity payments of principal, (ii) principal payments on the Subordinated Debt
and (iii) principal payments on or before the Closing Date under the Credit Agreement dated as of August 11, 1998
by and among Borrowers and The Chase Manhattan Bank, as agent for itself and the other lenders who are parties
thereto, as amended, and (d) all cash dividends or other cash distributions, direct or indirect, in respect of
any class of stock or other equity interest of the Borrowers (except to the extent permitted by Section 7.6(b));
provided that Fixed Charges for any period shall include payments of principal of Borrowed Money described (I) in
clause (f) of the definition thereof only to the extent that the primary obligor thereon has not in fact made
such payment by the time when Fixed Charges are being calculated, or (II) in clause (i) of the definition thereof
only to the extent of the Borrowers' interest in the applicable partnership or joint venture or such greater
portion of such payments, if any, that any Borrower may be obligated to pay because of the failure of the
partnership or joint venture to have made such payments by the time when Fixed Charges are being calculated.
Section 1.48......Fremont. "Fremont" means Fremont Investment & Loan, a California industrial bank and
--------
a participant in the Loans, and its successors and assigns.
5
Section 1.49. ....GAAP. "GAAP" means generally accepted accounting principles applied in a consistent
-----
manner.
Section 1.50. ....Governmental Agency. "Governmental Agency" has the meaning set forth in
----------------------
Section 3.1(b)(viii).
Section 1.51. ....Governmental Authority. "Governmental Authority" means and includes any federal,
------------------------
state, District of Columbia, county, municipal, or other government and any department, commission, board,
bureau, agency or instrumentality thereof, whether domestic or foreign.
Section 1.52. ....Healthcare Laws. "Healthcare Laws" has the meaning set forth in Section 4.27.
----------------
Section 1.53. ....Hazardous Material. "Hazardous Material" means any substances defined or designated
--------------------
as hazardous or toxic waste, hazardous or toxic material, hazardous or toxic substance, or other similar term, by
any environmental statute, rule or regulation or any Governmental Authority applicable to Borrower or its
business, operations or assets.
Section 1.54. ....Xxxxxx. "Xxxxxx" means Xxxxxx Healthcare Finance, Inc., a Delaware corporation.
-------
Section 1.55......HHLP Collecting Bank. "HHLP Collecting Bank" has the meaning set forth in
------------------------
Section 2.3(a).
Section 1.56......HHLP Concentration Account. "HHLP Concentration Account" has the meaning set forth in
----------------------------
Section 2.3(a).
Section 1.57. ....Highest Lawful Rate. "Highest Lawful Rate" means the maximum lawful rate of interest
---------------------
referred to in Section 2.7 that may accrue pursuant to this Agreement.
Section 1.58......HIPAA. "HIPAA" means the Health Insurance Portability and Accountability Act of 1996,
------
as the same may be amended, modified or supplemented from time to time, and any successor statute thereto, and
any and all rules or regulations promulgated from time to time thereunder.
Section 1.59......HIPAA Compliance Date. "HIPAA Compliance Date" has the meaning set forth in
------------------------
Section 4.30.
Section 1.60......HIPAA Compliance Plan. "HIPAA Compliance Plan" has the meaning set forth in
------------------------
Section 4.30.
Section 1.61......HIPAA Compliant. "HIPAA Compliant" has the meaning set forth in Section 4.30.
----------------
Section 1.62......Indebtedness. "Indebtedness" means, without duplication, (i) all obligations for
-------------
Borrowed Money, (ii) all items that, in accordance with GAAP, would be included in determining total liabilities
as shown on the liability side of a balance sheet of a Borrower as of the date on which Indebtedness is to be
determined, (iii) all obligations of any other person or entity which any Borrower has guaranteed, and (iv) the
Obligations.
Section 1.63......Indemnitee. "Indemnitee" has the meaning set forth in Section 10.16.
-----------
Section 1.64......Initial Period. "Initial Period" has the meaning set forth in Section 2.9(a).
----------------
Section 1.65......Initial Maximum Term Facility Amount. "Initial Maximum Term Facility Amount" has the
--------------------------------------
meaning set forth in Section 2.1B(a).
Section 1.66......Insurer. "Insurer" means a Person that insures a Patient against certain of the costs
--------
incurred in the receipt by such Patient of Medical Services, or that has an agreement with Borrower to compensate
Borrower for providing goods or services to a Patient.
6
Section 1.67......Intercreditor Agreement. "Intercreditor Agreement" means those certain Accounts
-------------------------
Receivable Intercreditor Agreements dated on or about the date hereof by and among the Company, Agent, THCI
Company, LLC, THCI Mortgage Holding Company LLC, and/or certain of their respective affiliates and subsidiaries
named therein.
Section 1.68......Intermediate Collecting Bank. "Intermediate Collecting Bank" has the meaning set
-------------------------------
forth in Section 2.3(a).
Section 1.69......Intermediate Concentration Account. "Intermediate Concentration Account has the
-------------------------------------
meaning set forth in Section 2.3(a).
Section 1.70......Intellectual Property. "Intellectual Property" means, collectively, all of the
-----------------------
following: Copyrights, Patents and Trademarks.
Section 1.71......Interest Period. "Interest Period" means, in connection with each LIBOR loan, an
-----------------
interest period which Borrower shall elect to be applicable to such Loan, which Interest Period shall be either a
one (1) or three (3) month period.
Section 1.72......Interest Ratio. "Interest Ratio" has the meaning set forth in Section 9.8(a)(3).
--------------
Section 1.73......Interest Settlement Date. "Interest Settlement Date" has the meaning set forth in
--------------------------
Section 9.8(a)(4).
Section 1.74......Investcorp. "Investcorp" means Investcorp S.A., a Luxembourg corporation.
----------
Section 1.75......Issuing Lender. "Issuing Lender" has the meaning set forth in Section 2.1A(e)(6).
---------------
Section 1.76......Leases. "Leases" means all leases and subleases affecting the use, enjoyment or
-------
occupancy of the Real Property, including without limitation, resident care agreements and service agreements
that include an occupancy agreement, whether now existing or hereafter arising.
Section 1.77......Lender. "Lender" has the meaning set forth in the Preamble.
-------
Section 1.78......Lender Letter of Credit. "Lender Letter of Credit" has the meaning set forth in
---------------------------
Section 2.1A(e).
Section 1.79......Lessee Leases. "Lessee Leases" has the meaning set forth in Section 4.36.
--------------
Section 1.80......Letter of Credit Fee. "Letter of Credit Fee" has the meaning set forth in
-------------------------
Section 2.4(c).
Section 1.81......Letter of Credit Liability. "Letter of Credit Liability" means all reimbursement and
----------------------------
other liabilities of any Borrower with respect to each Lender Letter of Credit, including without duplication:
(a) the amount available to be drawn at the time of determination; (b) all amounts which have been paid or made
available by any Lender issuing a Lender Letter of Credit or any bank issuing a Bank Letter of Credit to the
extent not debited to the Revolving Facility or the Term Facility pursuant to Section 2.1A(e)(1), as applicable,
or otherwise reimbursed; and (c) all unpaid interest, fees and expenses related thereto.
Section 1.82......Letter of Credit Reserve. "Letter of Credit Reserve" means at any time, the sum of
--------------------------
the Revolving Letter of Credit Reserve and the Term Letter of Credit Reserve.
Section 1.83......LIBOR. "LIBOR" means, for each Interest Period, a rate per annum equal to the offered
------
rate for U.S. dollar deposits on Telerate Page 3750 as of 11:00 a.m. London time (or such other pages as may
7
replace the Telerate Page on that service for the purposes of displaying London interbank offered rates of major
banks). LIBOR for each calendar month shall be fixed based upon LIBOR published prior to and in effect on the
first (1st) business day of such month.
Section 1.84......Lien. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit
-----
arrangement, encumbrance, lien (statutory or otherwise), charge or other security interest or any preference,
priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement and any capital lease having
substantially the same practical effect as any of the foregoing).
Section 1.85......Loans. "Loans" means advances under the Revolving Facility and the Term Facility.
------
Section 1.86......Loan Documents. "Loan Documents" means and includes this Agreement, the Notes, the
----------------
Mortgages, the Officer's Certificate of the Chief Financial Officer of the Borrower delivered by Borrowers at
Closing, and each and every other document now or hereafter executed or certified and delivered by or on behalf
of Borrowers in connection with this Agreement, as any of them may be amended, modified, increased, renewed or
restated from time to time.
Section 1.87......Lockbox Agreements. "Lockbox Agreements" has the meaning set forth in Section 2.3(d).
-------------------
Section 1.88......Material Adverse Effect. "Material Adverse Effect" shall mean any fact, event or
--------------------------
circumstance that, alone or when taken with other events or conditions occurring or existing concurrently with
such event or condition (a) has or is reasonably expected to have a material adverse effect on the business,
operations, condition (financial or otherwise), assets, liabilities, or properties of the Borrowers taken as a
whole; (b) has or is reasonably expected to have any material adverse effect on the validity or enforceability of
this Agreement or the Loan Documents; (c) materially adversely affects or is reasonably expected to materially
adversely affect the ability of Borrowers to pay and perform the Obligations; (d) materially adversely affects or
is reasonably expected to materially adversely affect the ability of the Agent or the Lenders to enforce its
rights and remedies under this Agreement or any of the Loan Documents; or (e) has or is reasonably expected to
have a material adverse effect on the Collateral, the Liens of Lender in the Collateral or the priority of such
Liens.
Section 1.89......Maturity Date. "Maturity Date" has the meaning set forth in Section 2.8.
---------------
Section 1.90......Maximum Revolving Facility Amount. "Maximum Revolving Facility Amount" has the
-------------------------------------
meaning set forth in Section 2.1A(a).
Section 1.91......Maximum Term Facility Amount. "Maximum Term Facility Amount" has the meaning set
--------------------------------
forth in Section 2.1B(a).
Section 1.92......Mechanics Claims. "Mechanics Claims" has the meaning set forth in Section 6.6.
------------------
Section 1.93......Medicaid/Medicare/TRICARE Account Debtor. "Medicaid/Medicare/TRICARE Account Debtor"
-------------------------------------------
means any Account Debtor which is (a) the United States of America acting under the Medicaid/Medicare program
established pursuant to the Social Security Act, (b) the United States of America acting under TRICARE, (c) any
state or the District of Columbia acting pursuant to a health plan adopted pursuant to Title XIX of the Social
Security Act or (d) any agent, carrier, administrator or intermediary for any of the foregoing.
Section 1.94......Medical Services. "Medical Services" means medical and health care services provided
------------------
to a Patient, including, but not limited to, medical and health care services provided to a Patient and performed
by any Borrower which are covered by a policy of insurance issued by an Insurer, and includes physician services,
nurse and therapist services, dental services, hospital services, skilled nursing facility services,
comprehensive outpatient rehabilitation services, home health care services, hospice services, residential and
out-patient behavioral healthcare services, and medicine or health care equipment provided by any Borrower to a
Patient for a necessary or specifically requested valid and proper medical or health purpose.
8
Section 1.95......Minimum Census Amount. "Minimum Census Amount" means ninety percent (90%) of the
------------------------
Starting Census Amount for the Facilities taken as a whole.
Section 1.96......Mortgage Borrowers. "Mortgage Borrowers" means the owners and lessees of the Real
--------------------
Property, as listed in Schedule 1.119.
--------------
Section 1.97......Mortgaged Facilities. "Mortgaged Facilities" means the Facilities located on Real
----------------------
Property.
Section 1.98......Mortgages. "Mortgages" means the mortgages, deeds of trust, collateral assignments of
----------
leases or other real estate security documents delivered by any Mortgage Borrower to Agent, on behalf of Lenders,
with respect to the Real Property in form and substance reasonably satisfactory to Agent.
Section 1.99......Net Operating Income. "Net Operating Income" shall mean for any period Net Income
-----------------------
generated by the provision of Medical Services plus, to the extent included in the calculation of Net Income,
without duplication, the sum of (i) Tax Expense (not including property taxes), (ii) Interest Expense,
(iii) Depreciation Expense, (iv) Amortization Expense, (v) non-cash insurance related expenses (including
increases in incurred-but-not-reported (IBNR) reserves), and (vi) amortization of goodwill; provided however, if
-------- -------
such Net Income is generated by an entity in which Borrowers are less than a 100% owner, then such Net Income
shall be included in Net Operating Income only to the extent that Borrowers' ownership of an interest in such
entity entitles it to a share in the net income thereof, and then only to the extent of such share.
Section 1.100.....Notes. "Notes" shall mean any promissory note in the form attached as Exhibits A-1
------ -------------
and A-2, from time to time evidencing Borrowers' obligation to pay the Obligations, including, but not limited
-------
to, the Term Note and the Revolving Note, as any of them may be amended, modified, increased, renewed or restated
from time to time.
Section 1.101.....Obligations. "Obligations" means, without duplication, (a) the principal of, and
------------
interest on, the Notes and all other sums, fees, charges and expenses due or payable under this Agreement or the
other Loan Documents, (b) all agreements and covenants with and obligations to Lender arising under, out of, or
as a result of or in connection with the Loan Documents, (c) all amounts advanced by Lender to preserve, protect,
defend, and enforce its rights under this Agreement and the other Loan Documents, including its rights in the
Collateral, and all expenses incurred by Lender in connection therewith and due and payable under the Loan
Documents, and (d) any and all other present and future indebtedness, liabilities and obligations of every kind
and nature whatsoever of the Borrowers to the Lender under the Loan Documents, including without limitation,
Letter of Credit Reserve howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent, joint or several, both now and hereafter existing, or due or to become due, whether as borrower,
guarantor, surety, indemnitor, assignor, pledgor or otherwise.
Section 1.101A....Participation Agreement. "Participation Agreement" has the meaning set forth in
-------------------------
Section 9.5(b).
Section 1.102.....Patents. "Patents" means collectively all of the following (a) all U.S. patents and
-------
patent applications and the inventions and improvements described and claimed therein, and patentable inventions;
(b) the reissues, divisions, continuations, renewals, extensions and continuations-in-part of any of the
foregoing; (c) all income, royalties, damages and payments now or hereafter due and/or payable under any of the
foregoing or with respect to any of the foregoing, including, without limitation, damages and payments for past,
present and future infringements of any of the foregoing; (d) the right to xxx for past, present and future
infringements of any of the foregoing; and (e) all rights corresponding to any of the foregoing throughout the
world.
Section 1.103.....Patient. "Patient" means any Person receiving Medical Services from Borrower and all
--------
Persons legally liable to pay Borrower for such Medical Services other than Insurers.
9
Section 1.104. ...Permitted Liens. "Permitted Liens" means:
----------------
(a) deposits or pledges of Personal Property to secure obligations under workmen's compensation,
social security or similar laws, or under unemployment insurance;
(b) deposits or pledges of Personal Property (other than Accounts) from Borrowers (other than
Mortgage Borrowers who are not operators) to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, licenses, statutory obligations, surety and appeal
bonds and other obligations of like nature arising in the ordinary course of business;
(c) carriers', warehousemen's, mechanic's, workmen's or materialmen's or other like Liens, and
landlord's Liens (which landlord's Liens, with respect to the Collateral, have been expressly
waived or subordinated (or under the law pursuant to which they arise are subordinate, as
evidenced by an opinion of counsel delivered pursuant to Section 5.1(l)) to the Liens arising in
connection with this Agreement), arising in the ordinary course of business with respect to
obligations which are not due, or which are bonded or which are being contested in full
compliance with Section 6.6 of this Agreement;
(d) Liens and encumbrances in favor of Agent for the benefit of Lenders;
(e) Liens on assets acquired in a transaction financed by, and granted in order to secure, any
Approved Capital Lease Indebtedness permitted by Exhibit X, provided that no such Lien shall
---------
extend to or cover property of the Company or such Subsidiary other than the respective property
so acquired;
(f) Liens on assets acquired in a transaction financed by, and granted in order to secure, any
Approved Indebtedness permitted in Exhibit X; provided that (i) no such Liens shall extend to
---------
cover property of the Company or such Subsidiary other than the respective property so acquired;
(g) Liens on or (with respect to Capital Stock) restrictions on pledges of certain of the Capital
Stock or personal property (excluding Collateral) of any Borrower (other than a Mortgage
Borrower) which on the date hereof secure operating leases of such Borrower, to the extent set
forth in Schedule 3.1 and Schedule 7.4 or, in the future, in connection with an Approved
--------------------------------
Acquisition Transaction or Approved Lease Transaction.
(h) Liens on Capital Stock or any assets of Specified Borrowers;
(i) Liens set forth in Schedule 1.104;
--------------
(j) Liens for taxes, assessments or other governmental charges not yet delinquent or which are being
contested in good faith and by appropriate and lawful proceedings, and Borrowers shall have set
aside such reserves with respect thereto as are required by GAAP and deemed adequate by Agent and
by the Company and its independent accountants;
(k) easements (including, without limitation, reciprocal easement agreements), rights-of-way,
building, zoning and similar restrictions, utility agreements, covenants, reservations,
restrictions, encroachments, changes, and other similar encumbrances or title defects incurred in
the ordinary course of business, which do not materially detract from the aggregate value of any
Real Property or materially interfere with or adversely affect in any material respect the
ordinary conduct of the business of the Borrowers on any Real Property subject thereto;
(l) with respect to any Real Property, such exceptions to title as are set forth in the lender's
title insurance policy delivered on or about the date hereof;
(m) Liens on goods (and proceeds thereof) securing reimbursement obligations in respect of commercial
letters of credit issued in accordance with the terms of this Agreement provided such Liens are
not and shall not encumber any of the Collateral;
10
(n) Liens on that certain Collateral described in Section 3.1(a)(iii); provided, however, that such
Liens shall be subordinate in payment and priority to the Liens granted to Agent in this
Agreement.
Section 1.105.....Permitted Transaction Borrowing. "Permitted Transaction Borrowing" has the meaning
----------------------------------
set forth in Section 2.2(a).
Section 1.106.....Permits. "Permits" has the meaning set forth in Section 6.3.
--------
Section 1.107.....Person. "Person" means an individual, partnership, corporation, trust, joint venture,
-------
joint stock company, limited liability company, association, unincorporated organization, Governmental Authority,
or any other entity.
Section 1.108.....Personal Property. "Personal Property" has the meaning set forth in Section 3.1.
------------------
Section 1.109.....Plan. "Plan" has the meaning set forth in Section 4.12.
-----
Section 1.110.....Pledge Agreement. "Pledge Agreement" means that certain Ownership Pledge and Security
------------------
Agreement, dated the date hereof, pursuant to which all of the stock, membership, partnership and other ownership
and equity interests of all of the Mortgage Borrowers are pledged to Agent for the benefit of Lenders.
Section 1.111.....Premises. "Premises" has the meaning set forth in Section 4.14.
---------
Section 1.112.....Prime Rate of Interest. "Prime Rate of Interest" means that rate of interest
--------------------------
designated as such by Citibank, N.A., or any successor thereto, as the same may from time to time fluctuate.
Section 1.113.....Prohibited Transaction. "Prohibited Transaction" means a "prohibited transaction"
------------------------
within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Internal Revenue Code that is not exempt
under Section 407 or Section 408 of ERISA or Section 4975(c)(2) or (d) of the Internal Revenue Code or under a
class exemption granted by the U.S. Department of Labor.
Section 1.114.....Property. "Property" means the Real Property and the property encumbered by the
---------
Lessee Leases.
Section 1.115.....Pro Forma Borrowing Base. "Pro Forma Borrowing Base" has the meaning set forth in
---------------------------
Exhibit X.
Section 1.116.....Pro Rata Share. "Pro Rata Share" means the percentage obtained by dividing (i) the
----------------
Loan commitment of that Lender by (ii) all such commitments of all Lenders, as such percentage may be adjusted by
assignments permitted hereunder.
Section 1.117. ...Qualified Account. "Qualified Account" means an Account of any Borrower (other than a
-------------------
Specified Borrower) generated in the ordinary course of such Borrower's business from the sale of goods or
rendition of Medical Services that Lender, in its sole credit judgment, deems to be a Qualified Account. Without
limiting the generality of the foregoing, no Account shall be a Qualified Account if: (a) the Account or any
portion of the Account is payable by an individual beneficiary, recipient or subscriber individually and not
directly to a Borrower by a Medicaid/Medicare/TRICARE Account Debtor or Approved Insurer Account Debtor; (b) the
Account remains unpaid more than one hundred twenty (120) days past the claim or invoice date (but in no event
more than one hundred thirty-five (135) days after the applicable Medical Services have been rendered); (c) the
Account is subject to any defense, set-off (in respect of a liquidated amount), counterclaim, deduction,
discount, credit, chargeback, freight claim, allowance, right of recoupment, or adjustment of any kind; (d) any
part of any goods the sale of which has given rise to the Account has been returned, rejected, lost, or damaged;
(e) if the Account arises from the sale of goods by a Borrower, the sale was not an absolute sale, or the sale
was made on consignment or on approval or on a sale-or-return basis, or the sale was made subject to any other
repurchase or return agreement, or the goods have not been shipped to the Account Debtor or its designee; (f) if
the Account arises from the performance of Medical Services, the Medical Services have not actually been
11
performed or the Medical Services were undertaken in violation of any law; (g) the Account is subject to a Lien
other than a Permitted Lien; (h) Borrowers know or should have known of the bankruptcy, receivership,
reorganization, or insolvency of the Account Debtor; (i) the Account is evidenced by chattel paper or an
instrument of any kind, or has been reduced to judgment; (j) the Account is an Account of an Account Debtor
having its principal place of business or executive office outside the United States; (k) the Account Debtor is
an Affiliate or subsidiary of a Borrower; (l) more than ten percent (10%) of the aggregate balance of all
Accounts owing from the Account Debtor obligated on the Account are outstanding more than 150 days past their
invoice date; (m) fifty percent (50%) or more of the aggregate unpaid Accounts from any single Account Debtor are
not deemed Qualified Accounts under this Agreement unless such Account is so deemed solely pursuant to clause (o)
of this Section 1.117; (n) any covenant, representation or warranty contained in the Loan Documents with respect
to such Account has been breached (it being understood that, for purposes of this definition, the words "to the
best of Borrowers' knowledge" shall be deemed excised); (o) the Account fails to meet such other reasonable
specifications and requirements which may from time to time be established by Lenders consistent with Lenders'
general business practices in this area following Agent's analysis or audit; provided that the Agent shall
provide notice to the Company of any such other specifications and requirements, and such change shall not be
effective until the date of delivery of the next monthly Borrowing Base Certificate due after such notice; or
(p) is not paid directly to or collected directly or indirectly in the HHLP Concentration Account.
Section 1.118.....Rate Protection Agreement. "Rate Protection Agreement" has the meaning set forth in
----------------------------
Section 2.1B(e).
Section 1.119.....Real Property. "Real Property" means all property (including without limitation
---------------
"property", as such term is defined in the Mortgages) described in Schedule 1.119.
--------------
Section 1.120.....Real Property Collateral Fee. "Real Property Collateral Fee" has the meaning set
--------------------------------
forth in Section 2.4(f).
Section 1.121.....Register. "Register" has the meaning set forth in Section 9.5(e).
---------
Section 1.122.....Reportable Event. "Reportable Event" means a "reportable event" as defined in
------------------
Section 4043(c) of ERISA for which the notice requirements of Section 4043(a) of ERISA are not waived.
Section 1.123.....Requested Termination Date. "Requested Termination Date" has the meaning set forth in
----------------------------
Section 2.8(b).
Section 1.124.....Requisite Lenders. "Requisite Lenders" means Lenders, (other than a Defaulting
-------------------
Lender), holding or being responsible for: 70% or more of the sum of the (a) outstanding Loans, (b) Letter of
Credit Reserve and (c) unutilized commitments of all Lenders that are not Defaulting Lenders. For purposes of
this Agreement, the consent, execution or approval of Fremont as a participant, shall be required in each
instance where the consent, execution or approval of Requisite Lenders is required, and Fremont shall be sent
notice thereof at the time the Lenders are sent such notice.
Section 1.125. ...Revolving Base Rate. "Revolving Base Rate" means a rate of interest equal to one and
---------------------
one quarter percent (1.25%) per annum above the Prime Rate of Interest.
Section 1.126.....Revolving Base Rate Loan. "Revolving Base Rate Loan" means a Revolving Credit Loan
--------------------------
bearing interest at a rate determined by reference to the Revolving Base Rate.
Section 1.127.....Revolving Credit Loan. "Revolving Credit Loan" has the meaning set forth in
------------------------
Section 2.1A(b).
Section 1.128.....Revolving Facility. "Revolving Facility" has the meaning set forth in
-------------------------
Section 2.1A(a).
Section 1.129.....Revolving Letter of Credit Reserve. "Revolving Letter of Credit Reserve" means at any
------------------------------------
time, an amount equal to the sum of, without duplication, (a) the aggregate amount of Letter of Credit Liability
with respect to Lender Letters of Credit issued under the Revolving Facility plus any additional amounts
12
resulting from any increase in the amounts of any such Letter of Credit which may become available to be drawn
within sixty (60) days, by escalation or otherwise, with respect to all such Lender Letters of Credit outstanding
at such time plus, (b) the aggregate amount theretofore paid by Agent or any Lender under such Lender Letters of
Credit and not debited to the Revolving Facility pursuant to Section 2.1A(e)(1) or otherwise reimbursed by
Borrowers.
Section 1.130. ...Revolving LIBOR Rate. "Revolving LIBOR Rate" means a rate of interest equal to four
----------------------
and one quarter percent (4.25%) per annum above the applicable LIBOR.
Section 1.131.....Revolving LIBOR Rate Loan. "Revolving LIBOR Rate Loan" means a Revolving Credit Loan
---------------------------
bearing interest at a rate determined by reference to the Revolving LIBOR Rate.
Section 1.132.....Revolving Note. "Revolving Note" means the Revolving Note referred to in
-----------------
Section 2.1A(c), as it may be amended, modified, increased, renewed or restated from time to time.
Section 1.133.....Sale Leaseback Transaction. "Sale Leaseback Transaction" has the meaning set forth in
----------------------------
Exhibit X.
Section 1.133A....Security Documents . "Security Documents" means the collective reference to this Loan
---------------------
and Security Agreement, the Mortgages, the Assignment of Leases and Rents from certain of the Borrowers to Agent,
dated on or about the date hereof, the Pledge Agreement, and each and every other security document now or
hereafter executed and delivered to the Agent by or on behalf of any or all of the Borrowers granting a Lien on
any property of any Person to secure the obligations and liabilities of any Borrower under any Loan Document, as
any of them may be amended, modified, renewed or restated from time to time.
Section 1.134.....Settlement Date. "Settlement Date" has the meaning set forth in Section 9.8(a)(2).
----------------
Section 1.135.....Specified Borrower. "Specified Borrower" means those Borrowers (other than Mortgage
--------------------
Borrowers), the Accounts of which the Agent elects not to finance on the terms set forth in Section 7.9.
Section 1.136.....Stated Maturity Date. "Stated Maturity Date" has the meaning set forth in Section 2.8.
---------------------
Section 1.137.....Starting Census Amount. "Starting Census Amount" shall mean the average Census Amount
------------------------
for the Facilities taken as a whole, as measured during the thirty (30) day period preceding the date of this
Agreement. The Starting Census Amount, as represented to Agent by the Company, is shown on Schedule 1.137.
--------------
Section 1.138. ...Subordinated Debt. "Subordinated Debt" has the meaning set forth in Section 4.19.
------------------
Section 1.139. ...Subsidiary. "Subsidiary" means, with respect to any Person, any corporation,
-----------
association or other business entity of which more than fifty percent (50%) of the total voting percentage of
shares of stock (or equivalent ownership or controlling interest) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly by that Person or one or more of the other subsidiaries of that Person or a
combination thereof. Notwithstanding anything to the contrary in this definition, "Subsidiary" shall not include
Bowie Center L.P.
Section 1.140. ...Sweep Event. "Sweep Event" has the meaning set forth in Section 2.5(e).
------------
Section 1.141. ...Taxes. "Taxes" has the meaning set forth in Section 6.30(b).
------
Section 1.142.....Term Facility. "Term Facility" has the meaning set forth in Section 2.1B(a).
--------------
Section 1.143.....Term Loan. "Term Loan" has the meaning set forth in Section 2.1B(a).
----------
13
Section 1.144.....Termination Notice Period. "Termination Notice Period" has the meaning set forth in
----------------------------
Section 2.8(b).
Section 1.145.....Term Letter of Credit Reserve. "Term Letter of Credit Reserve" means at any time, an
-------------------------------
amount equal to the sum of, without duplication, (a) the aggregate amount of Letter of Credit Liability with
respect to Lender Letters of Credit issued under the Term Facility plus any additional amounts resulting from any
increase in the amounts of any such Letter of Credit which may become available to be drawn within sixty (60)
days, by escalation or otherwise, with respect to all such Lender Letters of Credit outstanding at such time
plus, (b) the aggregate amount theretofore paid by Agent or any Lender under such Lender Letters of Credit and
not debited to the Term Facility pursuant to Section 2.1A(e)(1) or otherwise reimbursed by Borrowers.
Section 1.146.....Term LIBOR Rate. means a rate of interest equal to four and one-tenth percent (4.10%)
----------------
per annum above the LIBOR; provided, however, that in no event shall the Term LIBOR Rate fall below seven percent
-------- -------
(7.00%) per annum so long as this Agreement remains in effect.
Section 1.147.....Term Note. "Term Note" means the Term Note referred to in Section 2.1B(c), as it may
----------
be amended, modified, increased, renewed or restated from time to time.
Section 1.148.....Trademarks. "Trademarks" means collectively all of the following: (a) all
-----------
trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles,
service marks, logos, other business identifiers, prints and labels on which any of the foregoing have appeared
or appear, all registrations and recordings thereof, and all applications in connection therewith; (b) all
renewals thereof; (c) all income, royalties, damages and payments now or hereafter due and/or payable under any
of the foregoing or with respect to any of the foregoing including damages and payments for past, present and
future infringements of any of the foregoing; (d) the right to xxx for past, present and future infringements of
any of the foregoing; (e) all rights corresponding to any of the foregoing throughout the world; and (f) all
goodwill associated with and symbolized by any of the foregoing.
Section 1.149.....Transfer Events. "Transfer Events" has the meaning set forth in Section 7.4(b).
-----------------
Section 1.150.....TRICARE. "TRICARE" means, collectively, a program of medical benefits covering former
--------
and active members of the uniformed services and certain of their dependents, financed and administered by the
United States Departments of Defense, Health and Human Services and Transportation, which program was formerly
known as the "Civilian Health and Medical Program of the Uniformed Services (CHAMPUS)".
Section 1.151.....UCC. "UCC" means the Uniform Commercial Code as in effect from time to time in the
----
State of New York; provided, however, to the extent the law of any other state or other jurisdiction applies to
-------- -------
the attachment, perfection, priority or enforcement of any Lien granted to Agent in any of the Collateral, "UCC"
means, as applicable, the Uniform Commercial Code as in effect in such other state or jurisdiction for purposes
of the provisions hereof relating to such attachment, perfection, priority or enforcement of a Lien in such
Collateral. To the extent this Agreement defines the term "Collateral" by reference to terms used in the UCC,
each of such terms shall have the broadest meaning given to such terms under the UCC as in effect in any state or
other jurisdiction.
Section 1.152.....Underwriting EBITDA[R]. "Underwriting EBITDA[R]" has the meaning set forth in Exhibit
------------------------
X.
Section 1.153.....Unrestricted Borrowings. "Unrestricted Borrowings" has the meaning set forth in
-------------------------
Section 2.2(b).
Section 1.154 Unused Revolver Loan Fee. "Unused Revolver Loan Fee" has the meaning set forth in
---------------------------
Section 2.4(b).
Section 1.155. Unused Term Loan Fee. "Unused Term Loan Fee" has the meaning set forth in
------------------------
Section 2.4(b).
14
ARTICLE II
AMOUNT AND TERMS OF CREDIT
--------------------------
Section 2.1A. ...Revolving Facility.
-------------------
.........(a)......The maximum aggregate principal amount of revolving credit loans extended by Lenders
to Borrowers under this Agreement (collectively, the "Revolving Facility") that may be outstanding at any time is
TWENTY FIVE MILLION and NO/100 DOLLARS ($25,000,000.00), as may be increased from time to time by Agent in its
sole discretion pursuant to Section 7.9 (the "Maximum Revolving Facility Amount"). Each Lender, severally, but
not jointly, agrees to lend to Borrowers from time to time such Lender's Pro Rata Share of each advance under the
Revolving Facility.
.........(b)......The Revolving Facility shall be in the nature of a revolving line of credit, and shall
include sums advanced and other credit extended by Lenders to or for the benefit of Borrowers from time to time
under this Section 2.1A (each a "Revolving Credit Loan") up to the Maximum Revolving Facility Amount depending
upon the availability in the Borrowing Base and the requests of Borrowers pursuant to the terms and conditions of
Section 2.2. For purposes of calculating availability, the amount borrowed in respect of the issuance of any
Lender Letter of Credit that may increase in amount during its term shall be assumed to be the fully escalated
amount of such Lender Letter of Credit. The outstanding principal balance of the Revolving Facility may
fluctuate from time to time, to be reduced by repayments made by Borrowers (which may be made without penalty or
premium subject to the limitations in Section 2.9), and to be increased by future Revolving Credit Loans. For
purposes of this Agreement, any determination as to whether there is availability within the Borrowing Base for
advances or extensions of credit shall be made by Agent, on behalf of the Lenders, in its discretion, applied in
a manner reasonably consistent with Agent's general business practices, by reference to the most recent monthly
Borrowing Base Certificate delivered to Agent pursuant to Section 6.1, and is final and binding upon Borrowers
absent manifest error. Each Borrowing Base Certificate shall remain in effect from and including the date on
which such Borrowing Base Certificate is delivered, to, but excluding the date on which the next Borrowing Base
Certificate is delivered. The Agent shall provide notice to the Company of any adjustment to the Borrowing Base,
including standards of eligibility and reserves, and any such change shall not be effective until the date of
required delivery of the next monthly Borrowing Base Certificate due under Section 6.1 after such notice.
.........(c)......At Closing, Borrowers shall execute and deliver to Lenders promissory notes, each with
appropriate insertions evidencing Borrowers' unconditional obligation to repay each respective Lender for the
Revolving Credit Loans, Letters of Credit, advances, and other extensions of credit made under the Revolving
Facility, in the form of Exhibit A-1 to this Agreement (as each may be amended, modified, increased, restated or
-----------
replaced from time to time, collectively, the "Revolving Note"), dated the date of this Agreement, each payable
to the order of each respective Lender in accordance with the terms thereof. In the event of an assignment under
Section 9.5, Borrowers shall, upon surrender and cancellation of the assigning Lender's Revolving Note issue new
Revolving Notes to reflect the interest held by the assigning Lender and its Eligible Assignee. The Revolving
Note shall bear interest on the outstanding principal balance of each Revolving Credit Loan from the date of the
Revolving Credit Loan until repaid at a rate per annum (on the basis of the actual number of days elapsed over a
year of 360 days) equal to the Revolving Base Rate for each Revolving Base Rate Loan and at the Revolving LIBOR
Rate for each Revolving LIBOR Rate Loan; provided, however, after the occurrence and during the continuance of an
-------- -------
Event of Default such rate shall be equal to the Default Rate. The Revolving Facility and all advances and other
extension of credit in respect of the Revolving Facility shall be deemed evidenced by the Revolving Note, which
is deemed incorporated into and made a part of this Agreement by this reference.
.........(d)......Subject to the terms and conditions of this Agreement, advances under the Revolving
Facility shall be made against a borrowing base equal to eighty-five percent (85%) of Qualified Accounts due and
owing from any Medicaid/Medicare/TRICARE Account Debtor or other Account Debtor (the "Borrowing Base"). Agent,
in its reasonable credit judgment consistent with its general business practices, may further adjust the
Borrowing Base by applying percentages (known as "liquidity factors") to Qualified Accounts by payor class based
upon Borrowers' actual recent collection history for each such payor class (i.e., Medicare, Medicaid, commercial
insurance, etc.) in a manner consistent with Agent's underwriting practices and procedures. Such liquidity
15
factors may be adjusted by Agent from time to time as warranted by Agent's underwriting practices and procedures
using its reasonable credit judgment consistent with its general business practices. Any such change shall not
become effective until the date of the next monthly Borrowing Base Certificate due under Section 6.1 after notice
of such change. In addition, Agent, in its reasonable credit judgment consistent with its general business
practices, may establish, from time to time, and may reduce the Borrowing Base by such reserves as Agent deems
reasonably appropriate, including without limitation reserves to reflect historically recurring declines, or
projected declines, in the amount of Qualified Accounts, and reserves with respect to all recoupments and
overpayments; provided that, any such change shall not become effective until the date of the next monthly
-------- ----
Borrowing Base Certificate due under Section 6.1 after notice of such change; provided further that in the event
-------- -------
of any occurrence requiring notice under Section 6.10(g), Agent may immediately require the establishment of
reserves that, in its sole credit judgment, are necessary to offset any loss of Qualified Accounts or other
Collateral related to the closing of such Facility.
