CREDIT AGREEMENT
Dated as of March 3, 2005,
among
INTEGRATED HEALTHCARE HOLDINGS, INC.,
WMC-SA, INC.,
WMC-A, INC.,
CHAPMAN MEDICAL CENTER, INC., and
COASTAL COMMUNITIES HOSPITAL, INC.,
as Borrowers,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
MEDICAL PROVIDER FINANCIAL CORPORATION II,
as Lender.
INDEX OF APPENDICES
Annex A (Recitals) Definitions
Annex C (Section 4.1(b)) Collateral Reports
Annex E List of Schedules and Loan Documents
Exhibit 1.1(b)(i) Form of Notice of Line of Credit Advance
Exhibit 1.1(a)(ii) Form of Acquisition Note
Disclosure Schedule 1.1 Lender's Representatives
Annex A (Recitals) Definitions Annex B (Section 1.5) Cash Management System
Annex C (Section 4.1(b)) Collateral Reports Annex D (Section 11.10) Notice Addresses
Annex E List of Schedules and Loan Documents
Exhibit 1.1(b)(i) Form of Notice of Line of Credit Advance Exhibit 1.1(b)(ii) Form of Line of Credit Note
Exhibit 1.1(a)(ii) Form of Acquisition Note
Disclosure Schedule 1.1 Lender's Representatives
Disclosure Schedule 1.3 Sources and Uses; Funds Flow Memorandum Disclosure Schedule 2.1(g) Lists of Required Consents and
Approvals
Disclosure Schedule 3.1 Type of Entity; State of Organization Disclosure Schedule 3.2 Executive Offices, Collateral
Locations, FEIN
Disclosure Schedule 3.6 Real Estate and Leases Disclosure Schedule 3.7 Labor Matters
Disclosure Schedule 3.8 Ventures, Subsidiaries and Affiliates; Disclosure Schedule 3.11 Tax Matters
Outstanding Stock
Disclosure Schedule 3.12 ERISA Plans Disclosure Schedule 3.13 Litigation
Disclosure Schedule 3.14 Brokers/Finders Disclosure Schedule 3.15 Intellectual Property
Disclosure Schedule 3.17 Environmental Matters Disclosure Schedule 3.18 Insurance (including certificates
of insurance)
Disclosure Schedule 3.19 Deposit and Disbursement Accounts (Deleted)
Disclosure Schedule 5.1 Trade Names Disclosure Schedule 6.3 Indebtedness
Disclosure Schedule 6.4(a) Transactions with Affiliates Disclosure Schedule 6.7 Existing Liens
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CREDIT AGREEMENT
This CREDIT AGREEMENT (this "AGREEMENT"), dated as of March 3, 2005, among
INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation ("IHHI"), WMC-SA,
INC., a California corporation ("WMC-SA"), WMC-A, INC., a California corporation
("WMC-A"), CHAPMAN MEDICAL CENTER, INC., a California corporation ("CHAPMAN"),
and COASTAL COMMUNITIES HOSPITAL, INC., a California corporation ("COASTAL")
(IHHI, WMC-SA, WMC-A, Chapman and Coastal are sometimes collectively referred to
herein as "BORROWERS" and individually as "Borrower"); the other Credit Parties
signatory hereto; and MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada
corporation ("LENDER").
RECITALS
WHEREAS, AHM CGH, Inc., a California corporation, HEALTH RESOURCES
CORPORATION OF AMERICA- CALIFORNIA, a Delaware corporation, UWMC HOSPITAL
CORPORATION, a California corporation, and SHL/O CORP., a Delaware corporation
(collectively, "SELLER") are in the business of delivering acute care services
to the public through the acute care hospital facilities identified in this
Agreement, and incident thereto, are also in the businesses of owning and
operating certain medical office buildings ("MOB'S") and other healthcare
businesses related thereto (the "BUSINESSES").
WHEREAS, pursuant to a certain Asset Sale Agreement dated as of September
29, 2004 ("ASSET SALE AGREEMENT"), IHHI is acquiring from Seller (a) the fee
interest in certain real property, hospital facilities, MOB's and Businesses in
three (3) separate locations in Orange County, California, and (b) the tenant's
interest in certain leases of real property, hospital facility and an MOB also
located in Orange County, California ("LEASED HOSPITAL FACILITY") (each a
"HOSPITAL FACILITY" and together the "HOSPITAL FACILITIES"), and the business
assets related to the same. The purchase price (plus or minus prorations as
provided therein) is Sixty-Five Million Dollars ($65,000,000). To enable IHHI to
make these acquisitions, Borrowers are borrowing the sum of Fifty Million
Dollars ($50,000,000) from Lender (the "ACQUISITION LOAN");
WHEREAS, immediately following IHHI's acquisition of the Hospital
Facilities, IHHI will transfer three (3) of the Hospital Facilities to Pacific
Coast Holdings Investment, LLC, a California limited liability company ("PCHI"),
a wholly-owned subsidiary limited liability company of IHHI. Immediately after
the transfer to PCHI, IHHI will transfer its entire ownership interest in PCHI
to (a) West Coast Holdings, LLC, a California limited liability company ("WEST
COAST") a fifty-one percent (51%) membership interest, and (b) Ganesha Realty,
LLC, a California limited liability company ("GANESHA") a forty-nine percent
(49%) interest. Then, PCHI will lease the three (3) Hospital Facilities back to
IHHI pursuant to a Triple Net Hospital and Medical Office Building Lease dated
March 3, 2005, as amended by Amendment No. 1 To Triple Net Hospital And Medical
Office Building Lease (collectively, the "TRIPLE NET LEASE"). Then, IHHI will
(i) sublease each of the three Hospital Facilities to three (3) of its
subsidiaries (WMC-SA, WMC-A and Coastal), each of which is identified above as a
Borrower, and (ii) sub-sublease the Leased Hospital Facility to another of its
subsidiaries (Chapman), which is also identified above as a Borrower.
