LOAN AND SECURITY AGREEMENT
between
Lexington Holding Corporation
as Borrower
and
COPELCO/AMERICAN HEALTHFUND, INC.,
as
Lender
March 14, 1996
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, dated as of March 14th, 1996 (this
"Agreement"), is entered into by and among Lexington Holding Corporation, a
Delaware corporation (the "Borrower"), and Copelco/American Healthfund, Inc.,
("CAHI), a Pennsylvania corporation (the "Lender").
Preliminary Statement:
The Borrower desires to obtain, and the Lender has agreed to provide, a
revolving credit facility which revolving credit facility will be used to fund
the purchase of certain accounts receivable from various healthcare providers
("Providers"), in each case pursuant to an Accounts Purchase and Servicing
Agreement among the respective Provider, the Borrower, as Purchaser, and
Copelco/American Healthfund, Inc., as Administrator (each a "Purchase Agreement"
and collectively, the "Purchase Agreements");
Intending to be legally bound hereby, the parties hereto agree as follows:
I. CERTAIN DEFINITIONS.
1.1 Definitions. Capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Purchase Agreements. As used in this
Agreement, the following terms shall have these meanings:
"Borrowing Base" shall mean, as of any date of determination, the lesser of
(i) the sum of each of the Purchaser Capital Investments (in each case as
calculated from time to time) under each Purchase Agreement and (ii) until such
time as the Providers have collected payments from Medicare representing at
least 120 days of patient service, 60% of the Estimated Net Value of all
Purchased Accounts; and thereafter, 80% of the Estimated Net Value of all
Purchased Accounts.
"Business Day" shall mean any day other than a Saturday, Sunday or any day
on which banking institutions in New York City are permitted or required by law,
executive order or governmental decree to remain closed or a day on which the
Lender is closed for business.
"Collateral" means (i) all accounts, instruments and general intangibles of
the Borrower, including all assets acquired by the Borrower from the Providers
from time to time pursuant to the Purchase Agreements, including, without
limitation, all of the Borrowers right, title and interest in and to the
Purchased Accounts, all Proceeds (including insurance Proceeds) thereof, as well
as all Commercial Lockboxes, all Government Lockboxes and all funds held in all
Commercial Lockboxes, Government Lockboxes and Cash Reserve Accounts, and any
instruments from time to time representing or evidencing Commercial Lockboxes,
Government
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Lockboxes, Cash Reserve Accounts or such funds and (ii) the Purchase
Agreements and any other documents or agreements now or hereafter in effect
relating to the purchase, servicing or processing of Purchased Accounts
(collectively, the "Borrower Assigned Agreements"), including all rights of the
Borrower to receive moneys due and to become due under or pursuant to the
Borrower Assigned Agreements, all rights of the Borrower to receive proceeds of
any insurance, indemnity, warranty or guaranty with respect to the Borrower
Assigned Agreements, any claims of the Borrower for damages arising out of or
for breach of or default under the Borrower Assigned Agreements, and the right
of the Borrower to amend, waive or terminate the Borrower Assigned Agreements,
to perform under the Borrower Assigned Agreements and to compel performance and
otherwise exercise all remedies under the Borrower Assigned Agreements.
"Default Rate" shall mean 400 basis points above the interest rate
otherwise applicable on all Loans.
"Event of Default" shall have the meaning set forth in Section 8.1.
"Generally Accepted Accounting Principles" shall mean generally accepted
accounting principles as in effect from time to time in the United States,
consistently applied.
"Indebtedness for Borrowed Money" shall mean (i) all indebtedness,
liabilities, and obligations, now existing or hereafter arising, for money
borrowed by the Borrower, whether or not evidenced by any note, indenture, or
agreement and (ii) all indebtedness of others for money borrowed with respect to
which the Borrower has become liable by way of a guarantee or indemnity.
"Interest Period" shall mean with respect to any Loan, the weekly period
commencing on the date such Loan is made and ending on the first day prior to
the weekly anniversary thereof and each like weekly period thereafter.
"LIBOR" means the annual rate in effect in the London Interbank Market
applicable to one month deposits of U.S. dollars as reported in the Wall Street
Journal on the second Business Day prior to the date of determination. If the
Wall Street Journal is not published on such Business Day or does not report
such rate, such rate shall be as reported by such other publication or source as
the Lender shall select.
"Lien" means any lien, mortgage, security interest, chattel mortgage,
pledge or other encumbrance (statutory or otherwise) of any kind securing
satisfaction of an obligation, including any agreement to give any of the
foregoing, any conditional sales or other title retention agreement, any lease
in the nature thereof, and the filing of or the agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction or similar
evidence of any encumbrance, whether within or outside the United States.
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"Loan" shall have the meaning set forth in Section 2.1.
"Loan Documents" shall mean this Agreement, the Note, and all financing
statements and other agreements, documents and certificates required to be
delivered hereunder (other than any Purchase Agreements).
"Note" shall mean the Revolving Credit Note.
"Obligations" shall mean all now existing or hereafter arising debts,
obligations, covenants, and duties of payment or performance of every kind,
matured or unmatured, direct or contingent, owing, arising, due, or payable to
the Lender by or from the Borrower arising out of this Agreement or any other
Loan Document, including, without limitation, all obligations to repay principal
of and interest on all the Loans, and to pay interest, fees, costs, charges,
expenses, professional fees, and all sums chargeable to the Borrower under the
Loan Documents, whether or not evidenced by any note or other instrument.