.........(e)......Advances under the Revolving Facility may, in addition to wire transfer of immediately
available funds, be utilized, upon the request of Company, for (i) the issuance of any Letter of Credit by Agent,
or (ii) the issuance by Agent of risk participations to banks to induce such banks to issue any Bank Letter of
Credit for the account of Borrowers (each of (i) and (ii) above a "Lender Letter of Credit"). Each Lender shall
be deemed to have purchased a participation in each Lender Letter of Credit issued on behalf of any Borrower in
an amount equal to its Pro Rata Share thereof. In no event shall any Lender Letter of Credit be issued, renewed
or increased under the Revolving Facility to the extent that the issuance, renewal or increase of such Lender
Letter of Credit would cause the sum of the Revolving Letter of Credit Reserve (after giving effect to such
issuance, renewal or increase), plus the then-outstanding balance under the Revolving Facility to exceed the
lesser of (x) the Borrowing Base and (y) the Maximum Revolving Facility Amount.
..................(1) Borrowers shall be irrevocably and unconditionally obligated forthwith without
presentment, demand, protest or other formalities of any kind, to reimburse Agent or the issuer for any amounts
paid by the issuer with respect to the face amount of a Lender Letter of Credit. Each Borrower hereby authorizes
and directs Agent, at Agent's option, to debit such Borrower's account (by making a Revolving Credit Loan) in the
amount of any payment made with respect to any Lender Letter of Credit. In the event that Agent elects not to
debit such Borrower's account and such Borrower fails to reimburse Agent in full on the date of any payment under
a Lender Letter of Credit, Agent shall promptly notify each Lender of the unreimbursed amount of such payment
together with accrued interest thereon and each Lender, on the next Business Day, shall deliver to Agent an
amount equal to its respective participation in same day funds. The obligation of each Lender to deliver to
Agent an amount equal to its respective participation pursuant to the foregoing sentence shall be absolute and
unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an Event of
Default or the failure to satisfy any condition set forth in Article 5. In the event any Lender fails to make
available to Agent the amount of such Lender's participation in such Lender Letter of Credit, Agent shall be
entitled to recover such amount on demand from such Lender together with interest on such amount calculated at
the Revolving Base Rate.
..................(2) Any Letter of Credit which Company requests must be in such form, be for such
amount, contain such terms as are reasonably satisfactory to Agent. The expiration date of each Lender Letter of
Credit shall be on a date that is at least thirty (30) days prior to the Stated Maturity Date.
..................(3) Each Lender Letter of Credit may be renewed on its expiry date for an
additional period equal to the lesser of the initial term thereof or one (1) year if Company gives notice to
Agent of such renewal not less than 75 days prior to the expiration of such Lender Letter of Credit and Agent
consents to such renewal (such consent not to be unreasonably withheld), but in no case shall any Lender Letter
of Credit have an expiry date occurring later than thirty days prior to the Stated Maturity Date.
..................(4) Borrower shall notify Agent, 60 days prior to the date of any increase in the
amount of any Letter of Credit available to be drawn, of such increase.
..................(5) The obligation of any Borrower to reimburse Agent or any Lender for payments
made under, and other amounts payable in connection with, any Lender Letter of Credit shall be unconditional and
irrevocable and shall be paid under all circumstances strictly in accordance with the terms of this Agreement
including, without limitation, the following circumstances:
16
.................. (i) any lack of validity or enforceability of any Lender Letter of
Credit, or any other agreement;
.................. (ii) the existence of any claim, set-off, defense or other right which any
Borrower, or any other Person may at any time have against any beneficiary or transferee of any Lender Letter of
Credit (or any Persons for whom any such transferee may be acting), Agent, any Lender, or any other Person,
whether in connection with this Agreement, any other Loan Document, or any other related or unrelated agreements
or transactions;
.................. (iii) any draft, demand, certificate or any other document presented under
any Lender Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
.................. (iv) any adverse change in the business, operations, properties, assets,
condition (financial or otherwise) or prospects of Borrowers;
.................. (v) any breach of this Agreement or any other Loan Document by any party
thereto;
.................. (vi) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing;
.................. (vii) the fact that an Event of Default shall have occurred and be
continuing; or
.................. (viii) payment under any Lender Letter of Credit against presentation of a
demand, draft or certificate or other document which does not comply with the terms of such Lender Letter of
Credit; provided that, in the case of any payment by Agent or a Lender under any Lender Letter of Credit, Agent
or such Lender has not acted with gross negligence or willful misconduct in determining that the demand for
payment under such Lender Letter of Credit complies on its face with any applicable requirements for a demand for
payment under such Lender Letter of Credit.
..................(6) As between any Lender that issues a Lender Letter of Credit (an "Issuing
Lender"), on the one hand, and all Lenders on the other hand, all Lenders assume all risks of the acts and
omissions of, or misuse of any Lender Letter of Credit by the beneficiary thereof. In furtherance and not in
limitation of the foregoing, neither Agent nor any Issuing Lender shall be responsible: (a) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document by any party in connection with the
application for and issuance of any Lender Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (b) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any Lender Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (c) for failure of the beneficiary of any Lender Letter of Credit to comply fully
with conditions required in order to demand payment thereunder; provided that, in the case of any payment under
any such Lender Letter of Credit, any Issuing Lender has not acted with gross negligence or willful misconduct in
determining that the demand for payment under any such Lender Letter of Credit complies on its face with any
applicable requirements for a demand for payment thereunder; (d) for errors, omissions, interruptions or delays
in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they
be in cipher; (e) for errors in interpretation of technical terms; (f) for any loss or delay in the transmission
or otherwise of any document required in order to make a payment under any such Lender Letter of Credit; (g) for
the credit of the proceeds of any drawing under any such Lender Letter of Credit; and (h) for any consequences
arising from causes beyond the control of Agent or any Lender as the case may be.
..................(7) In furtherance and extension of, and not in limitation of, the specific
provisions herein above set forth, any action taken or omitted by either Agent or any Lender under or in
connection with any Lender Letter of Credit, if taken or omitted in good faith, shall not put Agent or such
Lender under any resulting liability to any Borrower or any other Lender.
17
(f) Unless Agent receives written notice from a Lender on or prior to any proposed
borrowing date that such Lender will not make available to Agent as and when required such Lender's Pro Rata
Share of any requested Revolving Credit Loan or Term Loan, as applicable, Agent may assume that each Lender will
make such amount available to Agent in immediately available funds on the proposed borrowing date and Agent may
(but shall not be so required), in reliance upon such assumption, make available to the requesting Borrower(s) on
such date a corresponding amount.
..................(1) A Defaulting Lender shall pay interest to Agent at the Prime Rate of Interest
on the Defaulted Amount from the Business Day following the applicable proposed borrowing date of such Defaulted
Amount until the date such Defaulted Amount is paid to Agent. A notice of Agent submitted to any Lender with
respect to amounts owing under this section shall be conclusive, absent manifest error. If such amount is not
paid when due to Agent, Agent, at its option, may notify Borrowers of such failure to fund and, upon demand by
Agent, Borrowers shall pay such Lender's unpaid amount to Agent for Agent's account, together with interest
thereon for each day elapsed since the date of such borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Revolving Credit Loan or Term Loan, as applicable, made by the other Lenders on
such proposed borrowing date. The failure of any Lender to make available any portion of its Revolving Credit
Loan or Term Loan, as applicable, on any proposed borrowing date or to fund its participation in a Lender Letter
of Credit shall not relieve any other Lender of any obligation hereunder to fund such Lender's portion of
Revolving Credit Loan or Term Loan, as applicable, on such proposed borrowing date or to fund any such
participation, but no Lender shall be responsible for the failure of any other Lender to honor its portion of the
Revolving Credit Loan or Term Loan, as applicable, on any proposed borrowing date or to fund any participation to
be funded by any other Lender.
..................(2) Notwithstanding any provision to the contrary contained in this Agreement or
the other Loan Documents, Agent shall not be obligated to transfer to a Defaulting Lender any payment made by
Borrowers to Agent or any amount otherwise received by Agent for application to the Obligations nor shall a
Defaulting Lender be entitled to the sharing of any interest, fees or payments hereunder.
..................(3) Notwithstanding any provision to the contrary contained in this Agreement or
the other Loan Documents for purposes of voting or consenting to matters with respect to (a) the Loan Documents
or (b) any other matter concerning the Loans, a Defaulting Lender shall be deemed not to be a "Lender" and such
Lender's commitments and outstanding amounts under the Revolving Facility or the Term Facility shall be deemed to
be zero.
Section 2.1B. ...Term Facility.
--------------
.........(a)......The maximum aggregate principal amount of term loans extended by Lender to Borrowers
under this Agreement (collectively, the "Term Facility" or the "Term Loan") that may be outstanding at any time
is SIXTY MILLION and NO/100 DOLLARS ($60,000,000.00) (the "Initial Maximum Term Facility Amount"); provided,
--------
however, that so long as no Event of Default has occurred, the Initial Maximum Term Facility Amount is subject to
-------
a one-time increase to the Maximum Term Facility Amount (as defined below) which, absent an Event of Default, may
be borrowed in monthly disbursements if, no later than nine (9) months following the Closing Date, Company
delivers a notice (the "Term Increase Notice") to Agent requesting such increase and the following requirements
shall have been satisfied:
(1) Borrowers shall pay Agent for the benefit of the Lenders a fee in an amount
equal to one and one-half percent (1.50%) of the Additional Commitment Amount;
(2) Agent has determined, in its reasonable discretion, that all or a portion of
the Medicare reimbursement increases that became effective on or about April
2001 shall then remain in effect and shall have been extended for a period of
time of one year or longer, which extension does not expire prior to September
30, 2003, and in a manner reasonably acceptable to the Lenders;
18
(3) Upon receipt of such Term Increase Notice, Agent shall have ordered and shall
subsequently have received an updated Appraisal (if Agent chooses, in its sole
discretion, to require such an updated Appraisal); and
(4) The Company delivers a certified calculation of Adjusted Cash Flow dated as of
the date of such Term Increase Notice, which calculation is approved by Agent.
Agent shall approve or disapprove such Term Increase Notice (and the calculations delivered therewith) within
thirty (30) days following receipt thereof. If approved, then thereafter, so long as no Event of Default has
occurred, such Additional Commitment Amount (or any portion thereof) shall be disbursed to Borrowers, in monthly
disbursements as set forth in Section 2.2(a)(ii) below.
.........The "Maximum Term Facility Amount" shall be an amount equal to the lesser of (i) seventy-five
percent (75%) of the Appraisal of the Real Property (which Appraisal shall have been updated if Agent so
requests); and (ii) the product of 5.2 multiplied by Adjusted Cash Flow as of the date of Company's request to
increase the Initial Maximum Term Facility Amount; provided, however, in no event shall the Maximum Term Facility
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Amount exceed SEVENTY-FIVE MILLION and NO/100 DOLLARS ($75,000,000.00).
.........Each Lender, severally but not jointly, agrees to lend to Borrowers such Lender's Pro Rata
Share of the Initial Term Facility Amount or, if applicable, the Maximum Term Facility Amount.
.........(b)......The Term Facility shall not be in the nature of a revolving line of credit, but shall
---
include sums advanced and other credit extended by Lenders to or for the benefit of Borrowers from time to time
under this Section 2.1B up to the Initial Maximum Term Facility Amount or the Maximum Term Facility Amount, as
the case may be. All such advances and extensions of credit in respect of the Term Facility shall be used only
for those purposes set forth in Exhibit X, unless consented to by Agent in accordance with Section 2.2(a). To
---------
the extent any Term Facility proceeds are repaid for any reason, whether voluntarily or involuntarily (including
repayments from insurance or condemnation proceeds), Agent and Lenders shall have no obligation to re-advance
such sums to Borrowers.
.........(c)......At Closing, Borrowers shall execute and deliver to Lenders promissory notes each with
appropriate insertions to evidence Borrowers' unconditional obligation to repay each respective Lender for the
Term Loans, Letters of Credit, and all advances and other extensions of credit made under the Term Facility, in
the form of Exhibit A-2 to this Agreement (as amended, modified, increased, restated or replaced from time to
-----------
time, collectively, the "Term Note"), dated the date of this Agreement, payable to the order of each respective
Lender in accordance with the terms thereof. In the event of an assignment under Section 9.5, Borrowers shall,
upon surrender and cancellation of the assigning Lender's Term Notes issue new Term Notes to reflect the interest
held by the assigning Lender and its Eligible Assignee. The Term Note shall bear interest on the outstanding
principal balance of the Term Note from the date of the Term Note until repaid at a rate per annum (on the basis
of the actual number of days elapsed over a year of 360 days) equal to the Term LIBOR Rate; provided, however,
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after the occurrence and during the continuance of an Event of Default such rate shall be equal to the Default
Rate. The Term Facility and all advances and other extension of credit in respect of the Term Facility shall be
deemed evidenced by the Term Note, which is deemed incorporated into and made a part of this Agreement by this
reference.
(d) Advances under the Term Facility may, in addition to wire transfer of immediately available funds, be
utilized, upon the request of Company, for a Lender Letter of Credit; provided that the terms relating to Lender
Letters of Credit set forth in Section 2.1A(e) shall apply mutatis mutandis to any such Lender Letter of Credit.
Each Lender shall be deemed to have purchased a participation in each Lender Letter of Credit issued on behalf of
any Borrower in an amount equal to its Pro Rata Share thereof. In no event shall any Lender Letter of Credit be
issued, renewed or increased under the Term Facility to the extent that the issuance, renewal or increase of such
Lender Letter of Credit would cause the sum of the Term Letter of Credit Reserve (after giving effect to such
issuance, renewal or increase), plus the then-outstanding balance under the Term Facility to exceed the Initial
Maximum Term Facility Amount, or the Maximum Term Facility Amount, as applicable. Upon maturity of any Lender
Letter of Credit which has not otherwise been renewed, Agent and Lenders shall have no obligation to re-issue
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such Lender Letter of Credit nor any obligation to re-advance such sums to Borrower and the Initial Maximum Term
Facility Amount, or the Maximum Term Facility Amount shall be permanently reduced, but without any prepayment fee.
(e) With respect to the Term Facility, Borrowers shall, not later than the Closing Date, enter into an
interest rate protection agreement, hedging agreement or other similar agreement, at the sole cost and expense of
Borrowers, that shall be applicable to a principal amount of not less than FORTY MILLION DOLLARS ($40,000,000.00)
(the "Rate Protection Agreement"). Such Rate Protection Agreement (i) shall be in a form, on terms and
conditions and provided by a bank or other financial institution all reasonably satisfactory to Agent in its sole
discretion and (ii) shall provide that, if the Term LIBOR Rate shall at any time exceed eleven and thirty-three
one-hundredths percent (11.33%) per annum, such bank or other financial institution shall be liable to reimburse
Borrowers for payment of that portion of all interest payments due on the portion of the principal of the Term
Facility covered by such Rate Protection Agreement that arises from such excess interest rate.
Section 2.2. ....Loan Administration. Borrowings under the Loans shall be as follows:
--------------------
.........(a)......(i) A request for a Revolving Credit Loan shall be made, or shall be deemed to be
made, in the following manner:
(A) Company may give Agent notice of its intention to borrow, in which
notice Company shall specify the amount of the proposed borrowing, whether such Revolving
Credit Loan shall be a Revolving Base Rate Loan or a Revolving LIBOR Rate Loan, whether funds
shall be disbursed by wire transfer or by issuance of a Letter of Credit and the proposed
borrowing date, not later than 2:00 p.m. Eastern time one (1) Business Day before the proposed
borrowing date or in the case of a Letter of Credit, ten (10) Business Days before the proposed
borrowing date, identifying the beneficiary, describing the nature of the transactions proposed
and providing the form of the Letter of Credit being requested; provided, however, that no such
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request may be made if, at such time, a Default has occurred and is continuing, or an Event of
Default has occurred.
(B) If any amount shall be required to be paid by Borrowers under this
Agreement, whether as interest or for any other Obligation, then the occurrence of the due date
with respect to such amount shall be deemed irrevocably to be a request for a Revolving Credit
Loan on the day following the due date in the amount required to pay such interest or other
Obligation if such was not paid by Borrowers on the due date.
..................(ii) A request for a Term Loan shall be made in the following manner: Company may
give Agent notice of its intention to borrow, in which notice Company shall specify (A) the amount of the
proposed borrowing, (B) whether the proposed borrowing will be a Permitted Transaction Borrowing (and, if so,
what type of borrowing), a Consent Borrowing or an Unrestricted Borrowing, (C) if the proposed borrowing is a
Permitted Transaction Borrowing, whether funds shall be disbursed by wire transfer or by issuance of a Letter of
Credit, (D) the proposed borrowing date, not later than 2:00 p.m. Eastern time (x) two (2) Business Days before
the proposed borrowing date for Unrestricted Borrowings, (y) fifteen (15) Business Days before the proposed
borrowing date for Permitted Transaction Borrowings (except that Permitted Transaction Borrowings in the amount
requested by Company prior to the Closing Date shall be advanced on the Closing Date) or in the case of a Letter
of Credit, ten (10) Business Days before the proposed borrowing date, and (z) fifteen (15) Business Days before
the proposed borrowing date for Consent Borrowings, (E) in reasonable detail the proposed use of such proceeds,
or, for Letters of Credit, the beneficiary, the nature of the transactions proposed and shall provide the form of
the Letter of Credit being requested, and (F) for Permitted Transaction Borrowings and Consent Borrowings,
certificates required to be delivered for the relevant transaction under Article VII; provided, that no such
request may be made if, at such time, a Default has occurred and is continuing, or an Event of Default has
occurred; and provided further, that (A) such notice shall be delivered, if at all, no later than six (6) months
prior to the Stated Maturity Date; (B) Consent Borrowings shall only be advanced upon Agent's consent, which
consent may be withheld at Agent's sole discretion, (C) Agent's consent shall not be required for advances of
Unrestricted Borrowings or Permitted Transaction Borrowings; provided that each transaction for which a Permitted
Transaction Borrowing is requested must comply with the relevant requirements of Article VII and Exhibit X,
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(D) no more than $5,000,000 of Unrestricted Borrowings shall be advanced to Borrowers, and (E) all such advances
20
and extensions of credit in respect of the Term Facility shall be used only for those purposes set forth in
Exhibit X, unless consented to by Agent in accordance with this Section 2.2(a). All time periods in this
---------
paragraph shall be subject to timely compliance with the provisions of Section 5.2(c).
"Permitted Transaction Borrowing": means borrowings under the Term Loan, the proceeds of which shall be used
solely for those purposes set forth in Exhibit X.
"Unrestricted Borrowings": means up to $5,000,000 of borrowings under the Term Loan for which no Agent consent
is required, the proceeds of which shall be used solely for general corporate purposes as set forth in Exhibit X.
---------
"Consent Borrowings": means borrowings under the Term Loan which are neither Permitted Transaction Borrowings
nor Unrestricted Borrowings, the proceeds of which shall be used solely for the purposes set forth in Exhibit X
---------
and for which Agent consent is required, which consent may be withheld at Agent's sole discretion.
.........(b)......Borrowers hereby irrevocably authorize Agent to disburse the proceeds of each
Revolving Credit Loan requested, or deemed to be requested, and the proceeds of each disbursement under the Term
Facility requested as follows: (i) the proceeds of each Revolving Credit Loan requested under Section 2.2(a)(i),
or for an advance under the Term Facility requested under Section 2.2(a)(ii), shall be disbursed by Agent by wire
transfer to such bank account as may be agreed upon by Company and Agent from time to time or elsewhere if
pursuant to written direction from Company; and (ii) the proceeds of each Revolving Credit Loan deemed to be
requested under Section 2.2(a)(i)(B) shall be disbursed by Agent by way of direct payment of the relevant
interest or other Obligation.
.........By executing this Agreement, each of the Borrowers confirms to the other parties to this
Agreement that Company shall (and has been duly appointed by each of the Borrowers to) act as agent for the
Borrowers for all purposes of the Loan Documents, including, without limitation, (i) requesting Loans,
(ii) requesting the issuance of Lender Letters of Credit, (iii) allocating (to the extent permitted herein) the
proceeds of Loans, and (iv) taking any other action or receiving any communication on behalf of such Borrower in
connection with the Loan Documents. Each of the Lenders and the Agents shall be entitled to deal with any
Borrower through Company and to rely on any instructions or other communications from Company on behalf of any
Borrower. None of the Lenders or Agents shall have any responsibility to any Borrower for dealing with the
Borrowers as provided in this Section 2.2(b), and the Obligations of each of the Borrowers to the Lenders shall
not be affected by any matter relating to acts or omissions of Company relating to the Loans, requests for Lender
Letters of Credit or otherwise as agent for the Borrowers hereunder. Notwithstanding the appointment of Company
as agent for the Borrowers hereunder, the Agent and the Lenders shall in their sole discretion be entitled to
deal directly with any Borrower for all purposes of the Loan Documents.
.........(c)......All Loans, advances and other extensions of credit to or for the benefit of Borrowers
shall constitute one general Obligation of Borrowers, and each Borrower, jointly and severally, will be obligated
to pay all amounts owing under this Agreement. Such Obligations shall be secured by a Lien upon all of the
Collateral.
.........(d)......Agent shall enter all Loans as debits to a loan account or accounts in the names of
Borrowers and shall also record in said loan account(s) all payments made by Borrowers on any Obligations and all
proceeds of Collateral which are indefeasibly paid to Agent, and may record therein, in accordance with customary
accounting practice, other debits and credits, including interest and all charges and expenses properly
chargeable to Borrowers. Prior to the earlier to occur of an Event of Default or the Maturity Date, all payments
received by Agent pursuant to Section 2.5 and collections into the Agent's Concentration Account pursuant to
Section 2.3 shall be applied first to fees, costs and expenses due and owing under the Loan Documents. Following
any Event of Default hereunder, or following the Maturity Date, all payments received by Agent pursuant to
Section 2.5 and collections pursuant to Section 2.5 and Section 2.3 into the Agent's Concentration Account shall
be applied to the Obligations in such order as Agent shall elect in its sole and absolute discretion.
.........(e)......Agent will account to Borrowers monthly with a statement of the Loans, charges and
payments made pursuant to this Agreement, and such accounting rendered by Agent shall be deemed final, binding
and conclusive upon Borrowers, absent manifest error, unless Agent is notified by Borrowers in writing to the
21
contrary within forty-five (45) days of the date each accounting is mailed to Borrowers. Such notice shall be
deemed an objection only to those items specifically objected to in the notice.
Section 2.3. ....Collections, Disbursements, Borrowing Availability, and Lockbox Account. For purposes
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of this Section 2.3, the term "Borrowers" shall not include Specified Borrowers, and the term "Facility" shall
not include Facilities owned or operated by Specified Borrowers.
...................(a)......Borrowers shall establish and maintain, at their sole expense, the following accounts
and facilities, which Borrowers hereby represent are in existence as of the Closing Date:
(i) depository accounts into which payments and collections of Accounts of each
Facility, other than the Xxxxxx Xxxxx Facility owned by Bowie Center L.P., received by check, draft or other
similar means from any Account Debtor by any Borrower, which shall be held in trust by such Borrower (for the
benefit of Lenders) and shall be deposited immediately by such Borrower into such depository accounts
(collectively, "Facility Deposit Accounts" and the banks at which such Facility Deposit Accounts are maintained
are collectively defined as "Depository Banks"), which are identified on Schedule 2.3;
------------
(ii) that certain depository account into which collections of Accounts of all
Facilities shall be (1) paid by Medicaid/Medicare/TRICARE Account Debtors by electronic funds transfer, (2) paid
by such Insurer Account Debtors (other than Medicaid/Medicare/TRICARE Account Debtors) as may be permitted by
Agent from time to time in its sole discretion, ("Approved Insurer Account Debtors") by electronic funds
transfer, and (3) concentrated and deposited by electronic funds transfer not less often than weekly (except to
the extent such failure to pay or transfer is due solely to the failure of a Depository Bank to follow expressed
transfer instructions from Borrowers) from each and every Facility Deposit Account (the "HHLP Concentration
Account" and the bank at which such Concentration Account is maintained is the "HHLP Collecting Bank"), which is
identified on Schedule 2.3;
---------------
(iii) that certain depository account into which Borrowers shall ensure that all
funds on deposit in the HHLP Concentration Account are paid on a daily basis by electronic funds transfer (except
to the extent such failure to transfer is due solely to the failure of a Depository Bank to follow expressed
transfer instructions from Borrowers) from the HHLP Concentration Account (the "Intermediate Concentration
Account" and the bank at which such Intermediate Concentration Account is maintained, which may be the same bank
as the HHLP Collecting Bank, is the "Intermediate Collecting Bank"), which is identified on Schedule 2.3; and
------------
(iv) Borrowers shall ensure that no payment or collections of any amounts due to
Specified Borrowers are deposited into any of the foregoing accounts.
(b) Borrowers shall ensure that all payments and collections of Accounts of
Medicaid/Medicare/TRICARE Account Debtors (other than Accounts payable to Specified Borrowers) shall be paid
directly, by electronic funds transfer into the HHLP Concentration Account, and that all payments and collections
of Accounts (other than Accounts paid by Medicaid/Medicare/TRICARE Account Debtors or Approved Insurer Account
Debtors to the HHLP Concentration Account) are sent directly to a Facility Deposit Account for deposit, except to
the extent such failure to pay or transfer is due solely to the failure of a Depository Bank to follow expressed
transfer instructions from Borrowers.
...................(c)......Agent shall establish and maintain, at the sole expense of Borrowers, that certain
concentration account into which, after the occurrence of a Sweep Event, all funds on deposit in the Intermediate
Concentration Account shall be transferred on a daily basis on each Business Day ("Agent's Concentration
Account").
...................(d)......On or before Closing, Borrowers shall have executed with each of the HHLP Collecting
Bank and the Intermediate Collecting Bank three party lockbox agreements in the forms attached to this Agreement
as Exhibit B-1 and Exhibit B-2, respectively (collectively, the "Lockbox Agreements"). Such Lockbox Agreements
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may not be modified without Agent's prior written approval and Borrowers (i) shall not close or modify the
arrangements regarding the HHLP Concentration Account, the Intermediate Concentration Account or the Agent's
Concentration Account; (ii) shall not establish, open or modify any Facility Deposit Account without giving
22
prompt notice thereof to the Agent; and (iii) shall not create, incur, assume or suffer to exist any Indebtedness
whatsoever at any time from the HHLP Collecting Bank or the Intermediate Collecting Bank other than amounts
related to any fees and charges in effect from time to time charged by the HHLP Collecting Bank or the
Intermediate Collecting Bank. Furthermore, Borrowers shall not create, incur, assume or suffer to exist any
Indebtedness whatsoever at any time from a Depository Bank unless such Indebtedness shall be the subject of a
satisfactory intercreditor agreement by and between the Depository Bank and Agent which shall include provisions
required by Section 4.50.
(e)......Pursuant to Section 2.5, following the occurrence of a Sweep Event, all funds on
deposit in the Intermediate Concentration Account shall be sent by electronic funds transfer on a daily basis to
the Agent's Concentration Account, which shall be:
Bank One N.A.
Chicago, Illinois
Account No.: 0000000
ABA No.: 000000000
Attention: Xxxxxx Healthcare Finance, Inc.
Re: Harborside Healthcare Corporation
...................(f)......Notwithstanding anything in any Lockbox Agreement to the contrary, Borrowers agree
that they shall be liable for any fees and charges in effect from time to time and charged by the HHLP Collecting
Bank, the Intermediate Collecting Bank, the Depository Banks or Agent in connection with this Agreement and the
Lockbox Agreements, and that Agent and Lenders shall have no liability therefor. Borrowers further acknowledge
and agree that, to the extent such fees and charges are not paid by Borrowers, such fees and charges shall be
deemed to be Revolving Credit Loans made by Lenders hereunder and, to the extent that the payment of such fees or
charges by Borrowers as provided herein results in any overadvance under this Agreement, Borrowers agree to
immediately repay to Agent, for the benefit of Lenders, the amount of such overadvance. Borrowers agree to
indemnify and hold Lenders and Agent harmless from any and all liabilities, claims, losses and demands
whatsoever, including reasonable attorney's fees and expenses, arising from or relating to actions of Borrowers,
the HHLP Collecting Bank, the Intermediate Collecting Bank or Agent pursuant to this Section 2.3 or any Lockbox
Agreement.
...................(g)......Following and during the continuance of any Sweep Event, Agent shall apply, on a daily
basis, all funds transferred into the Agent's Concentration Account pursuant to this Section 2.3 to reduce the
Obligations under the Loans and this Agreement (in accordance with Section 2.2(d)) in such order and manner as
Agent shall determine in its sole discretion.
...................(h)......Borrowers acknowledge and agree that their compliance with the terms of this
Section 2.3 is essential, and that Agent and Lenders will suffer immediate and irreparable injury and have no
adequate remedy at law (i) if Borrowers, through its acts or omissions, cause or permit Medicaid/Medicare/TRICARE
Account Debtors to send payments other than to the HHLP Concentration Account, (ii) if Borrowers fail to
immediately deposit collections of Accounts or proceeds of other Collateral in a Facility Deposit Account or to
the HHLP Concentration Account as herein required, (iii) if Borrowers fail to effect a weekly transfer of all
funds deposited in all Facility Deposit Accounts to the HHLP Concentration Account, except to the extent such
failure is due solely to the failure of a Depository Bank to follow expressed transfer instructions from
Borrowers, or (iv) if Borrowers fail to effect a daily transfer of all funds deposited in the HHLP Concentration
Account to the Intermediate Concentration Account, except to the extent such failure is due solely to the failure
of a Depository Bank to follow expressed transfer instructions from Borrowers. Upon any Borrower's failure to
comply with the terms of this Section 2.3, Agent, for the account of the Lenders, will be entitled, in addition
to exercising any other rights and remedies available to it, to assess a non-compliance fee which shall operate
to increase the Revolving Base Rate and the Term LIBOR Rate by two percent (2%) per annum during any period of
non-compliance; provided that Agent shall not assess such non-compliance fee earlier than five (5) Business Days
after notice to Borrowers of Agent's intent to assess such fee and Borrowers' failure to cure such
noncompliance. Agent shall be entitled to assess such fee whether or not an Event of Default is declared or
otherwise occurs.
.........(i)......All funds transferred to the Agent's Concentration Account for application to
Borrowers' indebtedness to Lenders shall be applied as provided in Section 2.2(d). If as the result of
23
collections of Accounts, after the occurrence of a Sweep Event as described in Section 2.5 and pursuant to the
terms and conditions of this Section 2.3, a credit balance exists with respect to the Intermediate Concentration
Account, such credit balance shall only be returned to the Borrowers upon payment in full and satisfaction of all
of Borrowers' Obligations under this Agreement and the other Loan Documents.
.........(j)......In any case where a bank fails to transfer funds notwithstanding Borrowers'
instructions, Borrowers shall use their best efforts to immediately and completely cure the problem.
Section 2.4. ....Fees.
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.........(a)......By executing this Agreement, Borrowers agree unconditionally to pay to Agent for the
account of Lenders on the Closing Date a commitment fee equal to one and one-half percent (1.5%) of the sum of
the Maximum Revolving Facility Amount plus the Initial Maximum Term Facility Amount (collectively, the
"Commitment Fee").
.........(b)......For so long as any of the Loans are available to Borrowers, Borrowers agree
unconditionally to pay to Agent for the account of Lenders, the following fees (each calculated on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed and each payable quarterly in arrears on
the first Business Day of each successive quarter (July 1, October 1, January 1 and April 1) after the Closing
Date):
..................(i) an unused line fee (the "Unused Revolver Loan Fee") equal to four-tenths of one
percent (0.40%) per annum of the average amount by which the Maximum Revolving Facility Amount exceeds the
average amount of the outstanding principal balance of the Revolving Credit Loans during the preceding quarter,
whether borrowed in cash or by issuance of a Lender Letter of Credit (including without limitation the Escalated
Amounts but only after the amount available to be drawn under the Lender Letter of Credit includes such Escalated
Amount); and
..................(ii) an unused line fee (the "Unused Term Loan Fee") equal to one-half (1/2) of one
percent (0.50%) per annum of the average amount by which the Maximum Term Facility Amount exceeds the average of
the sum of the amount of the Initial Maximum Term Facility Amount plus any disbursements pursuant to
Section 2.1B(a) during the preceding quarter whether borrowed in cash or by issuance of a Lender Letter of Credit
(including without limitation the Escalated Amounts but only after the amount available to be drawn under the
Lender Letter of Credit includes such Escalated Amount); provided that such fee shall not apply to any portion of
the Additional Commitment Amount which is not available to be borrowed as provided for in Section 2.1B(a).
.........(c)......Borrowers shall pay to Agent a fee with respect to the Lender Letters of Credit
(i) for the benefit of all Lenders in the amount of the average daily amount of Letter of Credit Liability
outstanding during such month, including without limitation any additional amounts resulting from any increase in
the amount of any Letter of Credit available to be drawn during any such month ("Escalated Amounts"), multiplied
by two and one-quarter percent (2.25%) per annum (the "Letter of Credit Fee") and (ii) for the account of Agent
or the issuing Lender a fronting fee for each Lender Letter of Credit issued or obtained by Agent or any Lender
from the date of issuance to the date of termination equal to the average daily amount of Letter of Credit
Liability with respect to such Lender Letters of Credit outstanding during such month, including Escalated
Amounts multiplied by one-quarter of one percent (0.25%) per annum (the "Facing Fee"). Such fees will be
calculated on the basis of a three hundred sixty (360) day year for the actual number of days elapsed and will be
payable monthly in arrears on the first Business Day of each month.
.........(d)......Borrowers shall pay to Agent, on demand, any and all fees, costs or expenses which
Agent or any Lender pays to a bank or other similar institution (including, without limitation, any fees paid by
any Lender to any participant) arising out of or in connection with (i) the forwarding to Borrowers or any other
Person on behalf of Borrowers, by Agent or any Lender, of proceeds of Revolving Credit Loans made by Lenders to
Borrowers pursuant to this Agreement, and (ii) the depositing for collection, by Agent or any Lender of any check
or item of payment received or delivered to Agent or any Lender on account of Obligations.
.........(e)......Borrowers agree unconditionally to pay to Agent for its own account (i) a
fully-earned, nonrefundable administrative fee in an amount equal to ONE HUNDRED THOUSAND and NO/100
24
($100,000.00) per annum in advance beginning on the Closing Date and thereafter on each anniversary of the
Closing Date and (ii) a fully-earned, nonrefundable collateral monitoring fee of FIFTEEN THOUSAND and NO/100
DOLLARS ($15,000.00) per month payable monthly in advance beginning on the Closing Date (pro rated for the month
during which Closing shall have occurred based on a thirty (30) day month) and on the first Business Day of each
successive calendar month. Such fees shall be payable until the Obligations shall have been paid in full and all
commitments hereunder shall have been terminated in accordance with the provisions of this Agreement
.........(f)......For so long as any of the Collateral consists of Real Property, Borrowers
unconditionally shall pay to Agent a monthly Real Property collateral inspection fee (the "Real Property
Collateral Fee") equal to ONE THOUSAND DOLLARS ($1,000.00). The Real Property Collateral Fee shall be payable
monthly in advance beginning on the Closing Date on the first Business Day of each successive calendar month.
Such fees shall be payable until the Obligations shall have been paid in full and all commitments hereunder shall
have been terminated in accordance with the provisions of this Agreement.
Section 2.5. ....Payments.
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.........(a)......Principal payable on account of Revolving Credit Loans shall be payable by Borrowers
to Lenders immediately upon the earliest of (i) the receipt by Borrowers or Lenders of any payments on or
proceeds from any of the Personal Property after the occurrence and during the continuance of a Sweep Event, to
the extent of such proceeds, except if received in the ordinary course of business, (ii) the occurrence of an
Event of Default if any of the Loans and the maturity of the payment of any of the Obligations are accelerated,
(iii) the termination of this Agreement pursuant to Section 2.8 or (iv) the Maturity Date; provided, however,
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that if the sum of the Revolving Letter of Credit Reserve plus the outstanding principal balance of the Revolving
Credit Loans is at any time in excess of the Borrowing Base, Borrowers shall, immediately upon demand, repay such
excess. Interest accrued on the Revolving Credit Loans shall be due on the earliest of (x) the first day of each
month (for the immediately preceding month), computed on the last calendar day of the preceding month, (y) during
the continuance of an Event of Default, the day such interest accrues, or (z) the Maturity Date.
.........(b)......Principal payable on account of the Term Facility shall be payable by Borrowers to
Lenders immediately upon the earliest of (i) the date(s) set forth in the amortization schedule attached as or
described in Exhibit D hereto, or (ii) the Maturity Date; provided, however, such principal amortization payments
--------- -------- -------
shall commence only after Lender's disbursement of the entire Additional Commitment Amount. Interest accrued on
the Term Facility shall be due on the earliest of (x) the first day of each month (for the immediately preceding
month), computed on the last calendar day of the preceding month, (y) during the continuance of an Event of
Default, the day such interest accrues, or (z) the Maturity Date.