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WHEREAS, Borrowers have also requested that Lender extend a non-revolving
Line of Credit facility to Borrowers of up to Thirty Million Dollars
($30,000,000) in the aggregate for the purpose of providing (a) working capital
financing for Borrowers, (b) funds for other general corporate purposes of
Borrowers, and (c) funds for other purposes permitted hereunder (the "LINE OF
CREDIT LOAN").
WHEREAS, for the purposes set forth above, Lender is willing to make the
Acquisition Loan and the Line of Credit Loan and other extensions of credit to
or for the benefit of Borrowers of up to such amount upon the terms and
conditions set forth herein;
WHEREAS, it is intended by IHHI and the other Borrowers that the
administration and financial affairs relating to each Loan shall be administered
for the benefit of all Borrowers by IHHI, and that IHHI shall be the "BORROWER'S
REPRESENTATIVE" under this Agreement.
WHEREAS, the payment and performance of the Obligations hereunder shall be
secured by a Lien on substantially all of the assets of each Borrower, including
without limitation, a pledge of the capital stock by IHHI in the other
Borrowers.
WHEREAS, as further inducement to Lender to enter into this Agreement and
to provide the credit facilities described in this Agreement, (i) PCHI has
agreed to guaranty the payment and performance of all Obligations hereunder,
(ii) West Coast and Ganesha have each agreed to pledge their membership
interests in PCHI as security for repayment of the Obligations, (iii) the
members of West Coast have agreed to pledge their membership interests in PCHI
as security for repayment of the Obligations, and (iv) Orange County Physicians
Investment Network, LLC, a Nevada limited liability company and a significant
shareholder of IHHI ("OC-PIN") has agreed to guaranty the payment and
performance of all the Obligations hereunder;
WHEREAS, AHM CGH, Inc., a California corporation, has also agreed to sell
its ownership interest in certain condominium units located at 999 North Tustin
Avenue, Santa Ana, California (the "CONDOMINIUM UNITS" as more specifically
described in Annex A) to IHHI, and upon such acquisition using IHHI's own funds,
the parties intend that the Liens granted in Leasehold Deed of Trust shall be
expanded and spread to encumber such interests in the Condominium Units as
hereinafter provided;
WHEREAS, IHHI intends immediately to transfer the Condominium Units to
PCHI, to which transfer Lender hereby consents; and
WHEREAS, initially capitalized terms used in this Agreement shall have the
meanings ascribed to them in Annex A and, for purposes of this Agreement and the
other Loan Documents, the rules of construction set forth in Annex A shall
govern. All Annexes, Disclosure Schedules, Exhibits and other attachments
(collectively, "APPENDICES") hereto, or expressly identified to this Agreement,
are incorporated herein by reference, and taken together with this Agreement,
shall constitute but a single agreement. These Recitals shall be construed as
part of the Agreement.
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AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Credit Facilities.
(a) Acquisition Loan.
(i) Subject to the terms and conditions hereof, on the date of
this Agreement, Lender agrees to make the Acquisition Loan in one advance to or
for the benefit of Borrowers to enable Borrowers to consummate the Asset Sale
Agreement with Seller (the "ACQUISITION ADVANCE") and the other transactions
contemplated thereby. It is intended that the Acquisition Advance shall be made
concurrently with the execution and delivery of this Agreement which is also
intended to be the closing date identified in the Asset Sale Agreement.
(ii) Concurrently with the execution and delivery of this
Agreement, Borrowers shall execute and deliver to Lender a promissory note to
evidence the Acquisition Advance of Lender, and be substantially in the form of
Exhibit 1.1(a)(ii) (the "ACQUISITION NOTE"). The Acquisition Note shall
represent the obligation of the Borrowers, jointly and severally, individually
and collectively, to pay the amount of the Acquisition Advance including
interest thereon as prescribed in Section 1.4. The entire unpaid balance of the
Acquisition Note and all other non-contingent Obligations shall be immediately
due and payable in full in immediately available funds on the Maturity Date.
(b) Non-Revolving Line of Credit Commitment.
(i) Subject to the terms and conditions hereof, Lender agrees
to make available to Borrower from time to time until the Commitment Termination
Date advances (each, a "LINE OF CREDIT ADVANCE") pursuant to the Line of Credit
Commitment. The Line of Credit Advances may only be used for (1) working capital
financing for Borrowers, (2) funds for other general corporate purposes of
Borrowers, (3) to make or pay interest payments on the Acquisition Loan, and (4)
funds for other purposes permitted hereunder. The Line of Credit Advances may
not be used to make or pay principal payments on the Acquisition Loan. Borrowers
may borrow, but may not repay and reborrow, under this Line of Credit
Commitment. Each Line of Credit Advance shall be made on notice by Borrower's
Representative on behalf of Borrowers to the Lender's Representative identified
in Schedule 1.1 at the address specified therein. Any such notice must be given
no later than (1) 2:00 p.m. (Nevada local time) on the date which is at least
two (2) Business Days prior to the date of the proposed Line of Credit Advance,
and only one request may be made during any calendar week. Each such notice (a
"NOTICE OF LINE OF CREDIT ADVANCE") must be given in writing (by telecopy or
overnight courier) substantially in the form of Exhibit 1.1(b)(i), shall
separately identify the amount of the requested Line of Credit Advance, and
shall include the information required in such Exhibit and such other
information as may be required by Lender. In no event shall Borrowers be
permitted to request further Line of Credit Advances under the Commitment at any
time during the thirty (30) day period prior to the Stated Maturity Date.