"Permitted Liens" shall mean Liens in favor of the Lender under the Loan
Documents.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, company, business trust or entity.
"Potential Default" shall mean an event that with the giving of notice or
lapse of time or both would become an Event of Default.
"Proceeds" shall have the meaning assigned to such term in the UCC.
"Regulation" means any statute, law, ordinance, regulation, order or rule
of any foreign, federal, state, local or other government or governmental body.
"Revolver Termination Date" shall have the meaning set forth in Section
2.1.
"Revolving Loan Commitment" shall have the meaning set forth in Section
2.1.
"Revolving Credit Note" shall have the meaning set forth in Section 2.2.
"Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial Code
as in effect from time to time in the Commonwealth of Pennsylvania.
1.2 Accounting Terms. All accounting terms used herein shall be construed
in accordance with Generally Accepted Accounting Principles.
II. THE LOAN
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2.1 The Loans.
(a) Subject to the terms and conditions hereof, the Lender agrees to
make revolving credit loans (collectively called the "Loans" and individually a
"Loan") to the Borrower from time to time during the period commencing the date
hereof and ending on March __, 1998, or on any earlier date as provided in
Sections 2.6 and 8.1 hereof (the "Revolver Termination Date"), in a principal
amount not to exceed at any time outstanding in the aggregate One Million Eight
Hundred Thousand Dollars - $1,800,000 (the "Revolving Loan Commitment").
(b) Within the limits of the Revolving Loan Commitment and the
Borrowing Base, the Borrower may borrow, prepay (in accordance with Section 2.7)
and reborrow Loans. All Loans shall, in any event, be repaid by the Borrower on
the Revolver Termination Date.
(c) The Lender's failure to deliver any bill, statement or invoice
with respect to amounts due under this Agreement shall not affect the Borrower's
obligation to pay any installment of principal, interest or any other amount
under this Agreement when due and payable.
2.2 The Note. The Loans shall all be evidenced by a single promissory note
of the Borrower (the "Revolving Credit Note") in principal face amount equal to
the Revolving Loan Commitment, payable to the order of the Lender and otherwise
in the form attached hereto as Exhibit A. The Revolving Credit Note shall be
dated the date the first Loan is made and shall bear interest in accordance with
the terms hereof. The Revolving Credit Note shall mature upon the Revolver
Termination Date and, upon maturity, each outstanding Loan shall be due and
payable. The Lender shall maintain records of all Loans evidenced by the
Revolving Credit Note and of all payments thereon, which records shall be
conclusive absent manifest error.
2.3 Funding Procedures.
(a) Each request for a Loan shall be made not later than 11:00 a.m. on
a Business Day by delivery to the Lender of a written request signed by the
Borrower, or in the alternative a telephone request followed promptly by written
confirmation of the request, in substantially the form reasonably requested by
the Lender from time to time, including the date and amount of the Loan to be
made. Until such time as the Lender shall reasonably direct the use of a
different form of request, the form of request attached hereto as Exhibit B
shall be used to request the making of Loans. Each request shall be received not
less than two (2) Business Days prior to the date of the proposed borrowing. No
request shall be effective until actually received by the Lender. Upon receipt
by the Lender the request for a Loan shall not be revocable by the Borrower.
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(b) Not later than 11:00 A.M. on the date of each Loan, the Lender
shall make available to the Borrower the amount of such Loan in immediately
available funds.
(c) If the Lender makes a Loan on a day on which all or any part of an
outstanding Loan is to be repaid, the Lender shall apply the proceeds of the new
Loan to make such repayment and only an amount equal to the difference (if any)
between the amount being borrowed and the amount being repaid shall be made
available by the Lender to the Borrower as provided in paragraph (b).
2.4 Interest.
(a) LIBOR. Each Loan shall bear interest on the principal amount
thereof from the date made until such Loan is paid in full, at a rate per annum
initially equal to LIBOR (determined as of the date such Loan is funded) plus
450 basis points. Such rate shall be adjusted by the Lender, based upon LIBOR
determined on the first day of each Interest Period.
(b) Default Rate.
(i) If any Event of Default specified in Section 8.1(a) or
Section 8.1(d) shall occur; or
(ii) If any other Event of Default occurs and the Lender declares
the Note to be immediately due and payable;
THEN, the rate of interest applicable to each Loan then outstanding shall be the
Default Rate. Unless waived by the Lender, the Default Rate shall apply from the
date of the Event of Default until the date such Event of Default or breach is
cured, and interest accruing at the Default Rate shall be payable upon demand.
2.5 Fees.
(a) Origination Fee. Upon the execution and delivery of this Agreement
by the Borrower and the Lender, the Borrower shall pay to the Lender a fee (the
"Origination Fee") in an amount equal to $36,000 in immediately available funds.
Once paid, the Origination Fee shall not be refundable to the Borrower, in whole
or in part, for any reason.
