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LOAN AND SECURITY AGREEMENT
BETWEEN
CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC,
CERTAIN SUBSIDIARIES OF CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC,
AND
MAGELLAN HEALTH SERVICES, INC.
CLOSING DATE: MAY __, 1997
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LOAN AND SECURITY AGREEMENT
THIS AGREEMENT, entered into and effective as of May __, 1997, between
CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC, a Delaware limited liability company
("Borrower"), the Subsidiaries of Borrower which are set forth on Exhibit "A"
and MAGELLAN HEALTH SERVICES, INC., a Delaware corporation ("Lender");
W I T N E S S E T H :
WHEREAS, Lender and ____________________, a ____________
[corporation/LLC/partnership] ("New Crescent") have established Borrower to (i)
operate certain acute care psychiatric hospitals and (ii) engage in the business
of hospital-based behavioral healthcare using Borrower as the operating entity;
WHEREAS, in connection with the agreement between Lender and New
Crescent to establish Borrower, Lender has agreed to provide certain financing
to Borrower;
WHEREAS, Lender is willing to extend financing to Borrower in
accordance with the terms of this Agreement;
WHEREAS, the Subsidiaries are party to this Agreement solely for
purposes of their obligations under Article 3 and Sections 4.3 and 4.5;
NOW, THEREFORE, Lender and Borrower agree as follows:
1. DEFINITIONS, TERMS AND REFERENCES.
1.1. Certain Definitions. In addition to terms defined
elsewhere in this Agreement and in any Exhibits, the following terms shall have
the following meanings:
"Account Debtor" shall mean the person who is obligated to pay or repay
any of the items constituting any of the Collateral.
"Agreement" shall mean this Loan and Security Agreement, as it may be
amended or supplemented from time to time.
"Bankruptcy Code" shall mean Title 11 of the United States Code, as it
may be amended from time to time.
"Borrower" shall have the meaning given to such term in the preamble to
this Agreement.
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"Business Day" shall mean a day of the year on which banks are not
required or authorized to close in Atlanta, Georgia or Dallas, Texas.
"Closing Date" shall mean the date on which the initial extension of
credit is made to Borrower pursuant to this Agreement.
"Collateral" shall mean and include all rights of Borrower and its
Subsidiaries to payment for goods sold or leased, or to be sold or to be leased,
or for services rendered or to be rendered, howsoever evidenced or incurred
including, without limitation, all accounts, instruments, chattel paper and
general intangibles evidencing or arising out of such rights to payment and all
books, records, computer tapes, programs and ledger books arising therefrom or
relating thereto, all whether now owned or hereafter acquired or arising.
"Collateral Locations" shall mean the Executive Office and those
additional locations set forth and described on Exhibit "A" attached to this
Agreement.
"Default Condition" shall mean the occurrence of any event which, after
satisfaction of any requirement for the giving of notice or the lapse of time,
or both, would become an Event of Default.
"Default Rate" shall mean that interest rate per annum equal to two
percent (2%) per annum in excess of the contract interest rate otherwise
applicable to any Obligation.
"Event of Default" shall mean any of the events or conditions described
in Article 8, provided that any requirement for the giving of notice or the
lapse of time, or both, has been satisfied.
"Executive Office" shall mean the address of Borrower at 3414 Peachtree
Road, N.E., Suite [900], Atlanta, Georgia 30326.
"Fiscal Year", in respect of Borrower, shall mean the fiscal year of
Borrower employed by Borrower as of the Closing Date. The terms "Fiscal Quarter"
and "Fiscal Month" shall correspond accordingly to "Fiscal Year."
"GAAP" shall mean generally accepted accounting principles consistently
applied for the period or periods in question.
"Lender" shall have the meaning given to such term in the preamble to
this Agreement.
"Lien" shall mean any deed to secure debt, deed of trust, mortgage or
similar instrument, and any lien, security interest, preferential arrangement
which has the practical effect of constituting a security interest, security
title, pledge, charge, encumbrance or servitude of any kind, whether by
consensual agreement or by operation of statute or other law, and whether
voluntary or involuntary, including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof.
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"Line of Credit" shall refer to the line of credit in the principal
amount of $55 million opened by Lender in favor of Borrower pursuant to the
provisions of Section 2.1.
"Loan Documents" shall mean this Agreement, the Note, any financing
statements covering portions of the Collateral, the documents, instruments,
certificates and agreements delivered by Borrower or a Subsidiary pursuant to
the provisions of this Agreement and all other documents, instruments and
agreements evidencing, securing or modifying obligations under the Line of
Credit.
"Magellan Facility" shall mean the credit facility created pursuant to
the Credit Agreement dated as of April __, 1997, among Lender, the lenders named
therein and [Money Center Bank], as administrative agent for such lenders, as
the same may be amended from time to time.
"Maturity Date" shall mean May __, 1998.
"Note" shall mean the promissory note, dated of even date herewith, as
amended or supplemented from time to time, in a principal amount equal to the
maximum amount of the Line of Credit, evidencing advances to be obtained by
Borrower under the Line of Credit, together with any renewals or extensions of
such note thereof, in whole or in part. The Note shall be in the form of Exhibit
"B".
"Obligations" shall mean any indebtedness, liability or obligation of
Borrower to Lender arising hereunder or under any of the other Loan Documents,
whether evidenced by the Note or otherwise, and any and all extensions or
renewals thereof in whole or in part.
"Permitted Encumbrances" shall mean (i) Liens in favor of Lender and
(ii) those additional Liens, if any, set forth and described on Exhibit "C"
pertaining to the Collateral.
"Person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, joint stock company, trust, governmental unit
or other entity.
"Prime Rate" refers to that interest rate so denominated set by [Money
Center Bank] from time to time as its prime interest rate basis for borrowings.