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(ii) Concurrently with the execution and delivery of this
Agreement, Borrowers shall execute and deliver to Lender a promissory note to
evidence the Commitment in the face amount of the Line of Credit Loan, and be
substantially in the form of Exhibit 1.1(b)(ii) (the "LINE OF CREDIT NOTE"). The
Line of Credit Note shall represent the obligation of the Borrowers to pay the
amount of the amounts advanced from time to time by Lender pursuant to the
Commitment to or for the benefit of any one or more of the Borrowers together
with interest thereon as prescribed in Section 1.4, and shall be the joint and
several, and individual and collective liability of the Borrowers. The entire
unpaid balance of the aggregate Line of Credit Commitment and all other
non-contingent Obligations shall be immediately due and payable in full in
immediately available funds on the Commitment Termination Date.
(iii) Concurrently with the funding of the Acquisition Loan,
Borrowers have requested, and this provision constitutes a Notice of Line of
Credit Advance, for an Advance of Three Million Dollars ($3,000,000) on the Line
of Credit Commitment to enable Borrowers to complete the acquisition
transactions under the Asset Sale Agreement (the "INITIAL Draw"). Lender hereby
agrees to the Initial Draw.
1.2 Prepayments.
(a) Voluntary Prepayments. Borrowers may at any time prepay the
outstanding Loans in whole or in part, in addition to regularly scheduled
monthly payments. In addition, Borrowers may at any time on at least three (3)
days' prior written notice by Borrower's Representative to Lender terminate the
Commitment; provided that upon such termination, in Lender's sole and absolute
discretion, upon receipt or at any time thereafter of such notice, Lender may
elect to accelerate the payment of all then outstanding Loans and other
Obligations and the same shall thereupon become due and payable in full within
five (5) business days of Lender's written notice to Borrower of Lender's
election to accelerate. Upon any such termination of the Commitment, Borrowers'
right to request Line of Credit Advances shall simultaneously be permanently
terminated. Lender reserves the right to apply any such prepayment to such of
the Obligations owing hereunder from time to time as Lender in its sole and
absolute discretion, elects. Prepayments hereunder shall be made in accordance
with the application of payments set forth in Section 1.2(c) below.
(b) Mandatory Prepayments.
(i) Immediately upon receipt by any Credit Party of any cash
proceeds of any sale or other disposition of any Collateral, Borrowers shall
prepay the Loans in an amount equal to all such proceeds, net of (A) commissions
and other reasonable and customary transaction costs, fees and expenses properly
attributable to such transaction and payable by Borrower in connection therewith
(in each case, paid to non-Affiliates), (B) transfer taxes, (C) amounts payable
to holders of senior Liens on such asset (to the extent such Liens constitute
Permitted Encumbrances hereunder), if any, and (D) an appropriate reserve for
income taxes in accordance with GAAP in connection therewith. Any such
prepayment shall be applied in accordance with Section 1.2(c). The following
shall not be subject to mandatory prepayment under this subsection: (1) proceeds
of sales of Inventory in the ordinary course of business; (2) proceeds of
collection of Accounts in the ordinary course of business; (3) proceeds of sales
of equipment and other personal property in the ordinary course of business so
long as such equipment and other personal property is replaced (if necessary in
the exercise of prudent business judgment) by equipment and other personal
property of equal or greater value or utility for a Borrower's business; and (4)
transfers of equipment and other personal property between Borrowers in the
ordinary course of business.
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(ii) In addition to the foregoing, if by the date which is
thirty (30) calendar days from the Closing Date ("MANDATORY PREPAY DATE"),
Borrowers for any reason fail to acquire all of the Condominium Units from
Sellers as provided in the Asset Sale Agreement with capital contributed to IHHI
by its shareholders, then Borrowers agree to and shall on the Mandatory Prepay
Date prepay the amount of $5,000,000 against outstanding principal balance of
the Loans. Said $5,000,000 must consist of capital contributed to IHHI by its
shareholders and may not constitute funds borrowed from any source. Said
mandatory $5,000,000 prepayment shall be applied to the principal balance of the
Acquisition Loan outstanding to Borrowers.
(c) Application of Prepayments. Except as otherwise set forth in
Section 1.2(b)(ii) above, any prepayments made pursuant to Section 1.2 (a) or
(b) above shall be applied as follows: first, to reimbursable expenses of Lender
then due and payable pursuant to any of the Loan Documents; second, to interest
then due and payable on all Loans made to Borrowers; third, to the principal
balance of Line of Credit Loan outstanding to Borrowers until the same has been
paid in full; and last, to the principal balance of the Acquisition Loan
outstanding to Borrowers until the same has been paid in full. If an Event of
Default has occurred and is continuing, Lender shall have the absolute right, in
its sole discretion, to determine which of the Obligations shall be paid and in
what order and amounts.
(d) Application of Prepayments from Insurance and Condemnation
Proceeds. Prepayments from insurance or condemnation proceeds in accordance with
Section 5.4(c) shall be applied to the Loans in the manner described in Section
1.2(c) above.
(e) No Implied Consent. Nothing in this Section 1.2 shall be
construed to constitute Lender's consent to any transaction that is not
permitted by other provisions of this Agreement or the other Loan Documents.
1.3 Use of Proceeds.
(a) Borrowers shall utilize the proceeds of the Loans solely for the
express purposes authorized in this Agreement. Disclosure Schedule (1.3) shall
contain a description of Borrowers' sources and uses of funds as of the Initial
Funding Date, including Loans to be made or incurred on that date, and a funds
flow memorandum detailing how funds from each source are to be transferred to
particular uses.
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(b) Reliance on Notices; Appointment of Borrower's Representative.
