Exhibit 10.49
WORKING CAPITAL LOAN AND SECURITY AGREEMENT
Dated as of August 31, 1996
between
GENESIS HEALTH VENTURES, INC.
and
AGE INSTITUTE OF FLORIDA, INC.
WORKING CAPITAL LOAN AND SECURITY AGREEMENT
This WORKING CAPITAL LOAN AND SECURITY AGREEMENT is made and entered
into as of this 31st day of August, 1996, between AGE INSTITUTE OF FLORIDA,
INC., a Florida non-profit corporation (together with its successors in interest
and assigns, "Borrower") and GENESIS HEALTH VENTURES, INC., a Pennsylvania
business corporation (together with its successors in interest and assigns,
"Lender").
BACKGROUND
A. On the date hereof, Borrower has acquired from Edgemont
Partners, L.P., a Tennessee limited partnership ("Edgemont") eleven (11) health
care facilities located in Pinellas, Polk, Volusia, Bay and Okaloosa Counties in
the State of Florida, as listed on Exhibit "A" attached hereto and made a part
hereof (collectively, the "Facilities"), together with all equipment, fixtures
and other tangible and intangible assets of Edgemont as more particularly
described in that certain Asset Purchase Agreement dated the date hereof by and
between Borrower and Edgemont (the "Asset Purchase Agreement") (the Facilities
and all such equipment, fixtures and assets, collectively, the "Property").
B. Borrower will need funds for the Facility's working capital
needs and Lender has agreed to enter into this Agreement with Borrower to
provide Borrower with such working capital funds, subject to the terms and
conditions contained in this Agreement.
TERMS
NOW, THEREFORE, in consideration of the terms and conditions
set forth herein, and of any loans, advances, or extensions of credit
heretofore, now or hereafter made to or for the benefit of Borrower by Lender,
and intending to be legally bound hereby, the parties hereto agree as follows:
1. Loans.
1.1 Commitment for Loans. Subject to the terms and conditions
hereof, and in reliance on the representations and warranties contained in this
Agreement, Lender agrees to make loans (such loans being collectively referred
to herein as the "Working Capital Loan") to Borrower at any time or from time to
time between the date of this Agreement and August 31, 2001 (as may be extended
pursuant to the provisions of Section 1.12 hereof, the "Expiration Date") up to
TEN MILLION DOLLARS ($10,000,000.00) (the "Loan
Commitment"). Subject to the terms and conditions hereof, Borrower may draw upon
the Working Capital Loan, repay amounts drawn thereunder and draw again on such
loan.
1.2 Note. Borrower's obligation to repay the Working Capital
Loan with interest in accordance with the terms of this Agreement shall be
evidenced by a single promissory note (the "Note") in the amount of Ten Million
Dollars ($10,000,000.00) substantially in the form of Exhibit 1.2 attached
hereto. The Note shall be dated the date of this Agreement, shall mature and
become due and payable on the Expiration Date and shall bear interest as set
forth in Section 1.3.
1.3 Payment of Principal and Interest on Working Capital Loan.
The outstanding principal amount of the Working Capital Loan and all interest
then due or accrued thereon if not sooner paid shall be paid in full on the
Expiration Date. Borrower shall pay interest on the unpaid principal amount of
the Working Capital Loan at a rate per annum of thirteen percent (13%), payable
in arrears, commencing on October 1, 1996 and continuing on the first day of
each and every calendar month thereafter up to and including the Expiration
Date. Interest shall be calculated based upon a three hundred sixty (360) day
year and charged on the basis of actual days elapsed.
1.4 Making the Working Capital Loan. Borrower may give Lender
notice no later than 12:00 noon (Eastern time) at least one (1) business day
prior to the date of the proposed borrowing. Each such notice shall be in
writing given by Borrower setting forth the amount of the proposed borrowing and
the date of the proposed borrowing. Each such notice for a Working Capital Loan
such constitute a reaffirmation by the Borrower, effective as the date of such
advance, that (a) the representations and warranties contained in Section 4 of
this Agreement are true and correct, and will be true and correct, on the date
of the proposed borrowing, (b) no Default or Event of Default has occurred and
is continuing hereunder and (c) no material adverse change in the operations or
condition, financial or otherwise, of Borrower has occurred and is continuing.
Each such notice for a Working Capital Loan hereunder shall constitute a
representation and warranty by Borrower that all the conditions in Sections 2 or
3, as the case may be, have been satisfied. Subject to the satisfaction of the
terms and conditions hereof, Lender shall make the requested Working Capital
Loan available to the Borrower by depositing the proposed borrowing amount into
the operating account of the Facility.
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1.5 Security for the Working Capital Loan.
(a) Borrower hereby grants to Lender a first priority lien and security
interest on all of Borrower's Gross Patients Accounts Receivable and other
personal property utilized in the Facilities or in connection with the operation
thereof, tangible or intangible, whether now owned or hereafter acquired, and
all proceeds and products thereof, together with all documents, contracts,
guarantees, books and records, processing cards, tapes, tabulating runs,
programs and similar material related thereto (collectively, "Personal Property"
and the "Collateral"). Said lien shall secure the repayment of the Working
Capital Loan. Said lien shall also secure the payment of management fees owed to
Genesis Eldercare Network Services, Inc. (together with any successors, the
"Manager") and payments with respect to services supplied to the Facilities by
Lender, Manager, or affiliates of either for pharmaceutical, rehabilitation and
other services as permitted by that certain Management Agreement dated the date
hereof among Borrower, Lender and Manager (as amended, modified, renewed,
restated or substituted from time to time, the "Management Agreement").