.........(c)......Except to the extent otherwise set forth in this Agreement, all payments of principal
of and of interest on the Loans, all other charges and any other obligations of Borrowers under this Agreement,
shall be made to Agent or to the Agent's Concentration Account, as the case may be, in immediately available
funds. All payments shall be made without deduction for any set-off, recoupment, counterclaim or defense that
Borrowers now have or may have in the future.
(d) In the event that any payment required hereunder is not actually received by the Agent
within five (5) calendar days of the date such payment is due, Borrowers agree to pay a late charge equal to four
percent (4%) of the total amount of any delinquent payment as liquidated damages in order to defray the increased
cost of collection occasioned by such late payment and the lost investment opportunity. Such charges shall be
imposed automatically, without any notice to the Borrowers or any other person, but not more often than once a
month.
(e) Notwithstanding the foregoing, immediately upon the occurrence of any of the following
events (individually a "Sweep Event" and collectively, the "Sweep Events"), whether or not declared by Agent as
an Event of Default, Agent may, without notice to Borrowers, initiate the automatic transfer of funds from the
Intermediate Concentration Account to the Agent's Concentration Account pursuant to that certain Lockbox
Agreement with the Intermediate Collecting Bank, which transfers shall continue on each Business Day thereafter:
(1) An Event of Default pursuant to Section 8.1 (a), (b), (f), (g), (m), (q) or
(r)(i);
25
(2) Borrowers' failure to comply with any financial covenant pursuant to Sections
6.22 or 6.23, which failure shall not have been cured, amended or waived within thirty (30) days;
(3) Borrowers shall have (i) failed to maintain deposit accounts or Lockbox
Agreements or (ii) received, transferred, or applied payments of Account Debtors, in either case in contravention
of Section 2.3;
(4) Borrowers shall have failed to timely meet obligations related to payroll
taxes in excess of $50,000.00;
(5) Agent or any Lender shall have paid, on behalf of any Borrower, any fee, tax
assessment, premium or similar charge or shall have incurred any obligation for payment, including but not
limited to incurrence of attorneys fees, as a result of any Borrowers' action or inaction (in which event(s) the
transfer of funds shall be limited to the amounts paid or incurred by Agent or Lender) and Borrowers have not
reimbursed Agent or such Lender in full within five (5) days of written notice thereof;
(6) Agent or any Lender shall have commenced foreclosure or execution on any of
the Collateral as permitted under any Loan Document; or
(7) Any Borrower shall have acted in a fraudulent manner or shall have committed
an act of fraud.
Section 2.6. Use of Proceeds. The proceeds of Lenders' advances under the Loans shall be used
-----------------
solely for the purposes set forth on Exhibit X; provided that, if a Sweep Event has occurred, but no Event of
---------
Default exists, and funds on deposit in the Intermediate Concentration Account are being transferred on a daily
basis to the Agent's Concentration Account, proceeds from the Revolving Facility shall be used for Borrowers'
(other than Specified Borrowers') general corporate purposes and working capital. To the extent any Term
Facility proceeds are repaid for any reason, whether voluntarily or involuntarily (including repayments from
insurance or condemnation proceeds), Agent and Lenders shall have no obligation to re-advance such sums to
Borrowers
Section 2.7. Interest Rate Limitation. The parties intend to conform strictly to the applicable
---------------------------
usury laws in effect from time to time during the term of the Loans. Accordingly, if any transaction
contemplated by this Agreement would be usurious under such laws, then notwithstanding any other provision of
this Agreement: (a) the aggregate of all interest that is contracted for, charged, or received under this
Agreement or under any other Loan Document shall not exceed the maximum amount of interest allowed by applicable
law (the "Highest Lawful Rate"), and any excess shall be promptly credited to Borrowers by Agent, on behalf of
Lenders (or, to the extent that such consideration shall have been paid, such excess shall be promptly refunded
to Borrowers by Agent, on behalf of Lenders); (b) no Borrower nor any other Person now or hereafter liable under
this Agreement shall be obligated to pay the amount of such interest to the extent that it is in excess of the
Highest Lawful Rate; and (c) the effective rate of interest for the portion of the Loans that would otherwise be
usurious under applicable laws shall be reduced to the Highest Lawful Rate. All sums paid, or agreed to be paid,
to Lenders for the use, forbearance, and detention of the debt of Borrowers to Lenders shall, to the extent
permitted by applicable law, be allocated by Agent, on behalf of Lenders throughout the full term of the
applicable Note until payment is made in full so that the actual rate of interest does not exceed the Highest
Lawful Rate in effect at any particular time during the full term thereof. If at any time the rate of interest
under the applicable portion of the Loans exceeds the Highest Lawful Rate, the rate of interest to accrue
pursuant to this Agreement under such portion of the Loans shall be limited, notwithstanding anything to the
contrary in this Agreement, to the Highest Lawful Rate, but any subsequent reductions in the applicable interest
accrual rate shall not reduce the interest to accrue pursuant to this Agreement below the Highest Lawful Rate
until the total amount of interest accrued equals the amount of interest that would have accrued if the Term
LIBOR Rate, Revolving LIBOR Rate or Revolving Base Rate, as applicable, had at all times been in effect. If the
total amount of interest paid or accrued pursuant to this Agreement under the foregoing provisions is less than
the total amount of interest that would have accrued if the Term LIBOR Rate, Revolving LIBOR Rate or Revolving
Base Rate, as applicable, had at all times been in effect, then Borrowers agree to pay to Agent, on behalf of
Lenders an amount equal to the difference between (x) the lesser of (A) the amount of interest that would have
accrued if the Highest Lawful Rate had at all times been in effect, or (B) the amount of interest that would have
26
accrued if the Term LIBOR Rate, Revolving LIBOR Rate or Revolving Base Rate, as applicable, had at all times been
in effect, and (y) the amount of interest accrued in accordance with the other provisions of this Agreement.
Section 2.8. Maturity Date; Termination of Agreement; Termination Fee.
---------------------------------------------------------
(a) The Notes, all interest accrued thereon, all fees, expenses and other charges accrued
hereunder, and all other Obligations, if not earlier paid or required to be paid, shall become due and payable in
full upon the "Maturity Date" (as defined below). The "Maturity Date" shall be the earliest to occur of
(i) September 13, 2005 (the "Stated Maturity Date"), (ii) the date on which the Obligations otherwise become due
as a result of acceleration of the Obligations as provided for under this Agreement or any other Loan Document,
or (iii) the effective date of any earlier termination of this Agreement.
(b) Subject to the provisions of Section 2.8(c) and Section 2.9, and upon payment of all
termination and prepayment fees pursuant to Section 2.9, upon at least three (3) days prior written notice to
Agent from Company (the "Termination Notice Period"), Borrowers may terminate this Agreement. Borrower shall
specify an effective termination date in any notice of termination of this Agreement (the "Requested Termination
Date"). Unless earlier terminated pursuant to this Agreement, all funding obligations of Lenders under this
Agreement shall terminate no later than the expiration of the Termination Notice Period.
(c) All undertakings, agreements, covenants, warranties, and representations of Borrowers
contained in the Loan Documents shall survive any termination of this Agreement or Lenders' funding obligations
under this Agreement and Lenders shall retain their Liens in the Collateral and all of their rights and remedies
under the Loan Documents notwithstanding such termination until Borrowers have paid the Obligations to Lenders,
in full, in immediately available funds and all Letter of Credit Reserve is eliminated to Agent's satisfaction.
All indemnities of Borrowers in this Agreement or any other Loan Document shall survive termination of this
Agreement.
Section 2.9. Prepayment.
-----------
(a) Except as specifically provided otherwise in Section 2.9, Borrowers shall have no
right to prepay the Term Note. Except as otherwise set forth in Section 3.8 (b)(iv) and (v), Borrowers shall
have no right to terminate the Revolving Facility in part at any time, nor in whole until such time as the Term
Facility is terminated in accordance with this Section 2.9 and upon payment to Agent for the benefit of Lenders
of (i) all interest accrued on the Revolving Note and all other Obligations accrued hereunder in respect of the
Revolving Note and (ii) a termination fee of three percent (3%) of the Maximum Revolving Facility Amount if
terminated prior to the eighteen (18) month anniversary of the Closing Date (the "Initial Period") and two
percent (2%) of the Maximum Revolving Facility Amount if terminated at any time after the Initial Period but
prior to the twenty-four month anniversary of the Closing Date (in either case, only if the Company shall have
delivered a Term Increase Notice, and Agent shall have approved it, thus making the Additional Commitment Amount
available for borrowing under the Term Facility pursuant to the provisions of Section 2.1B(a)). Thereafter, no
termination fee shall apply to the termination of the Revolving Facility. To terminate the Revolving Facility,
Company shall give Agent three (3) days' prior written notice. In the event that the Revolving Facility or Term
Facility is terminated at a time that any Lender Letters of Credit are outstanding thereunder, respectively,
Borrowers shall immediately cause the Agent and each Lender to be released from all liability under any such
Lender Letters of Credit or, at Company's option, Borrowers shall deposit with Agent for the benefit of Lenders
cash in an amount equal to one hundred five percent (105%) of the aggregate outstanding Revolving Letter of
Credit Reserve or Term Letter of Credit Reserve, as applicable, to be available to Agent to reimburse payment of
drafts drawn under such Lender Letters of Credit and pay any fees and expenses related thereto, all in accordance
with a reimbursement agreement executed by Borrower and reasonably satisfactory to Agent.
(b) Upon three (3) days' prior written notice of the date of prepayment from Company,
Borrowers may prepay all or any portion of the Term Note outstanding, together with all interest accrued on the
Term Note and all other Obligations accrued hereunder in respect of the Term Facility. If any prepayment is made
at any time during the Initial Period, Borrower shall pay to Agent for the benefit of Lenders a prepayment fee of
two percent (2%) of any amount prepaid; provided that if any Lender Letter of Credit issued under the Term
Facility is terminated during the Initial Period, no such fee shall be payable. Thereafter, the Term Note may be
prepaid without payment of a fee.
27
(c) All of Lender's obligations hereunder to make advances in respect of the Term Facility
shall terminate upon the earlier to occur of (1) prepayment of all or any portion of the Term Note or (2)
Lender's receipt of Borrowers' notice of its intention to prepay the Term Note in whole or in part.
Section 2.10. Joint and Several Liability; Binding Obligations. Each entity constituting Borrower
---------------------------------------------------
shall be jointly and severally liable for all of the obligations of Borrower under the Notes and this Agreement.
Each Borrower, individually, expressly understands, agrees and acknowledges, that the Loans would not be made
available on the terms herein in the absence of the collective credit of all of the Borrowers, the joint and
several liability of all Borrowers, and the cross-collateralization of the Collateral of all Borrowers.
Accordingly, each Borrower, individually acknowledges that the benefit to each of the Borrowers under the Loans
as a whole constitutes reasonably equivalent value, regardless of the amount of the Loans actually borrowed by,
advanced to, or the amount of Collateral provided by, any individual Borrower. In addition, each Borrower hereby
acknowledges and agrees that all of the representations, warranties, covenants, obligations, conditions,
agreements and other terms contained in this Agreement shall be applicable to and shall be binding upon each
Borrower, and shall be binding upon all such entities when taken together.
ARTICLE III
COLLATERAL
----------
Section 3.1. Generally.
----------
(a) Borrowers. As security for the prompt and complete payment and performance when due
---------
(whether at the stated maturity, by acceleration or otherwise) of the Obligations, Borrowers (other than the
Specified Borrowers) hereby assign and grant to Agent, for the benefit of Agent and Lenders, a continuing first
priority Lien on and security interest in, upon, and to all of the Borrowers' (other than the Specified
Borrowers) right title and interest in the following property whether now owned or hereafter acquired or arising
(the "Personal Property", it being understood that the defined term "Personal Property" shall also include the
property described in Section 3.1(b) in each instance herein where the context refers to or includes Mortgage
Borrowers, including without limitation each instance where Mortgage Borrowers grant an interest in, or are
prohibited from encumbering, such property; unless otherwise defined in this Agreement, all terms used in the
following subparagraphs shall have the meanings given them in the Uniform Commercial Code as now or hereafter in
effect):
(i) All of Borrowers' Accounts, including, but not limited to, all of Borrowers'
money, contract rights, chattel paper, documents, deposit accounts, securities, investment property and
instruments with respect thereto, and all of Borrowers' rights, remedies, security, Liens and supporting
obligations, in, to and in respect of the foregoing, including, without limitation, rights of stoppage in
transit, replevin, repossession and reclamation and other rights and remedies of an unpaid vendor, lienor or
secured party, guaranties or other contracts of suretyship with respect to the Accounts, deposits or other
security for the obligation of any Account Debtor, and credit and other insurance;
(ii) To the extent not listed above, all of Borrowers' now owned or hereafter
acquired deposit accounts into which Accounts or the proceeds of Accounts are deposited, including any Lockbox
Account;
(iii) All of Borrowers' general intangibles (including, but not limited to, payment
intangibles) and other property of every kind and description, all with respect to, evidencing or relating to its
Accounts, including, but not limited to, all existing and future customer lists, choses in action, claims, books,
records, ledger cards, contracts, licenses, formulae, tax and other types of refunds, returned and unearned
insurance premiums, rights and claims under insurance policies, and computer programs, information, software,
records, and data, as the same relates to the Accounts but excluding those certain contracts listed on
Schedule 3.1 which Borrowers represent by their terms are not assignable;
(iv) All of Borrowers' letter of credit rights and commercial tort claims; and
28
(v) To the extent not listed above as original collateral, the proceeds
(including, without limitation, insurance proceeds) of all of the foregoing, irrespective of whether such
proceeds are deposited into a deposit account and/or are transferred from one deposit account to another deposit
account.
(vi) "Personal Property" as defined in this Section 3.1 shall include the permits
or licenses of any Borrower (other than any Specified Borrower) necessary in connection with the operation of any
Facility that is the subject of a Lessee Lease except to the extent (i) pledged to a landlord under a Lessee
Lease as disclosed on Schedule 3.1 or (ii) any of such permits and licenses are required by a prospective
------------
landlord to be pledged to such landlord in connection with an Approved Lease Transaction or Approved Acquisition
Transaction, in which case "Personal Property" as defined in this Section 3.1 shall not include any such permits
and licenses and Borrower may grant such landlord a security interest in any such permits and licenses.
(b) Mortgage Borrowers. As security for the prompt and complete payment and performance
-------------------
when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations, Mortgage Borrowers
hereby assign and grant to Agent, for the benefit of Agent and Lenders, a continuing first priority Lien on and
security interest in, upon, and to all of such Mortgage Borrowers' right, title and interest in the following
property whether now owned or hereafter acquired or arising (the "Personal Property"; unless otherwise defined in
this Agreement, all terms used in the following subparagraphs shall have the meanings given them in the Uniform
Commercial Code as now or hereafter in effect) in addition to the grant set forth in (a) above:
(i) All of Mortgage Borrowers' right, title and interest in, to and in respect of
all goods relating to, or which by sale have resulted in, Accounts, including, without limitation, all goods
described in invoices or other documents or instruments with respect to, or otherwise representing or evidencing,
any Account, and all returned, reclaimed or repossessed goods;
(ii) All of Mortgage Borrowers' general intangibles (including, without limitation,
any proceeds from insurance policies after payment of prior interests), software, patents, unpatented inventions,
trade secrets, copyrights, contract rights, goodwill, literary rights, rights to performance, rights under
licenses, choses-in-action, claims, information contained in computer media (such as data bases, source and
object codes, and information therein), things in action, trademarks and trademarks applied for (together with
the goodwill associated therewith) and derivatives thereof, trade names, including the right to make, use, and
vend goods utilizing any of the foregoing, and permits, licenses, certifications, authorizations and approvals,
and the rights of any Mortgage Borrower thereunder, issued by any governmental, regulatory, or private authority,
agency, or entity whether now owned or hereafter acquired, together with all cash and non-cash proceeds and
products thereof;
(iii) All of Mortgage Borrowers' now owned or hereafter acquired, inventory of every
description which is held by any Mortgage Borrower for sale or lease or is furnished by any Mortgage Borrower
under any contract of service or is held by any Mortgage Borrower as raw materials, work in process or materials
used or consumed in a business, wherever located, and as the same may now and hereafter from time to time be
constituted, together with all cash and non-cash proceeds and products thereof;
(iv) All of Mortgage Borrowers' now owned or hereafter acquired personal property
of every kind or nature, machinery, appliances, equipment (including, without limitation, medical equipment and
instruments), furniture, computer equipment, tools, tooling, fixtures, goods, supplies, materials, work in
process, together with all additions, parts, fittings, accessories, special tools, attachments, and accessions
now and hereafter affixed thereto and/or used in connection therewith, all additions, substitutions and
replacements to any of the foregoing, and all cash and non-cash proceeds and products thereof; and
(v) All of Mortgage Borrowers' other money, securities, investment property,
deposit accounts, instruments, documents, supporting obligations and chattel paper;
(vi) To the extent assignable, all management contracts, permits, certificates,
licenses, approvals, contracts, options, development rights, entitlements and authorizations, however
characterized, issued or in any way furnished for the acquisition, construction, development, operation and use
29
of the Land (as defined in the Mortgage), Improvements (as defined in the Mortgage) and/or Leases, including
building permits, environmental certificates, licenses, certificates of operation, warranties and guaranties;
(vii) All refunds, rebates, reimbursements, reserves, deferred payments, deposits,
cost savings, governmental subsidy payments, governmentally-registered credits (such as emissions reduction
credits), other credits, waivers and payments, whether in cash or in kind, due from or payable by (i) any
federal, state, municipal or other governmental or quasi-governmental agency, authority or district (a
"Governmental Agency") or (ii) any insurance or utility company relating to any or all of the Property or arising
out of the satisfaction of any conditions imposed upon or the obtaining of any approvals for the development or
rehabilitation of the Property; and
(viii) To the extent not listed above as original collateral, the proceeds
(including, without limitation, insurance proceeds) and products of all of the foregoing, irrespective of whether
such proceeds are deposited into a deposit account and/or are transferred from one deposit account to another
deposit account, and all replacements, additions, substitutions and accessions of and to all of the foregoing.
Section 3.2. Lien Documents. At Closing and thereafter as Agent deems necessary in its sole
----------------
discretion, Borrowers (other than Specified Borrowers) shall execute and deliver to Agent, or have executed and
delivered (all in form and substance reasonably satisfactory to Agent in its sole discretion) any agreements,
documents, instruments, and writings deemed necessary by Agent or as Agent may otherwise reasonably request from
time to time in its sole discretion to evidence, perfect, or protect Lenders' Lien and security interest in the
Collateral required under this Agreement; provided that lockbox or control agreements with respect to Borrowers'
deposit accounts shall not be required except to the extent set forth in Section 2.3. Borrowers (other than
Specified Borrowers) hereby authorize Agent to file one or more financing statements, continuation statements (or
equivalent) and amendments thereto describing the Collateral and describing any statutory liens held by Lender.
This Agreement shall constitute a security agreement as that term is used in the Uniform Commercial Code
in effect in the jurisdiction(s) in which each Borrower (other than Specified Borrowers) is organized and in the
jurisdiction(s) in which the Collateral is situated and Borrowers (other than Specified Borrowers) hereby grant
to Agent for the benefit of the Lenders in order to secure the Obligations, a security interest in the Collateral.
Section 3.3. Personal Property Collateral Administration.
--------------------------------------------
(a) Borrowers (other than Specified Borrowers) shall keep accurate and complete records of
its Accounts and all payments and collections thereon and shall submit to Agent as set forth in Section 6.1,
sales and collections reports. In addition, if Accounts in an aggregate face amount in excess of $50,000.00
become ineligible because they fall within one of the specified categories of ineligibility set forth in the
definition of Qualified Accounts or otherwise, Borrowers (other than Specified Borrowers) shall notify Agent of
such occurrence on the first Business Day following the time Borrowers (other than Specified Borrowers) know or
should have known of such occurrence and the Borrowing Base shall thereupon be adjusted to reflect such
occurrence.
(b) Whether or not an Event of Default has occurred, any of Agent's officers, employees or
agents shall have the right, at any reasonable time or times hereafter, in the name of Lender or any designee of
Lender or any Borrower (other than Specified Borrowers), to verify the validity, amount or any other matter
relating to any Accounts by mail, telephone, telegraph or otherwise. Borrowers (other than Specified Borrowers)
shall cooperate fully with Agent in an effort to facilitate and promptly conclude such verification process.
(c) After the occurrence and during the continuance of an Event of Default or Sweep Event,
Agent shall have the right at any time to notify Account Debtors (subject to applicable law regarding
Medicaid/Medicare/TRICARE Account Debtors) that Accounts have been assigned to Agent, on behalf of Lenders.
(d) Borrowers shall bear the risk of loss on all Personal Property, regardless of whether
such Personal Property is in the possession or control of any Borrower, any Lender, Agent, a bailee or any other
Person.
Section 3.4. Other Actions. In addition to the foregoing, Borrowers (other than Specified
---------------
Borrowers):
30
(a) after the occurrence and during the continuance of a Sweep Event, shall provide prompt
written notice to each private indemnity, managed care or other Insurer who either is currently an Account Debtor
or becomes an Account Debtor at any time following the date of this Agreement that Agent, on behalf of Lenders,
has been granted a first priority Lien and security interest in, upon and to all Accounts applicable to such
Insurer and directs each Account Debtor to make payments into the HHLP Concentration Account, and hereby
authorizes Agent, upon Borrowers' failure to send such notices within ten (10) days after the date of this
Agreement (or ten (10) days after the Insurer becomes an Account Debtor), to send any and all similar notices to
such Insurers;
(b) shall do anything further that may be lawfully and reasonably required by Agent to secure
Lenders' interests granted hereunder and effectuate the intentions and objects of this Agreement, including but
not limited to the execution and delivery of lockbox agreements, continuation statements, amendments to financing
statements, and any other documents required under this Agreement; provided that lockbox agreements or other
control agreements with respect to Borrowers' deposit accounts shall not be required except to the extent set
forth in Section 2.3 hereof;
(c) at Agent's request, shall immediately deliver to Agent all items of Collateral for which
Agent must receive possession to obtain a perfected security interest;
(d) shall, on Agent's demand, deliver to Agent all notes, certificates, and documents of title,
chattel paper, warehouse receipts, instruments, and any other similar instruments constituting Personal Property;
(e) shall, where Personal Property is in the possession of a third party and possession is the
sole or customary means of perfecting a security interest in such Personal Property, join with Agent in notifying
the third party of Agent's security interests and obtaining an acknowledgement from the third party that it is
holding the Personal Property for the benefit of Lender;
(f) shall cooperate with Agent in obtaining control with respect to Personal Property
consisting of deposit accounts, to the extent required by Section 2.3, investment property, letter of credit
rights, electronic chattel paper and any other portion of the Personal Property for which control is required in
order to perfect a security interest; and
(g) shall not create any chattel paper without placing a legend on the chattel paper acceptable
to Agent indicating that Agent, on behalf of Lenders, has a security interest in the chattel paper.
Section 3.5. Searches. Before Closing, and thereafter (as and when determined by Agent in its
---------
reasonable discretion), Agent will perform the searches described in clauses (a), (b) and (c) below against each
Borrower (other than Specified Borrowers) (the results of which are to be consistent with such Borrowers'
representations and warranties under this Agreement), all at Borrowers' expense:
(a) Uniform Commercial Code searches with the Secretary of State and local filing offices
of each jurisdiction where each Borrower (other than Specified Borrowers) maintains its executive offices, a
place of business, or assets and the jurisdiction in which each Borrower is organized;
(b) Judgment, federal tax lien and corporate and partnership tax lien searches, in each
jurisdiction searched under clause (a) above; and
(c) Searches of applicable corporate, limited liability company, partnership and related
records to confirm the continued existence, organization and good standing of each Borrower (other than Specified
Borrowers) and the exact legal name under which each Borrower (other than Specified Borrowers) is organized.
Section 3.6. Power of Attorney. Each of the officers of Agent is hereby irrevocably made,
--------------------
constituted and appointed the true and lawful attorney for Borrowers (other than Specified Borrowers) (without
requiring any of them to act as such) with full power of substitution to do the following after the occurrence
and during the continuance of an Event of Default: (a) endorse the name of any Borrower (other than Specified
Borrowers) upon any and all checks, drafts, money orders, and other instruments for the payment of money that are
payable to such Borrower and constitute collections on such Borrower's Accounts; (b) execute in the name of any
31
Borrower (other than Specified Borrowers) any financing statements, schedules, assignments, instruments,
documents, and statements that such Borrower is obligated to give Agent or Lenders under this Agreement; (c) take
any action any Borrower (other than Specified Borrowers) is required to take under Section 3.4 above; and (d) do
such other and further acts and deeds in the name of any Borrower (other than Specified Borrowers) that Agent may
reasonably deem necessary or desirable to enforce any Account or other Personal Property or perfect Lenders'
security interest or Lien in any Collateral. In addition, if any Borrower (other than Specified Borrowers)
breaches its obligation to direct payments of the proceeds of the Personal Property to the Facility Deposit
Account, Agent, as the irrevocably made, constituted and appointed true and lawful attorney for such Borrower
pursuant to this paragraph, may, by the signature or other act of any of Agent's officers (without requiring any
of them to do so), direct any federal, state or private payor or fiscal intermediary to pay proceeds of the
Personal Property to such Borrower by directing payment to the Facility Deposit Account.
Section 3.7. New Mortgage Borrowers. In order to cure or prevent a default under Section 6.22, the
-----------------------
Company may, upon (a) Agent's consent and due diligence review and the satisfaction of those conditions precedent
specified in Section 5.1 relating to the Real Property required by Agent and (b) delivery to Agent of legal
opinions, title insurance and other such documents as Agent then requires in form and substance satisfactory to
Agent, add additional Facilities to the Mortgaged Facilities and update Schedule 1.119 accordingly, so long as
--------------
(x) such additional Facilities shall be owned by a Borrower or an entity that becomes a Borrower hereunder and
(y) such owner is designated as an additional Mortgage Borrower. No cure of any such default shall be effected
until all of the matters set forth in this Section 3.7 shall be fully completed, and nothing in this Section 3.7
shall be deemed or construed to create or extend any cure period in this Agreement or in any of the Loan
Documents.
Section 3.8. No Liens and Encumbrances; No Disposition of Personal Property or Real Property.
----------------------------------------------------------------------------------------
Borrowers agree that upon the occurrence of any of the following, without Requisite Lenders' prior written
consent (which may be withheld in Requisite Lenders' sole discretion), such occurrence shall constitute an Event
of Default under this Agreement and under the other Loan Documents without the need for notice or an opportunity
to cure and Lenders shall have the absolute right, at their option, without notice and without demand, to declare
all of the Obligations immediately due and payable and to exercise any or all of their rights under the Loan
Documents:
(a) if any Borrower creates, incurs, assumes or suffers to exist any mortgage,
encumbrance, hypothecation, pledge, Lien or other encumbrance of any kind (including the charge upon property
purchased under a conditional sale or other title retention agreement) upon, or any security interest in, any of
their Collateral or upon any interest in the Real Property (including without limitation, upon any leasehold
interest), whether now owned or hereafter acquired, except for Permitted Liens;
(b) if any Borrower makes or suffers to occur any sale, lease, transfer, grant,
conveyance, assignment or other disposition or alienation of any of its assets or of any interest (including
leasehold interests) in any of the Real Property, including without limitation any Collateral, other than:
(i) entering into Leases and Lessee Lease in effect on the date hereof, or entering into
leases under which both the lessor (or sublessor) and lessee (or sublessee) are Borrowers (other than Mortgage
Borrowers and Specified Borrowers), and leases permitted under Section 7.20;
(ii) the sale, lease, transfer or other disposition of any or all of any Borrowers' (other
than Mortgage Borrowers') assets (upon voluntary liquidation or otherwise) to another Borrower (other than a
Specified Borrower) provided such sale, lease, transfer or disposition could not reasonably be expected to have a
Material Adverse Effect;
(iii) the merger or consolidation of (1) any Mortgage Borrower with or into any other
Mortgage Borrower or (2) any Borrower (other than a Mortgage Borrower) with or into any other Borrower (other
than a Mortgage Borrower), provided, in each case, (A) such merger could not reasonably be expected to have a
Material Adverse Effect and (B) Borrowers execute such documents as Agent shall require (including, without
limitation, assumption documents) and Borrowers provide to Agent such authorization documents and other due
diligence documentation as Agent shall require;
32
(iv) the sale or other disposition of any personal property by any Borrower that, in
Borrowers' reasonable judgment has become uneconomic, obsolete or worn out, provided that (A) such personal
property (1) is sold or disposed of in the ordinary course of business and (2) in the aggregate has a depreciated
book value as of the date of disposition not in excess of $500,000.00, or (B) such sale or disposition is
incident to the replacement of such personal property with items of like kind in the ordinary course; provided
--------
however, that Borrowers (other than Mortgage Borrowers) shall have the right to dispose of personal property that
-------
has a depreciated book value as of the date of disposition in excess of $500,000.00, which sale or disposition is
not incident to the replacement thereof with items of like kind in the ordinary course, so long as Borrowers
shall immediately pay to Agent for the benefit of Lenders the proceeds paid to Borrowers in connection with such
sale or disposition less any amount required to be paid by such Borrower to a lender under an Approved
Indebtedness. Any proceeds so paid to Agent shall be applied on a pro rata basis (based on the respective
principal balances as of the date of payment) to a permanent reduction of the Revolving Facility and to a partial
repayment, without prepayment fee, of the Term Facility; and
(v) the sale or other disposition of the Laurelwood Facility, the proceeds of which shall
be required to be paid immediately to Agent to the extent such proceeds (less ordinary and customary closing
costs) exceed $2,500,000.00. Any proceeds so paid to Agent shall be applied on a pro rata basis (based on the
respective principal balances as of the date of payment) to a permanent reduction of the Revolving Facility and
to a partial repayment, without prepayment fee, of the Term Facility.
To the extent any Collateral is sold as provided in this Section 3.8 (b), upon payment of the amounts required
such Collateral (unless sold to any Borrower) shall be sold free and clear of the Liens granted by the Loan
Documents, and the Agent shall be authorized to take any actions deemed appropriate in order to effect the
foregoing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Each Borrower represents and warrants to Lenders, and shall be deemed to represent and warrant (a) on
each day on which Borrowers request that any Loan be disbursed to Borrowers under this Agreement and (b) on each
day that any disbursement of any Loan to Borrowers shall occur under this Agreement, that:
Section 4.1. Subsidiaries. The Subsidiaries of the Company and their respective jurisdictions of
-------------
organization are as set forth in Schedule 4.1. Subsidiaries that are not Borrowers under this Agreement are
------------
marked as such on Schedule 4.1.
-------------
Section 4.2. Organization and Good Standing. Each Borrower is a corporation, trust, limited
----------------------------------
partnership, limited liability company or limited liability partnership, as the case may be, duly organized,
validly existing, and in good standing under the laws of its state of formation, is in good standing as a foreign
corporation, trust, limited partnership, limited liability company or limited liability partnership, as the case
may be, in each jurisdiction in which the character of the properties owned or leased by it therein or the nature
of its business makes such qualification necessary, except such jurisdictions where the failure so to qualify
would not have a Material Adverse Effect, has the corporate, trust, limited partnership, limited liability
company or limited liability partnership (as the case may be) power and authority to own its assets and transact
the business in which it is engaged, and has obtained all certificates, licenses and qualifications required
under all laws, regulations, ordinances, or orders of public authorities necessary for the ownership and
operation of all of its properties and transaction of all of its business, all of which are in the name of such
Borrower other than such certificates, licenses and qualifications the lack of which, individually or in the
aggregate, would not have a Material Adverse Effect. Each Borrower's exact legal name is as set forth on the
-----
signature pages of this Agreement.
33
Section 4.3. Authority. Each Borrower has full corporate, limited partnership, trust, limited
----------
liability company or limited liability partnership (as the case may be) power and authority to enter into,
execute, and deliver this Agreement and to perform its obligations under this Agreement, to borrow the Loans, to
execute and deliver the Notes, and to incur and perform the obligations provided for in the Loan Documents, all
of which have been duly authorized by all necessary corporate, limited partnership, limited liability company or
limited liability partnership (as the case may be) action. No consent or approval of shareholders, trust
beneficiaries, members or partners of, or lenders to, any Borrower and no consent, approval, filing or
registration with any Governmental Authority is required as a condition to the validity of the Loan Documents or
the performance by each Borrower of its obligations under the Loan Documents except for consents or approvals
which have been obtained or made and are in full force and effect and except (a) such consents and approvals, the
failure to obtain or perform which would not have a Material Adverse Effect, and (b) such filings as are
necessary to perfect the Liens of the Lenders created pursuant to this Agreement and the Loan Documents.
Section 4.4. Binding Agreement. This Agreement and all other Loan Documents constitute, and the
---------------------
Notes, when issued and delivered pursuant to this Agreement for value received, will constitute, the valid and
legally binding obligations of each Borrower, enforceable against each Borrower in accordance with their
respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting creditors' rights generally and by general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law).
Section 4.5. Litigation. Except as disclosed in Schedule 4.5, there are no actions, suits,
----------- ------------
proceedings or investigations pending or, to the best knowledge of the Borrowers, threatened against any Borrower
before any court or arbitrator or before or by any Governmental Authority in which there is a probability of an
adverse determination and which, in any one case or in the aggregate, if determined adversely to the interests of
such Borrower, is reasonably likely to have a Material Adverse Effect. No Borrower is in default with respect to
any material order of any court, arbitrator, or Governmental Authority applicable to such Borrower or its
properties, except to the extent that such default, in any one case or in the aggregate, would not have a
Material Adverse Effect.
Section 4.6. No Conflicts. The execution and delivery by Borrowers of this Agreement and the other
-------------
Loan Documents do not, and the performance of its obligations under the Loan Documents will not, violate,
conflict with, constitute a default under, or result in the creation of a Lien or encumbrance upon the property
of any Borrower (other than for the benefit of Lender) under: (a) any provision of any Borrower's articles of
incorporation or bylaws, certificate of formation or operating agreement, certificate of limited partnership or
agreement of limited partnership, or certificate of limited liability partnership or agreement of limited
liability partnership, as the case may be, (b) any provision of any law, rule, or regulation applicable to
Borrowers except such violations, conflicts, defaults or Liens arising with respect to any provision of any law,
rule or regulation which could not reasonably be expected to have a Material Adverse Effect, individually or in
the aggregate, (c) any indenture or other agreement or instrument to which any Borrower is a party or by which
any Borrower or its property is bound, or (d) any judgment, order or decree of any court, arbitration tribunal,
or Governmental Authority having jurisdiction over any Borrower which is applicable to such Borrower.
Section 4.7. Financial Condition. The financial statements of the Company and its consolidated
---------------------
Subsidiaries and the combined financial statements of Mortgage Borrowers which have been most recently delivered
to Lenders as required by Section 6.1 fairly present the financial condition of the Borrowers and the results of
their operations and changes in financial condition as of the dates and for the periods referred to, and have
been prepared in accordance with GAAP. There are no material unrealized or anticipated liabilities, direct or
indirect, fixed or contingent, of any Borrower as of the dates of such financial statements that are not
reflected in such financial statements or in the notes to such financial statements or expressly permitted to be
incurred or not prohibited hereunder. There has been no material adverse change in the business, properties,
condition or operations of the Borrowers taken as a whole since the date of the last financial statement
delivered to Lenders as reflected in such financial statements or the notes thereto. The federal tax
identification number and fiscal year of each Borrower is as described on Schedule 4.7.
------------
Section 4.8. No Default. No Borrower is in default under or with respect to any contractual
------------
obligation in any respect that could reasonably be expected to have a Material Adverse Effect. No Event of
Default or Default, has occurred and is continuing.
34
Section 4.9. Title to Properties. Subject to transfers and dispositions of property permitted
---------------------
under Sections 3.8, 7.4 or 7.5, each Mortgage Borrower has good, marketable and indefeasible title to, rights in
and the power to transfer the Real Property subject to no Lien, mortgage, pledge, encumbrance or charge of any
kind, other than Permitted Liens. No Mortgage Borrower has agreed or consented to cause any of the Real Property
whether owned now or hereafter acquired to be subject in the future (upon the happening of a contingency or
otherwise) to any Lien, mortgage, pledge, encumbrance or charge of any kind other than Permitted Liens.
Section 4.10. Taxes. Each Borrower has filed, or has obtained extensions for the filing of, all
------
material federal, state and other tax returns which are required to be filed, and has paid all taxes shown as due
on those returns and all assessments, fees and other amounts due as of the date of this Agreement (other than any
the amount of which is currently being contested in good faith and by appropriate and lawful proceedings, and
Borrowers shall have set aside such reserves, if any, with respect thereto as are required by GAAP and deemed
adequate by Borrowers and their independent accountants). All material tax liabilities of each Borrower are
adequately provided for on such Borrower's books. No material tax liability has been asserted by the Internal
Revenue Service or other taxing authority against any Borrower for taxes in excess of those already paid.