Lender shall be entitled to rely upon, and shall be fully protected in relying
upon, any Notice of Line of Credit Advance or other notice believed by Lender to
be genuine. Lender may assume that each Person executing and delivering any
notice in accordance herewith, including without limitation the Line of Credit
Notice, was duly authorized, unless the responsible individual acting thereon
for Lender has actual knowledge to the contrary. Each Borrower hereby designates
IHHI as the Borrower's Representative for the purposes of issuing Notices of
Line of Credit Advances, giving instructions with respect to the disbursement of
the proceeds of the Line of Credit Loan, giving and receiving all other notices
and consents hereunder or under any of the other Loan Documents and taking all
other actions (including in respect of compliance with covenants) on behalf of
Borrowers under the Loan Documents. Borrower's Representative hereby accepts
such appointment. Lender may regard any notice or other communication pursuant
to any Loan Document from Borrower's Representative as a notice or communication
from all Borrowers, and may give any notice or communication required or
permitted to be given to Borrowers hereunder to Borrower's Representative on
behalf of such Borrowers. Borrowers agree that each notice, election,
representation and warranty, covenant, agreement and undertaking made on their
behalf by Borrower's Representative shall be deemed for all purposes to have
been made by all such Borrowers and shall be binding upon and enforceable
against all Borrowers to the same extent as if the same had been made directly
by each such Borrower.
1.4 Interest.
(a) Borrowers shall pay interest to Lender on all Loans made
hereunder, in arrears, on each applicable Interest Payment Date, at the rate of
fourteen percent (14%) per annum.
(b) If any payment on any Loan becomes due and payable on a day
other than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
(c) All computations of interest shall be made by Lender and
calculated on a per annum basis on the basis of a 360-day year, for the actual
number of days occurring in the period for which such interest is payable. Each
calculation by Lender of the interest payment due hereunder shall be presumptive
evidence of the correctness thereof.
(d) So long as an Event of Default has occurred and is continuing
under any Loan Document, the interest rates applicable to the Loans shall be
increased by five percentage points (5%) per annum above the rates of interest
otherwise applicable hereunder (the "DEFAULT RATE"), and all outstanding
Obligations shall bear interest at the Default Rate applicable to such
Obligations. Interest at the Default Rate shall accrue from the initial date of
such Event of Default until that Event of Default is cured or waived and shall
be payable upon demand. All interest payments owing hereunder or under any of
the other Loan Documents, including interest accruing at the Default Rate, shall
constitute additional Obligations hereunder and shall be secured by the
Collateral.
(e) All payments by Borrowers to Lender hereunder shall be made to
the following deposit account:
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Bank of America (LV, NV)
Medical Capital Corporation (Collection Acct for MPFC2)
Acct# 496-687-6714
ABA# 026009593
Address: 4795 S. Marilyn Parkway, Las Vegas, NV 89119-7621
Contact Person: Sal 888-852-5000 x6004
(e) Notwithstanding anything to the contrary set forth in this
Section 1.4, if a court of competent jurisdiction determines in a final order
that the rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the "MAXIMUM LAWFUL RATE"), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate. In no event shall the total interest
received by Lender pursuant to the terms hereof exceed the amount that such
Lender could lawfully have received had the interest due hereunder been
calculated for the full term hereof at the Maximum Lawful Rate. Any payments
made by Borrowers in excess of the Maximum Lawful Rate shall be considered
voluntary prepayments of the Loan under Section 1.2(a).
1.5 Cash Management Systems. On or prior to the Closing Date, Borrowers
will establish and will maintain until the Termination Date, the cash management
systems described in Annex B (the "CASH MANAGEMENT Systems"). The Cash
Management System will include mandatory provisions requiring the daily sweep of
cash from any deposit account into which any Borrower receives any payments or
reimbursements from a Governmental Authority to deposit accounts over which
Lender has an established control arrangement. It is understood and agreed by
Lender that it is not permitted under current federal regulations to acquire a
direct Lien in payments or reimbursements from Governmental Authorities nor in
the deposit account(s) into which Proceeds are deposited. However, to protect
Lender and the Liens granted to Lender and to Lender's Affiliate, Medical
Provider Financial Corporation I, by Borrowers, Borrowers have agreed to the
provisions of the Deposit Account Security Agreement and related Control
Agreements.
1.6 Fees.
(a) Concurrently with the execution and delivery of this Agreement
and as a condition to the funding of the Acquisition Loan, Borrowers shall pay
to Lender an origination fee in an amount equal to two percent (2%) of the
Commitment (Six Hundred Thousand Dollars ($600,000)), and two percent (2%) of
the Acquisition Loan (One Million Dollars ($1,000,000)) (together the
"ORIGINATION FEE"), to be payable out of Borrowers' own funds, which fee shall
be deemed earned in full upon receipt by Lender.
(b) Concurrently with the execution and delivery of this Agreement
and as a condition to the funding of the Acquisition Loan, Borrower shall pay
all costs paid or incurred by Lender to such date, including the attorneys' fees
and expenses of Lender's outside counsel (collectively, "LENDER'S COSTS").
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1.7 Receipt of Payments. Borrowers shall make each payment under this
Agreement not later than 2:00 p.m. (Nevada local time) on the day when due in
immediately available funds in Dollars to a Collection Account. For purposes of
computing interest as of any date, all payments shall be deemed received on the
Business Day on which immediately available funds therefore are received in a
Collection Account prior to 2:00 p.m. (Nevada local time). Payments received in
good and immediate funds after 2:00 p.m. Nevada local time on any Business Day
or on a day that is not a Business Day shall be deemed to have been received on
the following Business Day.
1.8 Application and Allocation of Payments.
(a) So long as no Event of Default has occurred and is continuing,
(i) scheduled monthly payments shall be applied first, to reimbursable expenses
of Lender then due and payable pursuant to any of the Loan Documents; second, to
interest then due and payable on outstanding Loans made to Borrowers; and last,
to the principal balance of the Loans outstanding to Borrowers until the same
has been paid in full; and (ii) voluntary prepayments and mandatory prepayments
shall be applied as set forth in Section 1.2(c). As to any other payment, and as
to all payments made when an Event of Default has occurred and is continuing or
following the Commitment Termination Date, Borrowers and all Credit Parties
hereby irrevocably waive the right to direct the application of any and all
payments received from or on behalf of Borrowers, and Borrowers hereby
irrevocably agree that Lender shall have the continuing exclusive right to apply
any and all such payments against the Obligations of Borrowers as Lender may
deem advisable notwithstanding any previous entry by Lender in the Loan Account
or any other books and records.