Notwithstanding the foregoing, in the absence of an Event of Default (as defined
herein), Borrower shall be entitled to pay from the Gross Patients Accounts
Receivable ordinary and necessary expenses and costs of operation of the
Facilities, including, without limitation, payroll expenses and utility charges
and the payment of Home Office Fees (as defined and permitted herein) to
Borrower prior to payment of interest on the Working Capital Loan as provided
herein, and any such unpaid interest shall accrue (without additional interest
or penalty) and be payable at the Expiration Date.
(b) This Agreement constitutes a security agreement under the
Pennsylvania Uniform Commercial Code and Florida Uniform Commercial Code.
Borrower agrees to execute and/or deliver to Lender all security documents,
assignments, financing statements and other documents requested by Lender or its
affiliates from time to time to perfect and protect its interest in the
collateral and enforce this Agreement at Borrower's sole expense.
1.6 Use of Proceeds. Borrower shall use the proceeds of the
Working Capital Loan solely for the purchase of the Property from Edgemont and
for working capital purposes.
1.7 Payment. Any principal, interest, or other obligations
payable by Borrower hereunder shall be paid to Lender in immediately available
funds before 12:00 noon (Eastern time) on the date due at the principal office
of the Lender set forth in this Agreement.
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1.8 Excess Over Loan Commitment. Borrower agrees that the
aggregate unpaid principal balance of the Working Capital Loan at any one time
outstanding hereunder shall not exceed the Loan Commitment, and that, if for any
reason such aggregate unpaid principal balance should at any time exceed the
Loan Commitment, Borrower shall immediately pay to Lender in cash an amount
equal to the excess. Borrower shall immediately notify Lender of any such
deficiency.
1.9 Prepayment. Borrower may, without premium or penalty,
prepay at any time the Working Capital Loan, in whole or in part, by paying to
Lender the amount to be prepaid with accrued interest thereon to the date of
such prepayment by 12:00 noon (Eastern time) on any business day.
1.10 Late Charges; Default Interest.
(A) If any scheduled payment of principal or
interest, or any other agreed charge, is not paid within ten (10) days after
due, Borrower agrees to pay Lender a late charge equal to five percent (5%) of
the amount of such payment or charge.
(B) If Borrower shall default in the payment of the
principal or interest on the Working Capital Loan or any other amount becoming
due hereunder, whether by scheduled maturity, acceleration or otherwise,
Borrower shall on demand from time to time pay interest, to the extent permitted
by law, on the outstanding amount of the Working Capital Loan and other overdue
amounts outstanding up to the date of actual payment (after as well as before
judgment) at a rate equal to 3% per annum above the interest rate then
applicable to the Working Capital Loan.
1.11 Maximum Rate. Nothing contained in this Agreement or the
Note shall require Borrower to pay interest at a rate prohibited by applicable
statute. If interest payable to Lender on any date would be in a prohibited
amount, it shall be automatically reduced to an amount which is not prohibited
and any amounts paid in excess of the prohibited amount shall be applied to the
reduction of the principal of the Note.
1.12 Extension of Expiration Date. Borrower may provide Lender
notice no later than 12:00 noon (Eastern time) at least ninety (90) days prior
to the current Expiration Date that Borrower desires to extend the Expiration
Date of the Working Capital Loan for up to five additional years, to August 31,
2006; provided, that in such event, Borrower shall be required to amortize the
then outstanding principal balance of the Working Capital Loan by the sum of
$1,000,000 per year.
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2. Conditions Precedent to Working Capital Loan. The obligation of
Lender to fund the Working Capital Loan hereunder shall be subject to the prior
or concurrent fulfillment of each of the following conditions precedent:
2.1 Representations. The representations and warranties of
Borrower contained in this Agreement and in any other writings delivered to
Lender pursuant hereto, or in connection herewith, on or prior to the date
hereof, shall be true and correct on and as of the date hereof.
2.2 Deliveries to Lender. Lender shall have received on or
before the date hereof the following, each in form and substance satisfactory to
Lender:
(A) the Note, duly executed and delivered by
Borrower;
(B) the Security Agreement, duly executed and
delivered by Borrower;
(C) appropriate financing statements on Form UCC-1,
duly executed by Borrower in proper form for filing in such offices as may be
necessary or, in the opinion of Lender, desirable to perfect the security
interests in the Collateral purported to be created by the Security Agreement
and this Agreement;
(D) if required by Lender, searches of appropriate
state and local records listing all effective financing statements which name as
Borrower, Borrower or any predecessor of Borrower (or the owner of the assets of
Borrower or any predecessor of Borrower) which are filed in the governmental
offices, together with copies of such financing statements, none of which shall
cover any of the Collateral;
(E) evidence of such insurance coverage with respect
to the respective business and operations of Borrower as Lender may reasonably
request;
(F) the following authorizing documents from
Borrower: (a) a copy of the resolutions adopted by its governing body (and if
required its members) certified by Borrower's authorized officer as of the date
hereof, authorizing the execution, delivery and performance of this Agreement,
the Note and the other Loan Documents; (b) an incumbency certificate with
officers' signatures; (c) a copy of Borrower's organizational documents and all
amendments thereto certified by the Secretary of Borrower as of the date hereof;
(d) a copy of the Borrower's
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bylaws or similar governance document, as amended, certified by the Secretary of
Borrower as of the date hereof; and (e) a good standing certificate from the
Secretary of State of the state of organization of Borrower;
(G) copies of all current licenses, certifications
and financial information as the Lender shall reasonably require;
(H) a letter of direction from Borrower addressed to
Lender with respect to the disbursement of the proceeds of the funding;
(I) favorable written opinion of counsel to Borrower,
dated the date hereof, in form and substance satisfactory to Lender and as to
such matters as Lender may reasonably request; and
(J) such other approvals, opinions or documents as
any Lender may reasonably request.