Section 4.11. Securities and Banking Laws and Regulations.
---------------------------------------------
(a) The use of the proceeds of the Loans and Borrowers' issuance of the Notes will not
directly or indirectly violate or result in a violation of the Securities Act of 1933 or the Securities Exchange
Act of 1934, as amended, or any regulations issued pursuant thereto or Regulations U, T or X of the Board of
Governors of the Federal Reserve System. No Borrower is engaged in the business of extending credit for the
purpose of the purchasing or carrying "margin stock" within the meaning of said Regulation U. No part of the
proceeds of the Loans under this Agreement will be used to purchase or carry any margin stock or to extend credit
to others for such purpose.
(b) No Borrower is an investment company within the meaning of the Investment Company Act
of 1940, as amended, nor is it, directly or indirectly, controlled by or acting on behalf of any Person which is
an investment company within the meaning of that Act.
Section 4.12. ERISA. No employee benefit plan (a "Plan") subject to the Employee Retirement Income
------
Security Act of 1974 ("ERISA") and regulations issued pursuant to ERISA that is maintained by any Borrower or
under which any Borrower could have any material liability under ERISA (i) has failed to meet minimum funding
standards established in Section 302 of ERISA, (ii) has failed to substantially comply with all applicable
requirements of ERISA and of the Internal Revenue Code, including all applicable rulings and regulations
thereunder, or (iii) has engaged in or been involved in a prohibited transaction (as defined in ERISA) under
ERISA or under the Internal Revenue Code which prohibited transaction could reasonably be expected to have a
Material Adverse Effect. Neither any Borrower nor any member of a Controlled Group that includes any Borrower
has assumed, or received notice of a claim asserted against such Borrower or another member of the Controlled
Group for, withdrawal liability (as defined in the Multi-Employer Pension Plan Amendments Act of 1980, as
amended) with respect to any multi-employer pension plan. Each Borrower has timely made when due all
contributions with respect to any multi-employer pension plan in which it participates and no event has occurred
triggering a material claim against such Borrower for withdrawal liability with respect to any multi-employer
pension plan in which such Borrower participates.
Section 4.13. Compliance with Laws. Except as described in Schedule 4.13, no Borrower is in
----------------------- -------------
violation of any statute, rule or regulation of any Governmental Authority (including, without limitation, any
statute, rule or regulation relating to employment practices or to environmental, occupational and health
standards and controls) which violation could reasonably be expected to have a Material Adverse Effect. Each
Borrower has obtained all licenses, permits, franchises, and other governmental authorizations necessary for the
ownership of its properties and the conduct of its business except where the failure to so obtain could not
reasonably be expected to have a Material Adverse Effect. Each Borrower is current with all reports and
documents required to be filed with any state or federal securities commission or similar Governmental Authority
and is in full compliance with all applicable rules and regulations of such commissions except where the failure
to file or comply could not reasonably be expected to have a Material Adverse Effect.
35
Section 4.14. Environmental Matters. No material use, exposure, release, generation, manufacture,
-----------------------
storage, treatment, transportation or disposal of Hazardous Material has occurred or is occurring on or from the
Real Property or any real property which is owned, leased or otherwise occupied by any Borrower (all such real
property, including the Real Property, is herein referred to collectively as the "Premises"), or off the Premises
--------
as a result of any action of any Borrower, except (a) in accordance with any applicable environmental statute,
rule or regulation or other requirement of a Governmental Authority, (b) as would not have a material adverse
effect on any Mortgage Borrower, or (c) as described in Schedule 4.14. All Hazardous Material used, treated,
-------------
stored, transported to or from, generated or handled on the Premises, or off the Premises by any Borrower, has
been disposed of on or off the Premises by or on behalf of such Borrower in a lawful manner, except as would not
have a material adverse effect on the Borrowers or as described in Schedule 4.14. To the Borrowers' best
-------------
knowledge, there are no underground storage tanks present on or under the Premises except as described in
Schedule 4.14. No other material environmental, public health or safety hazards that constitute non-compliance
-------------
with any applicable environmental statute, rule or regulation or other requirement of a Governmental Authority
exist with respect to the Premises except as described in Schedule 4.14. Borrowers acknowledge and agree that
-------------
disclosure of any information on Schedule 4.14 does not in any way waive the obligations of Borrowers under this
-------------
Agreement or any other Loan Document, including without limitation, the Environmental Indemnity Agreement, dated
as of even date herewith, given by Borrowers to and for the benefit of Agent on behalf of Lenders.
Section 4.15. Places of Business. As of the Closing Date, the only places of business of Borrowers,
-------------------
and the places where they keep and intend to keep the Personal Property and records concerning the Personal
Property, are at the addresses set forth in Schedule 4.15. The correct owners, lessees or sublessees, as the
-------------
case may be, of each of the Facilities are as set forth in Schedule 4.15. Schedule 4.15 also lists the correct
------------- -------------
owner of record of each such property. The Chief Executive Office of each Borrower is located in the state and
at the address shown in Schedule 4.15.
-------------
Section 4.16. Intellectual Property. Borrowers exclusively own or possess all the patents, patent
-----------------------
applications, trademarks, trademark applications, service marks, trade names, and copyrights, and all franchises,
licenses, and rights with respect to the foregoing necessary for the current and planned future conduct of its
business, without any conflict with the rights of others. A list of all such intellectual property (indicating
the nature of each Borrower's interest), as well as all outstanding franchises and licenses given by or held by
any Borrower, is attached as Schedule 4.16. No Borrower is in default of any material obligation or undertaking
-------------
with respect to such intellectual property or rights. No Borrower is infringing on any patents, patent
applications, trademarks, trademark applications, service marks, trade names or copyrights, or any franchises,
licenses, or rights with respect to the foregoing, or any other intellectual property rights of others and no
Borrower is aware of any infringement by others of any such rights owned by any Borrower.
Section 4.17. Capitalization. The authorized equity securities (whether capital stock, partnership
---------------
or membership interests or otherwise) of each Borrower (other than the Company) are as set forth in
Schedule 4.17. All issued and outstanding equity securities of each Borrower (other than the Company) is duly
authorized and validly issued, fully paid, nonassessable, free and clear of all Liens or pledges other than those
in favor of Agent or for the benefit of Lenders, and such equity securities were issued in compliance with all
applicable state, federal and foreign laws concerning the issuance of securities. Except as set forth in
Schedule 4.17, all equity securities of all Borrowers (except the equity securities of the Company) have been
-------------
pledged to Agent for the benefit of Lenders. The identity of all holders of outstanding equity securities of any
Borrower (other than the Company) that is a private company, or the holders of equity securities in excess of
five percent (5%) of all issued and outstanding equity securities on a fully diluted basis as of March 31, 2002
of any Borrower (other than the Company) that is a public company, and the percentage of such holder's fully
diluted ownership of such equity securities are set forth on Schedule 4.17 or such holder's ownership has been
-------------
added, deleted, changed or modified strictly in accordance with Exhibit X. No shares of the equity securities of
---------
any Borrower (other than the Company), other than those described above, are issued and outstanding. Except as
provided in Schedule 4.17 or as permitted in accordance with Exhibit X, there are no preemptive or other
------------- ---------
outstanding rights, options, warrants, conversion rights or similar agreements or understandings for the purchase
or acquisition from any Borrower (other than the Company) of any equity securities of any Borrower (other than
the Company).
36
Section 4.18. Material Facts. Neither this Agreement nor any other Loan Document contains any
----------------
untrue statement of material fact or omits to state a material fact necessary to make the statements contained
therein not misleading in light of the circumstances in which the same were made.
Section 4.19. Investments, Guarantees, and Certain Contracts. No Borrower owns or holds any equity
--------------------------------------------------
or long-term debt investments in, has any outstanding advances to, has any outstanding guarantees for the
obligations of, or has any outstanding borrowings from, any Person, except (a) the Subordinated Debt described in
Schedule 4.19 (the "Subordinated Debt"), (b) the other equity or long-term investments described in
-------------
Schedule 4.19, and (c) as otherwise expressly permitted in Sections 7.1, 7.2, 7.7, 7.8 or 7.9. No Borrower is a
party to any contract or agreement, or subject to any corporate restriction, which could reasonably be expected
to have a Material Adverse Effect.
Section 4.20. Business Interruptions. Except as has been disclosed in filings with the Securities
------------------------
Exchange Commission, within five years before the date of this Agreement, neither the business, property or
assets, nor operations of any Borrower has been materially adversely affected in any way by any casualty, strike,
lockout, combination of workers, or order of the United States of America or other Governmental Authority,
directed against such Borrower. There are no pending or, to the best knowledge of the Borrowers, threatened
labor disputes, strikes, lockouts, or similar occurrences or grievances against any Borrower or its business that
could reasonably be expected to have a Material Adverse Effect.
Section 4.21. Names. Within five years before the date of this Agreement, no Borrower has conducted
------
business under or used any other name (whether corporate, partnership or assumed) other than as shown on
Schedule 4.21. The name of each Borrower designated on the signature pages hereto provides the name of each
-------------
Borrower indicated on the public record of such Borrower's jurisdiction of organization. Each trade name of each
Borrower represents the Borrower or a division or trading style of such Borrower and not a separate Person or
independent Affiliate.
Section 4.22. Joint Ventures. No Borrower is engaged in any joint venture or partnership with any
----------------
other Person, except as set forth on Schedule 4.22 or as expressly permitted in Section 7.2.
-------------
Section 4.23. Accounts. Lenders may rely, in determining which Accounts are Qualified Accounts, on
---------
all statements and representations made by Borrowers (other than Specified Borrowers) with respect to any Account
or Accounts. With respect to each Qualified Account, Borrowers (other than Specified Borrowers) represent that:
(a) The Account is genuine and in all respects what it purports to be, and is not
evidenced by a judgment;
(b) The Account arises out of a completed, bona fide sale and delivery of goods or
---- ----
rendition of Medical Services by a Borrower in the ordinary course of its business and in accordance with the
terms and conditions of all purchase orders, contracts, certification, participation, certificate of need, or
other documents relating thereto and forming a part of the contract between such Borrower and the Account Debtor;
(c) The Account is for a liquidated amount maturing as stated in an electronically
generated or a duplicate claim or invoice covering such sale or rendition of Medical Services, a copy of which
has been furnished or is available to Agent;
(d) To the best of Borrowers' knowledge, the Account, and Lenders' security interest in
such Account, is not, and will not (by voluntary act or omission by Borrowers), be in the future, subject to any
offset, Lien, deduction, defense, dispute, counterclaim or any other adverse condition, and each such Account is
absolutely owing to a Borrower and is not contingent in any respect or for any reason;
(e) To the best of Borrowers' knowledge, there are no facts, events or occurrences that in
any way impair the validity or enforceability of any Accounts or tend to reduce the amount payable thereunder
from the face amount of the claim or invoice and statements delivered to Lender with respect thereto;
37
(f) To the best of Borrowers' knowledge, (i) the Account Debtor under the Account had the
capacity to contract at the time any contract or other document giving rise to the Account was executed and (ii)
such Account Debtor is solvent;
(g) To the best of Borrowers' knowledge, there are no proceedings or actions which are
threatened or pending against any Account Debtor under the Account which might result in any material adverse
change in such Account Debtor's financial condition or the collectibility of such Account;
(h) The Account has been billed and forwarded to the Account Debtor for payment in
accordance with applicable laws and compliance and conformance with any and requisite procedures, requirements
and regulations governing payment by such Account Debtor with respect to such Account, and such Account if due
from a Medicaid/Medicare/TRICARE Account Debtor is properly payable directly to a Borrower; and
(i) Each Borrower has obtained and currently has all certificates of need, Medicaid and
Medicare provider numbers, provider agreements, licenses, permits and authorizations that are necessary in the
generation of such Accounts.
Section 4.24. Solvency. Both before and after giving effect to the transactions contemplated by the
---------
terms and provisions of this Agreement, Borrowers (taken as a whole) (a) own property whose fair saleable value
is greater than the amount required to pay all of Borrowers' Indebtedness (including contingent debts), (b) were
and are able to pay all of their Indebtedness as such Indebtedness matures, and (c) had and have capital
sufficient to carry on their business and transactions and all business and transactions in which they are about
to engage.
Section 4.25. Recoupments. On each Borrowing Base certificate given to Agent in connection with a
------------
request for a Revolving Credit Loan, Borrowers have disclosed the amount of any Medicare, Medicaid or TRICARE
overpayments and recoupments, and any material overpayments and recoupments of any third-party payor, which
Medicare, Medicaid or TRICARE (or their respective fiscal intermediaries) or such third-party payor have alleged
in writing is due from Borrowers, all as of the dates and for the periods referred to in such Borrowing Base
certificate.
Section 4.26. Reports. Each Borrower has timely filed or caused to be timely filed, subject to any
--------
filing extension as such Borrower may have duly obtained under applicable law, all material cost reports and
other material reports required by third party payors required by law or by written contracts or otherwise to
have been filed or made as a condition for payment for Medical Services furnished at any Facility on or after
January 1, 2001. Except as set forth in Schedule 4.26, there are no material adverse claims, actions or appeals
-------------
pending (and no Borrower has filed any claims or reports which should result in any such claims, actions or
appeals) before any commission, board or agency including without limitation any intermediary or carrier, the
Provider Reimbursement Review Board or the Administrator of the Health Care Financing Administration, with
respect to any state or federal Medicare, Medicaid or TRICARE cost reports or claims filed by any Borrower or any
disallowance by any commission, board or agency in connection with any audit of such cost reports, which, if
decided adversely to any Borrower, would result in any material adverse change in such Borrower's financial
condition. No validation review or program integrity review related to any Borrower, or the consummation of the
transactions contemplated herein, or related to the Facilities or the Collateral, that could reasonably be
expected to have a Material Adverse Effect, is being conducted by any commission, board or agency in connection
with the Medicare, Medicaid or TRICARE programs, and to the knowledge of any Borrower, no such reviews are
scheduled, pending or threatened against or affecting any of the Facilities or the Collateral, or the
consummation of the transactions contemplated hereby that could reasonably be expected to have a Material Adverse
Effect.
Section 4.27. Compliance With Health Care Laws. Without limiting the generality of Section 4.13 or
----------------------------------
any other representation or warranty made herein, no Facility and, to Borrowers' best knowledge, no licensed
employee or licensed contractor of any Borrower in the exercise of his or her respective duties on behalf of any
Facility, has received written notice from any governmental authority regarding any currently existing violation
of any, applicable statutes, laws, ordinances, rules and regulations of any governmental authority with respect
to regulatory matters primarily relating to patient healthcare (including without limitation Section 1128B(b) of
the Social Security Act, as amended, 42 U.S.C. Section 1320a-7(b) (Criminal Penalties Involving Medicare or State
Health Care Programs), commonly referred to as the "Federal Anti-Kickback Statute," and the Social Security Act,
as amended, Section 1877, 42 U.S.C. Section 1395nn (Prohibition Against Certain Referrals), commonly referred to
as "Xxxxx Statute" (collectively, "Healthcare Laws")), except as disclosed on Schedule 4.27 or as could not
-------------
38
reasonably be expected to have a Material Adverse Effect. Borrowers maintain in all material respects all
records required to be maintained by the Food and Drug Administration, Drug Enforcement Agency and State Boards
of Pharmacy and, to the extent such Borrowers participate in Medicare, Medicaid and/or TRICARE, the federal and
state Medicare, Medicaid and TRICARE programs as required by the Healthcare Laws and to the knowledge of
Borrowers, Borrowers are not in violation of any Healthcare Laws which violation could reasonably be expected to
have a Material Adverse Effect. Borrowers have such permits, licenses, franchises, certificates and other
approvals or authorizations of governmental or regulatory authorities as are necessary under applicable law to
own their respective properties and to conduct their respective businesses, and with respect to those Facilities
that participate in Medicare, Medicaid and/or TRICARE, to receive reimbursement under such programs, other than
such permits, licenses, franchises, certificates, approvals and authorizations the lack of which, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse Effect. To Borrowers' best
knowledge, there are no existing sanctions in the form of either a program termination, temporary management,
denial of payment for new admissions, state monitoring or facility closure imposed by the Center of Medicare and
Medicaid Services ("CMS") or the applicable state survey agency on any Facility, except as disclosed on
Schedule 4.27 that could reasonably be expected to have a Material Adverse Effect.
-------------
Section 4.28. Funds from Restricted Grants. Except as described on Schedule 4.28, none of the
-------------------------------- -------------
Facilities or other Collateral is subject to, and Borrowers shall indemnify, defend and hold Lender harmless from
and against, any liability in respect of amounts received by any Borrower or others for the purchase or
improvement of the Facilities or other Collateral or any part thereof under restricted or conditioned grants or
donations, including, without limitation, monies received under the Public Health Service Act, 42 U.S.C.
Section 291 et seq.
Section 4.29. Participation Agreements. Schedule 4.29 hereto sets forth an accurate, complete and
-------------------------- -------------
current list of all material participation agreements with health maintenance organizations, insurance programs,
third party payors and preferred provider organizations with respect to the Facilities. For purposes of this
paragraph, a participation agreement shall be deemed material if annual revenues received by Borrowers pursuant
to such participation agreement are, or are expected to be, in excess of One Hundred Thousand Dollars
($100,000.00).
Section 4.30. HIPAA Compliance. To the extent that and for so long as any Borrower is a "covered
------------------
entity" within the meaning of HIPAA, such Borrower (i) has undertaken or will promptly undertake all necessary
surveys, audits, inventories, reviews, analyses and/or assessments (including any necessary risk assessments) of
all areas of its business and operations required by HIPAA and/or that could be materially adversely affected by
the failure of Borrower to be HIPAA Compliant (as defined below); (ii) has developed or will promptly develop a
detailed plan and time line for becoming HIPAA Compliant (a "HIPAA Compliance Plan"); and (iii) has implemented
or will implement those provisions of such HIPAA Compliance Plan in all material respects necessary to ensure
that Borrower is or becomes HIPAA Compliant. For purposes hereof, "HIPAA Compliant" shall mean that such
Borrower is or will be in compliance with each of the applicable requirements of the so-called "Administrative
Simplification" provisions of HIPAA on and as of each date that any part thereof, or any final rule or regulation
thereunder, becomes effective in accordance with its or their terms, as the case may be (each such date, a "HIPAA
Compliance Date") except to the extent such noncompliance could not reasonably be expected to have a Material
Adverse Effect, and to Borrowers' best knowledge, is not and could not reasonably be expected to become, as of
any date following any such HIPAA Compliance Date, the subject of any civil or criminal penalty, process, claim,
action or proceeding, or any administrative or other regulatory review, survey, process or proceeding (other than
routine surveys or reviews conducted by any government health plan or other accreditation entity) that could
result in any of the foregoing or that could reasonably be expected to materially adversely affect the Borrowers'
business, operations, assets, properties or condition (financial or otherwise), in connection with any actual or
potential violation by such Borrower of the then effective provisions of HIPAA, which violation could reasonably
be expected to have a Material Adverse Effect.
Section 4.31. Medicaid/Medicare Programs. Except as disclosed on Schedule 4.31, the Facilities and
---------------------------- -------------
all separately licensed units of the Facilities are certified for participation in the Medicare and Medicaid
programs, and are each a party to valid participation agreements for payments by the Medicare and Medicaid
programs which agreements are in full force and effect. To Borrowers' best knowledge, no Facility has received
written notice from any governmental authority regarding any existing proceeding or action to terminate, suspend
or revoke any Facility's participation in the Medicare, Medicaid or TRICARE programs, except as set forth on
39
Schedule 4.31, except to the extent such proceeding or action could not reasonably be expected to have a Material
-------------
Adverse Effect.
Section 4.32. Certificate of Need. Each Mortgage Borrower is the lawful owner of any certificate of
--------------------
need required in connection with the ownership of each Facility owned by it, and to the best knowledge of each
Borrower that leases and operates a Facility, the landlord of such Facility is the lawful owner of any
certificate of need required in connection with the ownership of such Facility. Each Borrower which operates a
Facility has been issued a nursing home license required by applicable law in connection with the operation of
such Facility. As of the Closing Date, in the event that Agent or Lenders acquire the Mortgaged Facilities
through foreclosure or otherwise, neither the Borrowers nor Lenders, nor any purchaser of any of the Mortgaged
Facilities (through a foreclosure or otherwise), must obtain a certificate of need from any applicable state
healthcare regulatory authority or agency (other than giving such notice required under the applicable state law
or regulation) prior to applying for and receiving a license to operate the Facility and certification to receive
Medicare and Medicaid payments (and any successor program) for patients having coverage thereunder, provided that
neither the services offered at the Facility nor the number of beds operated would be changed.
Section 4.33. Intentionally Left Blank.
--------------------------
Section 4.34. Xxxx Xxxxxx Act. No Borrower nor, to Borrowers' best knowledge, any previous owner of
----------------
the Facilities has received any funding in connection with the Facilities under the federal Xxxx-Xxxxxx Act.
Section 4.35. Government Contracts. Except for Borrowers' participation agreements with the
----------------------
Medicare (including hospice), Medicaid and TRICARE programs, except as set forth in Schedule 4.35, no Borrower is
-------------
a party to any contract or agreement that is subject to the Federal Assignment of Claims Act, as amended (31
U.S.C. Section 3727) or any similar state or local law.
Section 4.36. Leases.
--------
(a) Except as disclosed on Schedule 4.36, and other than resident care agreements, service
-------------
agreements for ancillary services or medical office agreements, no Mortgage Borrower has entered into any Leases
or licenses of any of the Mortgage Facilities nor are there any unrecorded Leases pertaining to the Mortgage
Facilities (other than resident care agreements, service agreements for ancillary services or medical office
agreements).
(b) Schedule 4.15 sets forth a complete list of all Facilities where any Borrower is a lessee or
-------------
sublessee. The leases or subleases pursuant to which Borrowers (other than Mortgage Borrowers) lease such
Facilities (as lessee or sublessee, respectively), but excluding any such lease or sublease under which both the
lessor (or sublessor) and lessee (or sublessee) are Borrowers, are collectively referred to as "Lessee
Leases".
(c) For all Leases (other than resident care agreements, service agreements for ancillary services,
or medical office agreements) and Lessee Leases currently in effect:
(1) The Leases are in full force and effect and have not been materially modified except as
disclosed on Schedule 4.36 or as permitted in Section 7.20;
-------------
(2) There are no defaults by, or defenses or setoffs against, a Borrower under the Leases or
Lessee Leases that could reasonably be expected to have a Material Adverse Effect nor, to Borrowers' best
knowledge, is there any fact that, with the giving of notice or lapse of time or both, would constitute a default
by a Borrower under the Leases or Lessee Leases that could reasonably be expected to have a Material Adverse
Effect;
(3) The sole ownership of the entire landlord's interest in the Leases is vested in a Borrower
and the Leases have not been otherwise assigned or pledged;
(4) The sole ownership of the entire tenant's interest in the Lessee Leases (and in those
certain Leases under which a Mortgage Borrower is the owner and its Affiliate is the tenant) is vested in a
Borrower and the Lessee Leases (and those certain Leases under which a Mortgage Borrower is the owner and its
Affiliate is the tenant) have not been otherwise assigned or pledged; and
40
(5) All rents or other payments required of the tenant under the Leases or of a Borrower under
the Leases, due to date, have been paid no more than one (1) month in advance, and no tenant under the Leases has
been granted any rent concession or inducement whatsoever.
Section 4.37. Condemnation. No condemnation of any portion of the Real Property has commenced or,
-------------
to the best of Borrowers' best knowledge, is contemplated by any governmental authority.
Section 4.38. Intentionally Left Blank.
-------------------------
Section 4.39. Compliance. To Borrowers' best knowledge, the Mortgage Facilities are structurally
-----------
sound and Borrowers have not received written notice from any governmental authority with respect to the
non-compliance of any of the Mortgage Facilities with any applicable zoning, environmental protection or control
codes and fire, electrical and building codes, rules and regulations, where such failure to so comply could be
reasonably expected to have a Material Adverse Effect. To Borrowers' best knowledge, there is no license,
approval or permit, necessary for either the lawful operation of the Mortgage Facilities or the lawful occupancy
thereof, including, without limitation, utility, building, zoning, subdivision control, land and water use,
environmental protection and flood hazard permits, which has not been obtained, except, with respect to licenses,
approvals and permits not relating to the business conducted thereon, where the failure to obtain such a license,
approval or permit could not reasonably be expected to have a Material Adverse Effect.
Section 4.40. Unrecorded Contracts. There are no unrecorded contracts to purchase the Mortgage
----------------------
Facilities or any interest therein.
Section 4.41. Tax Lot. To Borrowers' best knowledge, the Real Property consists of separate tax
--------
lots assessed separately and apart from any other property owned by any Borrower or any other owner. To
Borrowers' best knowledge, all real estate taxes and assessments against the Facilities are fully paid for all
prior years.
Section 4.42. Flood Plain. To Borrowers' knowledge, and based solely on surveys and surveyors'
-------------
certificates, the Mortgage Facilities do not lie in a 100 year flood plain that has been identified by the
Secretary of Housing and Urban Development or any other governmental authority.
Section 4.43. Real Property. The Loan Documents create a valid first lien on the marketable, fee
---------------
simple estate in the Real Property. The Real Property is improved by the Mortgage Facilities. To Borrowers'
best knowledge, and except for the Permitted Liens, the Real Property, including all access roadways, driveways
and any other paving, has been completed in a good and workmanlike manner, and the Borrowers have not received
any written notice of noncompliance from any governmental authority that all site work, fencing, lighting and
other improvements upon the Real Property have not been completed in accordance with the plans, specifications
and/or site plans previously approved by the county or city in which the Real Property is situated (where such
failure to so comply could reasonably be expected to have a Material Adverse Effect). To Borrowers' best
knowledge, the Real Property is free from filed or unfiled mechanics' and materialmen's liens, except for
Permitted Liens of the type described in clause (c) of the definition of such term, and has not been
substantially damaged by fire or casualty and there are no material deficiencies or problems with the design
and/or construction of the improvements on the Real Property. To Borrowers' best knowledge, final certificates
of occupancy or non-residential use permits have been obtained for all improvements on the Real Property. To
Borrowers' best knowledge, and based solely on surveys and surveyors' certificates, the parcels of land
comprising the Real Property are contiguous, subdivided parcels and are in full compliance with applicable
subdivision ordinances. To Borrowers' best knowledge, no subdivision or resubdivision of such parcels is
required to: (i) convey, transfer, assign or lease such parcels, either individually or as a whole; or
(ii) rebuild after a casualty all or any portion of the improvements on the Real Property to current size and
configuration.
Section 4.44. Insurance. All insurance required by the Loan Documents is in full force and effect.
----------
For all casualty, rent loss, business interruption and other insurance relating to damage to the Real Property,
the Agent, for the benefit of the Lenders, is insured as a first mortgagee thereunder, with a non-contributory
41
loss payee clause, a minimum thirty-day cancellation notice provision, and agreed amount, replacement cost and
inflation guard endorsements.
Section 4.45. Utilities. To Borrowers' best knowledge, the Real Property is adequately served by
----------
electric, gas (if applicable), public water, public sewer, public storm sewer and other utilities and municipal
services required for the use of the Real Property as Mortgage Borrowers have represented such use to Lenders.
To Borrowers' best knowledge, utilities entering the Real Property either do so from a public street or are
located in recorded easements, which Lenders' title insurer has insured as being senior in priority over the
affected land to all other matters of record, and, to Borrowers' best knowledge, and except as shown on the
surveys described in the surveyors' certificates, do not run under or through any building, structure or
improvement (except paving) or land privately owned by persons or entities other than Mortgage Borrowers.
Section 4.46. Streets. All streets, roads, parking areas and driveways necessary to serve the Real
--------
Property for the use represented by Borrowers have been completed and are serviceable; and to Borrowers'
knowledge, and based solely on the surveys and surveyors' certificates, all streets and roads to be dedicated
have been dedicated and accepted for public use and maintenance by the jurisdiction in which the Real Property is
located.
Section 4.47. Other Liens. To Borrowers' best knowledge, there are no deeds of trust, mortgages,
------------
conditional sales contracts, chattel mortgages, leases of personalty, financing statements, title retention
agreements or other liens filed and/or recorded against the Real Property other than Permitted Liens.
Section 4.48. Title and Ownership. Title to the Real Property will be held in the names of the
----------------------
"Mortgage Borrowers" under the deeds of trust, deeds to secure debt and/or mortgages securing the Notes and will
not be the subject of any transaction whereby the legal or beneficial title to all or any part of the Real
Property shall be transferred to anyone other than such entities.
Section 4.49. Restricted Use. Borrowers have no knowledge that the present or proposed use and
----------------
occupancy of any Real Property violates any restrictive covenant, right-of-way, easement, operating agreement,
environmental protection statute or regulation or historical preservation statute or regulation, and no notice of
any violation of any regulation in respect of such Real Property has been issued or received. To the Borrowers'
best knowledge, there are no pending proceedings to change or down-zone the existing zoning classification as to
any portion of the Real Property.
Section 4.50. Indebtedness to HHLP Collecting Bank, Intermediate Collecting Bank or Depository
----------------------------------------------------------------------------------------
Banks. Borrowers have no liability of any kind for Indebtedness for Borrowed Money to any of the following: (i)
the HHLP Collecting Bank, (ii) the Intermediate Collecting Bank, or (iii) any Depository Banks, unless Lenders,
Borrowers and such bank have entered into an intercreditor agreement or similar document which shall include an
absolute waiver of any and all of such bank's rights of setoff, statutory or otherwise, and other terms
satisfactory to Agent; provided, however, in the case of a Specified Borrower such waiver may be limited to an
-------- -------
absolute waiver of such bank's rights against any and all accounts of other Borrowers or Affiliates in such bank,
including but limited to the HHLP Concentration Account, the Intermediate Concentration Account or any Facility
Account, but such bank may exclude from such waiver the account of such Specified Borrower.
Section 4.51. Indebtedness Allocable to Rhode Island Facilities. Both before and after giving
--------------------------------------------------
effect to the transactions contemplated by the terms and provisions of this Agreement, to the extent required by
the Department of Health of the State of Rhode Island or any successor thereto (the "Rhode Island Department of
Health"), the obligations under the Loan Documents of Harborside Rhode Island Limited Partnership, a
Massachusetts limited partnership ("HRI"), and any other Subsidiary substantially all the assets of which are
located in the State of Rhode Island do not exceed, for each such Subsidiary, an amount equal to 80% of the
aggregate Acquisition Consideration (as defined by the Rhode Island Department of Health), paid by the Company,
HRI or any other Subsidiary for Facilities owned or operated by such Subsidiary and located in the State of Rhode
Island.
Borrowers shall be permitted to update from time to time Schedules 2.3, 4.1 (if Section 7.9 is met), 4.7
(for new Borrowers), 4.15, 4.16, 4.17 (for new Borrowers), 4.29, 4.35, and 4.36 provided the following conditions
shall then be satisfied: (x) such update does not disclose a matter which could reasonably be expected to have a
42
Material Adverse Effect and (y) either (i) such update is expressly permitted by this Agreement or (ii) as to
Sections 4.16, 4.29 and 4.35, such update is not prohibited by this Agreement.
ARTICLE V
CLOSING AND CONDITIONS OF LENDING
---------------------------------
Section 5.1. Conditions Precedent to Agreement. The obligations of Agent and each of the Lenders
------------------------------------
to enter into and perform this Agreement, to advance sums in respect of the Term Facility, to make Revolving
Credit Loans and to issue Lender Letters of Credit are subject to the following conditions precedent:
(a) Lenders shall have received ten (10) originals of this Agreement, the Notes, the
Intercreditor Agreement, the Pledge Agreement, and all other Loan Documents required to be executed and delivered
at or before Closing (other than the Notes, as to which Lender shall receive only one (1) original of each),
executed by Borrower and any other required Persons, as applicable.
(b) Agent shall have received all searches required by Section 3.5.
(c) Borrowers shall have complied and shall then be in compliance with all the terms,
covenants and conditions of the Loan Documents.
(d) There shall have occurred and be continuing no Event of Default and no Default.
(e) The representations and warranties contained in Article IV shall be true and correct
in all material respects, as though made on and as of such date (except to the extent that such representations
and warranties expressly relate solely to an earlier date).
(f) Agent shall have received copies of all board of directors resolutions, consents of
members and managers and consents of partners of each Borrower, and other action taken by Borrowers to authorize
the execution, delivery and performance of the Loan Documents and the borrowing of the Loans under the Loan
Documents, as well as the names and signatures of the officers of, members and managers of and partners of each
Borrower authorized to execute documents on its behalf in connection with the Loans, all as also certified as of
the date of this Agreement by each Borrower's chief financial officer, treasurer, or equivalent, as applicable,
and such other papers as Agent may require.
(g) Agent shall have received (i) copies, certified as true, correct and complete by the
applicable state of organization of each Borrower, of the certificate of incorporation, certificate of formation
or certificate of limited liability partnership of each Borrower, with any amendments to any of the foregoing,
(ii) copies, certified as true, correct and complete by an authorized officer, member or partner of each
Borrower, of all other documents necessary for performance of the obligations of Borrowers under this Agreement
and the other Loan Documents, and (iii) certificates of good standing for each Borrower issued by the state of
organization of each Borrower and by each state in which each Borrower is doing business for which qualification
is required.
(h) Agent shall have received a written opinion of counsel for Borrowers, dated the date
of this Agreement in form and substance satisfactory to Agent.
(i) Agent shall have received such financial statements, reports, certifications, and
other operational information required to be delivered under this Agreement, including without limitation an
initial borrowing base certificate calculating the Borrowing Base.
(j) Lenders shall have received the Commitment Fee.
(k) The HHLP Concentration Account, the Intermediate Collection Account and the Agent's
Concentration Account shall have been established and Lockbox Agreements, satisfactory to Agent, in its sole
discretion, shall have been entered into with the HHLP Collecting Bank and the Intermediate Collecting Bank.
43
(l) Agent shall have received either (I) an estoppel certificate substantially in the form
of Exhibit C, attached hereto, or a subordination agreement or intercreditor agreement from each landlord under
---------
the Lessee Leases, or (II) an opinion from counsel to the Company that no statutory landlord's lien is prior to
Lender's UCC lien.
(m) Agent shall have received a certificate of Borrowers' chief financial officer, dated
the Closing Date, certifying that all of the conditions specified in this Section 5.1 have been fulfilled.
(n) The state of title to the Real Property shall be satisfactory to Agent and Lenders'
mortgages, deeds to secure debt or deeds of trust shall be insured by a mortgagee title insurance policy (or
binding commitment therefor) in form and substance and from a title insurer acceptable to Agent. Such title
insurance policy shall be on an American Land Title Association ("ALTA") form designated by Agent, shall
specifically contain no exception as to survey matters or creditors rights, must contain affirmative coverage
against mechanics', contractors', suppliers' and/or materialmen's liens, filed or unfiled, must affirmatively
insure that the security instrument is a valid first lien against the fee simple, marketable estate, insuring
Agent for the benefit of Lenders for a sum not less than the maximum principal amount of all financing hereunder
and must contain such endorsements as may be required by Agent (including, but not limited to, endorsements
covering zoning (ALTA 3.1), variable interest rates, revolving credit, no violations of covenants, conditions and
restrictions, street address, no usury violation, environmental liens, tie-in, access, contiguity, encroachment,
tax parcel, doing business, mortgage tax, first loss and last dollar). Fee simple title to the Real Property and
to the fixtures, equipment, furniture and personal property encumbered by the Loan Documents shall be marketable,
and free and clear of all defects, liens, encumbrances, security interests, assessments, restrictions and
easements which are not acceptable to and approved in writing by Lender. If access to the Real Property is by
means of easements or leases, said easements or leases shall be satisfactory in form and substance to Lender,
shall be insured under the mortgagee's title insurance policy issued to Lender as part of the insured estate and
shall not be subject to any prior liens, encumbrances, covenants or restrictions. All streets necessary to serve
the property for the use represented by Borrowers shall have been completed and shall be serviceable and all
streets to be dedicated shall have been dedicated and accepted for public use and maintenance. A search of the
state and local public records shall disclose no conditional sales contracts, chattel mortgages, leases of
personalty, financing statements or title retention agreements filed and/or recorded against the Borrowers or the
property other than liens which are expressly permitted under this Agreement.