(b) Lender is authorized to, and in its sole and absolute discretion
may, charge to the Line of Credit Loan (which charges shall be deemed to be Line
of Credit Advances requested by Borrowers) on behalf of Borrowers and cause to
be paid all expenses, Charges, costs (including insurance premiums in accordance
with Section 5.4(a)) and interest and principal, other than principal of the
Loans owing by Borrower under this Agreement or any of the other Loan Documents
if and to the extent Borrowers fail to pay promptly any such amounts as and when
due. Such charge to the Line of Credit Loan shall not waive any Event of Default
due to Borrowers' non-payment, unless Lender, in its sole and absolute
discretion, agrees in writing. At Lender's option and to the extent permitted by
law, any charges so made shall constitute part of the Line of Credit Loan and
shall reduce the amount of the Line of Credit Commitment remaining available to
Borrowers, and shall be secured by the Collateral.
1.9 Loan Account and Accounting. Lender shall maintain a loan account (the
"LOAN ACCOUNT") on its books to record all Advances, all payments made by
Borrowers, and all other debits and credits as provided in this Agreement with
respect to the Loans or any other Obligations. All entries in the Loan Account
shall be made in accordance with Lender's customary accounting practices as in
effect from time to time. The balance in the Loan Account, as recorded on
Lender's most recent printout or other written statement, shall, absent
demonstrable error, be presumptive evidence of the amounts due and owing to
Lender by Borrower; provided that any failure to so record or any error in so
recording shall not limit or otherwise affect any Borrowers' duty to pay the
Obligations. Lender shall render to Borrower's Representative a monthly
accounting of transactions with respect to the Loans setting forth the balance
of the Loan Account as to Borrower for the immediately preceding month. Unless
Borrower's Representative notifies Lender in writing of any objection to any
such accounting (specifically describing the basis for such objection), within
thirty (30) days after the date of Borrower's Representative's receipt thereof,
each and every such accounting shall be presumptive evidence of all matters
reflected therein. Only those items expressly objected to in such notice and
explaining the basis for such objection(s) shall be deemed to be disputed by
Borrowers.
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1.10 Indemnity. Borrowers and each Credit Party shall jointly and
severally indemnify and hold harmless each of Lender and its Affiliates, and
each such Person's respective officers, directors, members, employees,
attorneys, agents, and representatives (each, an "INDEMNIFIED PERSON"), from and
against any and all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including reasonable attorneys' fees and disbursements
and other costs of investigation or defense, including those incurred upon any
appeal) that may be instituted or asserted against or incurred by any such
Indemnified Person as the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents and the
administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith, including any and all Environmental Liabilities
and legal costs and expenses arising out of or incurred in connection with
disputes between or among any parties to any of the Loan Documents
(collectively, "INDEMNIFIED LIABILITIES"); provided, that neither Borrowers nor
any Credit Party shall be liable for any indemnification to an Indemnified
Person to the extent that any such suit, action, proceeding, claim, damage,
loss, liability or expense results from that Indemnified Person's gross
negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR
LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD
PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. Notwithstanding anything
to the contrary contained in this Credit Agreement or in any other Loan
Document, the maximum liability of all Credit Parties as Credit Parties in the
aggregate shall be limited to One Million Dollars ($1,000,000); provided,
however, that such limitation shall not be applicable to each Credit Party's
individual liability for the payment and performance of any liabilities and
obligations under any other Loan Document (including any pledge agreement or
guaranty) to which such Credit Party is a direct party. With respect to the
liability of Credit Parties hereunder, Lender agrees to seek payment of any
financial Obligations (other than principal and interest payments) from
Borrowers but in the event Borrowers fail to pay within five (5) days, then
Lender shall be entitled to pursue its right to such payment from Borrowers
and/or Credit Parties. Lender further agrees that, with respect to any liability
or obligation of a Credit Party under this Credit Agreement or any other Loan
Document, Lender's only recourse shall be against the Credit Party itself and
any Collateral provided by the Credit Party. In this regard, Lender hereby
acknowledges that, except for distributions actually made by a Credit Party to
an Individual(s) (defined below), it is not looking to any constituent member or
other equity owner who is a natural person, or any manager, officer, director,
employee or other individual representative of any Credit Party ("INDIVIDUALS")
for recourse, and waives any rights it may have, by virtue of alter ego,
"piercing the veil," undercapitalization, failure to observe corporate or
limited liability company formalities, or any other legal theory, to pursue
causes of action under this Credit Agreement or any other Loan Document against
any of the Individuals.
9
1.11 Access. Each Borrower and each Credit Party shall, during normal
business hours, from time to time upon two (2) Business Days' prior notice as
frequently as Lender reasonably determines to be appropriate: (a) provide Lender
and any of its officers, employees and agents access to its properties,
facilities, advisors, officers and employees of each Borrower and Credit Party
and to the Collateral, (b) permit Lender, and any of its officers, employees and
agents, to inspect, audit and make extracts from each Borrower's and Credit
Party's respective books and records, and (c) permit Lender, and its officers,
employees and agents, to inspect, review, evaluate and make test verifications
and counts of the Collateral of any Credit Party. Any access under this Section
shall be granted and conducted only in compliance with all federal and
California state patient and medical record confidentiality laws. If an Event of
Default has occurred and is continuing, each such Credit Party shall provide
such access to Lender at all times and without advance notice. Furthermore, so
long as any Event of Default has occurred and is continuing, Borrowers shall use
commercially reasonable efforts to provide Lender with access to their suppliers
and customers. Each Borrower and each Credit Party shall make available to
Lender and its counsel reasonably promptly originals or copies of all books and
records that Lender may reasonably request. Each Borrower and each Credit Party
shall deliver any document or instrument necessary for Lender, as it may from
time to time reasonably request, to obtain records from any service bureau or
other Person that maintains records for such Borrower or Credit Party, and shall
maintain duplicate records or supporting documentation on media, including
computer tapes and discs owned by such Borrower or Credit Party.