3. Conditions Precedent to Additional Loans. The obligation of Lender
to make any Working Capital Loan, other than in connection with the initial
borrowing, is subject to the prior or concurrent fulfillment of each of the
following conditions precedent, and, except with respect to Section 3.3 hereof,
Borrower shall be deemed to have certified to Lender by a request for a Working
Capital Loan that each of the conditions precedent have been fulfilled:
3.1 Representations; No Default. The representations and
warranties contained in Article 4 of this Agreement and in any other writing
delivered to Lender pursuant hereto on or prior to the date of such borrowing
shall be true and correct in all material respects on and as of such date as
though made on and as of such date; and no Default or Event of Default shall
have occurred and be continuing or would result from the making of the Working
Capital Loan to be made on the date of such borrowing.
3.2 Notice. Lender shall have received a notice for such
borrowing pursuant to Section 1.4 hereof.
3.3 No Violation. The making of such Working Capital Loan
shall not contravene any law, rule or regulation enacted after the date hereof
applicable to Lender.
4. Representations and Warranties of Borrower. Borrower hereby
represents and warrants as follows:
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4.1 Corporate Status. Borrower is a not for profit corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida. Borrower has the power and authority to own its own property
and assets and to transact the business in which it is engaged. Borrower is not
required to qualify to do business in any state or jurisdiction except the State
of Florida. Borrower does not have any subsidiaries nor does Borrower operate
any portion of its business through any other person.
4.2 Corporate Power and Authority. Borrower has the power and
authority to execute, deliver and perform, as the case may be, the terms and
provisions of this Agreement, the Note and the other Loan Documents, and
Borrower has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement, the borrowings hereunder, the liens
granted upon the Collateral pursuant hereto, and the making and delivery of the
Note and the other Loan Documents. This Agreement constitutes, the Note and all
of the other Loan Documents, when executed and delivered pursuant hereto,
constitute or will constitute, the authorized, valid and legally binding
obligations of Borrower enforceable in accordance with their respective terms,
except to the extent that their enforceability is limited by applicable
bankruptcy, reorganization, insolvency, receivership or other laws of general
application or equitable principles relating to or affecting the enforcement of
creditor's rights.
4.3 No Violation of Agreements or Laws. Borrower is not in
default under the provisions of any agreement to which it is a party and
Borrower is not in violation of any applicable provision of law or any
applicable regulation of any governmental department, commission, board, bureau,
agency or instrumentality (including, without limitation, environmental laws and
regulations). Neither the execution and delivery of this Agreement, the Note or
any of the other Loan Documents nor the consummation of the transactions herein
or therein contemplated, nor compliance with the terms and provisions hereof or
thereof, will violate any applicable provision of law or any applicable
regulation, or any order, writ, injunction or decree of any court or
governmental department, commission, board, bureau, agency or instrumentality or
will conflict or will be inconsistent with, or will result in any breach of, any
of the terms, covenants, conditions or provisions of, or constitute a default
under, or result in the creation or imposition of (or the obligation to impose)
any lien, charge or encumbrance upon any of the property or assets of Borrower
pursuant to the terms of any indenture, franchise, license, permit, mortgage,
deed of trust, agreement or other instrument to which Borrower is a party or by
which Borrower may be bound, or to which Borrower may be subject.
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No order, consent, approval or authorization of any public body, agency,
commission or board is necessary for the execution, delivery and performance of
this Agreement, the Note or any of the other Loan Documents, except for such
orders, consents, approvals or authorizations which have been obtained.
4.4 Recording. There are no agreements, documents or
instruments that affect, and Borrower has not taken any action that will or may
affect, the first lien priority of Lender's security interest in Borrower's
Personal Property.
4.5 Litigation and Labor Disputes. To Borrower's knowledge,
there are no actions, suits or proceedings, pending or threatened, against or
affecting Borrower before any court or before any governmental or administrative
body or agency, which if determined adversely to Borrower, individually or in
the aggregate, would have a material adverse effect on Borrower's business or
properties. Borrower is not a party to any labor dispute.
4.6 Good Title to Properties. Based on Lawyers Title Insurance
Corporation commitment numbers 9602867, 2960352a, 2960352b, 9606449, 9602854,
and 9606397, upon closing the acquisition, Borrower has good and marketable
title to its property and assets subject to no liens, mortgages, pledges,
encumbrances or charges of any kind, except the Permitted Liens.
4.7 Franchises, License and Permits. Prior to the funding of
the Working Capital Loan, Borrower shall hold all material franchises,
agreements, licenses and grants of authority as are necessary in connection with
the conduct by it of its business, except that Borrower will not receive
approval of its application for licensure from the State of Florida as of the
closing date of the acquisition.
4.8 Outstanding Indebtedness. Except for (a) indebtedness
secured by Permitted Liens, (b) indebtedness represented by the Note and (c)
accounts and other current payables and accrued expenses arising from the
ordinary course of business, no material portion of which are past due, Borrower
does not have any indebtedness.
4.9 Trademarks, Patents, Licenses, Etc.. Borrower possesses
all necessary trademarks, trademark rights, trade names, trade name rights,
copyrights, patents, patent rights and licenses needed to conduct its
businesses. Borrower does not know of, nor has Borrower received any notice of,
any conflict between its trademarks, trademark rights, trade names, trade name
rights,
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copyrights, patent rights and licenses and the rights or claimed rights of
others.