(b) [OMITTED]
(c) Early Termination Fee. In the event that the Revolver Termination
Date occurs prior to March 13, 1998 (other than by reason of an Event of
Default described in Section 8.1(d) hereof or a "Termination Event" described in
clauses (vi) - (ix), or (xii), (xiii) of Section 12(b) of the Purchase
Agreement), the Borrower shall pay to the Lender a fee (the "Early
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Termination Fee") in immediately available funds, which fee shall be determined
pursuant to the following schedule, which the Borrower confirms is reasonable
under the circumstances:
Year in Which Revolver Early Termination Fee as a %
Termination Date Occurs of the Revolving Credit Commitment
- ----------------------- ----------------------------------
Year 1 2%
Year 2 1%
2.6 Termination of Revolving Loan Commitment.
(a) Notice. The Borrower may at any time, on not less than 90 days'
written notice, terminate the Revolving Loan Commitment.
(b) Termination. In the event the Revolving Loan Commitment is
terminated by the Borrower, the Revolver Termination Date shall be accelerated
to the effective date of termination, and the Borrower shall, simultaneously
with such termination, repay the Loans in accordance with Section 2.7.
2.7 Prepayments. The Borrower shall make such prepayments of the Loans
required for the Borrower to comply with Section 7.7 if at any time the
aggregate outstanding Loans exceed the lesser of (i) the Revolving Loan
Commitment or (ii) the then current Borrowing Base.
2.8 Payments.
(a) Due Dates. Accrued interest on each Loan for each Interest Period
shall be due and payable on the first Business Day following the end of such
Interest Period.
(b) Application of Payments, Payment Administration, Etc. All payments
and prepayments shall be applied first to any unpaid interest and thereafter to
principal and to such other outstanding amounts in such order as the Lender may
specify in its discretion. Except as otherwise provided herein, all payments of
principal, interest, fees, or other amounts payable by the Borrower hereunder
shall be remitted to the Lender in immediately available funds not later than
11:00 a.m. on the day when due. Whenever any payment is stated as due on a day
which is not a Business Day, the maturity of such payment shall be extended to
the next succeeding Business Day and interest shall continue to accrue during
such extension.
III. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender that:
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3.1 Organization. Standing. The Borrower (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and (ii) has the corporate power and authority
necessary to own its assets, carry on its business and enter into and perform
its obligations hereunder, and under each Purchase Agreement.
3.2 Corporate Authority. Etc. The execution, delivery and performance of
this Agreement and each Purchase Agreement have been duly authorized by all
necessary corporate action of the Borrower. The execution, delivery and
performance of this Agreement and each Purchase Agreement by the Borrower do not
and under present law will not require any consent or approval of any person, do
not and under present law will not violate any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award, do not and will not
violate any provision of its charter or by-laws, do not and will not result in
any breach of any material agreement, lease or instrument to which it is a
party, by which it is bound or to which any of its assets are or may be subject,
and do not and will not give rise to any Lien upon any of its assets except in
favor of the Lender. Further, the Borrower is not in default under any such
agreement, lease or instrument. No authorizations, approvals or consents of, and
no filings or registrations with, any governmental or regulatory authority or
agency (other than filings or notices required to perfect any security interests
in favor of the Lender) are necessary for the execution, delivery or performance
by the Borrower of this Agreement or for the validity or enforceability thereof.
3.3 Validity of Documents. Each of this Agreement, the Note and each
Purchase Agreement is the legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms.
3.4 No Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against the Borrower of any nature whatsoever,
including without limitation any action, suit, proceeding or investigation which
questions the validity of this Agreement or the Revolving Credit Note or the
right of Borrower to enter into this Agreement or issue the Revolving Credit
Note or to consummate the transactions contemplated hereby and thereby, nor is
the Borrower aware that there is any basis for the foregoing. The Borrower is
not a party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality.
3.5 New Company. The Borrower is a new company formed for the sole purpose
of consummating the transactions described in the Purchase Agreements, this
Agreement, and all agreements executed and delivered in connection therewith and
herewith and its only activities have been incident thereto. Without limiting
the foregoing, the Borrower has entered into no contracts or agreements of any
nature except those set forth or referred to in this Agreement, the Purchase
Agreements and certain agreements executed and delivered in connection therewith
and herewith and an agreement with CT Corporation concerning the two (2)
independent directors required by Borrower's certificate of incorporation.
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3.6 No Subsidiaries; No Partnerships. The Borrower has no subsidiaries and
is not engaged in any partnership with any other Person, nor does it hold an
equity interest in any other Person.
3.7 Collateral. No Liens in favor of any Person, other than the Lender,
exist on or with respect to the Collateral. Upon the filing of the financing
statements, the security interest granted under this Agreement will be perfected
(to the extent perfection may occur by filing). Attached hereto as Schedule 3.7
is a list showing all places at which the Borrower maintains, or will maintain,
the Collateral and all records relating to the Collateral. The address of the
chief executive office of the Borrower is identified on Schedule 3.7.
3.8 No Investments, Material Agreements. The Borrower (i) is not a party to
any indenture, agreement, contract, instrument or lease or subject to any
charter, by-law or other corporate restriction or any injunction, order, or
other corporate restriction or decree, which would materially and adversely
affect its business, operations, properties or assets; and (ii) has no material
contingent or long term liability or commitment which would materially affect
its business that has not been disclosed to the Lender in writing.
3.9 No Contingent Liabilities. The Borrower has not assumed, guaranteed or
endorsed, or otherwise become directly or contingently liable in connection
with, any liability of any other Person.