1.12 Taxes.
(a) Any and all payments by Borrowers hereunder (including any
payments made pursuant to Section 12) or under the Acquisition Note and/or the
Line of Credit Note shall be made, in accordance with this Section 1.12, free
and clear of and without deduction for any and all present or future Taxes. If
Borrowers shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder (including any sum payable pursuant to Section 12) or
under such Notes, (i) the sum payable shall be increased as much as shall be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 1.12) Lender receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) Borrowers shall make such deductions, and (iii) Borrowers shall pay
the full amount deducted to the relevant taxing or other authority in accordance
with applicable law. Within thirty (30) days after the date of any payment of
Taxes, Borrower's Representative shall furnish to Lender the original or a
certified copy of a receipt evidencing payment thereof.
(b) Each Credit Party shall jointly and severally indemnify and,
within ten (10) calendar days of demand therefore, pay Lender for the full
amount of Taxes that Borrower is obligated to pay pursuant hereto (including any
Taxes imposed by any jurisdiction on amounts payable under this Section 1.12)
paid by Lender and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes were
correctly or legally asserted. Notwithstanding the foregoing, Lender remains
ultimately responsible for paying any and all income taxes measured by Lender's
own gross income.
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1.13 Capital Adequacy; Increased Costs; Illegality.
(a) If any law, treaty, governmental (or quasi-governmental) rule,
regulation, guideline or order regarding capital adequacy, reserve requirements
or similar requirements or compliance by Lender with any request or directive
compliance regarding capital adequacy, reserve requirements or similar
requirements (whether or not having the force of law), in each case, adopted
after the Closing Date, from any Governmental Authority increases or would have
the effect of increasing the amount of capital, reserves or other funds required
to be maintained by Lender and thereby reducing the rate of return on Lender's
capital as a consequence of its obligations hereunder, then Borrowers shall from
time to time upon demand by Lender pay to Lender additional amounts sufficient
to compensate Lender for such reduction. A certificate as to the amount of that
reduction and showing the basis of the computation thereof submitted by Lender
to Borrower's Representative shall be presumptive evidence of the matters set
forth therein.
(b) If, due to either (i) the introduction of or any change in any
law or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any Governmental Authority
(whether or not having the force of law), in each case adopted after the Closing
Date, there shall be any increase in the cost to Lender of agreeing to make or
making, funding or maintaining any Loan, then Borrowers shall from time to time,
upon demand by Lender pay to Lender additional amounts sufficient to compensate
Lender for such increased cost. A certificate as to the amount of such increased
cost, submitted to Borrower's Representative by Lender, shall be presumptive
evidence of the matters set forth therein. Lender agrees that, as promptly as
practicable after it becomes aware of any circumstances referred to above which
would result in any such increased cost, Lender shall, to the extent not
inconsistent with Lender's internal policies of general application, use
reasonable commercial efforts to minimize costs and expenses incurred by it and
payable to it by Borrower pursuant to this Section 1.13(b). No amounts due from
Borrower under Sections 1.13(a) and (b) shall be amounts attributable to
Lender's non-compliance with any requirement of any Governmental Authority.
1.14 Single Loan. All Loans to Borrowers and all of the other Obligations
of Borrowers arising under this Agreement and the other Loan Documents shall
constitute one general obligation of all Borrowers secured by the Liens on all
of the Collateral.
2. CONDITIONS PRECEDENT
2.1 Conditions Precedent to the Closing Date. Lender shall not be
obligated to take, fulfill, or perform any action hereunder on or after the
Closing Date until the following conditions precedent have been satisfied or
provided for in a manner satisfactory to Lender, in its sole discretion, or
waived in writing by Lender, it being understood that Lender shall consider a
constituent transaction referred to in this Section 2.1 to have been consummated
when all conditions precedent to such transaction have been satisfied or waived
and that the only remaining action is the funding of the Acquisition Loan and
the Initial Draw:
(a) Credit Agreement; Loan Documents. This Agreement or counterparts
hereof shall have been duly executed by and delivered to Lender by Borrowers and
each Credit Party; and Lender shall have received such documents, instruments,
agreements and legal opinions as Lender shall request in connection with the
transactions contemplated by this Agreement and the other Loan Documents,
including all those listed in the List of Schedules and Loan Documents attached
hereto as Annex E, each in form and substance satisfactory to Lender.
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(b) Asset Sale Agreement. The Asset Sale Agreement shall be in form
and substance satisfactory to Lender. Additionally, the transactions
contemplated by the Asset Sale Agreement shall have been fully consummated
including the satisfaction or written waiver of all conditions precedent (except
for the payment of the purchase price thereunder by the Purchaser and the
delivery and recording of the instruments, agreements, title insurance and deeds
assigning and conveying the assets to be acquired thereunder) based upon
delivery of evidence to Lender in form and substance satisfactory to Lender. All
conditions precedent for the benefit of IHHI as the purchaser thereunder shall
have been fully performed and none waived, without the prior written consent of
Lender.
(c) Transfer to PCHI. All conditions to the transfer of title to the
three Hospital Facilities (other than the Leased Hospital Facility) by IHHI to
PCHI shall have been fully satisfied or waived by the party entitled to the
benefit of such condition, except for funding of the Acquisition Loan and the
Initial Draw.