"Subordinated Debt" shall mean any unsecured indebtedness for borrowed
money of Borrower or any Subsidiary to any Person which, by written agreement in
form and substance satisfactory to Lender, has been subordinated in right of
payment and claim, to the rights and claims of Lender in respect of the
Obligations, on terms and conditions satisfactory to Lender.
"Subsidiary" shall mean any corporation, partnership, business
association or other entity (including any Subsidiary of any of the foregoing)
of which Borrower owns, directly or indirectly, one hundred percent (100%) of
the capital stock or equity interest having ordinary power for the election of
directors or others performing similar functions. Exhibit "A" contains a
complete listing of all Subsidiaries which exist as of the Closing Date.
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"UCC" shall mean the Uniform Commercial Code- Secured Transactions of
Georgia (O.C.G.A. Art. 11-9), as in effect on the date hereof.
1.2. Use of Defined Terms. All terms defined in this
Agreement and the Exhibits shall have the same defined meanings when used in any
other Loan Documents, unless the context shall require otherwise.
1.3. Accounting Terms. All accounting terms not specifically
defined herein shall have the meanings generally attributed to such terms under
GAAP.
1.4. UCC Terms. The terms "accounts", "chattel paper",
"instruments", "general intangibles", "inventory," "equipment" and "fixtures",
as and when used in the Loan Documents, shall have the same meanings given such
terms under the UCC.
1.5. Terminology. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural, and the plural
shall include the singular. Titles of Articles and Sections in this Agreement
are for convenience only, and neither limit nor amplify the provisions of this
Agreement, and all references in this Agreement to Articles, Sections,
Subsections, paragraphs, clauses, subclauses or Exhibits shall refer to the
corresponding Article, Section, Subsection, paragraph, clause, subclause of, or
Exhibit attached to, this Agreement, unless specific reference is made to the
articles, sections or other subdivisions of, or Exhibit to, another document or
instrument. Wherever in this Agreement reference is made to any instrument,
agreement or other document, including, without limitation, any of the Loan
Documents, such reference shall be understood to mean and include any and all
amendments thereto or modifications, restatements, renewals or extensions
thereof. Wherever in this Agreement reference is made to any statute, such
reference shall be understood to mean and include any and all amendments thereof
and all regulations promulgated pursuant thereto. Whenever any matter set forth
herein or in any Loan Document is to be consented to or be satisfactory to
Lender, or is to be determined, calculated or approved by Lender, then, unless
otherwise expressly set forth herein or in any such Loan Document, such consent,
satisfaction, determination, calculation or approval shall be in Lender's sole
discretion, exercised in good faith and, where required by law, in a
commercially reasonable manner.
1.6. Exhibits. All Exhibits attached hereto are by reference
made a part hereof.
2. THE FINANCING.
2.1. Line of Credit. Upon the execution of this Agreement and
compliance with its terms and conditions, Lender agrees to extend the Line of
Credit in favor of Borrower so that, prior to the Maturity Date and so long as
there is not in existence any Default Condition or Event of Default, Borrower
may borrow and repay and reborrow up to a maximum aggregate principal amount
outstanding at any one time equal to the original principal amount of the Line
of Credit.
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All proceeds so obtained under the Line of Credit may be used by Borrower for
general corporate purposes in such manner as Borrower may elect in the ordinary
course of its business operations. All advances to Borrower under the Line of
Credit shall be evidenced by the Note, which shall be executed and delivered
simultaneously herewith. Each request for an advance under the Note shall be
made by Borrower to Lender in writing no later than 9:00 a.m. Eastern time on
the Business Day that is two Business Days prior to the date of the requested
advance. Lender shall make the amount of the requested advance available to
Borrower prior to 1:00 p.m. Eastern time on the requested borrowing date, by
transferring to the account directed by Borrower the amount of the requested
advance. The outstanding principal amount of the Note shall be repaid on the
Maturity Date or at such earlier time as may be provided pursuant to this
Agreement and shall bear interest paid on the first day of each month (computed
on the daily outstanding principal balance, for the actual number of days
outstanding, on the basis of a 365 day year), payable in the manner described
therein, from the date thereof on the unpaid principal amount thereof from time
to time outstanding at a rate per annum equal to the Prime Rate plus .50%, with
any change in such interest rate on the Note due to a change in the Prime Rate
to become effective as of the opening of business on each date on which such
change in the Prime Rate occurs. Notwithstanding any other provision of this
Agreement, Lender shall not be required to advance funds to Borrower pursuant to
the Line of Credit in excess of the amounts received by Lender pursuant to
Section [7.7] of the OpCo Contribution Agreement, dated January __, 1997,
between Lender and Crescent Real Estate Equities Limited Partnership, which
amounts consist of accounts receivable owned by Lender and collected by Borrower
on Lender's behalf.
2.2. Interest and Charges. Lender and Borrower hereby agree
that the only charge imposed by Lender upon Borrower for the use of money in
connection herewith is and shall be the interest expressed in the Note, at the
rate set forth therein, and that all other charges imposed by Lender upon
Borrower in connection herewith, including, without limitation, default and late
charges, are and shall be deemed to be charges made to compensate Lender for
underwriting and administrative services and costs, and other services and costs
performed and incurred, and to be performed and incurred, by Lender in
connection with the Line of Credit, and shall under no circumstances be deemed
to be charges for the use of money. In no contingency or event whatsoever shall
the aggregate of all amounts deemed interest hereunder or under the Note and
charged or collected pursuant to the terms of this Agreement or pursuant to the
Note exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that Lender has charged or received
interest hereunder in excess of the highest applicable rate, the rate in effect
hereunder shall automatically be reduced to the maximum rate permitted by
applicable law and Lender shall promptly refund to Borrower any interest
received by Lender in excess of the maximum lawful rate or, if so requested by
Borrower, shall apply such excess to the principal balance of the Obligations.