4.10 Names and Locations. Borrower does not operate or do
business, and, within the past five years, has not operated or done business,
under a fictitious, trade or assumed name, except the names set forth on Exhibit
4.10. All of the locations at which Borrower conducts its business are listed on
Exhibit 4.10.
4.11 Tax Returns and Payments. Borrower has filed all tax
returns required by law to be filed by it and has paid all taxes, assessments
and other governmental charges levied upon it and any of its respective
properties, assets, income or franchises which are due and payable, other than
those presently payable without penalty or interest.
4.12 Compliance with ERISA. Borrower is in compliance with all
applicable provisions of ERISA.
4.13 Financial Statements. Borrower is a newly formed
corporation and has no audited or unaudited financial statements as of the date
of this Agreement.
4.14 The Security Documents. The provisions of the Security
Documents are effective to create in favor of Lender a legal, valid and
enforceable security interest in all right, title and interest of Borrower in
the Collateral; when financing statements have been filed in the offices in the
jurisdictions listed in Exhibit 4.14 hereto, the Security Documents shall
constitute a fully perfected lien on, and security interest in all right, title
and interest of Borrower in the Collateral described therein to the extent the
filing of financing statements under the Uniform Commercial Code is a
permissible method of perfection of security interests in the Collateral
described therein in each such jurisdiction, subject to no prior liens except as
permitted by Section 5.8; and the Security Agreement shall constitute a lien on
the property described therein subject to no prior liens.
4.15 Ownership. The ownership of Borrower is correctly and
accurately set forth on Exhibit 4.15 hereto.
4.16 Disclosure. Neither this Agreement nor any other Loan
Document delivered to Lender by or on behalf of Borrower in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained in this Agreement and in such other documents, certificates
or instruments not misleading. There is no fact (other than matters
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of a general economic or political nature which do not affect Borrower uniquely)
which materially adversely affects or in the future may (so far as Borrower can
now foresee) materially adversely affect the business, condition (financial or
otherwise), operations, properties or prospects of Borrower which has not been
set forth in this Agreement or in the other Loan Documents delivered to Lender
by or on behalf of Borrower specifically for use in connection with the
transactions contemplated by this Agreement.
5. Covenants.
So long as the Working Capital Loan remains outstanding or
unsatisfied, Borrower agrees to the following:
5.1 Reporting Requirements. Borrower will furnish to Lender:
5.1.1 as soon as available and in any event within
sixty (60) days after the end of each calendar quarter, unaudited financial
statements of Borrower for the calendar quarter then ended, prepared on a basis
consistent with the annual statements, and certified by an authorized financial
officer of Borrower to be true and correct;
5.1.2 as soon as available and in any event within
one hundred and twenty (120) days after the end of each calendar year of
Borrower, financial statements of Borrower, prepared in accordance with
generally accepted accounting principles, and including a balance sheet, a
statement of income and expenses for the year then ended and which, at Lender's
request, shall be reviewed by a nationally recognized certified public
accounting firm or other independent certified public accounting firm acceptable
to Lender;
5.1.3 as soon as available and in any event within
fifteen (15) days of the end of each calendar quarter, an aged accounts
receivable report in sufficient detail to show amounts due by the account age
classifications of thirty (30) days, sixty (60) days, ninety (90) days, one
hundred twenty (120) days, and over one hundred twenty (120) days, certified by
an authorized financial officer of Borrower to be true and correct;
5.1.4 as soon as possible and in any event within
five (5) business days of the receipt by Borrower, any and all notices
(regardless of form) from any licensing and/or certifying agency that Borrower's
license or the Medicare or Medicaid certification of Borrower is being revoked
or suspended,
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or that action is pending or being considered to revoke or suspend Borrower's
license or certification;
5.1.5 as soon as possible and in any event within
five (5) business days after Borrower obtains knowledge of the occurrence of a
Default or an Event of Default, or any material adverse change in the condition
or operations, financial or otherwise, of Borrower, the written statement of the
Authorized Financial Officer of Borrower setting forth the details of such
Default, Event of Default, event or material adverse change;
5.1.6 promptly after the commencement thereof but in
any event not later than five (5) business days after service of process with
respect thereto on, or the obtaining of knowledge thereof by, Borrower, notice
of each action, suit or proceeding before any court, arbitrator or governmental
department, commission, board, bureau, agency or instrumentality concerning the
operations, financial or otherwise, of Borrower;
5.1.7 as soon as practicable and in any event within
ten (10) business days of delivery to Borrower, a copy of any letter issued by
Borrower's independent public accountants or other management consultants with
respect to Borrower's financial or accounting systems or controls, including all
so-called "management letters"; and
5.1.8 promptly upon request, such other information
concerning the condition or operations, financial or otherwise, of Borrower as
Lender, may from time to time reasonably request.
Notwithstanding the foregoing, so long as the Management Agreement remains in
full force and effect and to the extent that the current Manager or its
Affiliate or successor is the party with responsibility for any such report or
document, Borrower shall not be required to furnish Lender the reports and
documents required by subsections 5.1.1 through 5.1.5.
5.2 Use of Proceeds. Borrower will use the proceeds of the
Working Capital Loan made hereunder for the purposes set forth in Section 1.6.