(o) Agent shall have received the following, all in form and substance satisfactory to
Agent in its sole and absolute discretion:
(1) such property appraisals, property as-built surveys complying in all respects
with the "Minimum Standard Detail requirements for ALTA/ACSM Land Title Surveys," jointly established and adopted
in 1999 by ALTA, the American Congress on Surveying and Mapping and the National Society of Professional
Surveyors, and meeting the accuracy requirements of an urban survey, and including items 1 through 16 of Table A
thereof (except for item 5 relating to contours of the land), environmental reports, physical and structural
inspection reports and other third party reports as Lender shall deem necessary or appropriate;
(2) evidence that the Real Property and all improvements thereon comply with
applicable codes, regulations and ordinances, are zoned for their current use, are structurally sound, are
adequately served by public utilities, are completed free of mechanics and materialmen's liens, are not the
subject to any pending or threatened litigation, are not the subject of any pending or threatened condemnation
proceeding and have not been damaged by fire or other casualty;
(3) copies of all Leases pertaining to the Real Property, and copies of all Lessee
Leases; and
(4) such other documents and materials as Agent shall reasonably deem necessary or
appropriate.
(p) The Real Property shall be owned by a Borrower, and the leasehold estate in the Lessee
Leases shall be held by a Borrower, and they shall not be the subject of any transaction whereby the legal or
beneficial title to all or any part thereof shall be transferred to anyone other than a Borrower.
44
(q) All real estate taxes and assessments, special or otherwise, which are due and payable
with respect to each Real Property must be paid in full on or before Closing. Borrowers shall submit to Agent
prior to Closing copies of all recent real estate tax bills, with proof of payment, together with evidence that
each Real Property is a separately identifiable tax lot.
(r) Agent shall have received evidence satisfactory to Agent that the Real Property is not
within a special flood hazard area and is not eligible for flood insurance under the U. S. Flood Disaster
Protection Act of 1973, as amended.
Section 5.2. Conditions Precedent to Advances. Notwithstanding any other provision of this
-------------------------------------
Agreement, no Term Facility proceeds, Revolving Credit Loans, advances or other extensions of credit under the
Loans shall be disbursed under this Agreement, and no Lender Letter of Credit shall be issued, unless the
following conditions have been satisfied or waived immediately before such disbursement or issuance, as
applicable:
(a) The representations and warranties on the part of Borrowers contained in Article IV of
this Agreement shall be true and correct in all material respects at and as of the date of disbursement or
advance, as though made on and as of such date (except to the extent that such representations and warranties
expressly relate solely to an earlier date and except that the references in Section 4.7 to financial statements
shall be deemed to be a reference to the then most recent annual and interim financial statements of Borrowers
furnished to Agent pursuant to Section 6.1).
(b) No Event of Default or Default shall have occurred or would result from the making of
the disbursement or advance.
(c) With respect to any advances under the Term Facility, Borrowers shall have provided to
Agent (i) an updated search of title to the Real Property, effective to the date of the disbursement, (ii) an
endorsement to the title insurance policy insuring Lender's interest in the Real Property, which updates the
effective date of the policy to the date of the disbursement, which title endorsement contains no additional
Liens or title exceptions of any kind since the date of recordation of the Mortgage.
Notwithstanding anything in this Agreement to the contrary, Lenders, or Agent, on behalf of Lenders, may, without
notice, terminate funding and thereafter Lenders shall not be obligated to make additional loans or additional
letters of credit obligations under this Agreement without notice after the occurrence of an Event of Default.
Section 5.3. Closing. Subject to the conditions of this Article V, the Loans shall be made
--------
available on the date as is mutually agreed by the parties, which is September 13, 2002 (the "Closing Date") at
such time as may be mutually agreeable to the parties upon the execution of this Agreement (the "Closing") at
such place as may be reasonably requested by Agent.
Section 5.4. Waiver of Rights. By completing the Closing under this Agreement, or by making
-------------------
advances under the Loans, Lenders do not waive a breach of any representation or warranty of any Borrower under
this Agreement or under any other Loan Document, and all of Lenders' claims and rights resulting from any breach
or misrepresentation by any Borrower are specifically reserved by Lenders.
ARTICLE VI
AFFIRMATIVE COVENANTS
---------------------
Each Borrower covenants and agrees that for so long as Borrowers may borrow under this Agreement and
until payment in full of the Notes and termination or cash collateralization of all Lender Letters of Credit:
Section 6.1. Financial Statements and Collateral Reports. The Company will furnish to Agent (a) a
-----------------------------------------------
sales and collections report and accounts receivable aging schedule in the form attached hereto as Exhibit G
---------
within twenty-one (21) days after the end of each calendar month, which shall include, but not be limited to, a
report of sales, credits issued, and collections received; (b) a Borrowing Base certificate schedule in the form
45
attached hereto as Exhibit E within twenty-one (21) days after the end of each calendar month, which shall
---------
include, but not be limited to a computation of the Borrowing Base certified by the Chief Financial Officer of
the Company as being fairly stated in all material respects; (c) internally prepared monthly financial statements
for the Company and its consolidated Subsidiaries and combined monthly financial statements for the Mortgage
Borrowers (with operating statement schedules on each Real Property), certified by the Chief Financial Officer of
the Company, within forty-five (45) days of the end of each calendar month, accompanied by actual vs. budget
variance reports for each Facility generating Accounts; (d) to the extent prepared by Company, annual
projections, profit and loss statements, balance sheets, and cash flow reports (prepared on a monthly basis) for
the succeeding fiscal year within sixty (60) days after the end of Company's fiscal year; (e) internally prepared
annual financial statements for the Company and its consolidated Subsidiaries within sixty (60) days after the
Company's fiscal year; (f) annual audited financial statements for the Company and its consolidated Subsidiaries,
prepared by a firm of independent public accountants reasonably satisfactory to Agent, within one hundred twenty
(120) days after the end of Company's fiscal year; (g) promptly upon receipt thereof, copies of any final reports
submitted to any Borrower by the independent accountants in connection with any interim audit of the books of any
Borrower and copies of each final comment letter provided to any Borrower by independent accountants; (h) as soon
as available, copies of all financial statements and notices sent or made available to the public generally by
any of the Borrowers (including all quarterly and annual reports filed by Company with the Securities Exchange
Commission); (i) within fourteen (14) days of the date they are filed, copies of all cost reports filed with
Medicare or Medicaid; and (j) such additional information, reports or statements as Agent may from time to time
reasonably request. Annual financial statements shall set forth in comparative form figures for the
corresponding periods in the prior fiscal year. All financial statements shall include a balance sheet and
statement of earnings and shall be prepared in accordance with GAAP.
Section 6.2. Payments Under this Agreement. Borrowers will make all payments of principal,
---------------------------------
interest, fees, and all other payments required under this Agreement and under the Loans, and under any other
agreements with Lenders to which Borrowers are a party, as and when due. All items required to be furnished
under this Agreement or the other Loan Documents shall be furnished without cost to Agent or Lenders. To the
extent that any sums are received by Agent or Lenders from insurance proceeds, condemnation proceeds, or the
fulfillment by Borrowers of some other covenant under any Loan Documents, and such sums are applied by Agent to
the principal balance of the Notes, the amount of the regular monthly payments under the Notes shall continue to
be the amount provided for herein without adjustment for the principal prepayment, if any.
Section 6.3. Existence, Good Standing, and Compliance with Laws. Borrowers will do or cause to be
------------------------------------------------------
done all things necessary (a) to obtain and keep in full force and effect all corporate, limited liability
company or limited liability partnership existence; (b) to obtain and keep in full force and effect and all
licenses, permits, certificates of needs, regulatory approvals, privileges, and franchises (collectively,
"Permits") of each Borrower necessary to the ownership of its property or the conduct of its business, except for
such Permits the loss of which could not reasonably be expected to have a Material Adverse Effect; (c) to comply
with all applicable material current and future laws, ordinances, rules, regulations, orders and decrees of any
Governmental Authority having or claiming jurisdiction over such Borrower except to the extent that the failure
to comply therewith could not reasonably be expected to have a Material Adverse Effect; (d) to maintain and
protect the material properties used or useful in the conduct of the operations of Borrowers, in a prudent
manner, including without limitation the maintenance at all times of such insurance upon its insurable property
and operations as required by law or by Section 6.7; and (c) to maintain all Permits free from restrictions which
could materially impair their use or operation or cause the Permits to be provisional, probationary or restricted
in any material way, except where the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
Section 6.4. Legality. The making of the Loans and each disbursement or advance under the Loans
---------
shall not be subject to any penalty or special tax applicable to any Borrower, shall not be prohibited by any
governmental order or regulation applicable to any Borrower, and shall not violate any rule or regulation of any
Governmental Authority applicable to any Borrower.
Section 6.5. Lenders' Satisfaction. Borrowers shall deliver from time to time all instruments and
----------------------
legal documents in connection with the transactions contemplated by this Agreement as shall be reasonably
requested by Agent, in form and substance satisfactory to Agent and its counsel.
46
Section 6.6. Taxes and Charges. Each Borrower will timely file all material tax reports and pay
-------------------
and discharge all taxes, assessments and governmental charges or levies imposed upon such Borrower, or its income
or profits or upon its properties or any part thereof (collectively, "Charges"), before the same shall be in
default and before the date on which penalties attach thereto, as well as all lawful claims for labor, material,
supplies or otherwise (collectively, "Mechanics Claims") which, if unpaid, might become a Lien or charge upon the
properties or any part thereof of such Borrower. Such Borrower shall have the right to contest, in good faith by
appropriate proceedings, the amount or validity of any such Charges or Mechanics Claims so long as: (i) such
Borrower shall have set aside on its books adequate reserve therefor; (ii) such Borrower's title to, and its
right to use, the Collateral is not materially adversely affected thereby and Lender's Lien and priority on the
Collateral are not materially adversely affected, altered or impaired thereby; (iii) such Borrower has given
prior written notice to Agent of its intent to so contest or object to any such Charges or Mechanics Claims which
would materially adversely affect the Collateral; (iv) such contest stays the enforcement or collection of the
Charges and Mechanics Claims or any Lien created; and (v) in the case of material real estate taxes or
assessments or material Mechanics Claims, each relating to the Real Property, such Borrower has obtained an
endorsement, in form and substance reasonably satisfactory to Agent, to the loan policy of title insurance issued
to Agent for the benefit of Lenders insuring over any Lien created by such Charges or Mechanics Claims, against
the Real Property, or such Borrower has deposited with Agent a bond or other security reasonably satisfactory to
Agent in an amount sufficient to entirely eliminate any Lien for such Charges or Mechanics Claims as a Lien
against the Real Property. Should any stamp tax, intangible tax, intangible recording tax or other tax
(excluding income, franchise, gross receipts, transfer taxes or similar taxes with respect to Lenders), now or
hereafter become payable with respect to this Agreement or any of the other Loan Documents, Borrowers will pay
the tax before its due date and hold Lenders harmless from the cost of the tax, except as provided herein.
Section 6.7. Insurance. Borrowers shall carry adequate public liability and professional liability
----------
insurance with responsible companies reasonably satisfactory to Agent in such amounts and against such risks as
is customarily maintained by similar businesses and by owners of similar property in the same general area,
subject to Borrowers' self-insurance limits set forth in Schedule 6.7 for Real Property. In addition, Borrowers
------------
shall carry all insurance described on Schedule 6.7.
------------
Section 6.8. Information; Visits and Inspections. Borrowers shall furnish to Agent such
-----------------------------------------
information as Agent may, from time to time, reasonably request with respect to the business or financial affairs
of Borrowers. Company shall also permit any officer, employee, agent or representative of Agent or any Lender
upon reasonable notice to visit during business hours of the Company and inspect any of the properties of any
Borrower, to inspect, audit and make copies of or prepare extracts from any Borrower's minute books, books of
account and other records, including management letters prepared by such Borrower's auditors, and make copies
thereof or extracts therefrom, and to discuss the business affairs, finances and accounts of any Borrower with,
and be advised as to the same by, the officers, employees and independent accountants of such Borrower, all at
such times and as often as Agent or any Lender may reasonably require.
Section 6.9. Preservation and Maintenance of Facilities and Property.
--------------------------------------------------------
(a) Mortgage Borrowers will maintain, keep and preserve all of the Mortgaged Facilities in
good repair, working order and condition, subject to reasonable wear and tear, and from time to time make all
necessary repairs, renewals, replacements, betterments and improvements thereto, so that the business carried on
in connection therewith may be properly conducted at all times.
(b) Borrowers (other than Mortgage Borrowers) will maintain, keep and preserve all of
their Facilities in good repair, working order and condition, subject to reasonable wear and tear and except as
permitted by Section 3.8(b)(iv) and (v), and from time to time make all necessary repairs, renewals,
replacements, betterments and improvements thereto, all in accordance with the material provisions of their
respective leases.
(c) Mortgage Borrowers (1) shall not commit waste or permit material impairment or
deterioration of the Real Property; (2) shall not abandon the Real Property; (3) shall keep the Real Property in
good repair and restore or repair promptly, in a good and workmanlike manner, all or any part of the Real
Property to the equivalent of its original condition, ordinary wear and tear excepted, or such other condition as
Agent may approve in writing, upon any damage or loss thereto in accordance with the Loan Documents; (4) shall
47
comply with all laws, ordinances, regulations and requirements of any governmental body applicable to the Real
Property; (5) shall provide for management of the Real Property by Borrowers or by a property manager reasonably
satisfactory to Agent pursuant to a contract in form and substance reasonably satisfactory to Agent; (6) shall do
or cause to be done any and all things or acts, all in a timely and proper manner, which, from the character
and/or use of the Real Property, may be reasonably necessary to protect and preserve the Real Property; (7) shall
comply with all terms, covenants and conditions of all agreements and instruments, recorded and unrecorded,
affecting the Real Property; (8) shall not use the Real Property or any part thereof or allow the same to be used
or occupied for any purpose other than as commercial buildings fully in compliance with all zoning ordinances;
(9) will pay all costs of operation, maintenance and ownership of the Real Property as they come due; (10) will
not undertake or permit the execution of any renovation or other construction program which will cause the Real
Property or any material portion thereof to become unoccupied or vacant for a period in excess of ninety (90)
days; and (11) shall give notice in writing to Agent of and, unless otherwise directed in writing by Agent,
appear in and defend any material action or proceeding purporting to affect the Real Property, the security
granted by the Loan Documents in the Real Property or the rights or powers of Lender with respect to the Real
Property.
(d) Borrowers (other than Mortgage Borrowers) shall comply with the provisions of their
respective Lessee Leases, except to the extent such noncompliance could not reasonably be expected to have a
Material Adverse Effect. No Borrower or any tenant or other person shall remove, demolish or alter any
improvement or any fixture, equipment, machinery or appliance in or on the Real Property and owned or leased by
any Borrower except when incident to the replacement of fixtures, equipment, machinery and appliances with items
of like kind in the ordinary course.
(e) Mortgage Borrowers covenant and agree: that the improvements to the Real Property
have been, and all future improvements will be, constructed strictly in accordance with the requirements of all
regulatory authorities having jurisdiction, all approved site plan(s), all approved development plan(s) and all
restrictive covenants affecting the Real Property or any part thereof, except to the extent such noncompliance
has not, and could not reasonably be expected to have, a material adverse effect on such Real Property; that the
improvements at the Real Property have been, and all future improvements will be, constructed and installed
entirely within the bounds of the Real Property and do not and will not encroach upon any easement or
right-of-way or upon the land of others except for such minor encroachments, above or below ground, onto or upon
public space as may be consented to and permitted by the jurisdiction in which the Real Property is located; and
that the improvements to the Real Property are, and all future improvements will be, wholly within all building
restriction lines however established, and do not and will not violate use and other restrictions contained in
prior conveyances, zoning ordinances, building codes, health and safety codes, fire protection agreements,
subdivision ordinances or restrictions, and are situate on a single subdivided lot of record. The Mortgage
Borrowers covenant: (1) to diligently prosecute to completion and to complete within the time period required
under the Loan Documents or otherwise by Agent all improvements to the Real Property required to be made under
the terms of the Loan Documents; and (2) to diligently prosecute to completion and to complete all improvements
for which construction was commenced by Mortgage Borrowers (regardless of whether such construction was required
under the terms of the Loan Documents).
Section 6.10. Notification of Events of Default and Adverse Developments. Borrowers promptly will
-------------------------------------------------------------
notify Agent upon the occurrence of: (a) any Event of Default; (b) any Default; (c) and in any event, within ten
(10) days of Borrowers' knowledge of, any judicial, administrative or arbitration proceeding pending against any
Borrower, and any judicial or administrative proceeding known by any Borrower to be threatened against it, in
each case, not recorded in the financial statements delivered under Section 6.1, or which, if adversely decided,
would have a material adverse effect on the condition (financial or otherwise) or operations of the Borrowers
taken as a whole or which may expose such Borrower to uninsured liability of $1,000,000 or more; (d) and in any
event, within ten (10) days of Borrowers' knowledge of, any default claimed by any other creditor for Borrowed
Money of any Borrower other than Lenders, which default has not been waived and would have a material adverse
effect on the condition (financial or otherwise) or operations of the Borrowers, taken as a whole; (e) any
consensual or voluntary Lien arising against the Collateral, other than Permitted Liens, in each case describing
the nature of the event or development; (f) any non-consensual or involuntary Lien arising against the
Collateral, other than Permitted Liens, provided that Borrowers shall be required to notify Agent only when
Borrowers know or should know of the threat or existence of such Lien, in each case describing the nature of the
event or development; or (g) the closing of any Facility. In the case of notification under clauses (a) and (b),
48
Borrowers shall set forth any proposed action with respect to such event. In the case of notification under
clause (f), Borrowers may, with the consent of Agent (which shall not be unreasonably withheld) update
Schedule 1.104.
--------------
Section 6.11. Employee Benefit Plans. Borrowers will (a) comply with the funding requirements of
------------------------
ERISA with respect to the Plans for its employees, or will promptly satisfy any accumulated funding deficiency
that arises under Section 302 of ERISA; (b) furnish Agent, upon Agent's request, promptly after filing the same,
with copies of all reports or other statements filed with the United States Department of Labor, the Pension
Benefit Guaranty Corporation, or the Internal Revenue Service with respect to all Plans, or which any Borrower,
or any member of a Controlled Group, may receive from such Governmental Authority with respect to any such Plans,
and (c) promptly advise Agent of the occurrence of any Reportable Event or Prohibited Transaction with respect to
any such Plan and the action which Borrowers propose to take with respect thereto. Borrowers will make all
contributions when due with respect to any multi-employer pension plan in which it participates and will promptly
advise Agent: (x) upon their receipt of notice of the assertion against any Borrower of a claim for withdrawal
liability; (y) upon the occurrence of any event that could trigger the assertion of a claim for withdrawal
liability against any Borrower; and (z) upon the occurrence of any event that would place any Borrower in a
Controlled Group as a result of which any member (including any Borrower) thereof may be subject to a claim for
withdrawal liability, whether liquidated or contingent.
Section 6.12. Financing Statements. Borrowers shall provide to Agent evidence reasonably
-----------------------
satisfactory to Agent as to the due recording of termination statements, releases of collateral, and Forms UCC-3,
and shall cause to be recorded financing statements on Form UCC-3, duly executed by Borrowers and Agent, in all
places necessary to release all existing security interests and other Liens in the Personal Property (other than
as expressly permitted by, or not restricted by, this Agreement) and to perfect and protect Lenders' first
priority Lien and security interest in the Personal Property, as Agent may reasonably request.
Section 6.13. Financial Records. Borrowers shall keep current and accurate books of records and
-------------------
accounts in which full and correct entries will be made of all of its material business transactions, and will
reflect in its financial statements adequate accruals and appropriations to reserves, all in accordance with GAAP.
Section 6.14. Collection of Accounts. Borrowers shall continue to diligently collect its Accounts
-----------------------
in the ordinary course of business.
Section 6.15. Intentionally Left Blank.
-------------------------
Section 6.16. Business Conducted. Borrowers shall continue to engage in businesses of the same
--------------------
general type as currently conducted by them. Borrowers shall not engage, directly or indirectly, in any line of
business substantially different from the business conducted by it immediately before the Closing Date, or engage
in business or lines of business which are not reasonably related thereto or to home healthcare or hospice
healthcare or incidental to ownership, operation or maintenance of the Facilities.
Section 6.17. Litigation and Other Proceedings. Borrowers shall give prompt notice to Agent of any
-----------------------------------
litigation, arbitration, or other proceeding before any Governmental Authority against or affecting any Borrower
if more than $1,000,000 of the amount claimed is not covered by insurance (and, for this purpose, and for all
purposes of this Agreement, self-insurance shall be deemed not to be insurance and any amount purportedly covered
by self-insurance shall be deemed not covered).
Section 6.18. Bank Accounts. Borrowers shall assign, and does hereby assign to Agent for the
---------------
benefit of Lenders all of their depository and disbursement accounts into which collections of Accounts are
deposited.
Section 6.19. Submission of Personal Property Documents. Borrowers will, on reasonable request by
--------------------------------------------
Agent, make available to Agent copies of shipping and delivery receipts evidencing the shipment of goods that
gave rise to an Account, medical records, insurance verification forms, assignment of benefits, in-take forms or
other proof of the satisfactory performance of services that gave rise to an Account, a copy of the claim or
invoice for each Account and copies of any written contract or order from which the Account arose. Borrowers
shall promptly notify Agent if an Account becomes evidenced or secured by an instrument or chattel paper and upon
request of Agent, will promptly deliver any such instrument or chattel paper to Agent.
49
Section 6.20. Licensure; Medicaid/Medicare/TRICARE Cost Reports. Each Borrower will maintain all
-----------------------------------------------------
certificates of need (if Borrower is the owner of the Facility), provider numbers, provider agreements and
licenses reasonably necessary to conduct its business as currently conducted, and take any steps reasonably
required to comply with any such new or additional requirements that may be imposed on providers of medical
products and Medical Services. Each Borrower that is a participating Medicare, Medicaid or TRICARE provider
shall file all Medicare, Medicaid, and TRICARE cost reports in a timely manner, subject to such filing extensions
as such Borrower may obtain in accordance with applicable regulations.
Section 6.21. Officer's Certificates. Together with the monthly financial statements and the
------------------------
audited annual financial statements delivered pursuant to Section 6.1, Borrowers shall deliver to Agent a
certificate of the Chief Financial Officer of the Company, in form and substance reasonably satisfactory to Agent:
(a) Setting forth the information (including detailed calculations) required to establish
whether Borrowers are in compliance with the requirements of Articles VI and VII as of the end of the period
covered by the financial statements then being furnished (recognizing that Sections 6.22(a) and (b) are quarterly
as of the quarter then most recently ended); and
(b) Stating that such officer has reviewed the relevant terms of this Agreement, and has
made (or caused to be made under such officer's supervision) a review of the transactions and conditions of
Borrowers from the beginning of the accounting period covered by the income statements being delivered to the
date of the certificate, and that such review has not disclosed the existence during such period of any fact,
event or circumstance that constitutes a Default or Event of Default, and if any such condition or event existed
during such period or now exists, specifying the nature and period of existence thereof and what action Borrowers
have taken or propose to take with respect thereto.
Section 6.22. Financial Covenants.
--------------------
(a) Debt Service Coverage Ratio. The Company shall maintain at the last day of each
-------------------------------
calendar quarter a Debt Service Coverage Ratio (as defined below) of at least 1.40:1.00. The term "Debt Service
Coverage Ratio" shall mean the ratio of (i) Net Operating Income derived from the Real Property, plus, to the
extent included in such calculation of Net Operating Income derived from the Real Property, without duplication,
the sum of (A) management fees, plus (B) the amortization of those certain management fees pre-paid to
Investcorp in 1998 multiplied by a fraction, the numerator of which is the number of beds at the Real Property
and the denominator of which is the number of beds at all Facilities, less (x) a capital replacement reserve of
$300 per annum per bed at the Real Property, and less (y) five percent (5%) of Revenues (excluding any Revenues
not generated by the provision of Medical Services) generated at the Real Property to (ii) the product of (A) the
then outstanding principal balance of the Term Facility multiplied by (B) 0.1133. Debt Service Coverage Ratio
calculations shall be performed at the end of each calendar quarter with respect to the then immediately
preceding twelve months.
(b) Fixed Charge Coverage Ratio. The Company shall maintain at the last day of each
-------------------------------
calendar quarter a "Fixed Charge Coverage Ratio" (as defined below) of at least 1.25:1.00. The term "Fixed
Charge Coverage Ratio" shall mean the ratio of (i) consolidated Net Operating Income of the Company, plus, to the
extent included in the calculation of Net Operating Income, the sum of (A) Lease Expense (including base rent and
additional rent), plus (B) the amortization of those certain management fees pre-paid to Investcorp in 1998, plus
(C) non-recurring charges, provided however that if such non-recurring charges relate to the closing of, or
-------- -------
termination of business at any revenue-producing Subsidiary or facility, then Net Operating Income shall be
calculated excluding therefrom all income, expense and other effects with respect to such closed or terminated
Subsidiary or facility, as applicable to (ii) Fixed Charges. Fixed Charge Coverage Ratio calculations shall be
performed at the end of each calendar quarter with respect to the then immediately preceding twelve months.
(c) Company shall furnish to Agent, within forty-five (45) days of the end of each
calendar quarter, evidence (in form and content reasonably satisfactory to Agent) (i) of Mortgage Borrowers'
compliance with the Debt Service Coverage Ratio covenant and (ii) of the Company's compliance with the Fixed
Charge Coverage Ratio covenant.
50
Section 6.23. Census. (a) The Census Amount for the Facilities shall meet or exceed the Minimum
-------
Census Amount. The Census Amount calculations shall be performed at the end of each calendar quarter for such
quarter. (b) Company shall furnish to Agent, within twenty-one (21) days of the end of each calendar quarter,
evidence (in form and content reasonably satisfactory to Agent) of Borrowers' compliance with this covenant;
provided, however, on each Business Day, Company shall deliver to Agent a report, in the form attached to this
-------- -------
Agreement as Exhibit F, showing the Census Amount as of the end of the immediately prior Business Day, including
---------
patients by payor type, for all Facilities; provided further that in the event such daily report is delivered
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within three (3) Business Days of the date it becomes due, such late delivery shall not constitute an Event of
Default.
Section 6.24. Post-Closing Obligations. Borrowers shall cause to be performed and completed, to
--------------------------
Lenders' reasonable satisfaction, all of the obligations set forth on Schedule 6.24 hereto within the time
-------------
periods set forth on Schedule 6.24.
-------------
Section 6.25. Capital Adequacy and Other Adjustments.
---------------------------------------
(a) In the event that Agent or any Lender shall have determined that the adoption after
the date hereof of any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or compliance by any Lender or any
corporation controlling any Lender with any request or directive regarding capital adequacy, reserve requirements
or similar requirements (whether or not having the force of law and whether or not failure to comply therewith
would be unlawful) from any central bank or governmental agency or body having jurisdiction does or shall have
the effect of increasing the amount of capital, reserves or other funds required to be maintained by any Lender
or any corporation controlling such Lender and thereby reducing the rate of return on such Lender's or such
corporation's capital as a consequence of its obligations hereunder, then Borrowers shall from time to time
within fifteen (15) days after notice and demand from Agent pay to Agent for the benefit of such Lender
additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of
such cost and showing the basis of the computation of such cost submitted by such Lender to Borrowers shall,
absent manifest error, be final, conclusive and binding for all purposes.
(b) The Borrowers shall not be required to make any payments to any Lender for any
additional amounts pursuant to this Section 6.25 or the next Section 6.26 unless such Lender has given notice to
the Company, through the Agent, of its intent to request such payments prior to or within 60 days after the date
on which such Lender incurred such amounts.
Section 6.26. Taxes.
------
(a) No Deductions. Any and all payments or reimbursements made under the Loan Documents
---------------
shall be made free and clear of and without deduction for any and all taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto of any nature whatsoever imposed by any taxing
authority, excluding such taxes to the extent imposed on Lenders' net income by the jurisdiction in which any
Lender is organized. If Borrower shall be required by law to deduct any such amounts from or in respect of any
sum payable hereunder to any Lender, then the sum payable hereunder shall be increased as may be necessary so
that, after making all required deductions, such Lender receives an amount equal to the sum it would have
received had no such deductions been made.
(b) Changes in Tax Laws. In the event that, subsequent to the initial advance under the
--------------------
Loans, (1) any changes in any existing law, regulation, treaty or directive or in the interpretation or
application thereof, (2) any new law, regulation, treaty or directive enacted or any interpretation or
application thereof, or (3) compliance by Agent or any Lender with any request or directive (whether or not
having the force of law) from any governmental authority, agency or instrumentality:
(A) does or shall subject Agent or any Lender to any tax of any kind whatsoever
with respect to this Agreement or the other Loan Documents, or change the basis of taxation of payments to Agent
or any Lender of principal, fees, interest or any other amount payable hereunder (except for net income taxes, or
franchise taxes imposed in lieu of net income taxes, imposed generally by federal, state or local taxing
51
authorities with respect to interest or commitment fees or other fees payable hereunder or changes in the rate of
tax on the overall net income of Agent or such Lender); or
(B) does or shall impose on Agent or any Lender any other condition or increased
cost in connection with the transactions contemplated hereby or participations herein;
and the result of any of the foregoing is to increase the cost to Agent or any Lender of making or continuing the
Loans hereunder, as the case may be, or to reduce any amount receivable hereunder, then, in any such case,
Borrowers shall promptly pay to Agent, for the benefit of such Lender, upon demand, any additional amounts
necessary to compensate such Lender, on an after-tax basis, for such additional cost or reduced amount
receivable, as determined by Agent with respect to this Agreement or the other Loan Documents. If any Lender
becomes entitled to claim any additional amounts pursuant to this section, Agent shall promptly notify Borrowers
of the event by reason of which such Lender has become so entitled. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by such Lender, or Agent, to Borrowers shall, absent
manifest error, be final, conclusive and binding for all purposes.
Section 6.27. Further Documentation; Loss of Notes. In the event any further documentation or
----------------------------------------
information is (a) reasonably required by Agent, any Lender or any prospective transferee in connection with
selling, transferring, delivering, assigning, securitizing or granting a participation in the Loans (or
transferring the servicing of the Loans), (b) deemed necessary or appropriate by Agent in the exercise of its
rights under the Loan Documents or to correct patent mistakes (as agreed by Borrower and Agent) in the Loan
Documents, materials relating to mortgagee's land title insurance or the funding of the Loans, or (c) reasonably
required by Agent or any Lender in order to mortgage the leaseholds on any or all of the Real Property Borrowers
shall provide, or cause to be provided to Agent, at Borrowers' cost and expense, such documentation or
information. Borrowers shall execute and deliver to Agent and/or the prospective transferee or servicer such
documentation, including but not limited to, any amendments, corrections, deletions or additions to the Loan
Documents as is required by Agent or any Lender and/or the prospective transferee; provided, however, that
-------- -------
Borrowers shall not be required to do anything that has the effect of changing any of the terms of the Loans set
forth in the Loan Documents. Upon notice from Agent of the loss, theft, or destruction of any of the Notes and
upon receipt of indemnity reasonably satisfactory to Borrowers from Lenders, or in the case of mutilation of any
of the Notes, upon surrender of the mutilated Note, Borrowers shall make and deliver a new note of like tenor in
lieu of the then to be superseded Note.
Section 6.28. Intentionally Deleted.
---------------------
Section 6.29. Termination/Default of Contracts. Borrowers shall notify Agent of any (a) default or
---------------------------------
event of default under, (b) termination of, or (c) failure of any party to renew, any material contract of any
Borrower (unless the default or event of default under, termination of or failure to renew such contract, as the
case may be, could not reasonably be expected to have a Material Adverse Effect) as soon as reasonably possible.
Notwithstanding anything in this Section 6.29 to the contrary, no provision in this Section 6.29 shall modify,
reduce or otherwise affect Lenders' rights hereunder or under any other Loan Document.
Section 6.30. Reserves and Escrows.
---------------------
(a) Requirements. Mortgage Borrowers agree to establish and maintain all of the
-------------
reserves and escrows required in this Section 6.30. Agent shall cause all such reserves and escrows to be
deposited into interest bearing accounts of the type customarily maintained by Agent or its servicing agent for
the investment of (and may be commingled with) similar reserves, which accounts may not yield the highest
interest rate then available. Such funds shall be held in an account in Agent's name (or such other account name
as Agent may elect) at a financial institution or other depository selected by Agent (or its servicer) in its
sole discretion (collectively, the "Depository Institution"). No such sums shall be deemed to be held in trust
-----------------------
for the benefit of Borrowers, Borrowers shall earn no more than an amount of interest on such funds equal an
amount determine by applying to the average monthly balance of such funds the quoted interest rate for the
Depository Institution money market savings account, as such rate is determined from time to time (such allocated
amount being referred to as "Borrowers' Interest"). Agent or its Depository Institution shall be entitled to
--------------------
report under the Company's Federal tax identification number the Borrowers' Interest on such funds. If the
Depository Institution does not have an established money market savings account (of if an interest rate for such
amount cannot otherwise be determined in connection with the deposit of such funds), a comparable interest rate
52
quoted by the Depository Institution and acceptable to Agent (or its servicer) in its discretion shall be used.
The amount of Borrowers' interest allocated to such funds shall be added to the balance thereof, and shall be
disbursed for payment of the items for which applicable such fund is to be disbursed. Any interest above the
Borrower's Interest shall be retained by Agent (for the benefit of Lenders and Fremont) as compensation for its
administration and investment of such funds. All sums so reserved or escrowed shall be part of the Collateral
and shall stand as additional security for all of the Obligations. If Agent at any time determines that the
amount on deposit in any reserve or escrow is insufficient for its intended purposes, Mortgage Borrowers shall,
within ten (10) days following notice from Agent, deposit such additional sums as may be reasonably required by
Agent. In the event of any default by Borrowers under the terms of this Agreement or any other Loan Document,
Agent may, at its discretion, apply amounts on hand in the reserves or escrows to cure such default. Within five
(5) days after demand of Agent, Mortgage Borrowers shall replenish the applicable reserve or escrow to restore
any sums so applied by Agent. Upon the occurrence of an Event of Default and/or the maturity of any principal
amount of the Obligations, the moneys then remaining on deposit with Agent or its agent shall, at Agent's option,
be applied against the Obligations.
(b) Real Property Taxes. On the due date for, and in addition to, the monthly
-----------------------
installments of principal and/or interest due under the Term Note Mortgage Borrowers shall pay to Agent a sum
equal to one-twelfth (1/12) of the amount estimated by Agent to be sufficient (when aggregated with an initial
deposit to be designated by Agent and paid by Mortgage Borrowers to Agent at Closing or otherwise upon demand of
Agent) to pay at least thirty (30) days before they become due and payable, all taxes, assessments and other
similar charges levied against the Real Property and not already paid prior to Closing as evidenced by duly
stamped real estate tax bills or receipts (collectively, the "Taxes"). Any change in the amount of such required
payment shall be effective on the first payment date occurring more than three (3) Business Days after receipt of
notice thereof by the Borrower. In the event the Real Property or any portion thereof is part of a larger tract
for purposes of taxation and assessments, Agent may require Mortgage Borrowers to have the Real Property taxed
and assessed as a separate parcel or separate parcels, or, in the alternative, to make the deposits required
under this section based upon the taxation and assessment of the larger tract. So long as no Event of Default
shall have occurred hereunder, Agent shall apply the escrow sums to pay the Taxes. The obligation of Mortgage
Borrowers to pay the Taxes is not affected or modified by the provisions of this paragraph.
(c) Capital Replacement Reserve. On the Due Date for, and in addition to, the monthly
------------------------------
installments of principal and/or interest due under any of the Notes, and in any event within five (5) days after
notice to Borrowers by Agent, Borrowers shall pay to Agent monthly deposits in the amount of $25.00 per bed at
each Mortgaged Facility to be held by Agent in a capital replacement reserve. So long as no Default or Event of
Default exists hereunder and the Mortgaged Facilities are being sufficiently maintained (in the reasonable
judgment of the Agent), Agent shall waive the obligation for Borrowers to pay to Agent such monthly deposits
Agent shall disburse the funds contained in the capital replacement reserve to reimburse Borrowers solely for the
actual cost of capital improvements approved in advance by Agent in writing upon Company providing to Agent paid
receipts, lien waivers and other documentation deemed reasonably necessary by Agent, with minimum draws of
$25,000.00 which shall occur no more frequently than once per month.
Section 6.31. Rhode Island Facilities. Both before and after giving effect to the transactions
------------------------
contemplated by the terms and provisions of this Agreement, to the extent required by the Department of Health of
the State of Rhode Island or any successor thereto (the "Rhode Island Department of Health"), the obligations
under the Loan Documents of Harborside Rhode Island Limited Partnership, a Massachusetts limited partnership
("HRI"), and any other Subsidiary substantially all the assets of which are located in the State of Rhode Island
shall not exceed, for each such Subsidiary, at any time, an amount equal to 80% of the aggregate Acquisition
Consideration (as defined by the Rhode Island Department of Health), paid by the Company, HRI or any other
Subsidiary for Facilities owned or operated by such Subsidiary and located in the State of Rhode Island.
53
ARTICLE VII
NEGATIVE COVENANTS
------------------
Each Borrower covenants and agrees that so long as Borrowers may borrow under this Agreement and until
payment in full of the Notes and termination or cash collateralization of all Lender Letters of Credit:
Section 7.1. Borrowing.