3.10 No Defaults. No Event of Default or other event, act or occurrence
which, with the giving of notice or the lapse of time or both would become an
Event of Default has occurred and is continuing. Without limiting the generality
of the foregoing, the Borrower is in compliance with all terms, covenants and
conditions applicable to it under each Purchase Agreement to which it is a
party, and the Borrower knows of no default by the Provider under any such
Purchase Agreement.
3.11 Initial Capitalization. The Borrower has received an initial capital
contribution from its shareholders in the aggregate amount of $75,000 (the
"Initial Capital Contribution").
3.12 Disclosure Generally. The representations and statements made by or on
behalf of the Borrower in connection with this Agreement and each Loan
hereunder, do not contain any untrue statement of a material fact or omit to
state a material fact or any fact necessary to make the representations made not
materially misleading. No written information, exhibit, report or financial
statement furnished by the Borrower to the Lender in connection with this
Agreement or the Loans contains any material misstatement of fact or omits to
state a material fact or any fact necessary to make the statements contained
therein not materially misleading.
IV. SECURITY.
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4.1 Grant of Security Interest. To secure the payment, promptly when due,
and the punctual performance of all of the Obligations, the Borrower hereby
pledges and assigns to the Lender, a first priority general continuing lien
upon, and security interest in, all of the Collateral.
4.2 Financing Statements. The Borrower shall execute and deliver to the
Lender, at any time or times hereafter, such Uniform Commercial Code financing
statements and all such other agreements and documents, and do such other and
further acts as the Lender may reasonably request, in form and substance
reasonably acceptable to the Lender, in order to further evidence or carry out
the intent of Section 4.1 or to perfect the lien and security interest created
pursuant to Section 4.1 or intended so to be, and the Borrower shall pay the
costs of any recording or filing of the same. The Borrower agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement and may be filed by
the Lender as such. The Lender may execute and file financing statements and
amendments thereto without the Borrower's signature to the extent permitted by
law.
4.3 Inspection of Collateral. The Lender (by any of its officers, employees
and/or agents) shall have the right, at any time or times during the Borrower's
usual business hours, to inspect the Collateral and all records related thereto
(and to make extracts from such records). The Borrower shall keep accurate
records of the Collateral, including all information necessary to identify the
amounts due on any Purchased Accounts and the services giving rise to such
Purchased Accounts.
4.4 Release of Security Interest. Upon the termination of this Agreement,
and the payment in full of the Obligations, the Lender shall reassign to the
Borrower the Collateral, release the security interest therein and file
terminations of all financing statements covering the Collateral.
4.5 Compliance with Purchase Agreements. The Borrower will duly perform and
comply with all of the terms of each Purchase Agreement to be performed or
complied with by it and will take such action as is necessary to preserve the
Borrower's rights thereunder.
4.6 Other Actions. Until the occurrence of an Event of Default hereunder,
the Borrower shall be authorized to:
(a) pursue any remedies available under any Purchase Agreement or
other Borrower Assigned Agreement;
(b) prove any claim and file such other papers or documents as may be
necessary or advisable in order to have any claim against a Provider allowed in
any bankruptcy proceedings involving a Provider, and take such other actions in
relation to such proceedings as may be necessary or advisable in relation
thereto; and
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(c) take any other actions under any Purchase Agreement or other
Borrower Assigned Agreement that the Borrower is required or permitted to take
thereunder.
The Borrower shall have the right to contract with other parties for, or
otherwise delegate to other parties, with the prior approval of the Lender, the
performance of any or all of the actions referred to above; provided, however,
that any such contract or delegation will not relieve the Borrower of its
obligations relating to the performance of such actions.
V. CONDITIONS PRECEDENT.
5.1 All Loans. The obligation of the Lender to make any Loan is conditioned
upon the following:
(a) Documents. The Borrower shall have delivered and the Lender shall
have received a request for a Loan, as provided in Sections 2.1 and 2.3. In
addition, a Purchase Agreement, in each case in such form and substance as is
satisfactory to the Lender, shall be in effect between the Borrower and each
Provider which originated any accounts which are, or in connection with the
requested Loan, are to become, Purchased Accounts included in the Collateral,
and the Borrower shall have delivered a copy of each such Purchase Agreement to
the Lender.
(b) Covenants; Representations. In the case of each Purchase Agreement
referred to in paragraph (a), the Borrower and the Provider thereunder shall be
in compliance with all covenants, agreements and conditions in such Purchase
Agreement, and the Borrower shall be in compliance with all covenants,
agreements and conditions applicable to it under this Agreement. The
representations and warranties of the Provider contained in each such Purchase
Agreement and the representations and warranties of the Borrower contained in
this Agreement shall be true with the same effect as if such representation or
warranty had been made on the date such Loan is made. Also, the Lender shall
have received a certificate dated the date of the Loan signed by the chief
executive officer, chief financial officer or controller of the Borrower, to the
foregoing effect.
(c) Defaults. After giving effect to such Loan, no Event of Default or
Potential Default shall exist.