5.3 Compliance with Laws, Etc. Borrower will comply in all
material respects with all applicable laws, rules, regulations and orders, and
all contracts and agreements to which it or its properties are subject, paying
before the same become delinquent all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or its
properties, and paying
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all lawful claims which if unpaid might become a lien or charge upon any of its
properties, except to the extent such taxes, assessments and governmental
charges or levies are contested in good faith by proper proceedings which stay
the imposition of any penalty, fine or lien resulting from the non-payment
thereof and with respect to which adequate reserves have been set aside for the
payment thereof.
5.4 Preservation of Existence, Etc. Borrower will maintain and
preserve its existence, rights and privileges, and become or remain duly
qualified and in good standing in each jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its business
makes such qualification necessary.
5.5 Obtaining of Permits, Etc. Borrower will obtain, maintain
and observe all material permits, licenses, authorizations, approvals and
accreditation necessary or useful in the proper conduct of its business, except
that Borrower will use its best efforts to receive approval of its application
for licensure from the State of Florida.
5.6 Maintenance of Insurance. Borrower will maintain with
responsible and reputable insurance companies or associations insurance
(including, without limitation, comprehensive general liability and hazard
insurance) with respect to its properties and business, in such amounts and
covering such risks, as is required by any governmental authority having
jurisdiction with respect thereto or as is carried generally in accordance with
sound business practice by companies in similar businesses similarly situated or
as is required by any Loan Document.
5.7 Maintenance of Properties, Etc. Borrower will maintain and
preserve all of its properties necessary or useful in the proper conduct of its
business in good working order and condition, ordinary wear and tear excepted,
and comply at all times with the material provisions of all leases to which it
is or becomes a party or under which it now or hereafter occupies property, so
as to prevent any material loss or forfeiture thereof or thereunder.
5.8 Liens on Property. Borrower will not create or suffer to
exist, any lien, security interest or other charge or encumbrance, or any other
type of preferential arrangement, upon or with respect to any of its properties,
rights or other assets, whether now owned or hereafter acquired, other than the
following (referred to collectively as "Permitted Liens"):
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5.8.1 the liens or security interests granted to
Lender pursuant to this Agreement and the other Loan Documents;
5.8.2 the liens to Lender pursuant to that certain
Acquisition Loan and Security Agreement dated the date hereof in
the initial principal amount of $45,000,000;
5.8.3 liens for taxes, assessments or other
governmental charges which are non-delinquent or being contested in good faith
and by appropriate proceedings and with respect to which proper reserves have
been taken in accordance with generally accepted accounting principles;
5.8.4 deposits or pledges to secure obligations under
workers' compensation, social security or similar laws, or under unemployment
insurance; and
5.8.5 judgment liens that have been stayed or bonded.
5.9 Indebtedness. Borrower will not create, incur, suffer to
exist any indebtedness other than (a) indebtedness created by the Loan Documents
and (b) indebtedness which is secured by Permitted Liens.
5.10 Merger, Consolidation. Borrower will not enter into any
merger, consolidation or similar transaction, or sell assign, lease or otherwise
dispose of (whether in one transaction or in a series of transactions), all or
substantially all of its assets (whether now or hereafter acquired), without the
prior written consent of Lender, which may be granted or refused by Lender in
Lender's sole discretion.
5.11 Sale of Assets, Etc. Borrower will not assign, lease or
otherwise dispose of any of its properties or assets (whether now owned or
hereafter acquired) to any Person, other than sales in the ordinary course of
business for a full and fair consideration (except as prohibited by any Loan
Document), which in no event shall include a transfer for full or partial
satisfaction of a preexisting debt, unless pursuant to enforcement of this
Agreement.
5.12 Guaranties, Etc. Borrower will not assume, guarantee,
endorse or otherwise become directly or contingently liable, including, without
limitation, liable by way of agreement, contingent or otherwise, to purchase, to
provide funds for payment, or to supply funds, in connection with any
indebtedness of any other Person without the prior consent of Lender.
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5.13 Change in Nature of Business. Borrower will not make any
material change in the nature of its business, or discontinue or liquidate any
material part of its operations without the prior written consent of Lender.
5.14 Pension Plans. Borrower will comply in all material
respects with all material requirements of ERISA and will notify Lender
immediately upon receipt by Borrower of any notice of the institution of any
proceeding or other action which may result in the termination of any employee
plan, and deliver to Lender, promptly after the filing or receipt thereof,
copies of all reports or notices relating to such proceeding or related action
which Borrower files or receives under ERISA with or from the Internal Revenue
Service, the Pension Benefit Guaranty Corporation, or the U.S. Department of
Labor.
5.15 Environmental Compliance. Borrower will with respect to
its properties (now owned or hereafter acquired) comply in all material respects
with applicable Environmental Laws, including, without limitation, obtaining,
remaining in material compliance with, and maintaining all necessary permits,
certificates, licenses, approvals and other authorizations required by such
Environmental Laws, and filing when due all notifications, required by such
Environmental Laws in connection with its ownership or use of any real estate or
the operation of its business. Borrower shall not send any wastes to any site
listed or formally proposed for listing on the National Priority List
promulgated pursuant to CERCLA or to any site listed pursuant to any similar
state law on any state list of hazardous substance sites requiring investigation
or clean-up.
5.16 Transactions with Affiliates; Payments to Affiliates.
Borrower will not directly or indirectly enter into any transaction with an
Affiliate on terms less favorable (including, but not limited to, price and
credit terms) to Borrower than would be the case if such transaction had been
effected at arms length with a Person other than an Affiliate.