It is the intent hereof that Borrower not pay or contract to pay, and that
Lender not receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by Borrower under
applicable law.
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2.3. Prepayment. Borrower may prepay amounts outstanding
under the Line of Credit at any time without premium or penalty.
3. SECURITY INTEREST.
3.1. Grant of Security Interest. As security for the payment
of the Note and all Obligations whatsoever of Borrower to Lender, Borrower and
each Subsidiary hereby grant to Lender a continuing, general lien upon and
security interest in and to the following described property, wherever located,
whether now existing or hereafter acquired or arising, namely: (a) the
Collateral and (b) all proceeds of the Collateral.
3.2. Grant of Security Interest by Subsidiaries. The grant of
security interests in and to the Collateral by each Subsidiary pursuant to
Section 3.1 shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of Borrower under this Agreement, the Note,
or any other Loan Document, by operation of law or otherwise or any obligation
of any other Subsidiary pursuant to this Agreement;
(b) any modification or amendment of or supplement to
this Agreement, any Note, or any other Loan Document;
(c) any release, nonperfection or invalidity of any direct or
indirect security for any obligation of the Borrower under this Agreement, the
Note, any Loan Document, or any obligations of any other Subsidiary;
(d) any change in the existence, structure or ownership of
Borrower or any other Subsidiary, or any insolvency, bankruptcy, reorganization
or other similar proceeding affecting Borrower, or any other Subsidiary, or its
assets or any resulting release or discharge of any obligation of Borrower, or
any other Subsidiary;
(e) the existence of any claim, setoff or other rights which
any Subsidiary may have at any time against Borrower, any other Subsidiary,
Lender or any other Person, whether in connection herewith or any unrelated
transactions, provided that nothing herein shall prevent the assertion of any
such claim by separate suit or compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against
Borrower, or any other Subsidiary, for any reason related to this Agreement, any
other Loan Document, or any provision of applicable law or regulation purporting
to prohibit the payment by Borrower, of the principal of or interest on the Note
or any other amount payable by Borrower under this Agreement, the Note, or any
other Loan Document; or
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(g) any other act or omission to act or delay of any kind by
Borrower, any other Subsidiary, Lender or any other Person or any other
circumstance whatsoever which might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of any Subsidiary's obligations
hereunder.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO COLLATERAL.
With respect to the Collateral, Borrower (and, with respect to Sections 4.3 and
4.5 only, each Subsidiary) hereby represents, warrants and covenants to Lender
as set forth below.
4.1. Bona Fide Accounts. Each item of the Collateral arises or
will arise under a contract between Borrower or a Subsidiary and the Account
Debtor, or from the bona fide sale or delivery of goods to or performance of
services for, the Account Debtor.
4.2. Good Title. Borrower and the Subsidiaries have good title
to the Collateral free and clear of all liens, security interests and
encumbrances thereon other than any Permitted Encumbrances, and no financing
statement covering the Collateral is on file in any public office other than any
evidencing Permitted Encumbrances.
4.3. Right to Assign. Each of Borrower and the Subsidiaries
has full right, power and authority to make the assignment of the Collateral to
Lender and hereafter will not pledge, hypothecate, grant a security interest in,
sell, assign, transfer, or otherwise dispose of any portion of the Collateral,
or any interest therein without the written permission of Lender.
4.4. Trade Styles. Except as may be set forth on Exhibit "D"
attached hereto, neither Borrower nor any Subsidiary uses any trade names or
trade styles in its business operations (herein, "Trade Styles"), and Borrower
covenants with Lender not to use or allow any Subsidiary to use any Trade Styles
in their business operations hereafter, except as so specified on Exhibit "D"
prior to having given Lender at least thirty (30) days written notice thereof.
In any event, to the extent that, now or hereafter, Borrower or any Subsidiary
uses any Trade Styles, Borrower hereby certifies and agrees with Lender that:
(i) all of the accounts receivable and proceeds thereof arising out of sales
under the Trade Styles shall be the property of, and belong to, Borrower or a
Subsidiary; (ii) each of the Trade Styles is a trade name and trade style (and
not an independent corporation or other legal entity) by which Borrower or a
Subsidiary identifies and sells certain of its products or services and under
which it may conduct a portion of its business; and (iii) all accounts
receivable and proceeds thereof invoiced under the names of any of the Trade
Styles shall be owned solely by Borrower or a Subsidiary and shall be subject to
the terms of this Agreement as they relate to Collateral.
4.5. Power of Attorney. (i) Each of Borrower and the
Subsidiaries hereby appoints Lender as its attorney-in-fact to file such
certificates disclosing its use of the Trade Styles and to take such other
actions on its behalf as are necessary to comply with the statutes of any states
relating to the use of fictitious or assumed business names, to the extent that
Borrower
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or such Subsidiary fails to do so; and (ii) each of Borrower and the
Subsidiaries irrevocably designates and appoints Lender its true and lawful
attorney either in the name of Lender or in the name of Borrower or such
Subsidiary to, upon the occurrence and during the continuance of any Event of
Default, ask for, demand, sue for, collect, compromise, compound, receive,
receipt for and give acquittances for any and all sums owing or which may become
due upon any items of the Collateral and, in connection therewith, to take any
and all actions as Lender may deem necessary or desirable in order to realize
upon the Collateral, including, without limitation, power to endorse for
collection in the name of Borrower or such Subsidiary, any checks, drafts, notes
or other instruments received in payment of or on account of the Collateral, but
Lender shall not be under any duty to exercise any such authority or power or in
any way be responsible for the collection of the Collateral.