----------
(a) Borrowers will not create, incur, assume or suffer to exist any liability for Borrowed
Money except:
(i) Indebtedness to Lenders;
(ii) Indebtedness not exceeding $500,000.00 in the aggregate outstanding at any one
time;
(iii) Indebtedness as described on Schedule 7.1, including the refinancing of any
------------
such Indebtedness on economic terms and conditions (including all fees, charges and other up-front payments)
that, in the good faith judgment of the Company, is no less favorable to the Company and its Subsidiaries or to
the Lenders, in an aggregate principal amount not to exceed the then principal balance of the debt being
refinanced and without any increase in the interest rate (including all fees, charges and other up-front
payments), the monthly debt service, or the amortization of principal;
(iv) Indebtedness owed to another Borrower (except a Specified Borrower), which
shall be subordinated in all respects to Indebtedness to Lenders;
(v) Indebtedness in connection with surety bonds, letters of credit (if required
in connection with the insurance program authorized under Section 6.7 or otherwise expressly permitted in this
Agreement) and performance bonds obtained in connection with (A) workers' compensation obligations or (B) general
liability exposure of Borrowers; and
(vi) guaranties and contingent liabilities to the extent permitted by Section 7.8;
provided, however, Borrowers (other than Mortgage Borrowers) may create, incur, assume or suffer to exist
-------- -------
liability for Borrowed Money that is
(w) (I) Approved Indebtedness expressly permitted in Exhibit X, including
---------
the refinancing of any such Indebtedness on economic terms and conditions (including all fees, charges and other
up-front payments) that, in the good faith judgment of the Company, is no less favorable to the Company and its
Subsidiaries or to the Lenders, in an aggregate principal amount not to exceed the then principal balance of the
debt being refinanced and without any increase in the interest rate (including all fees, charges and other
up-front payments), the monthly debt service, or the amortization of principal or (II) Approved Capital Lease
Indebtedness expressly permitted in Exhibit X, so long as, in the case of I and II above, the same could not
---------
reasonably be expected to have a Material Adverse Effect;
(x) in the form of unsecured standby letters of credit incurred in the
ordinary course of business but in no event shall the aggregate amount at any time outstanding of such letters of
credit exceed FIVE MILLION DOLLARS ($5,000,000.00), so long as such liability for Borrowed Money could not
reasonably be expected to have a Material Adverse Effect; or
(y) unsecured Indebtedness obtained from Investcorp and its Affiliates;
provided that (i) interest on such Indebtedness shall not be payable in cash, (ii) no part of the principal
amount of or interest on such Indebtedness shall have a maturity date earlier than the one year anniversary of
the Stated Maturity Date, (iii) the non-default rate of interest thereon shall not exceed 12% per annum, and
54
(iv) such Indebtedness is fully subordinated in all respects (including without limitation payment and priority)
to the Revolving Facility, the Term Facility and all Obligations.
In the case of clause (w) immediately above, (A) Borrowers shall notify Agent at least fifteen
(15) Business Days prior to such transaction, and (B) together with such notice, Borrowers shall provide to Agent
a compliance certificate, in a form reasonably satisfactory to Agent, prepared on a pro forma basis, to give
effect to such transaction as of the last day of the calendar quarter immediately preceding the expected closing
date of such transaction for which the appropriate financial information is available, demonstrating that after
giving such effect to such transaction and adding the incremental additional Underwriting EBITDA[R] and
corresponding incremental additional Fixed Charges for such transaction each to the extent permitted by the terms
of this Agreement, Borrowers shall be in compliance with Section 6.22(b) as of the end of such fiscal quarter and
no Event of Default shall have occurred.
(b) Borrowers will not make prepayments on any existing or future indebtedness for
Borrowed Money to any Person (other than (i) Lenders, to the extent permitted by this Agreement or any subsequent
agreement between Borrowers and Lenders), or (ii) in connection with the refinancing or replacement thereof, to
the extent permitted by this Section 7.1.
Section 7.2. Joint Ventures. Except as set forth on Schedule 4.22, Borrowers will not form any
---------------- -------------
joint venture or partnership nor invest directly or indirectly in any joint venture or partnership for any
purpose (other than a joint venture or partnership all of the joint venturers or partners of which are the
Company or any Borrower other than a Mortgage Borrower); provided, however, so long as no Event of Default has
-------- -------
occurred, Borrowers (other than Mortgage Borrowers) may form joint ventures or partnerships expressly permitted
in Exhibit X, but only so long as (a) such joint venture or partnership shall take the form of a single purpose
---------
corporation, limited liability company, limited liability partnership, or other single purpose entity duly formed
and validly existing under the laws of any state within the United States, (b) Borrowers shall have notified
Agent at least fifteen (15) Business Days prior to such transaction, (c) together with such notice, Borrowers
shall provide to Agent a compliance certificate, in the form set forth on Exhibit H attached hereto, prepared on
a pro forma basis, to give effect to such transaction as of the last day of the calendar quarter immediately
preceding the expected closing date of such transaction for which the appropriate financial information is
available, demonstrating that after giving such effect to such transaction and adding the incremental additional
Underwriting EBITDA[R] and corresponding incremental additional Fixed Charges for such transaction each to the
extent permitted by the terms of this Agreement, Borrowers shall be in compliance with Section 6.22(b) as of the
end of such fiscal quarter and, no Event of Default shall have occurred, (d) the aggregate investment of all
Borrowers in such joint ventures (including, without limitation, all guaranties and contingent liabilities) shall
not exceed Five Million Dollars ($5,000,000.00) and (e) such joint venture, or such investment directly or
indirectly in any joint venture, could not reasonably be expected to have a Material Adverse Effect.
Section 7.3. Intentionally Deleted.
---------------------
Section 7.4. No Change in Ownership, Operation or Control.
---------------------------------------------
(a) Except as expressly provided otherwise in this Agreement, without the prior written
consent of Agent (which consent may be given or withheld in Agent's sole and absolute discretion), Borrowers
shall not execute, participate in, facilitate, consent to or suffer or permit to occur any "Transfer Event" (as
defined below). Except as expressly provided otherwise in this Agreement, the occurrence of a Transfer Event
without Agent's prior written consent shall constitute an immediate Event of Default hereunder, regardless of
whether any Borrower had the power or capacity to prevent such occurrence.
(b) The term "Transfer Event" shall mean any or all of the following facts, events or
circumstances, whether voluntary or involuntary and whether occurring as a single transaction or as a series of
transactions: (i) without limiting the generality of the foregoing, any circumstance under which any Borrower
shall merge or consolidate with or into any other entity excluding (x) a merger or consolidation permitted by
Section 3.8(b)(iii) and (y) a merger or consolidation that is part of any Approved Acquisition Transaction
expressly permitted by Exhibit X so long as it does not involve a Mortgage Borrower or a Specified Borrower;
---------
(ii) any Borrower shall liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution) except
55
(A) Borrowers, other than Mortgage Borrowers, with a net book value not greater than $100,000 may be dissolved,
(B) any Borrower, other than a Mortgage Borrower, may otherwise be dissolved, provided that upon dissolution, the
assets of such Borrower are transferred to a Borrower on the terms and subject to the conditions set forth in
subsection 3.8(b)(ii), and (C) any Borrower may engage in transactions in compliance with subsection 3.8(b)(ii);
(iii) the mortgage, pledge, hypothecation, assignment or grant of any security interest in or lien upon any
ownership interest in, voting interest in or interest in the profits or distributions from any Borrower except as
permitted by clauses (g) or (h) of the definition of "Permitted Lien"; or (iv) the sale, transfer, grant,
conveyance, assignment, or other disposition or alienation of any of the capital stock partnership interest, or
beneficial interest of any Mortgage Borrower, whether now owned or hereafter acquired except pursuant to a merger
or consolidation permitted by Section 3.8(b)(iii)(1) or (with respect to this clause (iv)) upon the written
reasonable consent of Agent. The term "Transfer Event" shall not include (x) residential leases made by any
Borrower in the ordinary course of business and otherwise in compliance with law and with any restrictions set
forth in this Agreement or other Loan Documents and (y) the pledges of and restrictions on pledges of stock or
interests set forth in Schedule 7.4 (but not any execution or remedial action thereupon).
------------
(c) Borrowers agree that compliance with this Section 7.4 is a material inducement to
Lenders' advancing credit under this Agreement. Borrowers further agree that in addition to all other remedies
available to Lenders, Lenders shall be entitled to specific enforcement of the covenants in this Section 7.4,
including injunctive relief.
Section 7.5. Sale and Leaseback. Borrowers will not, directly or indirectly, enter into any
---------------------
arrangement whereby any Borrower sells or transfers all or any part of its assets and thereupon and within one
year thereafter rents or leases the assets so sold or transferred); provided, however, so long as no Event of
-------- -------
Default has occurred hereunder, (I) Borrowers (other than Mortgage Borrowers) may enter into such sale and
leaseback transactions if it is expressly permitted in Exhibit X so long as (a) Borrowers shall notify Agent at
---------
least fifteen (15) Business Days prior to such transaction, (b) together with such notice, Borrowers shall
provide to Agent a compliance certificate, in the form set forth on Exhibit H attached hereto, prepared on a pro
forma basis, to give effect to such transaction as of the last day of the calendar quarter immediately preceding
the expected closing date of such transaction for which the appropriate financial information is available,
demonstrating that after giving such effect to such transaction and adding the incremental additional
Underwriting EBITDA[R] and corresponding incremental additional Fixed Charges for such transaction each to the
extent permitted by the terms of this Agreement, Borrowers shall be in compliance with Section 6.22(b) as of the
end of such fiscal quarter and no Event of Default shall have occurred, and (c) such transaction could not
reasonably be expected to have a Material Adverse Effect and (II) Borrowers (other than Mortgage Borrowers) may
enter into sale and leaseback transactions with respect to the Facilities located in Palm Harbor, Clearwater,
Tampa Bay and Terre Haute (which are currently mortgaged to THCI Company LLC or its Affiliates); provided that
--------
(a) the aggregate principal amount received in the sale of any of the Facilities shall not exceed the then
principal balance of the loan being re-paid unless such excess shall be paid immediately to Agent to be applied
as set forth in the last sentence of Section 3.8(a)(iv), (b) the payments of monthly rent (including all fees,
charges and other up-front payments) do not exceed the payments of monthly debt service, (c) if the lease entered
into in connection with such sale-leaseback is a capital lease, the imputed interest rate and the imputed
amortization of principal do not exceed the interest rate and amortization of principal under the loan then being
re-paid, and (d) Borrowers shall cause the parties to such sale leaseback to enter into an intercreditor
agreement with Agent on terms satisfactory to Agent.
Section 7.6. Distributions and Management Fees. Borrowers shall not make, declare, order or pay
------------------------------------
any "Distributions" (as defined below) to any of its Affiliates, to any shareholder, member, partner or other
person holding an equity interest in any Borrower or to any other Person related to or affiliated with any of the
foregoing. "Distributions" shall mean management fees, salaries or other fees or compensation, lease or rental
payments, dividends or other distributions with respect to any of its stock, partnership or membership interests
(as the case may be) now or hereafter outstanding, the purchase, redemption or other acquisition for value of any
of its stock, partnership or membership interests (as the case may be) now or hereafter outstanding, or the
return of any capital of the Company's stockholders, partners or members; provided that, Borrowers may pay
--------
reasonable salaries to officers or employees, and reasonable fees to directors, who are shareholders under
customary benefit programs or arrangements for employees, officers or directors, including, without limitation,
reasonable equity based compensation programs, reasonable retirement or savings plans and similar reasonable
plans, so long as (i) such payments, arrangements, programs and plans are in the ordinary course of business and
56
(ii) with respect to executive officers and directors, such payments, arrangements, programs and plans shall have
been approved by the board of directors of the Company. Notwithstanding the foregoing, so long as no Event of
Default has occurred, and no Material Adverse Effect could reasonably be expected,
(a) Borrowers may pay management fees only as disclosed in Schedule 7.6 or as permitted by
Section 7.6(b). Borrowers may make reasonable payments to Investcorp and its Affiliates (whether or not such
Persons are Affiliates of the Company) (i) for any financial advisory, financing, underwriting or placement
services or in respect of other investment banking activities, which relate solely to transactions actually
consummated by Borrowers, including in connection with acquisitions or divestitures permitted hereunder, which
payments are approved by the Board of Directors of the Company in good faith, provided that the amount of such
payments under this clause (i) in any year in respect of one or more transactions shall not exceed $2,000,000 and
(ii) after August 1, 2003 for annual management, consulting and advisory fees and related expenses, except to the
extent such fees under this clause (ii) exceed $750,000 in any 12-month period;
(b) Borrowers may make Distributions to any other Borrower other than Specified
Borrowers. Borrowers may make Distributions consisting of salaries or other fees or compensation, lease or
rental payments to any Affiliate (other than a Specified Borrower) on arm's length terms in accordance with
Section 7.12;
(c) Borrowers may pay or make dividends or distributions to any holder of their capital
stock in the form of additional shares of capital stock of the same class and type; and
(d) The Company may repurchase capital stock of the Company owned by former, present or
future employees of the Company or its Subsidiaries or their assigns, estates and heirs, provided that the
aggregate amount expended by the Company pursuant to this clause (d) shall not in the aggregate exceed (i)
$100,000 in any fiscal year or (ii) $250,000 during the term of this Agreement, plus any amounts contributed to
the Company after the date hereof as a result of resales of such repurchased shares of capital stock.
(e) The Company may redeem preferred stock with the proceeds of issuances of common stock
or other preferred stock and/or with the proceeds of Indebtedness issued as permitted by Section 7.1(a)(vi)(y);
provided that no net cash Distribution is made in connection with such redemption (after giving effect to the
receipt of proceeds of the issuance of such new common stock, preferred stock or Indebtedness), and any new
preferred stock has the same or more favorable (to the Company) cash dividend payment and redemption terms to the
existing preferred stock.
Section 7.7. Loans. Borrowers will not make loans or advances to any Person, other than (a) trade
------
credit extended in the ordinary course of its business, (b) advances for business travel and similar temporary
advances made in the ordinary course of business to officers, stockholders, directors, and employees; (c) loans
or advances to another Borrower (other than a Specified Borrower); (d) payroll advances in the ordinary course of
business; (e) loans or advances permitted under Section 7.2; (f) so long as no Event of Default has occurred
hereunder, loans or advances by Borrowers (other than Mortgage Borrowers) to other Borrowers expressly permitted
in Exhibit X in connection with Approved Transactions or Approved Lease Transactions, so long as such loans or
---------
advances by Borrowers (other than Mortgage Borrowers) could not reasonably be expected to have a Material Adverse
Effect; and (g) up to $15,000,000 of loans or advances, in the aggregate over the term of the Loan, in connection
with Purchase Option Payments.
In the case of clause (f) immediately above, (A) Borrowers shall notify Agent at least fifteen (15)
Business Days prior to such transaction, and (B) together with such notice, Borrowers shall provide to Agent a
compliance certificate, in the form set forth on Exhibit H attached hereto, prepared on a pro forma basis, to
give effect to such transaction as of the last day of the calendar quarter immediately preceding the expected
closing date of such transaction for which appropriate financial information is available, demonstrating that
after giving such effect to such transaction and adding the incremental additional Underwriting EBITDA[R] and
corresponding incremental additional Fixed Charges for such transaction each to the extent permitted by the terms
of this Agreement, Borrowers shall be in compliance with Section 6.22(b) as of the end of such fiscal quarter
and no Event of Default shall have occurred.
57
Section 7.8. Contingent Liabilities. Borrowers will not assume, guarantee, endorse, contingently
------------------------
agree to purchase or otherwise become liable upon the obligation of any Person, except (a) by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the ordinary course of business;
(b) those certain guarantees by certain Borrowers of obligations of the Company or of other Borrowers as set forth
on Schedule 7.8; (c) those certain guarantees in respect of Subordinated Debt as set forth on Schedule 7.8;
------------ ------------
(d) guarantees of any liability for Borrowed Money that is incurred by any Borrower (other than a Specified
Borrower and other than a Mortgage Borrower) and is otherwise expressly permitted under Section 7.1(a);
(e) guaranties by Borrowers (other than Mortgage Borrowers) of obligations of other Borrowers (other than a
Specified Borrower); (f) guaranties of obligations of Borrowers under leases or subleases of Facilities and
(g) with the unanimous written consent of Agent and all the Lenders, which consent may be withheld in their sole
discretion, guaranties by Borrowers (other than Mortgage Borrowers) of obligations of Specified Borrowers.
Section 7.9. Subsidiaries.
-------------
(a) Borrowers shall not form or acquire any new Subsidiary, unless, ten
(10) Business Days prior to the formation or acquisition, Borrowers shall provide notice to Agent and, at Agent's
sole discretion, such new Subsidiary shall become a Borrower under this Agreement and the Loan Documents. If
such new Subsidiary is engaging in an Approved Acquisition Transaction or an Approved Lease Transaction, the
Company shall be required to request that Agent, on behalf of Lenders, include the Accounts of such new
Subsidiary in the Borrowing Base (to the extent such Accounts are Qualified Accounts). Agent, in its sole
discretion, shall have the right to accept or reject such Accounts. If Agent chooses to accept such Accounts,
Agent shall receive a Lien upon all Personal Property (as defined in Section 3.1(a)) of such new Subsidiary. If
the Pro-Forma Borrowing Base with respect to such Approved Acquisition Transaction or Approved Lease Transaction
calculated by the Company (and approved by Agent) exceeds the Maximum Revolving Facility Amount at the time, the
Company shall have the right to request the Agent, on behalf of Lenders, to increase the Maximum Revolving
Facility Amount by such excess amount. If the Agent, in its sole discretion, agrees to increase the Maximum
Revolving Facility Amount and all Lenders consent to such increase, immediately upon such increase Borrowers
shall pay a commitment fee equal to one and one half percent (1.5%) multiplied by the amount by which the Maximum
Revolving Facility Amount shall be increased. If the Agent, in its sole discretion, does not agree to
(i) include such qualifying Accounts in the Borrowing Base, or (ii) if requested, so increase the Maximum
Revolving Facility Amount (or if all the Lenders do not consent to such an increase), then the inclusion and/or
increase shall not occur and such new Subsidiary shall become both a Borrower and a Specified Borrower. The
assets and capital stock of Specified Borrowers shall not be included in Collateral and shall be permitted to be
pledged to another lender. No proceeds from a Specified Borrower's Accounts shall be deposited into the Facility
Deposit Accounts, the HHLP Concentration Account or the Intermediate Concentration Account, and no assets of a
Specified Borrower may be used in calculating availability under the Borrowing Base or the Maximum Term Facility
Amount. Such new Subsidiaries shall become obligated in the same manner and to the same extent of any other
Borrower and, if relevant, Specified Borrower under this Agreement. Borrowers shall, and shall cause each new
Subsidiary to execute and deliver any and all guarantees and such other agreements, modifications, revisions or
amendments to the Loan Documents as Agent shall require to evidence the addition of such new Subsidiary as a
Borrower and, if relevant, Specified Borrower, to evidence and secure the Lien upon such Accounts (if applicable)
and to evidence the increase in the Maximum Revolving Facility Amount (if applicable), including, but not limited
to, all Exhibits and Schedules related thereto and Borrowers that are the holders thereof shall immediately
pledge all equity securities issued by such new Subsidiary (other than the equity securities issued by a
Specified Borrower) to Agent for the benefit of Lenders.
(b) Borrowers will not make any investment in or any loan in the nature of an investment
to, any other Person; provided, however, so long as no Event of Default has occurred hereunder, Borrowers (other
-------- -------
than Mortgage Borrowers) may
(i) make investments in or loans to other Borrowers other than to a Specified Borrower
unless permitted by Section 7.9(b)(v) below;
(ii) make investments expressly permitted in Section 7.2;
(iii) hold (a) the promissory note in the original principal amount of $7,487,000,
dated December 12, 1997, made by Xxxxxx X. Xxxxxx and certain other entities listed therein for the benefit of
58
the Company, (b) the promissory note in the original principal amount of $215,000 dated on or about August 9,
2002 made by Xxxxx Xxxxx for the benefit of the Company and (c) approximately 700 shares of common stock of
Metropolitan Life Insurance Company;
(iv) make investments in Cash Equivalents; and
(v) make investments or loans in the nature of an investment to another Borrower (or
to a Subsidiary, which shall become a Borrower pursuant to Section 7.9(a)) in connection with an Approved Lease
Transaction or an Approved Acquisition Transaction, if expressly permitted in Exhibit X;
---------
so long as, in all cases of (i) through (v), such investment could not reasonably be expected to have a Material
Adverse Effect.
In the case of clauses (ii) and (v) above, Borrowers (A) shall notify Agent at least fifteen (15)
Business Days prior to such transaction, and (B) together with such notice, shall provide to Agent a compliance
certificate, in the form set forth on Exhibit H attached hereto, prepared on a pro forma basis, to give effect to
such transaction as of the last day of the calendar quarter immediately preceding the expected closing date of
such transaction for which appropriate financial information is available, demonstrating that after giving such
effect to such transaction and adding the incremental additional Underwriting EBITDA[R] and corresponding
incremental additional Fixed Charges for such transaction each to the extent permitted by the terms of this
Agreement, Borrowers shall be in compliance with Section 6.22(b) as of the end of such fiscal quarter and no
Event of Default shall have occurred.
Section 7.10. Compliance with ERISA. Borrowers will not permit with respect to any Plan covered by
-----------------------
Title IV of ERISA any Prohibited Transaction or any Reportable Event.
Section 7.11. Certificates of Need. Borrowers will not amend, alter or suspend or terminate or make
----------------------
provisional in any material way, any certificate of need, provider number or provider agreement without the prior
written consent of Agent, which consent shall not be unreasonably withheld; provided that any such amendment,
alternation, suspension or termination or making provisional in connection with an intercompany reorganization
shall be permitted so long as such certificate of need, provider number or provider agreement is held at all
times by a Borrower.
Section 7.12. Transactions with Affiliates. Except as expressly permitted under Schedule 7.12,
------------------------------- -------------
Borrowers will not, directly or indirectly enter into any transactions with any Affiliate, including without
limitation the purchase, sale, or exchange of property, or the loaning or giving of funds to any Affiliate except
transactions which are (i) among Borrowers (excluding Mortgage Borrowers), or (ii) in the ordinary course of the
Borrowers' business and that are upon fair market terms no less favorable to the Borrower than it would obtain in
a hypothetical comparable arm's length transaction with a Person not an Affiliate, provided that nothing in this
subsection 7.12 shall prohibit the Borrowers from the maintenance of customary benefit programs or arrangements
for employees, officers or directors, including, without limitation, vacation plans, health and life insurance
plans, deferred compensation plans, and retirement or savings plans and similar plans in each case, in the
ordinary course of business. Upon the occurrence of any Event of Default hereunder, Agent shall have the right
to terminate any lease, management and other intercompany agreements among the Borrowers regardless of whether
such agreement was permitted herein or Agent previously consented thereto to the extent not prohibited by law.
All such leases, management agreements and other intercompany agreements are hereby subordinated in right and
time of payment to the Obligations.
Section 7.13. Intentionally Left Blank.
-------------------------
Section 7.14. Intentionally Left Blank.
-------------------------
Section 7.15. Contracts and Agreements. Borrowers will not breach any other instrument, agreement,
--------------------------
or document to which any Borrower is a party or by which it is or may be bound which breach could reasonably be
expected to have a Material Adverse Effect. In addition to the restrictions forth in Section 7.1, Borrower will
not amend, restate or otherwise change any agreement evidencing Subordinated Debt to the extent that any such
59
amendment, restatement or change would be materially adverse to the Lenders without the prior written consent of
the Agent.
Section 7.16. Margin Stock. Borrowers will not carry or purchase any "margin security" within the
--------------
meaning of Regulations U, T or X or any other regulation of the Board of Governors of the Federal Reserve System.
Section 7.17. Truth of Statements and Certificates. Borrowers will not furnish to Agent or any
-----------------------------------------
Lender any certificate or other document that contains any untrue statement of a material fact or that omits to
state a material fact necessary to make it not misleading in light of the circumstances under which it was
furnished.
Section 7.18. Intentionally Left Blank.
-------------------------
Section 7.19. Certain Fundamental, Tax Designation and Fiscal Year Changes. Borrowers will not,
------------------------------------------------------------------
without providing Agent with thirty (30) days' prior written notice, change the state of its formation, its legal
name, its chief executive office, or its Fiscal Year. No Borrower shall use Xxxxxx Xxxxxxxx as its accountant.
Section 7.20. Leases of Real Property.
------------------------
(a) Except in the ordinary course of Mortgage Borrowers' business with respect to resident
care agreements, service agreements for ancillary services or medical office agreements, Mortgage Borrowers shall
not execute, materially modify, materially amend, renew (except to exercise existing renewal options in
accordance with the terms of the relevant Lease), surrender or terminate any Lease without the consent of Agent,
which may be withheld in Agent's sole discretion.
(b) Except in the ordinary course of its business with respect to resident care
agreements, service agreements for ancillary services or medical office agreements, and except for Lessee Leases
or Leases where a Borrower is both lessor and lessee, Borrowers (other than Mortgage Borrowers) shall not
execute, modify, amend, renew, (except to exercise existing renewal options in accordance with the terms of the
relevant Lease), surrender or terminate any Lease or Lessee Lease without the written consent of Agent (which
consent shall not be unreasonably withheld) and only so long as such modifications, amendment, renewal, surrender
or termination could not reasonably be expected to have a Material Adverse Effect; provided, however, so long as
-------- -------
no Event of Default has occurred hereunder, Borrowers (other than Mortgage Borrowers) may execute, modify, amend,
renew, surrender or terminate any Lease or Lessee Lease (I) as to which another Borrower (other than a Mortgage
Borrower) is a lessor or lessee, as applicable, to the extent such transaction relates solely to the extension of
the lease term or to the exercise of a purchase option contained in the lease and otherwise could not reasonably
be expected to have a Material Adverse Effect, or (II) so long as such Lease or Lessee Lease is expressly
permitted as an Approved Lease Transaction, or Sale Leaseback Transaction in Exhibit X; provided that, for
---------
purposes of clause (II), (i) Borrowers shall notify Agent at least fifteen (15) Business Days prior to such
transaction, (ii) together with such notice, Borrowers shall provide to Agent a compliance certificate in the
form set forth on Exhibit H attached hereto, prepared on a pro forma basis, to give effect to such transaction as
of the last day of the calendar quarter immediately preceding the expected closing date of such transaction for
which appropriate financial information is available, demonstrating that after giving such effect to such
transaction and adding the incremental additional Underwriting EBITDA[R] and corresponding incremental additional
Fixed Charges for such transaction each to the extent permitted by the terms of this Agreement, Borrowers shall
be in compliance with Section 6.22(b) as of the end of such fiscal quarter and no Event of Default shall have
occurred, and (iii) such transaction could not reasonably be expected to have a Material Adverse Effect. Agent
may impose, as a condition to its required consent to any new Lease (or to the renewal or amendment of any
Lease), the receipt from the tenant thereunder of an executed subordination and attornment agreement in form and
substance reasonably satisfactory to Agent. Borrowers shall comply with and observe Borrowers' obligations under
all Leases and Lessee Leases except to the extent such noncompliance could not reasonably be expected to have a
Material Adverse Effect. Borrowers shall furnish Agent with executed copies of all Leases (other than resident
care agreements, service agreements for ancillary services or medical office agreements, which shall be furnished
to Agent upon Agent's request therefor).
(c) Without limiting any provision of the Loan Documents, the following provisions shall
be applicable to any present or future leases, ground leases or subleases of the Real Property or any portion
thereof where any Borrower or Affiliate of any Borrower is the lessee, ground lessee or sublessee: (i) the
lessee, ground lessee or sublessee, as applicable, shall be a Mortgage Borrower, (ii) the Mortgage Borrower
60
owning fee title to the applicable Real Property shall have all interest in the Rents (as defined in the
Assignment of Leases and Rents executed in connection with such Real Property) and fixtures relating to such Real
Property, and to the extent necessary, such lessee, ground lessee or sublessee shall assign all of its interest
in such Rents and fixtures to the Mortgage Borrower owning fee title to the Real Property, (iii) such lease,
ground lease or sublease shall be unconditionally subordinate to the lien of the Loan Documents and the
applicable Mortgage Borrowers shall execute a subordination agreement in form acceptable to Lenders evidencing
such subordination, and (iv) at the Agent's reasonable request, the applicable Mortgage Borrowers shall execute
and deliver to Agent such documents and instruments as may be reasonably requested by Lenders and in form
acceptable to the Lenders encumbering such lessee's, ground lessee's or sublessee's interest in the Real Property
as security for the Obligations.
Section 7.21. Conduct of Business. From and after the Closing Date, Borrower shall not engage in
-----------------------
any business other than businesses of the same general type engaged in by Borrowers on the Closing Date and
businesses or lines of business which are reasonably related thereto or to home healthcare or healthcare or are
incidental to the ownership, operation or maintenance of the Facilities.
Section 7.22. Bank Accounts. Borrowers shall not, without Agent's prior written consent, attempt
--------------
to amend or terminate the HHLP Concentration Account, the Intermediate Concentration Account or the Agent's
Concentration Account or any lockbox or control agreement by which such accounts are governed. The amendment or
termination of any such account or agreement shall not be approved if Borrowers, the depository bank and the
Agent shall not have executed a lockbox agreement or a control agreement with provisions the same in all material
respects to such agreement executed and delivered with respect to the HHLP Concentration Account or the
Intermediate Concentration Account or Agent's Concentration Account, on or about the date of Closing.
Section 7.23. IRS Form 8821. Borrowers shall not revoke any IRS Form 8821 designating Agent as
---------------
Borrowers' appointee to receive directly from the IRS, on an on-going basis, certain tax information, notices and
other written communication or fail to take actions necessary to renew such Form 8821 prior to its expiration for
all time periods prior to the Maturity Date.
ARTICLE VIII
EVENTS OF DEFAULT
-----------------
Section 8.1. Events of Default. Each of the following (individually, an "Event of Default" and
-------------------
collectively, the "Events of Default") shall constitute an event of default under this Agreement:
(a) A failure to make payment of any principal of, or interest upon, any of the Notes when
due and payable, whether at maturity or otherwise or a failure to pay the reserves and escrows required pursuant
to Section 6.30, and, in the case of interest, reserves or escrows, such failure shall not be cured within five
(5) days of the applicable due date;
(b) A failure to make payment of any other charges, fees, or other monetary Obligations
(other than as set forth in Section 8.1(a) above) when such payment is due and payable, which failure shall have
continued unremedied for a period of five (5) days after written notice of the failure from Agent to Borrowers;
(c) A failure in the due observance or performance by any Borrower of the Obligations
(other than as set forth in Section 8.1(a), Section 8.1(b) or Section 8.1(j)) or of any other term, covenant or
agreement contained in any of the Loan Documents, which failure shall have continued unremedied for the lesser of
(i) a period of thirty (30) days after written notice of the default from Agent to Borrowers or (ii) the period
of notice and cure specified in the Loan Document;
(d) Any representation or warranty made by any Borrower in this Agreement or in any of the
other Loan Documents, any financial statement, or any statement or representation made in any other certificate,
report or opinion delivered in connection with this Agreement or the other Loan Documents proves to have been
incorrect or misleading in any material respect when made;
61
(e) Any obligation of any Borrower (other than its Obligations under this Agreement) for
the payment of (1) Borrowed Money in excess of $50,000.00 is not paid at maturity, or (2) any obligation for
Borrowed Money in a principal amount greater than $50,000.00 becomes or is declared to be due and payable before
the expressed maturity of the obligation, or there shall have occurred an event that, after expiration of any
applicable cure period, could cause any such obligation to become, or allow any such obligation to be declared to
be, due and payable;
(f) Any Borrower makes an assignment for the benefit of creditors, offers a composition or
extension to creditors, or makes or sends notice of an intended bulk sale of any business or assets now or
hereafter conducted by Borrower;
(g) Any Borrower (i) files a petition in bankruptcy, (ii) is adjudicated insolvent or
bankrupt, petitions or applies to any tribunal for any receiver of or any trustee for itself or any substantial
part of its property, (iii) commences any proceeding relating to itself under any reorganization, arrangement,
readjustment or debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in
effect, or any such proceeding is commenced against any Borrower and such proceeding remains undismissed or
undischarged for a period of sixty (60) days, (iv) by any act indicates its consent to, approval of, or
acquiescence in, any such proceeding or the appointment of any receiver of or any trustee for any Borrower or any
substantial part of its property, or suffers any such receivership or trusteeship to continue undischarged for a
period of sixty (60) days, or (v) admits in writing its inability to pay its debts as they become due;
(h) One or more (i) final judgments against any Borrower or attachments against its
property shall be rendered by a court, arbitrator, arbitration panel, mediator or any individual(s) or entity
with the authority to issue binding judgments against such Borrower or (ii) final settlements by or on behalf of
any Borrower of any pending litigation, arbitration or other claim or otherwise disputed matter, in any event
involving in the aggregate a liability not fully and unconditionally covered by insurance not including
self-insurance of $250,000.00 or more, shall, in each case, remain unpaid, unstayed on appeal, undischarged,
unbonded and undismissed for a period of fifteen (15) days;
(i) A Reportable Event that could be reasonably expected to constitute grounds for
termination of any Plan covered by Title IV of ERISA or for the appointment by the appropriate United States
District Court of a trustee to administer any such Plan or for the entry of a Lien or encumbrance to secure any
deficiency, has occurred and is continuing thirty (30) days after its occurrence, or any such Plan is terminated
(except if such Plan has been fully funded prior to its termination), or a trustee is appointed by an appropriate
United States District Court to administer any such Plan, or the Pension Benefit Guaranty Corporation institutes
proceedings to terminate any such Plan or to appoint a trustee to administer any such Plan, or a Lien or
encumbrance is entered to secure any deficiency or claim;
(j) Any Borrower breaches any of the provisions of Sections 2.3, 3.8, 6.1(a), (b), (g),
and (i), 6.7, 6.10, 6.22(a) and (b), 6.23, 6.24, 6.31, 7.1, 7.2, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.12, 7.15, 7.16,
7.19, 7.20 or 7.22 of this Agreement or Sections 5(a)(i), 11 or 12 of the Mortgages; or any Borrower breaches any
of the provisions of Sections 6.1(c), (d), (f), (h) or (j), 6.10(c) through (g), or 6.22(c), which breach shall
have continued unremedied for a period of three (3) Business Days after written notice of the default from Agent
to Borrowers;
(k) There shall occur any uninsured damage to or loss, theft or destruction of any portion
of the Collateral that exceeds $250,000.00 in the aggregate;
(l) (1) Borrowers cease any portion of their businesses that could reasonably be expected
to have a Material Adverse Effect or (2) any Mortgage Borrower ceases any material portion of its business
operations as currently conducted;
(m) Any Borrower shall challenge or contest, in any action, suit or proceeding, the
validity or enforceability of this Agreement, or any of the other Loan Documents, the legality or the
enforceability of any of the Obligations or the perfection or priority of any Lien granted to Agent for the
benefit of Lenders;
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(n) Any Borrower shall be criminally indicted or convicted under any law, which indictment
or conviction has a Material Adverse Effect on the operations of the Company;
(o) There shall have occurred a Change in Control;
(p) If at any time during the Term, four or more Mortgaged Facilities have outstanding
Medicare or Medicaid survey deficiencies at Level G, H, I, J, K, L or worse (i) which remain outstanding for a
period greater than six (6) months or (ii) resulting in the imposition by CMS or the applicable state survey
agency at four or more Mortgaged Facilities of sanctions in the form of either a program termination, temporary
management, denial of payment for new admissions, state monitoring or facility closure;
(q) A state or federal regulatory agency shall have revoked the licenses at four or more
Facilities (excluding Facilities managed but not owned or leased by any Borrower); or
(r) any monetary default or other material default, by any Borrower which is not cured
within any applicable cure period under (i) the Loan Documents or the Lease Documents (as such terms are defined
in the Intercreditor Agreement) or (ii) any lease (or any document executed by any Borrower in connection with
any lease) with Nationwide Health Properties, Inc. or its Affiliates or (iii) any lease (or any document executed
by any Borrower in connection with any lease) with Health Care REIT, Inc.
Notwithstanding any provision of this Agreement which makes reference to the continuance of an Event of Default,
nothing in this Agreement shall be construed to permit Borrowers to cure an Event of Default following the lapse
of the applicable cure period, and Borrowers shall have no such right in any such instance unless specifically
granted in writing by Agent.
All cure periods provided for in this section shall run concurrently with any cure period provided for in any
applicable Loan Documents under which the default occurred.
Section 8.2. Acceleration. Upon the occurrence of any of the foregoing Events of Default, the
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Obligations under the Notes shall become and be immediately due and payable upon declaration to that effect
delivered by Agent to Borrowers; provided that, upon the happening of any event specified in Section 8.1(f) or
8.1(g), all Obligations including, without limitation any termination or prepayment fees, shall be immediately
due and payable without declaration or other notice to Borrowers.