5.17 Limitation on Leases. Borrower will not incur, create or
assume any commitment to make any direct or indirect payment, whether as rent or
otherwise, under any lease, rental or other arrangement for the use of real or
personal property, or both, without the prior consent of Lender.
5.18 Restricted Payments; Executive Compensation; Loans and
Advances. Borrower will not declare or make any (i) distributions in respect of
any ownership interest of Borrower or to any Affiliate of Borrower; (ii) any
payment of compensation to
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any officer, director of Borrower, any shareholder of Borrower, or any Affiliate
of any such Person, or (iii) any loans or advances to any officer, director or
shareholder of Borrower, or any Affiliate of any such Person, except that
Borrower will be paid certain home office fees (collectively, the "Home Office
Fee"), which Home Office Fee shall be paid from net cash flow and have the
priority of an operating expense and may be paid Excess Cash pursuant to the
Management Agreement, any and all of which shall be distributable as Borrower
sees fit in its good business judgment. The Home Office Fee shall be paid as
follows: Fifty Thousand Dollars ($50,000) shall be payable upon execution
hereof; One Hundred Thousand Dollars ($100,000) shall be payable in twelve (12)
equal monthly installments of $8,333.33 each until and including the first
anniversary of the date hereof; from and after such date, One Hundred Fifteen
Thousand Dollars ($115,000) shall be payable in twelve (12) equal monthly
installments of $9,583.33; from and after the third anniversary of the date
hereof, One Hundred Thirty Thousand Dollars ($132,000) shall be payable in
twelve (12) equal monthly installments of $11,000.00; and from and after the
fourth anniversary of the date hereof, and on each such anniversary thereafter,
the Home Office Fee shall be increased by the same percentage by which the cost
of health care shall have increased over the immediately preceding year as
evidenced by the Index; such increased Home Office Fee shall be payable until
the next ensuing anniversary hereof in twelve (12) equal monthly installments.
5.19 Accounts Receivable. So long as Lender has a lien on
Borrower's accounts receivable, Borrower will not sell, discount or otherwise
dispose of notes, accounts receivable or other obligations owing to Borrower
except for the purpose of collection in the ordinary course of business, and
except that Borrower may pay or distribute Home Office Fees permitted pursuant
to Section 5.18 hereof.
5.20 Inconsistent Agreements. Borrower will not enter into any
agreement containing any provision which would be violated or breached by any
borrowing hereunder or by the performance by Borrower of its obligations
hereunder or under any Loan Document.
5.21 Locations and Change In Names. The location of the
principal place of business and chief executive office of Borrower shall not be
changed, without thirty (30) days' prior written notice to Lender.
6. Events of Default. If any of the following events of default (each
an "Event of Default") shall occur and be continuing (whatever the reason for
such Event of Default, whether it shall be voluntary or involuntary or be
affected by operation of law or
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pursuant to any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental instrumentality):
6.1 Subject to the terms and conditions contained herein,
Borrower shall fail to pay any principal of or interest on the Note (whether by
maturity, voluntary or required prepayment, acceleration, demand or otherwise)
or any amount payable hereunder in accordance with the terms of this Agreement,
and such failure shall remain unremedied for ten (10) days; or
6.2 Any representation or warranty made by Borrower in this
Agreement, the Note or any other Loan Document shall have been incorrect in any
material respect when made; or
6.3 Borrower shall fail to perform or observe any term,
covenant, condition or agreement contained in this Agreement, the Note or any
other Loan Document to be performed or observed by Borrower (excluding matters
set forth in Section 6.1 above), and such failure shall remain unremedied for
thirty (30) days following written notice to Borrower; or
6.4 A default shall occur under that certain Acquisition Loan
and Security Agreement of even date between Borrower and Lender, as amended or
restated from time to time, and such default shall continue after the expiration
of any applicable grace period; or
6.5 Borrower shall default in payment or performance of any
material obligation or indebtedness not described above in excess of $50,000 to
Lender or any other person, and such failure shall continue after the expiration
of any applicable grace period, if such default is not being contested in good
faith and by appropriate proceedings and with respect to which proper reserves
have been taken in advance in accordance with generally accepted accounting
principles; or
6.6 Borrower shall be generally not paying its debts as they
become due or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any petition
shall be filed by or against Borrower under the federal bankruptcy laws, or any
other proceeding shall be instituted by or against Borrower seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar
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official for such person or for any substantial part of its property; or
Borrower shall take any action to authorize or effect any of the actions set
forth above in this Section and, in the case of the institution of any
involuntary proceeding against Borrower such proceeding shall not be discharged
within ninety (90) days of its commencement; or
6.7 Any material provision of this Agreement, the Note or any
other Loan Document shall at any time for any reason be declared to be null and
void, or the validity or enforceability thereof shall be contested by Borrower,
or a proceeding shall be commenced by Borrower or by any governmental agency or
authority having jurisdiction over Borrower, seeking to establish the invalidity
or unenforceability thereof, or Borrower shall deny that it has any liability or
obligation purported to be created under this Agreement, the Note or any other
Loan Document; or
6.8 A judgment or order for the payment of money exceeding any
applicable insurance coverage by more than $50,000 shall be rendered against
Borrower and either (a) enforcement proceedings shall have been commenced and be
unstayed or (b) there shall be any period of thirty (30) consecutive days during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
6.9 The Management Agreement shall terminate for any reason,
except for termination for cause or for Manager's termination thereof without
cause; or
6.10 The sale of substantially all of the assets of any
Facility;
then, the obligation of Lender to make any further advances hereunder shall
immediately terminate, and at the election of Lender, Lender may by notice to
Borrower, (a) declare the Note and all interest thereon and all other amounts
payable under this Agreement to be forthwith due and payable, whereupon the Note
and all such interest, and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by Borrower; and (b) exercise any and
all of its other rights under applicable laws, hereunder and under any other
Loan Document; provided, that no notice need be given to Borrower upon the
occurrence of any Event of Default described in Section 6.7 and the obligations
shall be automatically accelerated.