5. GENERAL REPRESENTATIONS AND WARRANTIES. In order to induce
Lender to enter into this Agreement, Borrower hereby represents and warrants to
Lender (which representations and warranties, together with any other
representations and warranties of Borrower contained elsewhere in this
Agreement, shall be deemed to be renewed as of the date of each advance under
the Line of Credit) as set forth below:
5.1. Existence and Qualification. Each of Borrower and the
Subsidiaries is a limited liability company or corporation duly organized,
validly existing and in good standing under the laws of the state of its
formation and is duly qualified to do business and in good standing in any other
state wherein the conduct of its business or the ownership of its property
requires such qualification. Exhibit "A" sets forth the jurisdiction in which
each Subsidiary of Borrower is organized and the jurisdictions in which Borrower
and each Subsidiary is qualified to do business as a foreign entity.
5.2. Authority; Validity and Binding Effect. Each of Borrower
and the Subsidiaries (to the extent that each is a party thereto) has the power
to make, deliver and perform under the Loan Documents, and to borrow hereunder,
and has taken all necessary and appropriate action to authorize the execution,
delivery and performance of the Loan Documents. This Agreement constitutes, and
the remainder of the Loan Documents, when executed and delivered for value
received, will constitute, the valid obligations of each of Borrower and the
Subsidiaries (to the extent that each is a party thereto), legally binding upon
it and enforceable against it in accordance with their respective terms, except
as such enforceability may be limited by bankruptcy, insolvency, other similar
laws affecting the enforcement of creditor's rights in general, or general
principles of equity.
5.3. Incumbency and Authority of Signing Officers. Each of the
officers of the Borrower and the Subsidiaries who has executed any Loan Document
holds the office specified on such document and, in such capacity, is duly
authorized and empowered to execute, attest and deliver such Loan Document for
and on behalf of Borrower or such Subsidiary, and to bind Borrower or such
Subsidiary accordingly by his execution of such Loan Document thereby.
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5.4. Taxes. Each of Borrower and the Subsidiaries has filed or
caused to be filed all tax returns required to be filed by it and has paid all
taxes shown to be due and payable by it on said returns or on any assessments
made against it, except for any taxes being contested in good faith by
appropriate proceedings promptly initiated and diligently pursued and for which
reserves or other appropriate provisions required by GAAP have been established.
5.5. Organization. The (i) Certificate of Formation and the
Operating Agreement of Borrower, dated ______ __, 1997 (the "Operating
Agreement") and (ii) the Certificates of Formation and Operating Agreements or
Articles of Incorporation and Bylaws, as applicable of each Subsidiary and (iii)
all amendments to said certificates, operating agreements, articles of
incorporation and bylaws are in full force and effect under the law of the state
of such entity's organization.
5.6. Insolvency. After giving effect to the execution and
delivery of the Loan Documents and the making of any disbursements under the
Note, Borrower will not be "insolvent", within the meaning of such term as used
in O.C.G.A. ss. 18-2-22 or as defined in ss. 101(29) of the Bankruptcy Code; or
be unable to pay its debts generally as such debts become due; or have an
unreasonably small capital.
5.7. Title. Borrower and the Subsidiaries have good and
marketable title to all of the Collateral, except for the Permitted
Encumbrances.
5.8. No Violations. The execution, delivery and performance by
each of Borrower and the Subsidiaries (to the extent that each is a party
thereto) of this Agreement, the Note and each other Loan Document do not violate
any provision of any law, rule, regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System), order,
writ, judgment, injunction, decree, determination or award presently in effect
having applicability to Borrower or any Subsidiary or any organizational
document of Borrower or any Subsidiary, or result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which Borrower or any Subsidiary is a party or by which
it or its properties may be bound or affected; and neither Borrower nor any
Subsidiary is in default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
agreement, lease or instrument.
6. AFFIRMATIVE COVENANTS. Borrower covenants to Lender that from and
after the date hereof, and so long as any amounts remain unpaid on account of
any of the Obligations or this Agreement remains effective (whichever is the
last to occur), Borrower will comply (and will cause each Subsidiary to comply)
with the affirmative covenants set forth below:
6.1. Records Respecting Collateral. All records of Borrower
and its Subsidiaries with respect to the Collateral will be kept, in the case of
Borrower, at the Executive
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Office or, in the case of a Subsidiary, at the location shown on Exhibit "A" and
will not be removed from such address without the prior written consent of
Lender.
6.2. Further Assurances. Borrower shall duly execute and/or
deliver (or cause to be duly executed and/or delivered) to Lender any
instrument, invoice, document, document of title, order, financing statement,
assignment, waiver, consent or other writing which may be reasonably necessary
to Lender to carry out the terms of this Agreement and any of the other Loan
Documents and to perfect its security interest in and facilitate the collection
of the Collateral, the proceeds thereof, and any other property at any time
constituting security to Lender. Borrower shall perform or cause to be performed
such acts as Lender may reasonably request to establish and maintain for Lender
a valid and perfected security interest in and secure title to the Collateral,
free and clear of any liens, encumbrances or security interests other than
Permitted Encumbrances.
6.3. Right to Inspect. Lender (or any person or persons
designated by it) shall, in its sole discretion, have the right to call at any
place of business of Borrower or any Subsidiary at any reasonable time, during
normal business hours following reasonable advance notice and, without
hindrance, disruption or delay, inspect, audit, check and make extracts from any
books, records, journals, orders, receipts, correspondence or other data of
Borrower or any Subsidiary of Borrower relating to the Collateral, to Borrower's
business or to any other transactions between the parties hereto.
6.4. Reports. Borrower shall, as soon as practicable, but in
any event on or before twenty (20) days after the end of each calendar month,
furnish or cause to be furnished to Lender a status report, certified by a duly
authorized officer of Borrower, showing the aggregate dollar value of the items
comprising the Collateral and the age of each individual item thereof as of the
last day of the preceding fiscal month (segregating such items in such manner
and to such degree as Lender may reasonably request). In any event, upon request
from Lender, made at any time hereafter, subject to Borrower's confidentiality
constraints, Borrower shall furnish Lender with a then current Account Debtor
address list.