Section 8.3. Remedies.
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(a) Upon the occurrence of and during the continuance of an Event of Default under this
Agreement or the other Loan Documents, Agent, on behalf of Lenders, in addition to all other rights, options, and
remedies granted to Agent or Lenders under this Agreement or the other Loan Documents, including any mortgage,
deed to secure debt or deed of trust, or at law or in equity, may take any of the following steps (which list is
given by way of example and is not intended to be an exhaustive list of all such rights and remedies):
(i) At the direction of the Requisite Lenders, terminate the Loans, whereupon all
outstanding Obligations (including without limitation any termination or prepayment fees) shall be immediately
due and payable;
(ii) Exercise all other rights granted to it under this Agreement and all rights
under the UCC in effect in the applicable jurisdiction(s) and under any other applicable law; and
(iii) Exercise all rights and remedies under all Loan Documents now or hereafter in
effect, including but not limited to:
(A) The right to take possession of, send notices regarding, and collect
directly the Collateral, with or without judicial process;
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(B) The right to (by its own means or with judicial assistance) enter any
of premises of any Borrower and take possession of the Collateral, or render it unusable, or dispose of the
Collateral on such premises in compliance with subsection (C) below, without any liability for rent, storage,
utilities, or other sums, and Borrowers shall not resist or interfere with such action;
(C) The right to require Borrowers at Borrowers' expense to assemble all
or any part of the Personal Property and make it available to Agent at any place designated by Agent;
(D) The right to reduce the Initial Maximum Term Facility Amount or the
Maximum Term Facility Amount, as the case may be, or the Maximum Revolving Facility Amount, or to use the
Collateral and/or withdraw all funds in the HHLP Concentration Account or the Intermediate Concentration Account
in amounts up to the total amount of the Obligations then outstanding, for any reason; and
(E) The right to enforce Borrowers' rights against Account Debtors and
other obligors, including, but not limited to, the right to collect Accounts directly in Agent's own name and to
charge the collection costs and expenses, including attorneys' fees, to Borrowers.
(b) Borrowers agree that a notice received by it at least five (5) days before the time of
any intended public sale, or the time after which any private sale or other disposition of the Personal Property
is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by
applicable law, any perishable personal property which threatens to speedily decline in value or which is sold on
a recognized market may be sold immediately by Agent without prior notice to Borrowers. At any sale or
disposition of personal property, Agent or Lenders may (to the extent permitted by applicable law) purchase all
or any part of the personal property, free from any right of redemption by Borrowers, which right is hereby
waived and released. Borrowers covenant and agree not to interfere with or impose any obstacle to Agent's or
Lenders' exercise of rights and remedies with respect to the Collateral. Neither Agent nor Lenders shall have
any obligation to clean-up or otherwise prepare the Collateral for sale. Agent or Lenders may comply with any
applicable state or federal law requirements in connection with a disposition of the Collateral and compliance
will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. Agent or
Lenders may sell the Collateral without giving any warranties as to the Collateral. Agent and Lenders may
specifically disclaim any warranties of title or the like. This procedure will not be considered to adversely
affect the commercial reasonableness of any sale of the Collateral. If Agent or Lenders sell any of the
Collateral upon credit, Borrowers will be credited only with payments actually made by the purchaser, received by
Agent or Lenders and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for
the Collateral, Agent or Lenders may resell the Collateral and Borrowers shall be credited with the proceeds of
the sale.
(c) Neither Agent nor Lenders shall have any obligation to marshal any assets in favor of
Borrowers, or against or in payment of the Notes, any of the other Obligations or any other obligation owed to
Lenders by Borrowers or any other person.
(d) Upon the occurrence of any Event of Default, or any event which, with the giving of
notice or passage of time would become an Event of Default, notwithstanding any grace period or right to cure,
Agent may or upon demand by Requisite Lenders shall, without notice or demand, immediately cease making
additional Loans and the commitments hereunder to make Loans and issue Letters of Credit shall be suspended.
Section 8.4. Nature of Remedies. Upon the occurrence of an Event of Default, Agent, on behalf of
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Lenders, shall have the right to proceed against all or any portion of the Collateral to satisfy in any order (a)
the liabilities and Obligations of Borrowers to Agent or Lenders or any Affiliate of Lenders under this
Agreement. All rights and remedies granted Agent or Lenders under this Agreement and under any agreement
referred to in this Agreement, or otherwise available at law or in equity, shall be deemed concurrent and
cumulative, and not alternative remedies, and Agent may proceed with any number of remedies at the same time
until the Loans, and all other existing and future liabilities and Obligations of Borrowers to Agent and Lenders,
are satisfied in full. The exercise of any one right or remedy shall not be deemed a waiver or release of any
other right or remedy, and Agent, on behalf of Lenders, upon the occurrence of an Event of Default, may proceed
against any Borrower, and/or the Collateral, at any time, under any agreement, with any available remedy and in
any order. All sums received from Borrowers and/or the Collateral in respect of the Loans may be applied by
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Agent to any other Obligations of Borrowers under the Loan Documents in such order of application and in such
amounts as Agent shall deem appropriate in its sole and absolute discretion. Borrowers waive any right they may
have to require Agent or Lenders to pursue any Person for any of the Obligations.
Section 8.5. Appointment of Attorney-in-Fact. Borrowers hereby constitute and appoint Agent as
----------------------------------
Borrowers' attorney-in-fact with full authority in the place and stead of Borrowers and in the name of Borrowers,
Agent or otherwise, from time to time in Agent's discretion (after an Event of Default has occurred) to take any
action and to execute any instrument that Agent may deem necessary or advisable to accomplish the purposes of
this Agreement, including: (a) to ask, demand, collect, xxx for, recover, compound, receive and give acquittance
and receipts for moneys due and to become due under or in respect of any of the Collateral; (b) to enforce the
obligations of any Account Debtor or other Person obligated on the Collateral and enforce the rights of any
Borrower with respect to such obligations and to any property that secures such obligations; (c) to file any
claims or take any action or institute any proceedings that Agent may deem necessary or desirable for the
collection of or to preserve the value of any of the Collateral or otherwise to enforce the rights of Agent and
Lenders with respect to any of the Collateral; (d) to pay or discharge taxes or Liens levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the
same to be determined by Agent in its sole discretion, and such payments made by Agent to become Obligations, due
and payable promptly on demand; (e) to sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, assignments, verifications and notices in connection with Accounts, Chattel Paper
or General Intangibles and other Documents relating to the Collateral; and (f) generally to take any act required
of any Borrower under this Agreement, and to sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though Agent were the absolute owner thereof
for all purposes, and to do, at Agent's option and Borrowers' expense, at any time or from time to time, all acts
and things that Agent deems necessary to protect, preserve or realize upon the Collateral. Without limiting the
foregoing, each Borrower hereby irrevocably authorizes the Agent to send to each Insurer that is an Account
Debtor on any Account of such Borrower any notice that such Borrower is required to deliver hereunder if such
Borrower has failed to deliver any such notice within five (5) Business Days after such Borrower was required to
deliver such notice. After the occurrence of an Event of Default, the Borrowers hereby constitute and appoint
Agent, as the true and lawful attorney-in-fact for such Borrowers (with full authority in the place and stead of
Borrowers and in the name of Borrowers) subject to any applicable law or regulation, for the additional purpose
of permitting Agent to, by the signature or other act of any of the Agent's officers (without requiring any of
them to do so), direct any federal, state or private payor or fiscal intermediary to pay proceeds of the
Collateral to such Borrower and for the account of such Borrower (until a Sweep Event shall have occurred) by
directing payment to any of the HHLP Concentration Account, the Intermediate Concentration Account or the Agent's
Concentration Account in accordance with the terms of the relevant Lockbox Agreement to the extent permitted by
law.
Section 8.6. Limitation on Duty of Agent and Lenders with Respect to Collateral. Beyond the safe
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custody thereof, neither Agent nor any Lender shall have any duty with respect to any Collateral in its
possession (or in the possession of any agent or bailee) or with respect to any income thereon or the
preservation of rights against prior parties or any other rights pertaining thereto. Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which Agent accords its own property. Neither Agent
nor Lender shall be liable or responsible for any loss or damage to any of the Collateral, or for any diminution
in the value thereof, by reason of the act or omission of any warehouse, carrier, forwarding agency, consignee,
broker or other agent or bailee selected by Borrowers or selected by Agent in good faith.
Section 8.7. Application of Proceeds. Notwithstanding anything to the contrary contained in this
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Agreement, upon the occurrence and during the continuance of an Event of Default, (a) Borrowers irrevocably waive
the right to direct the application of any and all payments at any time or times thereafter received by Agent
from or on behalf of Borrowers, and Agent shall have the continuing and exclusive right to apply and to reapply
any and all payments received at any time or times after the occurrence and during the continuance of an Event of
Default against the Obligations until such time that the Event of Default shall have been cured or otherwise
waived by the Agent in writing in such manner as Agent may deem advisable notwithstanding any previous
application by Agent and (b) in the absence of a specific determination by Agent with respect thereto, the
proceeds of any sale of, or other realization upon, all or any part of the Collateral shall be applied: first, to
all fees, costs and expenses incurred by or owing to Agent and then any Lender with respect to this Agreement,
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the other Loan Documents or the Collateral; second, to accrued and unpaid interest on the Obligations (including
any interest which but for the provisions of any bankruptcy or insolvency law would have accrued on such
amounts); third, to the principal amounts of the Obligations outstanding; and fourth, to any other Obligations of
Borrowers owing to Agent or Lender under the Loan Documents, in the order elected by Lenders. Any balance
remaining shall be delivered to Borrowers or to whoever may be lawfully entitled to receive such balance or as a
court of competent jurisdiction may direct.
Section 8.8. License of Intellectual Property. Borrowers hereby assign, transfer and convey to
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Agent, for the benefit of itself and Lenders, effective upon the occurrence of any Event of Default hereunder,
the non-exclusive right and license to use all Intellectual Property owned or used by Borrowers together with any
goodwill associated therewith, all to the extent necessary to enable Agent to realize on the Collateral and any
successor or assign to enjoy the benefits of the Collateral. This right and license shall inure to the benefit
of all successors, assigns and transferees of Agent and Lenders and their respective successors, assigns and
transferees, whether by voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu
of foreclosure or otherwise. Such right and license is granted free of charge and does not require the consent
of any other person.
ARTICLE IX
AGENT
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Section 9.1. Agent.
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(a) Appointment. Each Lender hereunder and, upon obtaining an interest in any Loan, any
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participant, transferee or other assignee of any Lender irrevocably appoints, designates and authorizes Xxxxxx as
Agent to take such actions or refrain from taking such action as its agent on its behalf and to exercise such
powers hereunder and under the other Loan Documents as are delegated by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto. Neither the Agent nor any of its directors, officers,
employees or agents shall be liable for any action so taken. The provisions of this Section 9.1 are solely for
the benefit of Agent and Lenders (and their participants) and no Borrower shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and the
other Loan Documents, Agent shall act solely as agent of Lenders (and their participants) and does not assume and
shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for
Borrowers. Agent may perform any of its duties hereunder, or under the Loan Documents, by or through its agents
or employees.
(b) Nature of Duties. Agent shall have no duties, obligations or responsibilities except
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those expressly set forth in this Agreement or in the Loan Documents. The duties of Agent shall be mechanical
and administrative in nature. Agent shall not have by reason of this Agreement a fiduciary, trust or agency
relationship with or in respect of any Lender or any Borrower. Nothing in this Agreement or any of the Loan
Documents, express or implied, is intended to or shall be construed to impose upon Agent any obligations in
respect of this Agreement or any of the Loan Documents except as expressly set forth herein or therein. Each
Lender shall make its own appraisal of the creditworthiness of Borrowers, and shall have independently taken
whatever steps it considers necessary to evaluate the financial condition and affairs of Borrowers, and Agent
shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any
credit or other information with respect thereto (other than as expressly required herein or in a participation
agreement executed by Agent as a Lender), whether coming into its possession before the Closing Date or at any
time or times thereafter. If Agent seeks the consent or approval of Lenders to the taking or refraining from
taking any action hereunder, then Agent shall send notice thereof to each Lender. Agent shall promptly notify
each Lender and Fremont any time that the Requisite Lenders have instructed Agent to act or refrain from acting
pursuant hereto.
(c) Rights, Exculpation, Etc. Neither Agent nor any of its officers, directors, employees
--------------------------
or agents shall be liable to any Lender for any action taken or omitted by them hereunder or under any of the
Loan Documents, or in connection herewith or therewith, except that Agent shall be liable to the extent of its
own gross negligence or willful misconduct as determined by a court of competent jurisdiction. Agent shall not
be liable for any apportionment or distribution of payments made by it in good faith and if any such
apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any
Lender to whom payment was due but not made, shall be to recover from other Lenders any payment in excess of the
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amount to which they are determined to be entitled (and such other Lenders hereby agree to return to such Lender
any such erroneous payments received by them). In performing its functions and duties hereunder, Agent shall
exercise the same care which it would in dealing with loans for its own account, but neither Agent nor any of its
agents or representatives shall be responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, or
sufficiency of this Agreement or any of the Loan Documents or the transactions contemplated thereby, or for the
financial condition of any Borrower. Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this Agreement or any of the Loan
Documents or the financial condition of any Borrower, or the existence or possible existence of any breach or
Event of Default. Agent may at any time request instructions from Lenders with respect to any actions or
approvals which by the terms of this Agreement or of any of the Loan Documents Agent is permitted or required to
take or to grant, and if such instructions are promptly requested, Agent shall be absolutely entitled to refrain
from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person
for refraining from any action or withholding any approval under any of the Loan Documents until it shall have
received such instructions from Requisite Lenders or all or such other portion of the Lenders as shall be
prescribed by this Agreement. Without limiting the foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting under this Agreement or any of the
other Loan Documents in accordance with the instructions of Requisite Lenders in the absence of an express
requirement for a greater percentage of Lender approval hereunder for such action.
(d) Reliance. Agent shall not be under any duty to examine, inquire into, or pass upon
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the validity, effectiveness or genuineness of this Agreement, any other Loan Document, or any instrument,
document or communication furnished pursuant hereto or in connection herewith. Agent shall be entitled to rely,
and shall be fully protected in relying, upon any written or oral notices, statements, certificates, orders or
other documents or any telephone message or other communication (including any writing, fax, telecopy or
telegram) believed by it in good faith to be genuine and correct and to have been signed, sent or made by the
proper Person, and with respect to all matters pertaining to this Agreement or any of the Loan Documents and its
duties hereunder or thereunder. Agent shall be entitled to rely upon the advice of legal counsel, independent
accountants, and other experts selected by Agent in its sole discretion.
(e) Indemnification. Lenders will reimburse and indemnify Agent for and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including,
without limitation, attorneys' fees and expenses), advances or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against Agent in any way relating to or arising out of this
Agreement or any of the Loan Documents or any action taken or omitted by Agent under this Agreement or any of the
Loan Documents, in proportion to each Lender's Pro Rata Share, but only to the extent that any of the foregoing
is not promptly reimbursed by Borrowers; provided, however, no Lender shall be liable for any portion of such
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liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements resulting from Agent's gross negligence or willful misconduct. If any indemnity furnished to Agent
for any purpose shall, in the opinion of Agent, be insufficient or become impaired, Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against, even if so directed by Lenders or
Requisite Lenders, until such additional indemnity is furnished. The obligations of Lenders under this
Section 9.1(e) shall survive the payment in full of the Obligations and the termination of this Agreement.
(f) Lenders Includes Agent. With respect to its Loan commitments and the Loans made by
-------------------------
it, Xxxxxx, in its capacity as a Lender and not as Agent hereunder, shall have and may exercise the same rights
and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein
for any other Lender. The terms "Lenders" or "Requisite Lenders" or any similar terms shall, unless the context
clearly otherwise indicates, include Xxxxxx in its individual capacity as a Lender or one of the Requisite
Lenders. Each Lender acknowledges and agrees that Xxxxxx, either directly or through strategic affiliations, may
lend money to, acquire equity or other ownership interests in, provide advisory services to and generally engage
in any kind of banking, trust or other business with any Borrower as if it were not acting as an Agent pursuant
hereto and without any duty to account therefor to Lenders. Xxxxxx, either directly or through strategic
affiliations, may accept fees and other consideration from any Borrower for services in connection with this
Agreement or otherwise without having to account for the same to Lenders except as otherwise provided in this
Agreement.
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(g) Successor Agent.
----------------
(1) Resignation. Agent may resign from the performance of all its agency
------------
functions and duties hereunder at any time by giving at least thirty (30) Business Days' prior written notice to
Borrowers and the Lenders. Such resignation shall take effect upon the acceptance by a successor Agent of
appointment as provided below.
(2) Appointment of Successor. Upon any such notice of resignation pursuant to
---------------------------
Section 9.1(g)(1) above, Requisite Lenders shall appoint a successor Agent which, unless an Event of Default has
occurred and is continuing, shall be reasonably acceptable to Borrowers. If a successor Agent shall not have
been so appointed within said thirty (30) Business Day period, the retiring Agent, upon notice to Borrowers,
shall then appoint a successor Agent who shall serve as Agent until such time, if any, as Requisite Lenders
appoint a successor Agent as provided above.
(3) Successor Agent. Upon the acceptance of any appointment as Agent under the
-----------------
Loan Documents by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged and
released from its duties and obligations under the Loan Documents. After any retiring Agent's resignation as
Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent.
(h) Collateral Matters.
-------------------
(1) Release of Collateral. Lenders hereby irrevocably authorize Agent, at its
-----------------------
option and in its discretion, to release any Lien granted to or held by Agent upon any Collateral (a) upon
termination of the Loan commitments and upon payment and satisfaction of all Obligations (other than contingent
indemnification obligations to the extent no claims giving rise thereto have been asserted and Letter of Credit
obligations for which Borrowers have provided cash collateral or back-to-back Letters of Credit);
(b) constituting property being sold or disposed of by any Borrower if such Borrower certifies to Agent that the
sale or disposition is made in compliance with the provisions of this Agreement (and Agent may rely in good faith
conclusively on any such certificate, without further inquiry). In addition, with the consent of Requisite
Lenders, Agent may release Liens granted to or held by Agent upon any Collateral having a book value of not
greater than ten percent (10%) of the total book value of all Collateral, as determined by Agent, provided,
--------
however, in no event will Agent, acting under the authority granted to it pursuant to this sentence, release
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during any calendar year Liens granted to or held by Agent upon any Collateral having a total book value in
excess of twenty percent (20%) of the total book value of all Collateral, as determined by Agent; provided that,
notwithstanding the foregoing, this clause (1) shall not be applicable to and no consent of Lenders shall be
required for (i) releases of Collateral in connection with any asset sales or dispositions permitted by or not
restricted by Section 3.8, or (ii) releases of Collateral in accordance with clause (2) below.
(2) Confirmation of Authority; Execution of Releases. Without in any manner
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limiting Agent's authority to act without any specific or further authorization or consent by Lenders (as set
forth in Section 9.1(h)(1) above), each Lender agrees to confirm in writing, upon request by Agent or Borrowers,
the authority to release any Collateral conferred upon Agent under clauses (a) and (b) of Section 9.1(h)(1). To
the extent Agent agrees to release any Lien granted to or held by Agent as authorized under Section 9.1(h)(1),
(a) Agent is hereby irrevocably authorized by Lenders to execute and/or authorize the filing of such documents,
including, without limitation, UCC-3 partial release statements as may be necessary to evidence the release of
the Liens granted to Agent for the benefit of itself and Lenders, upon such Collateral; provided, however, that
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Agent shall not be required to execute any such document on terms which, in Agent's opinion, would expose Agent
to liability or create upon Agent any obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (b) Borrowers shall provide at least five (5) Business Days prior written
notice of any request for any document evidencing such release of the Liens and Borrowers agree that any such
release shall not in any manner discharge, affect or impair the Obligations or any Liens granted to Agent on
behalf of itself and Lenders upon (or obligations of any Borrower, in respect of) all interests retained by any
Borrower, including, without limitation, the proceeds of any sale, all of which shall continue to constitute part
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of the property covered by this Agreement or the Loan Documents. The Agent is hereby irrevocably authorized by
each of the Lenders to release any Lien covering any property or assets of any Borrower that is the subject of a
disposition which is permitted by this Agreement or which has been consented to in accordance with Section 9.4.
(3) Absence of Duty. The Agent shall have no obligation whatsoever to any Lender
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or any other Person to assure that the property covered by this Agreement or the Loan Documents exists or is
owned by Borrowers or is cared for, protected or insured or has been encumbered or that the Liens granted to
Agent on behalf of Agent and Lenders herein or pursuant hereto have been properly or sufficiently or lawfully
created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to Agent in this Agreement or in any of the Loan Documents,
it being understood and agreed that in respect of the property covered by this Agreement or the Loan Documents or
any act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its
reasonable discretion, given Agent's own interest in property covered by this Agreement or the Loan Documents as
one of the Lenders and that Agent shall have no duty or liability whatsoever to any of the other Lenders;
provided, however, that Agent shall exercise the same care which it would in dealing with loans for its own
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account.
(i) Agency for Perfection. Each Agent and each Lender hereby appoint each other Lender as
-----------------------
agent for the purpose of perfecting Agent's security interest in assets that, in accordance with the UCC in any
applicable jurisdiction, can be perfected by possession or control. Should any Lender (other than Agent) obtain
possession of any such assets, such Lender shall notify Agent thereof, and, promptly upon Agent's request
therefore, shall deliver such assets to Agent or in accordance with Agent's instructions. The Agent may file
such proofs of claim or documents as may be necessary or advisable in order to have the claims of itself and the
Lenders (including any claim for the reasonable compensation, expenses, disbursements and advances of the Agent
and the Lenders, their respective agents, financial advisors and counsel), allowed in any judicial proceedings
relative to Borrowers, or any of their respective creditors or property, and shall be entitled and empowered to
collect, receive and distribute any monies, securities or other property payable or deliverable on any such
claims. Any custodian in any judicial proceedings relative to Borrowers is hereby authorized by each Lender to
make payments to the Agent and, in the event that the Agent shall consent to the making of such payments directly
to the Lenders, to pay to the Agent any amount due for the reasonable compensation, expenses, disbursements and
advances of the Agent, its agents, financial advisors and counsel, and any other amounts due the Agent. Nothing
contained in this Agreement or the other Loan Documents shall be deemed to authorize the Agent to authorize or
consent to or accept or adopt on behalf of any Lender any plan of reorganization, or revision thereto,
arrangement, adjustment or composition affecting the Loans, or the rights of any holder thereof, or to authorize
the Agent to vote in respect of the claim of any Lender in any such proceeding, except as specifically permitted
herein.
(j) Exercise of Remedies. Each Lender agrees that it will not have any right individually
---------------------
to enforce or seek to enforce this Agreement or any Loan Document or to realize upon any collateral security for
the Loans, unless instructed to do so by Agent, it being understood and agreed that such rights and remedies may
be exercised only by Agent.
Section 9.2. Notice of Default.
-----------------
Agent shall not be deemed to have knowledge or notice of the occurrence of any breach or Event
of Default except with respect to defaults in the payment of principal, interest and fees required to be paid to
Agent for the account of Lenders, unless Agent shall have actual knowledge thereof or shall have received written
notice from a Lender or a Borrower referring to this Agreement, describing such breach or Event of Default and
stating that such notice is a "notice of default". Agent will notify each Lender of its receipt of any such
notice.
Section 9.3. Action by Agent.
----------------
Agent shall take such action with respect to any breach or Event of Default as may be requested
by Requisite Lenders in accordance with Section 8. Unless and until Agent has received any such request, Agent
may (but shall not be obligated to) take such action, or refrain from taking such action, all to the extent
permitted hereunder, with respect to any breach or Event of Default as it shall deem advisable or in the best
interests of Lenders.
69
Section 9.4. Amendments, Waivers and Consents.
---------------------------------
(a) Percentage of Lenders Required. Except as otherwise provided herein or in any of the
--------------------------------
other Loan Documents or in the Participation Agreement, no material amendment, modification, termination or
waiver of any provision of this Agreement or any other Loan Document, or consent to any departure by any Borrower
therefrom, shall in any event be effective unless the same shall be in writing and signed by (i) the Requisite
Lenders and Agent or (ii) Agent, with the consent and on behalf of the Requisite Lenders (or, Agent, if expressly
set forth herein or in any of the other Loan Documents) and the applicable Borrower; provided, however, no
-------- -------
amendment, modification, termination, waiver or consent shall be effective to do any of the following, unless in
writing and signed by all Lenders, Fremont and Agent, or by Agent, with the consent on behalf of all Lenders and
Fremont: (1) increase any of the Loan commitments; (2) reduce the principal of or the rate of interest on any
Loan or reduce the fees payable with respect to any Loan or Lender Letter of Credit; (3) extend the Maturity Date
or the scheduled due date for all or any portion of principal of the Loans or any interest or fees due hereunder
(other than fees due under Section 2.4(e) and (f), for which only Agent's consent shall be required); (4) amend
the definition of the term "Requisite Lenders" or the percentage of Lenders which shall be required for Lenders
to take any action hereunder; (5) amend or waive this Section 9.4 or the definitions of the terms used in this
Section 9.4 insofar as the definitions affect the substance of this Section 9.4; or (6) consent to the
assignment, delegation or other transfer by any Borrower of any of its rights and obligations under any Loan
Document; provided, further, that no amendment, modification, termination, waiver or consent affecting the rights
--------- -------
or duties of Agent under this Section 9 or under any Loan Document shall in any event be effective, unless in
writing and signed by Agent, in addition to the Lenders required to take such action. Any amendment,
modification, termination, waiver or consent effected in accordance with this Section 9 shall be binding upon
each Lender or future Lender.
Notwithstanding the foregoing, Borrowers hereby acknowledge the contents of the Participation Agreement
(an execution copy of which has been delivered to Borrowers) and acknowledge that, pursuant to the provisions of
the Participation Agreement, Fremont's consent shall be required in certain instances set forth therein.
Borrowers acknowledge that they have no right to consent to the Participation Agreement or to any modification
thereof.
(b) Specific Purpose or Intent. Each amendment, modification, termination, waiver or
------------------------------
consent shall be effective only in the specific instance and for the specific purpose for which it was given. No
amendment, modification, termination, waiver or consent shall be required for Agent to take additional
Collateral.
(c) Failure to Give Consent. In the event Agent requests the consent of a Lender and does
-------------------------
not receive a written consent or denial thereof within ten (10) Business Days or such earlier date as may be
specified in such request after such Lender's receipt of such request, then such Lender will be deemed to have
denied the giving of such consent.
Notwithstanding anything in this Section 9.4, Agent and Borrowers, without the written consent of either
Requisite Lenders or all Lenders, may execute amendments to this Agreement and the Loan Documents, which consist
solely of the making of typographical corrections.
Section 9.5. Assignments and Participations in Loans.
----------------------------------------
(a) Assignments. Each Lender may assign its rights and delegate its obligations under
------------
this Agreement to an Eligible Assignee; provided, however, (1) such Lender (if other than Xxxxxx) shall first
-------- -------
obtain the written consent of Agent, (2) the amount of Loan commitments and Loans of the assigning Lender being
assigned shall in no event be less than the lesser of (a) $10,000,000 or (b) the entire amount of the Loan
commitments and Loans of such assigning Lender, and (3)(a) each such assignment shall be of a pro rata portion of
all such assigning Lender's Loans and Loan commitments hereunder, and (b) the parties to such assignment shall
execute and deliver to Agent for acceptance and recording an Assignment and Acceptance Agreement together with
(i) a processing and recording fee of $3,500 payable by the assigning Lender to Agent and (ii) each of the Notes
originally delivered to the assigning Lender for cancellation. The administrative fee referred to in clause (3)
of the preceding sentence shall not apply to an assignment of a security interest in all or any portion of a
Lender's rights under this Agreement or the other Loan Documents, to another Related Fund (as defined below) or
Participant or as described in clause (1) of Section 9.5(d) below. Upon receipt of all of the foregoing, Agent
shall notify Borrowers of such assignment and Borrowers shall comply with their obligations under this Agreement
70
with respect to such assignments. In the case of an assignment authorized under this Section 9.5 and otherwise
in accordance with the terms of this Agreement, the assignee shall be considered to be a "Lender" hereunder and
Borrowers hereby acknowledge and agree that any assignment will give rise to a direct obligation of Borrowers to
the assignee. The assigning Lender shall be relieved of its obligations to make Loans hereunder with respect to
the assigned portion of its Loan commitment.
(b) Participations. Each Lender may sell participations in all or any part of any Loans
---------------
or Loan commitments made by it to another Person; provided, however, such Lender shall first obtain the prior
-------- -------
written consent of Agent, which written consent shall not be unreasonably withheld. All amounts payable by
Borrowers hereunder shall be determined as if that Lender had not sold such participation and the holder of any
such participation shall not be entitled to require such Lender to take or omit to take any action hereunder
except action directly effecting (1) any reduction in the principal amount or an interest rate on any Loan in
which such holder participates; (2) any extension of the Maturity Date or the date fixed for any payment of
interest or principal payable with respect to any Loan in which such holder participates; and (3) any release of
substantially all of the Collateral. Borrowers hereby acknowledge and agree that (x) the participant under each
participation shall for purposes of Sections 6.25, 6.26, 9.6 and 10.16 be considered to be a "Lender",
(y) Fremont has acquired an interest in the Loans, as a participant, effective as of the date hereof and subject
to the terms of that certain loan participation agreement dated on or about the date hereof between Agent and
Fremont ("the Participation Agreement") and (z) Fremont's consent, execution or approval shall be required in
each instance where the consent, execution or approval of Requisite Lenders or all Lenders is required under this
Agreement and in other instances more particularly set forth in the Participation Agreement.
(c) No Relief of Obligations; Cooperation; Ability to Make LIBOR Loans. Except as
----------------------------------------------------------------------------
otherwise provided in Section 9.5(a) no Lender shall, as between any Borrower and that Lender, be relieved of any
of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of
participation in, all or any part of the Loans or other Obligations owed to such Lender. Each Lender may furnish
any information concerning Borrowers and their Subsidiaries in the possession of that Lender from time to time to
Eligible Assignees and participants (including prospective assignees and participants provided that such
prospective assignees and participants agree to be bound by the confidentiality provisions hereof). Borrowers
agree that they will use their reasonable best efforts to assist and cooperate with Agent and any Lender in any
manner reasonably requested by Agent or such Lender to effect the sale of a participation or an assignment
described above, including without limitation assistance in the preparation of appropriate disclosure documents
or placement memoranda provided that the recipient of such information agrees to comply with the confidentiality
provisions hereof. Notwithstanding anything contained in this Agreement to the contrary, so long as the
Requisite Lenders shall remain capable of making LIBOR Loans, no Person shall become a Lender hereunder unless
such Person shall also be capable of making LIBOR Loans.
(d) Security Interests; Assignment to Affiliates. Notwithstanding any other provision set
----------------------------------------------
forth in this Agreement, any Lender may at any time following written notice to Agent (1) pledge the Obligations
held by it or create a security interest in all or any portion of its rights under this Agreement or the other
Loan Documents to secure obligations to any Federal Reserve Bank pursuant to Regulation A of the Federal Reserve
Board or any Related Fund and the provisions of Section 9.5(a) shall not apply to such pledge or security
interest; provided, however, (a) no such pledge or grant of security interest to any Person shall release such
-------- -------
Lender from its obligations hereunder or under any other Loan Document and (b) the acquisition of title to such
Lender's Obligations pursuant to any foreclosure or other exercise of remedies by such Person shall be subject to
the provisions of this Agreement and the other Loan Documents in all respects including, without limitation, any
written consent required by Section 9.5; and (2) subject to complying with the provisions of Section 9.5 (a),
assign all or any portion of its funded loans to an Eligible Assignee which is a Subsidiary of such Lender or its
parent company, to one or more other Lenders, or to a Related Fund. For purposes of this paragraph, a "Related
Fund" shall mean, with respect to any Lender, a fund or other investment vehicle that invests in commercial loans
and is managed by such Lender or by the same investment advisor that manages such Lender or by an Affiliate of
such investment advisor.
(e) Recording of Assignments. Agent shall maintain a copy of each Assignment and
---------------------------
Acceptance Agreement delivered to it, and a register for the recordation of the names and addresses of Lenders,
and the commitments of, and principal amount of the Loans owing to each Lender pursuant to the terms hereof from
time to time (the "Register"). The entries in the Register shall be presumptive evidence of the amounts due and
71
owing to Lender in the absence of manifest error. Each Borrower, Agent and Lender may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Company and any Lender, at any reasonable time
upon reasonable prior notice.
Section 9.6. Set Off and Sharing of Payments. In addition to any rights now or hereafter granted
---------------------------------
under applicable law and not by way of limitation of any such rights, upon the occurrence and during the
continuance of any Event of Default, each Lender is hereby authorized by Borrowers at any time or from time to
time, with reasonably prompt subsequent notice to Borrowers (any prior or contemporaneous notice being hereby
expressly waived) to set off and to appropriate and to apply any and all (a) balances held by such Lender or any
of its Affiliates at any of its offices for the account of any Borrower or any of its Subsidiaries (regardless of
whether such balances are then due to a Borrower or its Subsidiaries), and (b) other property at any time held or
owing by such Lender or any of its Affiliates to or for the credit or for the account of any Borrower against and
on account of any of the Obligations; except that no Lender shall exercise any such right without the prior
written consent of Agent. Any Lender exercising its right to set off shall purchase for cash (and the other
Lenders shall sell) interests in each of such other Lender's Pro Rata Share of the Obligations as would be
necessary to cause all Lenders to share the amount so set off with each other Lender in accordance with their
respective Pro Rata Shares. Borrowers agree, to the fullest extent permitted by law, that any Lender may
exercise its right to set off with respect to amounts in excess of its Pro Rata Share of the Obligations and upon
doing so shall deliver such amount so set off to Agent for the benefit of itself and of all Lenders in accordance
with their Pro Rata Shares.
Section 9.7. Disbursement of Funds. Agent may, on behalf of Lenders, disburse funds to Borrowers
-----------------------
for Loans requested. Each Lender shall reimburse Agent, within one (1) Business Day of Agent's request
accompanied by Borrower's draw request, for all funds disbursed on its behalf by Agent, or if Agent so requests,
each Lender will remit to Agent its Pro Rata Share of any Loan or Advance before Agent disburses same to
Borrowers. If Agent elects to require that each Lender make funds available to Agent prior to a disbursement by
Agent to Borrowers, Agent shall advise each Lender by telephone, telex, fax or telecopy of the amount of such
Lender's Pro Rata Share of the Loan requested by Borrowers no later than 1:00 p.m. New York time on the Business
Day prior to the funding date applicable thereto, and each such Lender shall pay Agent such Lender's Pro Rata
Share of such requested Loan, in same day funds, by wire transfer to Agent's account on such funding date.
Section 9.8. Settlements, Payments and Information.
--------------------------------------
(a) Revolving Advances and Payments; Fee Payments.
----------------------------------------------
(1) Fluctuation of Loan Balance. The Loan balance may fluctuate from day to day
-----------------------------
through Agent's disbursement of funds to, and receipt of funds from, Borrowers. In order to minimize the
frequency of transfers of funds between Agent and each Lender notwithstanding terms to the contrary set forth in
Section 2 and Section 9.7, Revolving Facility and Term Facility advances and repayments, except as set forth in
Section 2, will be settled according to the procedures described in this Section 9.8. Notwithstanding these
procedures, each Lender's obligation to fund its portion of any advances made by Agent to Borrowers will commence
on the date such advances are made by Agent. Such payments will be made by each Lender without set-off,
counterclaim or reduction of any kind.
(2) Settlement Dates. Once each month or upon disbursement of any proceeds
------------------
pursuant to Section 2 (whichever such period shall be shorter), or if an Event of Default shall have occurred and
be continuing more frequently (including daily), if Agent so elects (each such day being a "Settlement Date"),
Agent will advise each Lender by telephone, fax or telecopy of the amount of each such Lender's Pro Rata Share of
the Loan by 3:00 p.m. New York time. In the event payments are necessary to adjust the amount of such Lender's
required Pro Rata Share of the Loan balance to such Lender's actual Pro Rata Share of the Loan balance as of any
Settlement Date, the party from which such payment is due will pay the other, in same day funds, by wire transfer
to the other's account not later than 3:00 p.m. New York time on the Business Day following the Settlement Date.
(3) Settlement Definitions. For purposes of this Section 9.8(A), the following
------------------------
terms and conditions will have the meanings indicated:
72
(i) "Daily Loan Balance" means an amount calculated as of the
end of each calendar day by subtracting (i) the cumulative principal amount paid by Agent to a
Lender on a Loan from the Closing Date through and including such calendar day, from (ii) the
cumulative principal amount on a Loan advanced by such Lender to Agent on that Loan from the
Closing Date through and including such calendar day.