7. Right of Set-Off. Lender is hereby authorized at any time and from
time to time, to the fullest extent permitted by law,
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to set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by Lender to or for the credit or the account of Borrower against any and all of
the obligations of Borrower now or hereafter existing under the Loan Documents,
irrespective of whether or not Lender shall have made any demand hereunder or
under any other Loan Document, and although such obligations may be unmatured.
Lender agrees promptly to notify Borrower after any such set-off and application
made by Lender; provided, that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of Lender under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which Lender may have.
8. Definitions; Accounting and Other Terms.
8.1 Definitions. As used in this Agreement, the following
terms shall have the respective meanings indicated below (such meanings to be
applicable equally to both the singular and plural forms of such terms):
"Affiliate", as to any Person, means any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person, or any relative (by blood or marriage) of such Person.
"Agreement" means this Working Capital Loan and Security
Agreement, as the same may be amended or restated from time to time.
"Asset Purchase Agreement" has the meaning given to such term
in the Background Section hereof.
"Borrower" has the meaning given to such term in the preamble
hereof.
"Collateral" has the meaning given to such term in Section 1.5
hereof.
"Default" shall mean any event or occurrence which with the
passing of time, the giving of notice, or both, could become an Event of
Default.
"Edgemont" has the meaning given to such terms in the
Background Section hereof.
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"Environmental Laws" means all statutes, laws, rules,
regulations or judicial rulings pertaining to health or the environment
applicable to the properties of Borrower, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as heretofore or hereafter amended, the Resource Conservation and Recovery Act
of 1976, as heretofore or hereafter amended, and any other federal, state or
local statute, law, rule, regulation, or judicial ruling, whether now or
hereafter in existence, relating to, or imposing standards of conduct
concerning, the existence, release, disposal or handling of any waste,
substance, or material (including, but not limited to, asbestos, petroleum
products, radon and any substances that are considered hazardous or toxic).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, together with the rules and regulations
promulgated thereunder as in effect from time to time.
"Event of Default" means any of the events set forth in
Section 6 hereof.
"Excess Cash" has the meaning ascribed to such term in Section
7.2 of the Management Agreement.
"Expiration Date" has the meaning given to such term in
Section 1.1 hereof.
"Facilities" has the meaning given to such term in the
Background Section hereof.
"Gross Patients Accounts Receivable" shall mean all accounts
receivable of Borrower, including all rights of Borrower, if any, arising from
the payment for goods sold or leased or for services rendered with respect to
the Facilities, including, without limitation, (i) all accounts arising from the
operation of the Facilities and (ii) all rights to payment from the Medicare
program, Medicaid program or similar state or federal programs, boards, bureaus
or agencies and rights to payments from patients or private insurers and others
arising from the operation of their businesses, including rights to payment from
Reimbursement Contracts. Gross Patients Accounts Receivable shall include the
proceeds of the foregoing (whether cash or noncash, movable or immovable,
tangible or intangible) received from the sale, exchange, transfer, collection
or other disposition or substitution thereof; but, shall not include, (i) gifts,
grants, bequests, donations and/or contributions made to Borrower and (ii) with
respect to reimbursements from Medicare or Medicaid or like
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programs, not those accounts receivable in excess of allowable reimbursement
amounts.
"Home Office Fees" has the meaning given to such term in
Section 5.18 hereof.
"Lender" has the meaning given to such term in the
preamble hereof.
"Loan Commitment" has the meaning given to such term in
Section 1.1 hereof.
"Loan Documents" means, collectively, this Agreement, the
Note, and all other documents, instruments or agreements hereafter executed and
delivered to Lender by Borrower or others, evidencing or otherwise relating to
the Working Capital Loan and the Collateral.
"Management Agreement" has the meaning given to such term
in Section 1.5 hereof.
"Manager" has the meaning given to such term in
Section 1.5 hereof.
"Note" means Borrower's single promissory note, substantially
in the form of Exhibit 1.2 hereto, in the principal amount of Ten Million
Dollars ($10,000,000), evidencing the indebtedness of Borrower to Lender
resulting from the making of the Working Capital Loan, and any promissory note
or notes issued in exchange, renewal or replacement therefor, evidencing the
indebtedness of Borrower to Lender resulting from the making of the Working
Capital Loan.
"Permitted Liens" has the meaning given to such term in
Section 5.8 hereof.
"Person" means an individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization or joint
venture, or a court or government or any agency or political subdivision
thereof.
"Personal Property" has the meaning given to such term in
Section 1.5 hereof.
"Property" has the meaning given to such term in the
Background Section hereof.
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"Security Agreement" means that certain Security Agreement of
even date given by Borrower in favor of Lender, as may be amended, modified, or
restated from time to time.
"Security Documents" means, collectively, the Security
Agreement and the UCC-1 financing statements.
"Working Capital Loan" means the loans made pursuant to
Section 1 hereof.
8.2 Accounting and Other Terms. All accounting terms used in
this Agreement which are not otherwise defined herein shall be construed in
accordance with generally accepted accounting principles unless otherwise
expressly stated herein. All terms used in this Agreement which are defined in
Article 9 of the Uniform Commercial Code in effect in the State of Florida on
the date hereof and which are not otherwise defined shall have the same meanings
herein as set forth therein.