6.5. Payment of Taxes. Borrower shall pay and discharge and
shall cause each Subsidiary to pay and discharge all taxes, assessments and
governmental charges upon Borrower or such Subsidiary, their income and their
properties prior to the date on which penalties attach thereto, unless and to
the extent only that (x) such taxes, assessments and governmental charges are
being contested in good faith and by appropriate proceedings by Borrower or such
Subsidiary, (y) Borrower or such Subsidiary maintains reasonable reserves on its
books therefor and (z) the payment of such taxes does not result in a Lien upon
any of the Collateral other than a Permitted Encumbrance.
6.6. Certificate of No Default. Borrower shall, on a
quarterly basis not later than forty-five (45) days after the close of each of
its first three Fiscal Quarters and not later than ninety (90) days after the
close of its Fiscal Year, certify to Lender, in a statement executed by a
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duly authorized Officer of Borrower in the form of Exhibit "E" attached hereto,
that no Event of Default and no Default Condition exists or has occurred, or, if
an Event of Default or Default Condition exists, specifying the nature and
period of existence thereof.
6.7. Change of Principal Place of Business. Borrower hereby
agrees that if, at any time hereafter, Borrower elects to (i) move the Executive
Office or the principal place of business of a Subsidiary, (ii) change its name
or the name of a Subsidiary, or (iii) change its organizational structure or the
organizational structure of any Subsidiary to a structure other than a limited
liability company or corporation, Borrower will notify Lender in writing at
least thirty (30) days prior thereto.
6.8. Preservation of Existence. Borrower shall preserve and
maintain and shall cause each Subsidiary to maintain its existence, rights,
franchises and privileges in the jurisdiction of its organization, and qualify
and remain qualified to do business in each jurisdiction in which such
qualification is necessary or desirable in view of its business and operations
or the ownership of its properties.
6.9. Compliance With Laws. Borrower shall comply and shall
cause each Subsidiary to comply with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority, noncompliance with
which would or could materially adversely affect their respective financial
condition or the ownership, maintenance or operation of any material portion of
any of their respective properties. Without limiting the foregoing, each of
Borrower and its Subsidiaries shall obtain and maintain all material permits,
licenses and other authorizations which are required under, and otherwise comply
with, all federal, state, and local laws and regulations.
6.10. Certain Required Notices. Promptly, upon its receipt of
notice or knowledge thereof, Borrower will report to Lender: (i) any lawsuit,
proceeding, action, arbitration, claim or governmental investigation, inquiry or
proceeding, pending or threatened against Borrower or any Subsidiary seeking
damages for an amount in excess of $1 million; or (ii) the existence and nature
of any Default Condition or Event of Default.
7. NEGATIVE COVENANTS. Borrower covenants to Lender that from and after
the date hereof and so long as any amount remains unpaid on account of any of
the Obligations or this Agreement remains effective (whichever is the last to
occur), Borrower will not do (and will not permit any Subsidiary to do), without
the prior written consent of Lender, any of the things or acts set forth below:
7.1. Encumbrances. Create, assume, or suffer to exist any
Lien on the Collateral except for Permitted Encumbrances and as permitted by
Section 4.3 of this Agreement.
7.2. Business Locations. Transfer the Executive Office or
the principal place of business of any Subsidiary to, or maintain records with
respect to, Collateral at any locations
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other than those at which the same are presently kept or maintained as set forth
on Exhibit "A" hereto, except upon at least thirty (30) days prior written
notice to Lender and after the delivery to Lender of financing statements, if
reasonably required by Lender, in form reasonably satisfactory to Lender, to
perfect or continue the perfection of Lender's Lien.
8. EVENTS OF DEFAULT. The occurrence of any events or conditions set
forth below shall constitute an Event of Default hereunder, provided that any
requirement for the giving of notice or the lapse of time, or both, has been
satisfied:
8.1. Notes. Borrower shall fail to repay the principal on the
Note on the Maturity Date or at such earlier time as may be provided pursuant to
this Agreement or make payments of interest within five Business Days of the
giving of written notice by Lender to Borrower of Lender's right to such
payment.
8.2. Other Obligations. Borrower shall fail to make any
payments (other than those described in Section 8.1) on its Obligations to
Lender within 10 days of the giving of written notice by Lender to Borrower of
Lender's right to such payment.
8.3. Misrepresentations. Borrower shall make any
representation or warranty in any of the Loan Documents or in any certificate or
statement furnished at any time hereunder or in connection with any of the Loan
Documents which proves to have been untrue or misleading in any material respect
when made or furnished.
8.4. Covenants. Borrower shall default in the observance or
performance of any covenant or agreement (other than payment obligations covered
by Section 8.1 or 8.2 above) contained in any of the Loan Documents unless such
default is cured to Lender's satisfaction within thirty (30) days after the
sooner to occur of receipt of notice of such default from Lender or the date on
which such default first becomes known to Borrower.
8.5. Other Debts. Borrower shall default in connection with
any agreement for indebtedness for borrowed money of $10,000,000 or more with
any creditor other than Lender which entitles said creditor to accelerate the
maturity thereof.
8.6. Voluntary Bankruptcy. Borrower shall file a voluntary
petition in bankruptcy or a voluntary petition or answer seeking liquidation,
reorganization, arrangement, readjustment of its debts, or for any other relief
under the Bankruptcy Code, or under any other act or law pertaining to
insolvency or debtor relief, whether state, Federal, or foreign, now or
hereafter existing; Borrower shall enter into any agreement indicating its
consent to, approval of, or acquiescence in, any such petition or proceeding;
Borrower shall apply for or permit the appointment by consent or acquiescence of
a receiver, custodian or trustee of Borrower for all or a substantial part of
its property; Borrower shall make an assignment for the benefit of creditors; or
Borrower shall be unable or shall fail to pay its debts generally as such debts
become due, or
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Borrower shall admit, in writing, its inability or failure to pay its debts
generally as such debts become due.