5.2 Conditions to First Loan. The obligation of the Lender to make the
first Loan hereunder is conditioned upon the following:
(a) Articles, Bylaws. The Lender shall have received copies of the
Articles or Certificate of Incorporation and Bylaws of the Borrower, certified
by the secretary or assistant secretary of the Borrower;
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(b) Evidence of Authorization. The Lender shall have received
certified copies of all corporate or other action taken by each Person other
than the Lender who is a party to any Loan Document to authorize its execution
and delivery and performance of the Loan Documents and to authorize the Loans
hereunder, together with such other related certificates and documents as the
Lender shall reasonably require;
(c) Legal Opinions. The Lender shall have received a favorable written
opinion of Rogin, Nassau, Caplan, Lassman and Hittle, LLC, counsel to the
Borrower, which shall be addressed to the Lender and be dated the date of the
first Loan, in substantially the form attached as Exhibit C, and such other
legal opinion or opinions as the Lender may reasonably request;
(d) Incumbency. The Lender shall have received a certificate signed by
the secretary or assistant secretary of each corporate signatory to the Loan
Documents other than the Lender, together with the true signature of the officer
or officers authorized to execute and deliver the Loan Documents and
certificates thereunder, upon which the Lender shall be entitled to rely
conclusively until the Lender shall have received a further certificate of the
appropriate secretary or assistant secretary amending the prior certificate and
submitting the signature of the officer or officers named in the new certificate
as being authorized to execute and deliver Loan Documents and certificates
thereunder;
(e) Note. The Lender shall have received an executed Note payable to
the order of the Lender and otherwise in the form of Exhibit A hereto;
(f) Other Agreements. The Borrower shall have executed and delivered
each other Loan Document required hereunder and all certificates, instruments
and other documents then required to be delivered pursuant to any Loan
Documents, in each instance in form and substance reasonably satisfactory to the
Lender; and
(g) Financing Statements. The Borrower shall have executed and
delivered financing statements determined by the Lender and its counsel to be
necessary for perfecting the security interest of the Lender in the Collateral,
and such financing statements shall have been filed in the appropriate filing
offices.
(h) Initial Capitalization. The shareholders of the Borrower shall
have made the Initial Capital Contribution to the Borrower.
VI. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, without the prior written consent
of the Lender, from and after the date hereof and so long as the Revolving Loan
Commitment is in effect or any Obligations remain unpaid or outstanding, the
Borrower will:
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6.1 Reports. Furnish to the Lender the following:
(a) No Default. Within forty-five (45) calendar days after the end of
each of the first three fiscal quarters of each fiscal year and within ninety
(90) calendar days after the end of each fiscal year, a certificate signed by
the chief financial officer, treasurer or controller of the Borrower certifying
that, to the best of such officer's knowledge, after due inquiry, (i) the
Borrower has complied in all material respects (except where such covenant,
agreement and condition is already subject to a materiality standard, in which
case the certification will be without the materiality qualification immediately
preceeding this parenthetical) with all covenants, agreements and conditions in
each Loan Document and that each representation and warranty contained in each
Loan Document is true and correct with the same effect as though each such
representation and warranty had been made on the date of such certificate
(except to the extent such representation or warranty related to a specific
prior date), and (ii) no event has occurred and is continuing which constitutes
an Event of Default or Potential Default, or describing each such event and the
remedial steps being taken by the Borrower.
(b) Material Changes. The Borrower shall promptly notify the Lender of
any litigation, administrative proceeding, investigation, business development,
or change in financial condition which could reasonably have a material adverse
effect on the business, operations, assets or condition (financial or otherwise)
of the Borrower.
(c) Other Information. The Borrower will provide to the Lender such
financial and other information and reports regarding the operations, business
affairs, prospects and financial condition of the Borrower as the Lender may
reasonably request.
6.2 Taxes and Other Charges. Pay or cause to be paid after notice that the
same are due all taxes, assessments and governmental charges imposed upon the
Borrower, except as may be contested in good faith by the Borrower by
appropriate proceedings and for which adequate reserves have been established by
the Borrower as reflected in the Borrower's financial statements.
6.3 Corporate Existence. Preserve its corporate existence.
6.4 Compliance with Purchase Agreement and Regulations.
(a) Purchase Agreements. Comply with all terms, covenants and
conditions of each Purchase Agreement applicable to it.
(b) Regulations. Comply in all material respects with all Regulations
applicable to its business, the noncompliance with which could have a material
adverse effect on the business, operations, assets or condition (financial or
otherwise) of the Borrower.
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6.5 Notice of Events. Promptly upon discovery by the Borrower or any
officer of the Borrower of any of the events described in subsections (a)
through (e) hereof, the Borrower shall deliver to an officer of the Lender
telephone notice, and within three (3) calendar days of such telephone notice
deliver to the Lender a written notice, which describes the event and all action
the Borrower proposes to take with respect thereto:
(a) an Event of Default under this Agreement;
(b) any Potential Default or event which would entitle the Lender to
terminate or suspend the Revolving Loan Commitment hereunder or to accelerate
the Obligations;
(c) the institution of, any material adverse determination in, or the
entry of any default judgment or order or stipulated judgment or order in, any
suit, action, arbitration, administrative proceeding, criminal prosecution or
governmental investigation;
(d) any change in any Regulation, including, without limitation,
changes in tax laws and regulations, which could reasonably have a material
adverse impact on the ability of the Borrower to perform its obligations under
the Loan Documents or a material adverse effect on the business, operations,
assets or condition (financial or otherwise) of the Borrower; or
(e) a Termination Event under any Purchase Agreement between the
Borrower and a Provider.
6.6 Generally Accepted Accounting Principles. Maintain its books and
records at all times in accordance with Generally Accepted Accounting
Principles.