(d) Triple Net Lease. All conditions precedent to the lease back
transactions (except the funding of the Acquisition Loan and the Initial Draw
and the transfer of title to the three Hospital Facilities as contemplated by
Section 2.1(c) immediately above) by PCHI to IHHI of the Hospital Facilities
pursuant to the Triple Net Lease shall have been fully satisfied or waived in
writing by the party entitled to the benefit of such condition, based upon
documentation and delivery of evidence to Lender, in each case in form and
substance satisfactory to Lender. All conditions precedent for the benefit of
either IHHI or PCHI thereunder shall have been fully performed and none waived,
without the prior written consent of Lender.
(e) Lease of Leased Hospital Facility. All conditions precedent to
IHHI's acquisition of the Lessee's interest in two existing Leases for the
Leased Hospital Facility shall have been fully satisfied or waived in writing by
the party entitled to the benefit of such condition, based upon documentation
and delivery of evidence to Lender, in each case in form and substance
satisfactory to Lender.
(f) Three Hospital Facilities and Sub-Sublease of Leased Hospital
Facility. All conditions precedent to (i) IHHI's execution and delivery of the
subleases of each of the Three Hospital Facilities to its wholly-owned
Subsidiaries, WMC-SA, WMC-A, and Coastal, respectively, formed for each Hospital
Facility, and (ii) IHHI's sub-subleased of the Leased Hospital Facility to
Chapman, shall have been fully satisfied or waived in writing by the party
entitled to the benefit of such condition, based upon documentation and delivery
of evidence to Lender, in each case in form and substance satisfactory to
Lender.
(g) Approvals. Lender shall have received (i) satisfactory evidence
that the Credit Parties have obtained, or in the case of necessary Governmental
Authority approvals, have applied for, all required consents and approvals of
all Persons including all requisite Governmental Authorities, to the execution,
delivery and performance of (a) this Agreement and the other Loan Documents and
the consummation of the Related Transactions, and (ii) the consummation of the
Asset Sale Agreement, and the other transactions referenced in Sections 2.1(a)
through (f), inclusive, above. Schedule 2.1(g) attached hereto lists all
required consents and approvals of all Governmental Authorities and all other
Persons.
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(h) Payment of Fees and Costs. Borrowers shall have paid Lender for
all fees (including the Origination Fees on the Loans), and reimbursed Lender's
Costs for all costs and expenses of closing, including attorneys' fees and costs
and expenses of Lender, presented as of the Closing Date, and shall have agreed
to pay any such fees and expenses, including attorneys' fees and expenses
invoiced to Borrowers in care of Borrower's Representative after the Closing
Date within ten (10) days of the receipt of an invoice therefor.
(i) Capital Structure: Other Indebtedness. The capital structure of
each Credit Party, the ownership of each Credit Party, and the terms and
conditions of all Indebtedness of each Credit Party shall be acceptable to
Lender in its sole discretion.
(j) Due Diligence. Lender shall have completed its business and
legal due diligence.
(k) Closing Certified Cash. The Borrowers shall have Certified Cash
of not less than $5,000,000.
(l) Fairness opinion regarding Borrowers and the transactions
contemplated by the Asset Sale Agreement, and an allocation of fair value to
each Hospital Facility, in form and substance satisfactory to Lender.
(m) Copy of agreement among all Borrowers relating to the
proportionate sharing of common expenses.
(n) The Accounts Purchase Agreement shall have been fully executed
and delivered by the parties thereto.
(o) IHHI's membership interest in PCHI shall have been transferred
to West Coast and Ganesha.
(p) The execution and delivery of the Pledge Agreement by the
members of West Coast; provided, however, that West Coast has advised Lender
that although West Coast has approved the execution, delivery and performance of
the Pledge Agreement, because of the number of members, it will by physically
impossible to deliver a fully executed Pledge Agreement by such members on or
before the Closing Date. Accordingly, West Coast represents and warrants and
covenants to Lender that (i) Lender shall be entitled to rely upon such Pledge
Agreement in closing the Loan and entering into this Agreement, and (ii)
covenants to have the Pledge Agreement fully executed and delivered by its
members on or before March 15, 2005.
(o) The execution and delivery of the Guaranty Agreement by OC-PIN
to Lender.
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(p) The execution and delivery of the Guaranty Agreement by PCHI to
Lender.
(q) The execution and delivery of the Membership Pledge Agreement by
West Coast to Lender.
(r) The execution and delivery of the Membership Pledge Agreement by
Ganesha to Lender.
(s) Lender shall have received evidence satisfactory to it that IHHI
has received capital contributions of not less than Fifteen Million Dollars
($15,000,000).
2.2 Further Conditions to Loans. Notwithstanding any provision herein or
in any Loan Document to the contrary, the obligations of Lender to make any Loan
shall be subject to the following (in addition to the Closing Date having
occurred):
(a) Further Conditions to the Loans. Lender shall not be obligated
to make the Loans, unless and until the following conditions have been satisfied
or provided for in a manner reasonably satisfactory to Lender, or waived in
writing by Lender (such date, if any, on which such conditions have been so
satisfied or waived, the "INITIAL FUNDING DATE"):
(i) Loan Documents. All Loan Documents having been delivered
on or before the Initial Funding Date shall remain in full force and effect, and
Lender shall have received such further documents, instruments, agreements and
legal opinions as Lender shall reasonably request in connection with the
transactions contemplated by this Agreement and the other Loan Documents,
including all those listed in the List of Schedules and Loan Documents attached
hereto as Annex E, each in form and substance satisfactory to Lender.