8.7. Involuntary Bankruptcy. There shall have been filed
against Borrower an involuntary petition in bankruptcy or seeking liquidation,
reorganization, arrangement, readjustment of its debts or for any other relief
under the Bankruptcy Code, or under any other act or law pertaining to
insolvency or debtor relief, whether state, federal or foreign, now or hereafter
existing; Borrower shall suffer or permit the involuntary appointment of a
receiver, custodian or trustee of Borrower or for all or a substantial part of
its property; or Borrower shall suffer or permit the issuance of a warrant of
attachment, execution or similar process against all or any substantial part of
the property of Borrower; provided, however, that no filing, appointment or
issuance described above shall constitute an Event of Default if such filing,
appointment or issuance is dismissed or terminated within ninety (90) days of
its occurrence.
8.8. Judgments. A final judgment or order for the payment of
money is rendered against Borrower or any Subsidiary in the amount of $5,000,000
or more (exclusive of amounts covered by insurance) and either (x) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order, or (y) a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect for any period of sixty (60)
consecutive days.
8.9. Bankruptcy of Affiliate. Any motion, complaint or other
pleading is filed in any bankruptcy case of any person or entity other than
Borrower and such motion, complaint or pleading seeks the consolidation of
Borrower's assets and liabilities with the assets and liabilities of such person
or entity; provided, however, that the filing of any such motion, complaint or
pleading shall not constitute an Event of Default if such motion, complaint or
pleading is dismissed within ninety (90) days of its filing.
8.10. Material Adverse Change. There shall occur any
material adverse change in the financial condition, operations or business
prospects of Borrower.
9. REMEDIES. Upon the occurrence of any Default Condition or Event of
Default, Lender's obligation to disburse amounts under the Line of Credit shall
immediately cease; provided, however, that if such obligation has ceased due to
the occurrence of a Default Condition, and such Default Condition does not
become an Event of Default due to its having been cured or waived before it has
matured into an Event of Default, then such obligation shall be reinstated as of
the date such Default Condition is cured or waived. Upon the occurrence or
existence of any Event of Default, or at any time thereafter, without prejudice
to the rights of Lender to enforce its claims against Borrower for damages for
failure by Borrower to fulfill any of its obligations hereunder, subject only to
prior receipt by Lender of payment in full of all Obligations then outstanding
in immediately available funds, Lender shall have all of the rights and remedies
set forth below, and it may exercise any one, more, or all of such remedies, in
its sole discretion, without thereby waiving any of the others.
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9.1. Acceleration of the Obligations. Lender, at its option,
may declare all of the Obligations to be immediately due and payable, whereupon
the same shall become immediately due and payable without presentment, demand,
protest, notice of nonpayment or any other notice required by law relative
thereto, all of which are hereby expressly waived by Borrower, anything
contained herein to the contrary notwithstanding and, in connection therewith,
if Lender so elects, by further written notice to Borrower, Lender may increase
the rate of interest charged on the Note then outstanding for so long thereafter
as Lender further shall elect to an amount not to exceed the Default Rate.
Failure to declare all Obligations due shall not constitute an election by
Lender to waive its right to demand payment at any time and in any event, as
Lender in its discretion may deem appropriate. Thereafter, Lender, at its
option, may, but shall not be obligated to, accept less than the entire amount
of Obligations due, if tendered, provided, however, that unless then agreed to
in writing by Lender, no such acceptance shall or shall be deemed to constitute
a waiver of any Event of Default or a reinstatement of any commitments of Lender
hereunder.
9.2. Remedies of a Secured Party. Lender shall thereupon have
the rights and remedies of a secured party under the UCC in effect on the date
thereof (regardless of whether the same has been enacted in the jurisdiction
where the rights or remedies are asserted), including, without limitation, the
right to take possession of any of the Collateral or the proceeds thereof, to
sell or otherwise dispose of the same, and to apply the proceeds therefrom to
any of the Obligations in such order as Lender, in its sole discretion, may
elect. Lender shall give Borrower written notice of the time and place of any
public sale of the Collateral or the time after which any other intended
disposition thereof is to be made. The requirement of sending reasonable notice
shall be met if such notice is given to Borrower at least ten (10) days before
such disposition. Expenses of retaking, holding, insuring, preserving,
protecting, preparing for sale or selling or the like with respect to the
Collateral shall include, in any event, reasonable attorneys' fees and other
legally recoverable collection expenses, all of which shall constitute
Obligations.
9.3. Repossession of the Collateral. Lender may take the
Collateral or any portion thereof into its possession, by such means (without
breach of the peace) and through agents or otherwise as it may elect (and, in
connection therewith, demand that Borrower assemble the Collateral at a place or
places and in such manner as Lender shall prescribe), and sell, lease or
otherwise dispose of the Collateral or any portion thereof in its then condition
or following any commercially reasonable preparation or processing, which
disposition may be by public or private proceedings, by one or more contracts,
as a unit or in parcels, at any time and place and on any terms, so long as the
same are commercially reasonable and Borrower hereby waives all rights which
Borrower has or may have under and by virtue of O.C.G.A. sections 44-14-260
through 44-14-264, including, without limitation, the right of Borrower to
notice and to a judicial hearing prior to seizure of any Collateral by Lender.
9.4. Other Remedies. Unless and except to the extent
expressly provided for to the contrary herein, the rights of Lender specified
herein shall be in addition to, and not in
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limitation of, Lender's rights under the UCC, as amended from time to time, or
any other statute or rule of law or equity, or under any other provision of any
of the Loan Documents, all of which may be exercised successively or
concurrently.