9. Miscellaneous.
9.1 Notices, Etc. Except as otherwise provided herein, all
notices, requests, consents, demands, approvals and other communications
hereunder shall be deemed to have been duly given, made, served or received if
in writing and on the same day as sent when delivered personally or by telecopy,
on the third day after being sent when mailed first class mail, postage prepaid,
or on the next day after being sent when delivered by an overnight delivery
courier, charges prepaid, to the respective parties to this Agreement as
follows:
(A) If to Borrower:
AGE Institute of Florida, Inc.
Professional Arts Building
25 Penncraft Avenue
Chambersburg, PA 17201
Attention: Carol A. Tschop, President
(B) If to Lender:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention: Law Department
Attention: Chief Financial Officer
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The designation of the person to be so notified or the address
of such person for the purposes of such notice may be changed from time to time
by similar notice in writing, except that any communication with respect to a
change of address shall be deemed to be given or made when actually received by
the party to whom such communication was sent. No other method of written notice
is precluded by this Section.
9.2 Amendments, Etc. No amendment of any provision of this Agreement or
the Note shall be effective unless it is in writing and signed by Borrower and
Lender, and no waiver of any provision of this Agreement or the Note, nor
consent to any departure by Borrower therefrom, shall be effective unless it is
in writing and signed by Borrower and Lender and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
9.3 No Waiver; Remedies, Etc. No failure on the part of Lender to
exercise, and no delay in exercising, any right hereunder or under any other
Loan Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
Lender provided herein and in the other Loan Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The
rights of Lender under any Loan Document against any party thereto are not
conditional or contingent on any attempt by Lender to exercise any of its rights
under any other Loan Document against such party or against any other person.
9.4 Fees, Costs, Expenses and Taxes. Whether or not any advances under
the Working Capital Loan are made hereunder or the transactions contemplated
hereby are consummated, Borrower will pay on demand all fees, costs and expenses
in connection with the preparation, execution, delivery, filing, and recording,
if applicable, of the Loan Documents and the other documents to be delivered
under the Loan Documents, and all costs and expenses, if any, in connection with
any waiver or amendment of any Loan Document or in connection with the
enforcement of the Loan Documents and the other documents to be delivered under
the Loan Documents. In addition, Borrower will any and all other taxes and fees
payable or determined to be payable in connection with the execution, delivery,
filing and recording, if applicable, of the Loan Documents and the other
documents to be delivered under the Loan Documents, and will save Lender
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees.
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9.5 Severability of Provisions. Any provision of this Agreement or of
any other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or invalidity without invalidating the remaining portions hereof or thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
9.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors and
assigns, except that Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of Lender.
9.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
9.8 Headings. The captions herein have been inserted solely for
convenience of reference and in no way define, limit or describe the scope or
substance of any provision of this Agreement.
9.9 Entire Agreement. This Agreement and the other Loan Documents
represent the entire agreement between the parties with respect to the
transactions contemplated hereby and supersedes all prior agreements and
understandings, written or oral.
9.10 Waiver of Jury Trial; Consent to Jurisdiction.
(A) EXCEPT AS PROHIBITED BY LAW, EACH PARTY HERETO WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY OF
THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
(B) BORROWER IRREVOCABLY SUBMITS AND CONSENTS TO THE
JURISDICTION OF ANY OF THE COURTS OR THE STATE OF FLORIDA OR THE COMMONWEALTH OF
PENNSYLVANIA AND OR ANY FEDERAL COURT SITTING IN THE STATE OF FLORIDA OR THE
COMMONWEALTH OF PENNSYLVANIA OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THE LOAN DOCUMENTS, AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH COURT. BORROWER AGREES THAT SERVICE OF COPIES OF ANY SUMMONS AND
COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION MAY BE
MADE AT THE ADDRESS SPECIFIED IN Section 9.1 IN THE MANNER PROVIDED BY LAW.
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9.11 Exculpation. Notwithstanding anything to the contrary contained in
the Loan Documents, the liability and obligation of Borrower to perform and
observe and make good the obligations contained in the Loan Documents and to pay
the Working Capital Loan in accordance with the provisions of the Note and other
Loan Documents shall not be enforced by any action or proceeding wherein damages
or any money judgment or any deficiency judgment or any judgment establishing
any personal obligation or liability shall be sought, collected or otherwise
obtained against Borrower or against any past, present or future partner,
officer, director, shareholder or member of Borrower, and Lender for itself and
its successors and assigns hereby irrevocably, knowingly, voluntarily and
intentionally waives any and all right to sue for, seek or demand any such
damages, money judgment, deficiency judgment or personal judgment against
Borrower or against any past, present or future partner, officer, director,
shareholder or member of Borrower under or by reason of or in connection with
any of the Loan Documents and agrees to look solely to the Collateral held under
or in connection with the Loan Documents for the enforcement of such liability
and obligation of Borrower.
9.12 Governing Law. This Agreement, the Note, and the other Loan
Documents and the rights and obligation of the parties thereunder shall be
executed, delivered and accepted in the Commonwealth of Pennsylvania and
governed by, and construed and interpreted in accordance with, the laws of the
State of Florida.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
ATTEST: AGE INSTITUTE OF FLORIDA, INC.
_______________________________ By:__________________________________
Name: Name:
Title: Title:
ATTEST: GENESIS HEALTH VENTURES, INC.
_______________________________ By:__________________________________
Secretary Name:
Title:
21597-7
TPA2-366124.4
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