6.7 Use of Proceeds. Use the proceeds of the Loans to fund the purchase of
accounts receivable as contemplated by the Purchase Agreements.
6.8 Corporate Separateness. At all times ensure that:
(a) at least two directors of the Borrower are, and will at all times
remain, Independent (as such term is defined in the Borrower's Certificate or
Articles of Incorporation);
(b) the Borrower's funds and other assets are not commingled with
those of any other Person;
(c) the Borrower will not direct or participate in the management of
any other Person's operations and no affiliate of the Borrower will be permitted
to direct or participate in the management of the Borrower;
(d) the Borrower will conduct its business from an office separate
from that of any other Person;
Page 14 of 26
(e) the Borrower will have stationery and other business forms and a
mailing address and a telephone number separate from that of any other Person;
(f) the Borrower will at all times be adequately capitalized in light
of its contemplated business;
(g) the Borrower will at all times provide for its own operating
expenses and liabilities from its own funds;
(h) the Borrower will maintain its assets and transactions separately
from those of any other Person and reflect such assets and transactions in
financial statements separate and distinct from those of any other Person and
evidence such assets and transactions by appropriate entries in books and
records separate and distinct from those of any other Person;
(i) the Borrower will hold itself out to the public under its own name
as a legal entity separate and distinct from any other Person;
(j) the Borrower will not hold itself out as having agreed to pay, or
as being liable, primarily or secondarily, for any obligations of any other
Person;
(k) the Borrower will not maintain any joint account with any other
Person or become liable as a guarantor or otherwise with respect to any debt or
contractual obligation of any other Person;
(l) the Borrower will not make any payment or distribution of assets
with respect to any obligation of any other Person or grant any Lien on any of
its assets to secure any obligation of any other Person;
(m) the Borrower will not make loans, advances or otherwise extend
credit to any other Person;
(n) the Borrower will hold regular duly noticed meetings of its
stockholders and directors and make and retain minutes of such meetings;
(o) the Borrower will have bills of sale (or other similar instruments
of assignment) and, if appropriate, UCC-l financing statements, with respect to
all assets purchased from any other Person;
(p) the Borrower will file its own tax returns or, if it is a member
of a consolidated group, will join in the consolidated return of such group as a
separate member thereof,
Page 15 of 26
(q) the Borrower will maintain its assets in such a manner that it
will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any other Person; and
(r) the Borrower will comply with all provisions of its Certificate or
Articles of Incorporation and Bylaws and shall observe all corporate
formalities.
VII. NEGATIVE COVENANTS.
The Borrower covenants and agrees that, without the prior written consent
of the Lender, from and after the date hereof and so long as the Revolving Loan
Commitment is in effect or any Obligations remain unpaid or outstanding, the
Borrower will not:
7.1 Merger, Consolidation. Merge or consolidate with or into any other
Person.
7.2 Indebtedness for Borrowed Money. Incur, create, or permit to exist any
Indebtedness for Borrowed Money except the Obligations.
7.3 Liens. Create, assume or permit to exist any Lien on any of the
Borrower's property or assets, whether now owned or hereafter acquired, or upon
any income or profits therefrom, except Permitted Liens.
7.4 Guarantees. Guarantee or otherwise in any way become or be responsible
for indebtedness or obligations (including working capital maintenance,
take-or-pay contracts, etc.) of any other Person, contingently or otherwise.
7.5 Judgment, Attachment. Permit any of its assets to be subject to any
judgments, attachments or levies, which judgments, attachments or levies have
not been stayed by appeal, satisfied, bonded or discharged within thirty (30)
calendar days after service of notice thereof to the Borrower.
7.6 Transfer of Assets. Sell, transfer, pledge, assign or otherwise dispose
of any of its assets, except the resale of Purchased Accounts to a Provider
pursuant to the terms of the Purchase Agreement pursuant to which such Purchased
Accounts were acquired by the Borrower.
7.7 Borrowing Base. Permit the unpaid principal amount of the Loans
outstanding at any time, in the aggregate, to exceed the Borrowing Base;
provided, however, that this covenant shall not be deemed breached if, within
five (5) Business Days after each date on which the Borrower knows or should
know such aggregate unpaid principal amount of Loans exceeds such level, a
prepayment shall be made in accordance with the prepayment provisions of Section
2.7 in an amount sufficient to assure continued compliance with this covenant
going forward.
Page 16 of 26
VIII. DEFAULT.
8.1 Events of Default. The Borrower shall be in default if any one or more
of the following events ("Events of Default") occurs:
(a) Principal, Interest or Other Amounts. The Borrower fails to pay
any principal of or interest on the Note when due and payable or fails to pay
when it is due and payable any other amount payable under any Loan Document;
(b) Covenants.
(i) The Borrower fails to observe or perform as and when required
any of the terms, conditions or covenants contained in any Loan Document (other
than those referred to in clause (ii) below); or
(ii) Any Borrower fails to observe or perform as and when
required any of the terms, conditions or covenants contained in Sections 6.2,
6.4(b) or 6.6 of this Agreement, and such failure shall continue for thirty (30)
days after written notice to the Borrower by the Lender; or
(iii) Less than 100% of the voting securities of the Borrower are
owned directly (or through one or more wholly owned subsidiaries) by Lexington
Health Care Group, L.L.C.