10. MISCELLANEOUS.
10.1. Waiver. Each and every right granted to Lender under
this Agreement, or any of the other Loan Documents, or any other document
delivered hereunder or in connection herewith or allowed it by law or in equity,
shall be cumulative and may be exercised from time to time. No failure on the
part of Lender to exercise, and no delay in exercising, any right shall operate
as a waiver thereof, nor shall any single or partial exercise by Lender of any
right preclude any other or future exercise thereof or the exercise of any other
right. No waiver by Lender of any Default Condition or Event of Default shall
constitute a waiver of any subsequent Default Condition or Event of Default.
10.2. GOVERNING LAW. THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND THEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
GEORGIA.
10.3. Survival. All representations, warranties and covenants
made herein and in the Loan Documents shall survive the execution and delivery
hereof and thereof but shall terminate when Lender's obligation to advance funds
under the Line of Credit has expired. The terms and provisions of this Agreement
shall continue in full force and effect, notwithstanding the payment of the Note
or the termination of the Line of Credit, until all of the Obligations have been
paid in full and Lender's obligation to advance funds under the Line of Credit
has expired.
10.4. Assignment. No assignment hereof or of any Loan Document
shall be made by Borrower without the prior written consent of Lender. Lender
may collaterally assign, pledge or transfer its rights under this Agreement, the
Note or any other Loan Document to Lender's senior lenders without the consent
of Borrower; any other assignment or transfer shall require the prior written
consent of Borrower, which consent shall not be unreasonably withheld. It is
understood and agreed by the parties hereto that Lender's rights, but not its
obligations, under this Agreement, the Note and all other Loan Documents shall
be collaterally assigned by Lender to [Money Center Bank], in its capacity as
administrative agent under the Magellan Facility, for the benefit of the lenders
under the Magellan Facility, pursuant to a written instrument of assignment
satisfactory to [Money Center Bank] and the parties hereto; and Lender
acknowledges and agrees that such collateral assignment of rights shall in no
way relieve Lender of any of Lender's obligations under this Agreement or the
Loan Documents.
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10.5. Counterparts. This Agreement may be executed in two or
more counterparts, each of which when fully executed shall be an original, and
all of said counterparts taken together shall be deemed to constitute one and
the same agreement.
10.6. Reimbursement. Borrower shall pay to Lender on demand
all reasonable out-of-pocket costs and expenses that Lender pays or actually
incurs in connection with the negotiation, preparation, consummation,
enforcement and termination of this Agreement and the other Loan Documents.
Borrower will pay all expenses incurred by it in the transaction. In the event
Borrower becomes a debtor under the Bankruptcy Code, Lender's secured claim in
such case shall include interest on the Obligations and all fees, costs and
charges provided for herein (including, without limitation, reasonable
attorneys' fees actually incurred) all to the extent allowed by the Bankruptcy
Code. All expenses due under this Section 10.6 shall be Obligations.
10.7. Successors and Assigns. This Agreement and Loan
Documents shall be binding upon and inure to the benefit of the successors and
permitted assigns of the parties hereto and thereto.
10.8. Severability. If any provision of this Agreement or of
any of the Loan Documents or the application thereof to any party thereto or
circumstances shall be invalid or unenforceable to any extent, the remainder of
such Loan Documents and the application of such provisions to any other party
thereto or circumstance shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
10.9. Notices. All notices, requests and demands to or upon
the respective parties hereto shall be deemed to have been given or made when
personally delivered, upon the date originally received if delivered by telecopy
transmission followed by registered or certified mail confirmation, one Business
Day following deposit with an overnight delivery service, or three Business Days
following deposit in the mail, registered or certified mail, postage prepaid
(except in cases where it is expressly provided herein or by applicable law that
such notice, demand or request is not effective until received by the party to
whom it is addressed) as follows:
To Lender:
Magellan Health Services, Inc.
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326
Attn: Treasurer
Telecopy: 404/814-5823 or 814-5796
with a copy to:
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King & Spalding
191 Peachtree Street
Suite 4900
Atlanta, Georgia 30303-1763
Attn: Robert W. Miller
Telecopy: 404/572-5100
To Borrower:
Charter Behavioral Health Systems, LLC
3414 Peachtree Road, N.E.
Suite 900
Atlanta, Georgia 30326
Attn: General Counsel
Telecopy: 404/___- ____
with copies to:
__________________________
__________________________
Attn: ____________________
Telecopy: ________________
and:
New Crescent
__________________________
__________________________
Attn: ____________________
Telecopy: ________________
and:
Shaw, Pittman, Potts & Trowbridge
2300 N. Street, N.W.
Washington, D.C. 20037
Attn: Wendelin A. White
Telecopy: 202/663-8007
or to such other representative or at such other address of a party as such
party hereto may furnish to the other party in writing.
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10.10. Entire Agreement; Amendments. This Agreement, together
with the remaining Loan Documents, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof. Neither this Agreement
nor any Loan Document may be changed, waived, discharged, modified or terminated
orally, but only by an instrument in writing signed by the party against whom
enforcement is sought.
10.11. Time of Essence. Time is of the essence in this
Agreement and the other Loan Documents.
10.12. Interpretation. No provision of this Agreement or any
Loan Document shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
10.13. JURISDICTION. BORROWER AGREES THAT ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY LOAN DOCUMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF GEORGIA OR THE UNITED STATES OF AMERICA FOR THE
NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION, ALL AS LENDER MAY ELECT. BY
EXECUTION OF THIS AGREEMENT, BORROWER HEREBY SUBMITS TO EACH SUCH JURISDICTION,
HEREBY EXPRESSLY WAIVING WHATEVER RIGHTS MAY CORRESPOND TO IT BY REASON OF ITS
PRESENT OR FUTURE DOMICILE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER IN ANY OTHER
JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED OR REQUIRED BY LAW.
10.14. Payment on Non-Business Days. Whenever any payment to
be made hereunder or under the Note is due on a date which is not a Business
Day, such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of interest hereunder or under the Note.