(ii) "Daily Interest Rate" means an amount calculated by dividing
the interest rate payable to a Lender on a Loan as of each calendar day by three hundred sixty
(360).
(iii) "Daily Interest Amount" means an amount calculated by
multiplying the Daily Loan Balance of a Loan by the associated Daily Interest Rate on that Loan.
(iv) "Interest Ratio" means a number calculated by dividing the
total amount of the interest on a Loan received by Agent with respect to the immediately
preceding month by the total amount of interest on that Loan due from Borrowers during the
immediately preceding month.
(4) Settlement Payments. By 3:00 p.m. New York time on the first Business Day of
---------------------
each month ("Interest Settlement Date"), Agent will advise each Lender by telephone, fax or telecopy of the
amount of such Lender's share of interest and fees on each of the Loans as of the end of the last day of the
immediately preceding month. Provided that such Lender has made all payments required to be made by it under
this Agreement, Agent will pay to such Lender, by wire transfer to such Lender's account (as specified by such
Lender on Schedule 9.8 of this Agreement or the applicable Assignment and Acceptance Agreement, as amended by
------------
such Lender from time to time after the date hereof or in the applicable Assignment and Acceptance Agreement) not
later than 3:00 p.m. New York time on the third Business Day following receipt thereof, such Lender's share of
interest and fees on each of the Loans. Such Lender's share of interest on each Loan will be calculated for that
Loan by adding together the Daily Interest Amounts for each calendar day of the prior month for that Loan and
multiplying the total thereof by the Interest Ratio for that Loan. Such Lender's share of the Unused Revolver
Loan Fee described in Section 2.4(b)(i) shall be an amount equal to (a)(i) such Lender's average Revolving
Facility Loan commitment during such month, less (ii) the sum of (x) such Lender's average Daily Loan Balance of
the Revolving Facility Loan, plus (y) such Lender's Pro Rata Share of the average daily aggregate amount of
Letter of Credit Reserve, in each case for the preceding month, multiplied by (b) the percentage required by
Section 2.4(b)(i). Such Lender's share of the Unused Term Loan Fee described in Section 2.4(b)(ii) shall be an
amount equal to (x) (i) such Lender's average Term Facility Loan commitment during such month, less (ii) the sum
of (A) such Lender's average Daily Loan Balance of the Term Facility Loan, plus (B) such Lender's Pro Rata Share
of the Average Daily Aggregate amount of Term Letter of Credit reserve, in each case for the preceding month,
multiplied by (y) the percentage required by Section 2.4(b)(ii). Such Lender's share of all other fees paid to
Agent for the benefit of Lenders hereunder shall be paid and calculated based on such Lender's Loan commitment
with respect to the Loans on which such fees are associated. To the extent Agent does not receive the total
amount of any fee owing by Borrowers under this Agreement, each amount payable by Agent to a Lender under this
Section 9.8(a)(4) with respect to such fee shall be reduced on a pro rata basis. The Agent and the Lenders
hereby acknowledge and agree that in no event shall the aggregate fee payments received by such Lenders pursuant
to this Section 9.8(a)(4) exceed the total amount of fees pursuant to Section 2.4.
(b) Return of Payments.
-------------------
(1) Recovery after Non-Receipt of Expected Payment. If Agent pays an amount to a
------------------------------------------------
Lender under this Agreement in the belief or expectation that a related payment has been or will be received by
Agent from Borrowers and such related payment is not received by Agent, then Agent will be entitled to recover
such amount from such Lender without set-off, counterclaim or deduction of any kind together with interest
thereon, for each day from and including the date such amount is made available by Agent to such Lender to but
excluding the date of repayment to Agent, at the greater of the Prime Rate of Interest less fifty (50) basis
points and a rate determined by Agent in accordance with banking industry rules on interbank compensation.
73
(2) Recovery of Returned Payment. If Agent determines at any time that any amount
------------------------------
received by Agent under this Agreement must be returned to Borrowers or paid to any other Person pursuant to any
requirement of law, court order or otherwise, then, notwithstanding any other term or condition of this
Agreement, Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender
will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with
interest at such rate, if any, as Agent is required to pay to Borrowers or such other Person, without set-off,
counterclaim or deduction of any kind.
Section 9.9. Discretionary Advances. Notwithstanding anything contained herein to the contrary,
------------------------
Agent may, in its sole discretion, make advances of Revolving Credit Loans in an aggregate amount of not more
than $1,000,000 in excess of the limitations set forth in the Borrowing Base for the purpose of preserving or
protecting the Collateral or for incurring any costs associated with collection or enforcing rights or remedies
against the Collateral, or incurred in any action to enforce this Agreement or any other Loan Document.
ARTICLE X
MISCELLANEOUS
-------------
Section 10.1. Expenses and Taxes.
-------------------
(a) Borrowers agree to pay, whether or not the Closing occurs, the reasonable
out-of-pocket costs and expenses, including reasonable legal, audit and appraisal fees incurred by Agent, any
Lender or Fremont in connection with the negotiation, preparation, legal review and execution of each of the Loan
Documents, including but not limited to UCC and judgment lien searches and UCC filings and fees for post-Closing
UCC and judgment lien searches. In addition, Borrowers shall pay all such costs and expenses of Agent, any
Lender or Fremont associated with any amendments, modifications and terminations to the Loan Documents following
Closing. If Agent, any Lender or Fremont uses in-house counsel for any of these purposes, Borrowers further
agrees that its Obligations under the Loan Documents include reasonable charges for such work commensurate with
the fees that would otherwise be charged by outside legal counsel selected by Agent, such Lender or Fremont for
the work performed to the extent such work does not duplicate any work performed by outside counsel to Agent.
(b) Borrowers also agree to pay all out-of-pocket charges and expenses incurred by Agent,
any Lender or Fremont (including the reasonable fees and expenses of Lenders' counsel) in connection with the
enforcement, protection or preservation of any right or claim of Agent, Lenders or Fremont, the termination of
this Agreement, the termination of any Liens of Agent on the Collateral, or the collection of any amounts due
under the Loan Documents. If Agent, any Lender or Fremont uses in-house counsel for any of these purposes (i.e.,
for any task in connection with the enforcement, protection or preservation of any right or claim of Agent, any
Lender or Fremont and the collection of any amounts due under its Loan Documents), Borrowers further agree that
their Obligations under the Loan Documents include reasonable charges for such work commensurate with the fees
that would otherwise be charged by outside legal counsel selected by Agent, any Lender or Fremont for the work
performed to the extent work does not duplicate any work performed by outside counsel to Agent.
(c) Borrowers shall pay all taxes (other than taxes based upon or measured by Lenders' or
Fremont's income or revenues or any personal property tax), if any, in connection with the issuance of the Notes
and the recording of the security documents therefor. The obligations of Borrowers under this clause (c) shall
survive the payment of Borrowers' indebtedness under this Agreement and the termination of this Agreement to the
extent such work does not duplicate any work performed by outside counsel to Agent.
Section 10.2. Entire Agreement; Amendments. This Agreement and the other Loan Documents constitute
-------------------------------
the full and entire understanding and agreement among the parties with regard to their subject matter and
supersede all prior written or oral agreements, understandings, representations and warranties made with respect
thereto. No amendment, supplement or modification of this Agreement nor any waiver of any provision thereof
shall be made except in writing executed by the party against whom enforcement is sought.
74
Section 10.3. No Waiver; Cumulative Rights. No waiver by any party to this Agreement of any one or
-------------------------------
more defaults by the other party in the performance of any of the provisions of this Agreement shall operate or
be construed as a waiver of any future default or defaults, whether of a like or different nature. No failure or
delay on the part of any party in exercising any right, power or remedy under this Agreement, nor acceptance of
partial performance or partial payment, shall operate as a waiver of such right, power or remedy nor shall any
single or partial exercise of any such right, power or remedy preclude any other or further exercise of such
right, power or remedy or the exercise of any other right, power or remedy. The remedies provided for in this
Agreement are cumulative and are not exclusive of any remedies that may be available to any party to this
Agreement at law, in equity or otherwise.
Section 10.4. Notices. Any notice or other communication required or permitted under this Agreement
--------
shall be in writing and personally delivered, mailed by registered or certified mail (return receipt requested
and postage prepaid), sent by telecopier (with a confirming copy sent by regular mail), or sent by prepaid
overnight courier service, and addressed to the relevant party at its address set forth below, or at such other
address as such party may, by written notice, designate as its address for purposes of notice under this
Agreement:
(a) If to Lender, at:
Xxxxxx Healthcare Finance, Inc.
Loan Number 070004008
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx XxXxxx, Senior Vice President
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with copies to:
Xxxxxx Healthcare Finance, Inc
c/o Segal XxXxxxxxxxx Singer & Xxxxxxx
Loan Number 070004008
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxxx, Vice President and Chief Counsel, Senior Living Group
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and
Xxxxxx Healthcare Finance, Inc.
Loan Number 070004008
0 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx, Vice President, Senior Account Executive
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
75
(b) If to Borrowers, at:
Harborside Healthcare Corporation
Xxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If mailed, notice shall be deemed to be given five (5) days after being sent, and if sent by personal delivery,
telecopier or prepaid courier, notice shall be deemed to be given when delivered.
Section 10.5. Severability. If any term, covenant or condition of this Agreement, or the
-------------
application of such term, covenant or condition to any party or circumstance shall be found by a court of
competent jurisdiction to be, to any extent, invalid or unenforceable, the remainder of this Agreement and the
application of such term, covenant, or condition to parties or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby, and each term, covenant or condition shall be valid
and enforced to the fullest extent permitted by law. Upon determination that any such term is invalid, illegal
or unenforceable, Agent may, but is not obligated to, advance funds to Borrowers under this Agreement until the
parties to this Agreement amend this Agreement so as to effect the original intent of the parties as closely as
possible in a valid and enforceable manner.
Section 10.6. Successors and Assigns. This Agreement, the Notes, and the other Loan Documents shall
-----------------------
be binding upon and inure to the benefit of Borrowers, Agent and Lenders and their respective successors and
permitted assigns and shall bind all Persons who become bound as a debtor to this Agreement. Notwithstanding the
foregoing, Borrowers may not assign any of their rights or delegate any of their obligations under this Agreement
without the prior written consent of Agent, which may be withheld in its sole discretion. Any Lender may sell,
assign, transfer, or participate any or all of its rights or obligations under this Agreement without notice to
or written consent of Borrowers (except as otherwise expressly provided in this Agreement).
Section 10.7. Counterparts. This Agreement may be executed in any number of counterparts, each of
-------------
which shall be deemed an original, but all of which together shall constitute but one instrument.
Section 10.8. Interpretation. No provision of this Agreement or any other Loan Document shall be
---------------
interpreted or construed against any party because that party or its legal representative drafted that
provision. The titles of the paragraphs of this Agreement are for convenience of reference only and are not to
be considered in construing this Agreement. Any pronoun used in this Agreement shall be deemed to include
singular and plural and masculine, feminine and neuter gender as the case may be. The words "herein," "hereof,"
and "hereunder" shall be deemed to refer to this entire Agreement, except as the context otherwise requires.
Section 10.9. Survival of Terms. All covenants, agreements, representations and warranties made in
------------------
this Agreement, any other Loan Document, and in any certificates and other instruments delivered in connection
with this Agreement shall be considered to have been relied upon by Agent and Lenders and shall survive the
making by Lenders of the Loans contemplated by this Agreement and the execution and delivery to Lenders of the
Notes, and shall continue in full force and effect until all liabilities and obligations of Borrowers to Agent
and Lenders are satisfied in full.
76
Section 10.10. Release of Agent and Lenders. Agent and Lenders shall not be liable for any punitive
-----------------------------
or consequential damages and shall not be liable for any damages, claims, obligations, liabilities, costs,
expenses and demands of any kind arising from or in connection with actions taken in good faith. Each Borrower
acknowledges that the foregoing release is a material inducement to Lenders' decision to extend to Borrowers the
financial accommodations hereunder and has been relied upon by Lenders in agreeing to make the Loans and in
making each advance of Loan proceeds hereunder.
Section 10.11. Time. Whenever Borrowers are required to make any payment or perform any act on a
-----
Saturday, Sunday, or a legal holiday under the laws of the State of New York (or other jurisdiction where
Borrower is required to make the payment or perform the act), the payment may be made or the act performed on the
next Business Day. Time is of the essence in Borrowers' performance under this Agreement and all other Loan
Documents.
Section 10.12. Commissions. The transaction contemplated by this Agreement was brought about by
------------
Agent, on behalf of Lenders, and Borrowers acting as principals and without any brokers, agents, or finders being
the effective procuring cause. Borrowers represent that they have not committed Lenders or Agent to the payment
of any brokerage fee, commission, or charge in connection with this transaction. If any such claim is made on
Lenders by any broker, finder, or agent or other person, Borrowers will indemnify, defend, and hold Lender
harmless from and against the claim and will defend any action to recover on that claim, at Borrowers' cost and
expense, including Lenders' counsel fees. Borrowers further agree that until any such claim or demand is
adjudicated in Lenders' and Agent's favor, the amount demanded will be deemed a liability of Borrowers under this
Agreement, secured by the Collateral.
Section 10.13. Third Parties. No rights are intended to be created under this Agreement or under any
---------------
other Loan Document for the benefit of any third party donee, creditor (other than Fremont), or incidental
beneficiary of any Borrower. Nothing contained in this Agreement shall be construed as a delegation to Agent or
any Lender of Borrowers' duty of performance, including without limitation Borrowers' duties under any account or
contract in which Agent or any Lender has a security interest.
Section 10.14. Discharge of Borrowers' Obligations. Agent, in its sole discretion, shall have the
--------------------------------------
right at any time, and from time to time, without prior notice to Borrowers if Borrowers fail to do so, to: (a)
obtain insurance covering any of the Collateral as required under this Agreement; (b) pay for the performance of
any of Borrowers' obligations under this Agreement; (c) discharge taxes, Liens, security interests, or other
encumbrances at any time levied or placed on any of the Collateral in violation of this Agreement unless
Borrowers are, in good faith with due diligence by appropriate proceedings, contesting those items and have
established such reserves as are satisfactory to Agent; and (d) pay for the maintenance and preservation of any
of the Collateral. Expenses and advances shall be added to the Obligations, until reimbursed by Borrowers to
Agent and shall be secured by the Collateral. Any such payments and advances by Agent shall not be construed as
a waiver by Agent of an Event of Default.
Section 10.15. Information to Participants. Lenders agree that they will use reasonable efforts to
------------------------------
protect the confidentiality of any confidential information concerning the Company and its Subsidiaries and
Affiliates. Notwithstanding the foregoing, the Borrowers authorize any Lender to disclose (i) to its employees,
officers and advisors, who shall be bound by the confidentiality provisions hereof, (ii) to any regulatory
authority as required by law, (iii) in connection with any enforcement or other legal action and (iv) to any
participant it may obtain in the Loans, or any portion of the Loans, all information, and furnish to such
participant copies of reports, financial statements, certificates, and documents obtained under any provision of
this Agreement or any other Loan Document; provided that the Lender shall cause such participant to agree in
writing to protect the confidentiality of any confidential information concerning the Company and its
Subsidiaries and Affiliates.
Section 10.16. Indemnity. Borrowers hereby indemnify and agree to defend and hold harmless Agent,
----------
Lenders and Fremont, their partners, officers, (collectively, "Indemnitee") from and against any liability, loss,
cost, expense (including reasonable attorneys' fees and expenses for both in-house and outside counsel), claim,
damage, suit, action or proceeding ever suffered or incurred by Agent, Lenders or Fremont or in which Agent,
Lenders or Fremont may ever be or become involved (whether as a party, witness or otherwise) (a) arising from any
Borrower's failure to observe, perform or discharge any of its covenants, obligations, agreements or duties under
77
this Agreement, (b) arising from the breach of any of the representations or warranties contained in Article IV
of this Agreement, (c) by reason of this Agreement, the other Loan Documents or the transactions contemplated
hereby or thereby, (d) relating to claims of any Person with respect to the Collateral or (e) in connection with
any documentary, mortgage, intangibles or other taxes due or alleged to be due to the State of Florida in
connection with or arising from the Loans, the Mortgages or the transactions set forth in or contemplated by the
Loan Documents. Notwithstanding any contrary provision in this Agreement, the obligation of Borrowers under this
Section 10.16 shall survive the payment in full of the Obligations and the termination of this Agreement;
provided that no Borrower shall have any obligation hereunder with respect to indemnified liabilities of the
Indemnitees arising from the gross negligence or willful misconduct of the Indemnitees.
Section 10.17. Appointment of Agent under this Agreement.
------------------------------------------
(a) Each of the entities comprising Borrower hereby irrevocably appoints and constitutes
Company as its agent to request and receive advances in respect of the Loans (and to otherwise act on behalf of
each such entity pursuant to this Agreement and the other Loan Documents) from Agent in the name or on behalf of
each such entity. Agent may disburse proceeds of the Loans to the bank account of any one or more of such
entities without notice to any of the other entities comprising Borrower or any other Person at any time
obligated on or in respect of the Obligations.
(b) Each of the entities comprising Borrower hereby irrevocably appoints and constitutes
Company as its agent to receive statements of account and all other notices from Agent or the Lenders with
respect to the Obligations or otherwise under or in connection with this Agreement and the other Loan Documents.
(c) No purported termination of the appointment of Company as agent shall be effective
without the prior written consent of Agent.
Section 10.18. Lenders Approvals. Unless expressly provided herein to the contrary, any approval,
-------------------
written consent, waiver or satisfaction of Agent or any Lender with respect to any matter that is the subject of
this Agreement or the other Loan Documents may be granted or withheld by Agent or such Lender in its sole and
absolute discretion.
Section 10.19. Further Assurances. Borrowers hereby agree that at any time and from time to time, at
--------------------
the expense of Borrowers, Borrowers will promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or that Agent may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby, or to enable Agent or any of their
agents to exercise and enforce the rights and remedies under this Agreement with respect to any portion of such
Collateral.
Section 10.20. CHOICE OF LAW; WRITTEN CONSENT TO JURISDICTION. EXCEPT TO THE EXTENT THAT THE UCC
---------------------------------------------------
PROVIDES FOR THE APPLICATION OF THE LAW OF THE BORROWERS' STATE OF ORGANIZATION, THIS AGREEMENT AND THE NOTE
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCLUDING (TO THE
GREATEST EXTENT A NEW YORK COURT WOULD PERMIT) ANY RULE OF LAW THAT WOULD CAUSE THE APPLICATION OF THE LAW OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK. IF ANY ACTION ARISING OUT OF THIS AGREEMENT OR THE NOTE IS
COMMENCED BY AGENT OR ANY LENDER IN THE STATE COURTS OF THE STATE OF NEW YORK OR IN THE U.S. DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK, BORROWERS HEREBY CONSENT TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH
ACTION AND TO THE LAYING OF VENUE IN THE STATE OF NEW YORK. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED
IF MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO BORROWERS AT THEIR ADDRESS DESCRIBED IN SECTION 10.4. OR IF
SERVED BY ANY OTHER MEANS PERMITTED BY APPLICABLE LAW.
Section 10.21. WAIVER OF TRIAL BY JURY. BORROWERS HEREBY (A) COVENANT AND AGREE NOT TO ELECT A TRIAL
------------------------
BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT
THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN,
KNOWINGLY AND VOLUNTARILY, BY BORROWERS, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND
78
EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. AGENT AND LENDERS ARE HEREBY AUTHORIZED
AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES
TO THIS AGREEMENT, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF BORROWERS' WAIVER OF THE RIGHT TO JURY TRIAL.
FURTHER, BORROWERS HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF AGENT OR ANY AGENT OR ANY LENDER (INCLUDING
AGENT'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO BORROWERS THAT AGENT OR ANY LENDER WILL NOT SEEK TO
ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
Section 10.22. Harborside of Rhode Island. Notwithstanding any provision to the contrary contained
---------------------------
in this Agreement or any other Loan Document, to the extent required by the Department of Health of the State of
Rhode Island or any successor thereto, the obligations under the Loan Documents of HRI, and any other Subsidiary
substantially all the assets of which are located in the State of Rhode Island shall not exceed, for each such
Subsidiary, at any time an amount equal to 80% of the aggregate Acquisition Consideration (as defined by the
Rhode Island Department of Health) paid by the Company, HRI or any other Subsidiary for Facilities owned or
operated by such Subsidiary and located in the State of Rhode Island.
ARTICLE XI
JOINT AND SEVERAL LIABILITY AND SURETYSHIP WAIVERS
--------------------------------------------------
Section 11.1. Independent Obligations; Subrogation. The Obligations of each Borrower hereunder are
---------------------------------------
joint and several. To the maximum extent permitted by law, each Borrower hereby waives any claim, right or
remedy which either may now have or hereafter acquire against any other Borrower that arises hereunder including,
without limitation, any claim, remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim, right or remedy of Lender against any Borrower or any Collateral
which Lender now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under
contract, by statute, under common law or otherwise until the Obligations are fully paid and finally discharged.
In addition, each Borrower hereby waives any right to proceed against the other Borrowers, now or hereafter, for
contribution, indemnity, reimbursement and any other suretyship rights and claims, whether direct or indirect,
liquidated or contingent, whether arising under express or implied contract or by operation of law, which any
Borrower may now or hereafter have as against the other Borrowers with respect to the Obligations until the
Obligations are fully paid and finally discharged. Each Borrower also hereby waives any rights of recourse to or
with respect to any asset of the other Borrowers until the Obligations are fully paid and finally discharged.
Section 11.2. Authority to Modify Obligations and Security. Each Borrower authorizes Agent and/or
----------------------------------------------
Lenders without notice or demand and without affecting any Borrower's liability hereunder, from time to time,
whether before or after any notice of termination hereof or before or after any default in respect of the
Obligations, to: (a) renew, extend accelerate, or otherwise change the time for payment of, or otherwise change
any other term or condition of, any document or agreement evidencing or relating to any Obligations as such
Obligations relate to the other Borrowers, including, without limitation, to increase or decrease the rate of
interest thereon; (b) accept, substitute, waive, defease, increase, release, exchange or otherwise alter any
Collateral, in whole or in part, securing the other Borrower's Obligations; (c) apply any and all such Collateral
and direct the order or manner of sale thereof as Agent and/or Lenders, in their sole discretion, may determine;
(d) deal with the other Borrowers as Agent and/or Lenders may elect; (e) in Agent's and/or Lenders' sole
discretion, settle, release on terms satisfactory to Agent and/or Lenders, or by operation of law or otherwise,
compound, compromise, collect or otherwise liquidate any of the other Borrowers' Obligations and/or any of the
Collateral in any manner, and bid and purchase any of the collateral at any sale thereof; (f) apply any and all
payments or recoveries from the other Borrowers as Agent and/or Lenders, in their sole discretion may determine,
whether or not such indebtedness relates to the Obligations; all whether such Obligations are secured or
unsecured or guaranteed or not guaranteed by others; and (g) apply any sums realized from Collateral furnished
by the other Borrowers upon any of its indebtedness or obligations to Agent and/or Lenders as they in their sole
79
discretion may determine, whether or not such indebtedness relates to the Obligations; all without in any way
diminishing, releasing or discharging the liability of any Borrower hereunder.
Section 11.3. Waiver of Defenses. Upon an Event of Default by any Borrower in respect of any
--------------------
Obligations, Agent and/or Lenders may, at their option and without additional notice to any Borrower, proceed
directly against any Borrower to collect and recover the full amount of the liability hereunder, or any portion
thereof, and each Borrower waives any right to require Agent and/or Lenders to: (a) proceed against the other
Borrowers or any other person whomsoever; (b) proceed against or exhaust any Collateral given to or held by
Agent and/or Lenders in connection with the Obligations; (c) give notice of the terms, time and place of any
public or private sale of any of the Collateral except as otherwise provided herein; or (d) pursue any other
remedy in Agent's and/or Lenders' power whatsoever. A separate action or actions may be brought and prosecuted
against any Borrower whether or not action is brought against the other Borrowers and whether the other Borrowers
be joined in any such action or actions; and each Borrower agrees that any payment of any Obligations or other
act which shall toll any statute of limitations applicable thereto shall similarly operate to toll such statute
of limitations applicable to the liability hereunder.
Section 11.4. Exercise of Lender's Rights. Each Borrower hereby authorizes and empowers Agent
-----------------------------
and/or Lenders in their sole discretion, without any notice or demand to such Borrower whatsoever and without
affecting the liability of such Borrower hereunder, to exercise any right or remedy which Agent and/or Lenders
may have available to them against the other Borrowers.
Section 11.5. Additional Waivers. Each Borrower waives any defense arising by reason of any
-------------------
disability or other defense of the other Borrowers or by reason of the cessation from any cause whatsoever of the
liability of the other Borrowers or by reason of any act or omission of Agent and/or Lenders or others which
directly or indirectly results in or aids the discharge or release of the other Borrowers or any Obligations or
any Collateral by operation of law or otherwise. The Obligations shall be enforceable against each Borrower
without regard to the validity, regularity or enforceability of any of the Obligations with respect to any of
the other Borrowers or any of the documents related thereto or any collateral security documents securing any of
the Obligations. No exercise by Agent and/or Lenders of, and no omission of Agent and/or Lenders to exercise,
any power or authority recognized herein and no impairment or suspension of any right or remedy of Agent and/or
Lenders against any Borrower or any Collateral shall in any way suspend, discharge, release, exonerate or
otherwise affect any of the Obligations or any Collateral furnished by the Borrowers or give to the Borrowers any
right of recourse against Agent and/or Lenders. Each Borrower specifically agrees that the failure of Agent
and/or Lenders (a) to perfect any lien on or security interest in any property heretofore or hereafter given any
Borrower to secure payment of the Obligations, or to record or file any document relating thereto or (b) to file
or enforce a claim against the estate (either in administration, bankruptcy or other proceeding) of any
Borrower, shall not in any manner whatsoever terminate, diminish, exonerate or otherwise affect the liability of
any Borrower hereunder.
Section 11.6. Additional Indebtedness. Additional Obligations may be created from time to time at
------------------------
the request of any Borrower and without further authorization from or notice to any other Borrowers even though
the borrowing Borrowers' financial condition may deteriorate since the date hereof. Each Borrower waives the
right, if any, to require Lender to disclose to such Borrower any information it may now have or hereafter
acquire concerning the other Borrowers' character, credit, Collateral, financial condition or other matters.
Each Borrower has established adequate means to obtain from the other Borrowers on a continuing basis financial
and other information pertaining to such Borrower's business and affairs, and assumes the responsibility for
being and keeping informed of the financial and other conditions of the other Borrowers and of all circumstances
bearing upon the risk of nonpayment of the Obligations which diligent inquiry would reveal. Agent and/or
Lenders need not inquire into the powers of any Borrower or the authority of any of its officers, directors,
partners or agents acting or purporting to act in its behalf, and any obligations created in reliance upon the
purported exercise of such power or authority is hereby guaranteed. All obligations of each Borrower to Agent
and/or Lenders heretofore, now or hereafter created shall be deemed to have been granted at each Borrower's
special insistence and request and in consideration of and in reliance upon this Agreement.
Section 11.7. Subordination. Except as otherwise provided in this Section 11.7, any indebtedness of
-------------
any Borrower now or hereafter owing to any other Borrowers is hereby subordinated to the Obligations, whether
heretofore, now or hereafter created, and whether before or after notice of termination hereof, and, following
80
the occurrence and during the continuation of an Event of Default, no Borrower shall, without the prior consent
of Agent, pay in whole or in part any of such indebtedness nor will any such Borrower accept any payment of or on
account of any such indebtedness at any time while such Borrower remains liable hereunder. At the request of
Agent, after the occurrence and during the continuance of an Event of Default, each Borrower shall pay to Agent
(for the benefit of all Lenders) all or any part of such subordinated indebtedness and any amount so paid to
Agent (for the benefit of all Lenders) shall be applied to payment of the Obligations. Each payment on the
indebtedness of any Borrower to the other Borrowers received in violation of any of the provisions hereof shall
be deemed to have been received by any other Borrowers as trustee for Agent (for the benefit of Lenders) and
shall be paid over to Agent (for the benefit of all Lenders) immediately on account of the Obligations, but
without otherwise affecting in any manner any such Borrower's liability under any of the provisions of this
Agreement. Each Borrower agrees to file all claims against the other Borrowers in any bankruptcy or other
proceeding in which the filing of claims is required by law in respect of any indebtedness of the other Borrowers
to such Borrower, and Agent (for the benefit of Lenders) shall be entitled to all of any such Borrower's rights
thereunder. If for any reason any such Borrower fails to file such claim at least thirty (30) days prior to the
last date on which such claim should be filed, Agent, as such Borrower's attorney-in-fact, is hereby authorized
to do so in Borrowers' name, or in Agent's discretion, to assign such claim to, and cause a proof of claim to be
filed in the name of, Agent's nominee. In all such cases, whether in administration, bankruptcy or otherwise,
the person or persons authorized to pay such claim shall pay to Agent (for the benefit of Lenders) the full
amount payable on the claim in the proceeding, and to the full extent necessary for that purpose any such
Borrower hereby assigns to Agent (for the benefit of Lenders) all such Borrower's rights to any payments or
distributions to which such Borrower otherwise would be entitled. If the amount so paid is greater than any such
Borrower's liability hereunder, Agent (for the benefit of Lenders) will pay the excess amount to the party
entitled thereto.
Section 11.8. Revival. If any.payments of money or transfers of property made to Agent (for the
-------
benefit of Lenders) by any Borrower should for any reason subsequently be declared to be, or in Agent's counsel's
good faith opinion be determined to be, fraudulent (within the meaning of any state or federal law relating to
fraudulent conveyances), preferential or otherwise voidable or recoverable in whole or in part for any reason
(hereinafter collectively called "voidable transfers") under the Bankruptcy Code or any other federal or state
law and Agent or Lenders are required to repay or restore, or in Agent's counsel's opinion may be so liable to
repay or restore, any such voidable transfer, or the amount or any portion thereof, then as to any such voidable
transfer or the amount repaid or restored and all reasonable costs and expenses (including reasonable attorneys'
fees) of Agent and Lenders related thereto, such Borrower's liability hereunder shall automatically be revived,
reinstated and restored and shall exist as though such voidable transfer had never been made.
Section 11.9. Understanding of Waivers. Each Borrower warrants and agrees that the waivers set
--------------------------
forth in this Article 11 are made with full knowledge of their significance and consequences. If any of such
waivers are determined to be contrary to any applicable law or public policy, such waivers shall be effective
only to the maximum extent permitted by law.
[SIGNATURES FOLLOW]
81
IN WITNESS WHEREOF, intending to be legally bound, and intending that this Agreement constitutes an
instrument executed under seal, the parties have caused this Agreement to be executed under seal as of the date
first written above.
LENDERS:
XXXXXX HEALTHCARE FINANCE, INC.,
a Delaware corporation
By: _______________________________________________(SEAL)
Name:
------------------------------------------------
Title:
------------------------------------------------
AGENT:
XXXXXX HEALTHCARE FINANCE, INC.,
a Delaware corporation
By: _______________________________________________(SEAL)
Name:
------------------------------------------------
Title:
------------------------------------------------
S-1
BORROWERS:
HARBORSIDE HEALTHCARE CORPORATION
By:
---------------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
BAY TREE NURSING CENTER CORP.
BELMONT NURSING CENTER CORP.
COUNTRYSIDE CARE CENTER CORP.
HARBORSIDE HEALTH I CORPORATION
HARBORSIDE TOLEDO CORP.
KHI CORPORATION
MARYLAND HARBORSIDE CORP.
NEW JERSEY HARBORSIDE CORP.
OAKHURST MANOR NURSING CENTER CORP.
ORCHARD RIDGE NURSING CENTER CORP.
SUNSET POINT NURSING CENTER CORP.
WEST BAY NURSING CENTER CORP.
By:
---------------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
HARBORSIDE OF CLEVELAND LIMITED PARTNERSHIP
HARBORSIDE CONNECTICUT LIMITED PARTNERSHIP
HARBORSIDE DANBURY LIMITED PARTNERSHIP
HARBORSIDE OF DAYTON LIMITED PARTNERSHIP
HARBORSIDE HEALTHCARE BALTIMORE LIMITED PARTNERSHIP
HARBORSIDE MASSACHUSETTS LIMITED PARTNERSHIP
HARBORSIDE NORTH TOLEDO LIMITED PARTNERSHIP
HARBORSIDE OF OHIO LIMITED PARTNERSHIP
HARBORSIDE RHODE ISLAND LIMITED PARTNERSHIP
HARBORSIDE REHABILITATION LIMITED PARTNERSHIP
RIVERSIDE RETIREMENT LIMITED PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION, its general partner
By:
-----------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
S-2
HARBORSIDE HEALTHCARE ADVISORS LIMITED PARTNERSHIP
HARBORSIDE HEALTHCARE LIMITED PARTNERSHIP
By: KHI CORPORATION, its general partner
By:
-----------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
HARBORSIDE NEW HAMPSHIRE LIMITED PARTNERSHIP
HARBORSIDE TOLEDO LIMITED PARTNERSHIP
HHCI LIMITED PARTNERSHIP
By: HARBORSIDE TOLEDO CORP., its general partner
By:
--------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
S-3
HARBORSIDE HEALTHCARE MANAGEMENT, LLC
By:
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
S-4
FALMOUTH HEALTHCARE, LLC
By:
----------------------------------------
Name: Xxxxxxxx Fredurra
Title: President
S-5
FLORIDA HOLDINGS I, LLC
By:
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: President
S-6
FLORIDA HOLDINGS II, LLC
By:
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: President
S-7
FLORIDA HOLDINGS III, LLC
By:
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: President
S-8
FLORIDA ADMINISTRATIVE SERVICES, LLC
By:
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: President
S-9
LTC LEASING, LLC
By:
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: President
S-10
HARBORSIDE ADMINISTRATIVE SERVICES, LLC
By:
----------------------------------------
Name: Xxxx Xxxxx
Title: President
S-11
MARIETTA HEALTHCARE, LLC
By:
----------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: President
S-12
MASHPEE HEALTHCARE, LLC
By:
----------------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
S-13
MASSACHUSETTS HOLDINGS I, LLC
By:
----------------------------------------
Name: Xxxxxxx Xxxxxx
Title: President
S-14
OHIO HOLDINGS I, LLC
By:
----------------------------------------
Name: Xxxxxxx Xxxxxx
Title: President
S-15
WAKEFIELD HEALTHCARE, LLC
By:
----------------------------------------
Name: Xxxx Xxxx
Title: President
S-16
WESTFIELD HEALTHCARE, LLC
By:
----------------------------------------
Name: Xxx Xxx
Title: President
S-17
0000 XXXXXXXXX XXXX, LLC
By:
----------------------------------------
Name: Xxxxxxxxxx Xxxxxx
Title: President
S-18
0000 XX 00XX XXXX, LLC
By:
----------------------------------------
Name: Xxxx Xxxxx
Title: President
S-19
0000 XXXXXXXXXX XXXX, LLC
By:
----------------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
X-00
XXXXXXXXXX XXXXX LIMITED PARTNERSHIP
By: 0000 XXXXXXXXXX XXXX, LLC, its general partner
By:
------------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
S-21
1980 SUNSET POINT ROAD, LLC
By:
---------------------------------------
Name: Xxxxx Xxxxxx
Title: President
S-22
0000 XXXXXXXXX XXXXXXXXX, XXXXX, LLC
By:
---------------------------------------
Name: Xxxx Xxxxxx
Title: President
S-23
0000 XXXXXXX XXXXXX NORTH, LLC
By:
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: President
S-24
0000 XXXXX XXX ROAD, LLC
By:
----------------------------------------
Name: Xxxx Xxxx
Title: President
S-25
0000 XXXXXXXXX XXXXX, LLC
By:
----------------------------------------
Name: Xxxx Xxx
Title: President
S-26
0000 XXXXXXXX XXXX, LLC
By:
----------------------------------------
Name: Xxxxxxxx Xxxxx
Title: President
X-00
XXX 0000-0 TRUST
By: Wilmington Trust Company,
its Trustee
By:
--------------------------------------------------------------
Name:
-----------------------------------------------------
Title:
-----------------------------------------------------
S-28
ACKNOWLEDGMENT:
---------------
Harborside Administrative Services, LLC acknowledges and agrees that pursuant to Section 7.6 of this Agreement,
the management fees with respect to the nursing homes located in the states of Massachusetts, New Hampshire,
Ohio, Connecticut, Rhode Island, Maryland, and Indiana will not be paid by the Borrowers after the occurrence of
an Event of Default.
HARBORSIDE ADMINISTRATIVE SERVICES, LLC
By:
---------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
S-29
ACKNOWLEDGMENT:
---------------
Florida Administrative Services, LLC acknowledges and agrees that pursuant to Section 7.6 of this Agreement, the
management fees with respect to the nursing homes located in the state of Florida will not be paid by the
Borrowers after the occurrence of an Event of Default.
FLORIDA ADMINISTRATIVE SERVICES, LLC
By:
---------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
S-30