(c) Representations, Warranties, Etc. Any representation or warranty
made by the Borrower herein or in any Loan Document or in any exhibit, schedule,
report or certificate delivered pursuant hereto or thereto shall prove to have
been false, misleading or incorrect in any material respect when made or deemed
to have been made;
(d) Bankruptcy, Etc. The Borrower is dissolved or liquidated, makes an
assignment for the benefit of creditors, files a petition in bankruptcy, is
adjudicated insolvent or bankrupt, petitions or applies to any tribunal for any
receiver or trustee, commences any proceeding relating to itself under any
bankruptcy, reorganization, readjustment of debt, dissolution or liquidation law
or statute of any jurisdiction, has commenced against it any the proceeding
which remains undismissed for a period of thirty (30) days, indicated its
consent to, approval of or acquiescence in any such proceeding, or any receiver
of or trustee for the Borrower or any substantial part of the property of the
Borrower is appointed, or the Borrower suffers any such receivership or
trusteeship to continue undischarged for a period of thirty (30) days;
Page 17 of 26
(e) Termination Event. A Termination Event occurs under any Purchase
Agreement; THEN and in every such event other than that specified in clause (d),
the Lender may terminate the Revolving Loan Commitment and may declare the Loans
and all other Obligations, including without limitation accrued interest, to be,
and the Loans and all other Obligations shall thereupon become, due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower. Upon the occurrence of any event specified in
clause (d) above, the Revolving Loan Commitment shall automatically terminate
and the Loans and all other Obligations, including without limitation accrued
interest, shall immediately be due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower. (Any date on which the Loans and such other obligations are declared
due and payable pursuant to this Section 8.1, shall be a "Revolver Termination
Date" for purposes of this Agreement.) Following the occurrence of a Revolver
Termination Date, the Lender may, in addition to exercising any and all rights
under this Agreement, exercise any rights provided under the UCC and other
applicable law.
IX. MISCELLANEOUS.
9.1 Waiver. No failure or delay on the part of the Lender in exercising any
right, power or remedy under any Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy under any Loan Document. The remedies provided
under the Loan Documents are cumulative and not exclusive of any remedies
provided by law.
9.2 Amendments. No amendment, modification, termination or waiver of any
Loan Document or any provision thereof nor any consent to any departure by the
Borrower therefrom shall be effective unless the same shall be in writing and be
signed by Lender and then any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. No notice to
or demand on the Borrower shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances.
9.3 Governing Law. This Agreement and all rights and obligations of the
parties hereunder shall be governed by and be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without regard to
Pennsylvania or federal principles of conflict of laws.
9.4 Assignment. The Borrower may not assign this Agreement or its rights
hereunder without the prior written consent of the Lender. The Lender may sell,
assign, transfer and create a security interest in any of the Loan Documents,
including the Note, and any assignee or secured party may enforce the rights of
the Lender hereunder without the consent, participation or joinder of the
Lender.
Page 18 of 26
9.5 Notices. All notices, requests, demands, directions, declarations and
other communications between the Lender and the Borrower shall, except as
otherwise expressly provided, be mailed by registered or certified mail, return
receipt requested, or telegraphed, or telefaxed, or delivered in hand to the
applicable party at its address indicated opposite its name on the signature
page hereto. The foregoing shall be effective and deemed received three days
after being deposited in the mails, postage prepaid, addressed as aforesaid and
shall whenever sent by telegram, telegraph or telefax or delivered in hand be
effective when received. Either party may change its address by a communication
in accordance herewith.
9.6 Survival of Warranties and Certain Agreements. All agreements,
representations and warranties made or deemed made herein shall survive the
execution and delivery of this Agreement, the making of the Loans hereunder and
the execution and delivery of the Note. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of the Borrower set
forth in Sections 2.1 and 2.8, shall survive the payment of the Loans and the
termination of this Agreement. This Agreement shall remain in full force and
effect until the latest to occur of the termination of the Revolving Loan
Commitment or the repayment in full of all amounts owed by the Borrower under
any Loan Document.
9.7 Severability. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Agreement, the Note or
other Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
the Note or other Loan Documents or of such provision or obligation in any other
jurisdiction.
9.8 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE BORROWER HEREBY
CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE
COMMONWEALTH OF PENNSYLVANIA AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THE NOTE,
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.
THE BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH NOTE,
OR SUCH OTHER LOAN DOCUMENT. THE BORROWER DESIGNATES AND APPOINTS CT CORPORATION
SYSTEM (OR SUCH OTHER PERSON AS SHALL ACT AS REGISTERED AGENT OF THE BORROWER IN
PENNSYLVANIA AND AS TO WHOM THE BORROWER SHALL PROVIDE NOTICE IN WRITING TO THE
LENDER) AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY SUCH PERSON WHICH
IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF
SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE
BEING HEREBY ACKNOWLEDGED BY THE
Page 19 of 26
BORROWER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY
SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE BORROWER, AS
APPLICABLE, AT ITS ADDRESS PROVIDED IN SECTION 9.5, EXCEPT THAT UNLESS OTHERWISE
PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE
VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE BORROWER REFUSES
TO ACCEPT SERVICE, THE BORROWER HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION.