10.15. Cure of Defaults by Lender. If, hereafter, Borrower
defaults in the performance of any duty or obligation to Lender hereunder or
under any Loan Document, Lender may, at its option, but without obligation, cure
such default. Any costs, fees and expenses incurred by Lender in connection
therewith including, without limitation, for the purchase of insurance, the
payment of taxes and the removal or settlement of liens and claims, shall become
Obligations and shall be due and payable within ten Business Days of the giving
of notice of such to Borrower by Lender.
10.16. Recitals. All recitals contained herein are hereby
incorporated by reference into this Agreement and made part thereof.
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10.17. Sole Benefit. The rights and benefits set forth in
this Agreement and the other Loan Documents are for the sole and exclusive
benefit of the parties hereto and thereto and may be relied upon only by them,
and, in the case of Lender, its permitted assignees.
10.18. Indemnification. Borrower will hold Lender, its
respective directors, officers, employees, agents, successors and assigns
harmless from and indemnify Lender, its respective directors, officers,
employees, agents, successors and assigns against, all loss, damages, costs and
expenses (including, without limitation, reasonable attorney's fees, costs and
expenses) actually incurred by any of the foregoing, whether direct, indirect or
consequential, as a result of or arising from or relating to any "Proceedings"
(as defined below) by any Person, whether threatened or initiated, asserting a
claim for any legal or equitable remedy against any Person under any statute,
case or regulation, including, without limitation, any federal or state
securities laws or under any common law or equitable case or otherwise, arising
from this Agreement or any Loan Document or from any loans made or other actions
taken by Lender pursuant to this Agreement or any other Loan Document, except to
the extent such losses, damages, costs or expenses are due to the wilful
misconduct or gross negligence of Lender. As used herein, "Proceedings" shall
mean actions, suits or proceedings before any court, governmental or regulatory
authority. At the request of Lender, Borrower will indemnify any Person to whom
Lender transfers or sells (subject to the provisions of Section 10.4) all or any
portion of its interest in the Obligations or participation therein on terms
substantially similar to the terms set forth above. Neither Borrower nor Lender
shall not be responsible or liable to any Person for consequential damages which
may be alleged as a result of this Agreement or any of the transactions
contemplated hereby. The obligations of Borrower under this Section shall
survive the termination of this Agreement and payment of the Obligations.
10.19. JURY TRIAL WAIVER. EACH OF BORROWER AND LENDER HEREBY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO ANY OF THE LOAN DOCUMENTS, OBLIGATIONS OR THE COLLATERAL.
11. CONDITIONS PRECEDENT TO INITIAL ADVANCE. Unless waived in
writing by Lender at or prior to the execution and delivery of this Agreement,
the conditions set forth below shall constitute express conditions precedent to
the obligation of Lender to make the initial advance under the Line of Credit.
11.1. Secretary's Certificate. Receipt by Lender of a
certificate from the Secretary (or Assistant Secretary) of Borrower and each
Subsidiary, certifying to Lender that appropriate resolutions have been entered
into by the Governing Board of Borrower and the governing body of each
Subsidiary incident hereto and that the officers of Borrower and each Subsidiary
whose signatures appear hereinbelow, on the other Loan Documents, and on any and
all other documents, instruments and agreements executed in connection herewith,
are duly authorized by the Governing Board of Borrower and the governing body of
each Subsidiary for
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and on behalf of Borrower or such Subsidiary to execute and deliver this
Agreement, the other Loan Documents and such other documents, instruments and
agreements, and to bind Borrower and each Subsidiary accordingly thereby.
11.2. Loan Documents. Receipt by Lender of all the other
Loan Documents, duly executed in form and substance reasonably acceptable to
Lender.
11.3. Financing Statements. Receipt by Lender of Uniform
Commercial Code financing statements respecting the Collateral, duly executed by
Borrower or its Subsidiaries in form and substance reasonably acceptable to
Lender.
11.4. Opinion of Counsel. Receipt by Lender of an opinion of
counsel from independent legal counsel to Borrower and each Subsidiary in
substantially the form of Exhibit "F", subject to normal and customary
assumptions and exceptions.
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11.5. No Default. No Default Condition or Event of Default
shall exist and Borrower shall in all respects be in compliance with all of the
terms of the Loan Documents, as evidenced by its delivery of a certificate of no
default to such effect, to be substantially in the form of Exhibit "E" attached
hereto.
11.6. Other. Receipt by Lender of such other documents,
certificates, instruments and agreements as shall be reasonably required
hereunder or provided for herein or as Lender or Lender's counsel may reasonably
require in connection herewith.
11.7. Borrowing Notice. Receipt by Lender of a Borrowing
Notice to be substantially in the form of Exhibit "G" attached hereto.
12. CONDITIONS PRECEDENT TO SUBSEQUENT ADVANCES. Unless waived
in writing by Lender at or prior to the execution and delivery of this
Agreement, the conditions set forth below shall constitute express conditions
precedent to the obligation of Lender to make each advance (other than the
initial advance) under the Line of Credit.
12.1. No Default. No Default Condition or Event of Default
shall exist and Borrower shall in all respects be in compliance with all of the
terms of the Loan Documents, as evidenced by its delivery of a certificate of no
default to such effect, to be substantially in the form of Exhibit "E" attached
hereto.
12.2. Borrowing Notice. Receipt by Lender of a Borrowing
Notice to be substantially in the form of Exhibit "G" attached hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and Borrower has caused its corporate seal to be affixed hereto, as of
the day and year first above written.
"LENDER"
MAGELLAN HEALTH SERVICES, INC.
By:_____________________________
[Name/Title]
"BORROWER"
CHARTER BEHAVIORAL HEALTH
SYSTEMS, LLC.
By:_____________________________
[Name], President
"SUBSIDIARIES"
By:_____________________________
[Name/Title]
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