9.9 WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER EACH HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE
LENDER/BORROWER RELATIONSHIP ESTABLISHED HEREBY. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE BORROWER AND THE
LENDER EACH ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO THE
TRANSACTION, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. THE BORROWER AND THE LENDER EACH FURTHER WARRANTS AND
REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
9.10 Counterparts; Effectiveness. This Agreement and any amendment hereto
or waiver hereof may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
9.11 Use of Defined Terms. All words used herein in the singular or plural
shall be deemed to have been used in the plural or singular where the context or
construction so requires.
Page 20 of 26
Any defined term used in the singular preceded by "any" shall be taken to
indicate any number of the members of the relevant class.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Agreement
to be executed by their proper corporate officers thereunto duly authorized as
of the day and year first above written.
LEXINGTON HOLDING CORPORATION
Address: By: /s/ Harry Dermer
35 Park Place --------------------------------
New Britain, CT 06052 Print Name: Harry Dermer
Title: President
Address: COPELCO/AMERICAN HEALTHFUND, INC
l00 Berwyn Park #105
Berwyn, PA 19312 By: /s/ Gregory S. Campbell
--------------------------------
Gregory S. Campbell
President
Page 21 of 26
EXHIBIT A
REVOLVING CREDIT NOTE
_______________________,19___
FOR VALUE RECEIVED, Lexington Holding CORPORATION, a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
Copelco/American Healthfund, Inc. (the "Lender") the principal amount of
$1,800,000 or so much thereof as shall have been advanced as Loans under the
Agreement referred to below and shall be outstanding, such payment to be made at
such time or times and in the manner specified in the Agreement; provided,
however, that all Loans shall be repaid in full on or before the Revolver
Termination Date.
This Note is issued under and is subject to and secured by the Loan
and Security Agreement dated as of March__, 1996 between the Borrower and the
Lender (as from time to time amended, restated, supplemented or otherwise
modified, the "Agreement"). Terms used herein and not defined herein are used
with the respective meanings set forth in the Agreement.
Interest on the outstanding principal amount of each Loan evidenced by
this Note shall accrue at the rate or rates specified in, and be payable in
accordance with the terms of, the Agreement.
The Agreement provides for the acceleration of the payment of
principal of and interest on such Loans upon the happening of certain Events of
Default as defined in the Agreement.
The Borrower waives presentment, demand for payment, notice of
dishonor or acceleration, protest and notice of protest, and any and all other
notices or demands in connection with this Note, except any notice expressly
required by the Agreement.
This Note shall be governed by and construed in accordance with
Pennsylvania law.
LEXINGTON HOLDING CORPORATION
By:________________________
Title:
Page 22 of 26
EXHIBIT B
FORM OF LOAN REQUEST
_____________ 19
Copelco/American Healthfund, Inc.
Suite 112
200 Berwyn Park
Berwyn, PA 19312
Re: Loan and Security Agreement dated as of
Ladies and Gentlemen:
Pursuant to Section 2.3 of the Loan and Security Agreement described
above (the "Agreement"), the Borrower hereby requests the following Loan:
(1) The date of the proposed Loan is _________, 19__ (which day is a
Business Day).
(2) The aggregate amount of the proposed Loan is $_____________ (or
such lesser amount as may be borrowed under the terms of the Agreement).
(3) The proceeds of such Loan will be used for the purchase of the
accounts described on the attachment hereto.
The Borrower hereby certifies that the following statements are true
and correct on and as of the date hereof, and will be true and correct on and as
of the date of the proposed Loan, before and after giving effect thereto and to
the application of the proceeds therefrom:
(a) the representations and warranties of the Borrower contained in
the Agreement and the representations and warranties of the respective Provider
contained in each Purchase Agreement referred to in Section 5.1(a) of the
Agreement (in each case except to the extent such representations and warranties
by their express terms relate to an earlier date) are true and correct and will
be true and correct on the date of the Loan as if made on and as of such date;
Page 23 of 26
(b) the Borrower has complied and on the date of the Loan will be in
material compliance with all the terms, covenants and conditions of the
Agreement; and
(c) no Event of Default or event which, with notice or passage of time
or both, would constitute an Event of Default exists or shall result from the
proposed Loan.
Very truly yours,
LEXINGTON HOLDING CORPORATION
By:_________________________
Page 24 of 26
Disbursement Instructions
1. Disburse the following amounts to or for the account of the
following Providers at the accounts specified below:
Deposit
Provider Amount Account
-------- ------ -------
Such disbursements shall be on account of the Initial Payments payable
by the Borrower to such Providers for Batches of Purchased Accounts purchased
under the Accounts Purchase and Servicing Agreement dated as of_____________,
1996 (the "Purchase Agreements") among each of the Providers, the Borrower and
the Lender, as Administrator, net of (i) any payments due from the Providers to
the Borrower for Rejected Accounts, as specified in paragraph 2 below, and (ii)
any fees and expenses due from the Borrower or the Providers to the Lender, as
specified in paragraph 3 below.
2. Disburse the following amounts to the Collection Account under the
Purchase Agreement in payment of the repurchase of Rejected Accounts under
Section 7(d) of the Purchase Agreement by the following Providers:
Provider Amount
-------- ------
3. Credit to the Lender the following amounts for the fees and
expenses listed below due from the Borrower and/or the Providers under the Loan
Agreement and the Purchase Agreement respectively:
Fees and Expenses Amount
----------------- ------
Page 25 of 26
EXHIBIT C
[Form of Opinion]
Page 26 of 26