(ii) Approvals. Lender shall have received (i) satisfactory
evidence (or, shall, in its reasonable discretion, continue to be satisfied with
such evidence received under Section 2.1(g)) that the Credit Parties have
obtained, or in the case of necessary Governmental Authority approvals, have
applied for, all required consents and approvals of all Persons including all
requisite Governmental Authorities, to the execution, delivery and performance
of this Agreement and the other Loan Documents to which they are parties or a
signatory and the consummation of the Related Transactions or (ii) an officer's
certificate signed by an executive officer of Borrowers in form and substance
satisfactory to Lender affirming that no such consents or approvals are
required.
(iii) Timing. Such Initial Funding Date shall have occurred on
or before March 3, 2005;
(iv) Payment of Fees. Borrowers shall have paid the Fees
required to be paid on or before the Initial Funding Date in the respective
amounts specified in Section 1.6, and shall have reimbursed Lender for all fees,
costs and expenses of closing presented as of the Initial Funding Date.
(v) Collateral. Lender shall have approved the Collateral.
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(vi) Satisfaction with Changes to Disclosure Schedules. Lender
shall be satisfied in its reasonable discretion with all updates to the
Disclosure Schedules as have been delivered to Lender on or before the Initial
Funding Date.
(vii) Initial Certified Cash. The Credit Parties shall have
Certified Cash of not less than $5,000,000.
(viii) PCHI shall have caused its Operating Agreement to be
amended in accordance with the provisions of Section 6.14 hereof.
(ix) No event or circumstance shall have occurred that has or
reasonably could be expected to have a Material Adverse Effect.
(b) Further Conditions to Each Loan. Except as otherwise expressly
provided herein, Lender shall not be obligated to fund any Advance if, as of the
date thereof:
(i) any representation or warranty by any Credit Party
contained herein or in any other Loan Document is untrue or incorrect as of such
date, except to the extent that such representation or warranty expressly
relates to an earlier date, and Lender shall have determined not to make such
Advance as a result of the fact that such warranty or representation is untrue
or incorrect;
(ii) any Default or Event of Default has occurred and is
continuing or would result after giving effect to any Advance and Lender shall
have determined not to make any Advance as a result of that Default or Event of
Default; and
(iii) any event or circumstance shall have occurred that has
or reasonably could be expected to have a Material Adverse Effect.
The request and acceptance by any Borrower of the proceeds of any Advance or the
benefit of any Advance shall be deemed to constitute, as of the date thereof,
(i) a representation and warranty by Borrower that the conditions precedent in
this Section 2.2 have been satisfied and (ii) a reaffirmation by each Credit
Party of its obligations under the Loan Documents to which it is a party or a
signatory and of the granting and continuance of Lender's Liens pursuant to the
Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loans, Borrowers and the Credit Parties
executing this Agreement, jointly and severally, make the following
representations and warranties to Lender with respect to all Borrowers and
Credit Parties, each and all of which shall survive the execution and delivery
of this Agreement (it being understood, that, for purposes of any representation
and warranty expressly made as of the Closing Date and the Initial Funding Date
with reference to, or qualified by, a Disclosure Schedule, such reference shall
include such updated version, if any, of such Disclosure Schedule as may be made
effective (including by consent of Lender) pursuant to Section 5.6 on or before
the Initial Funding Date). Each representation and warranty shall be made on the
basis of the Asset Sale Agreement having been consummated.
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3.1 Corporate Existence; Compliance with Applicable Laws. Each Borrower
and each Credit Party (a) is a corporation, limited liability company or limited
partnership duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation or organization set forth in
Disclosure Schedule 3.1; (b) is duly qualified to conduct business and is in
good standing in each other jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified would not result in exposure to losses or
liabilities which could reasonably be expected to have a Material Adverse
Effect; (c) has the requisite power and authority and the legal right to own,
pledge, mortgage, or otherwise encumber and operate its properties, to lease the
property it operates under lease and to conduct its business as now conducted or
proposed to be conducted; (d) subject to specific representations regarding
Environmental Laws, has or has applied for all licenses, permits, consents or
approvals from or by, and has made all material filings with, and has given all
notices to, all Governmental Authorities having jurisdiction, to the extent
required for such ownership, operation and conduct; (e) is in compliance with
its charter and bylaws or partnership or operating agreement, as applicable; and
(f) subject to specific representations set forth herein regarding ERISA,
Environmental Laws, tax and other laws, is in compliance with all other
Applicable Laws. As of the Closing, IHHI is the sole member of PCHI prior to the
transfer of all of the membership interests in PCHI to West Coast and Ganesha.
3.2 Executive Offices, Collateral Locations, FEIN. As of each of the
Closing Date and the Initial Funding Date, each Borrower's and each Credit
Party's name as it appears in official filings in its state of incorporation or
organization, organization type, organization number, if any, issued by its
state incorporation or organization, and the current location of each Borrower's
and each Credit Party's chief executive office and the premises at which any
Collateral is located are set forth in Disclosure Schedule 3.2, none of such
locations has changed within the four (4) months preceding the Closing Date and
each Credit Party has only one state of incorporation or organization. In
addition, Disclosure Schedule 3.2 lists the federal employer identification
number of each Borrower and each Credit Party.
3.3 Corporate Power, Authorization, Enforceable Obligations. The
execution, delivery and performance by each Borrower and each Credit Party of
the Loan Documents to which it is a party and the creation of all Liens provided
for therein: (a) are within such Person's power; (b) have been duly authorized
by all necessary corporate, limited liability company or limited partnership
action; (c) do not contravene any provision of such Person's charter, bylaws or
partnership or operating agreement as applicable; (d) do not violate any law or
regulation, or any order or decree of any court or Governmental Authority; (e)
do not conflict with or result in the breach or termination of, constitute a
default under or accelerate or permit the acceleration of any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Person is a party or by which such Person or any of its
property is bound; (f) do not result in the creation or imposition of any Lien
upon any of the property of such Person other than those in favor of Lender
pursuant to the Loan Documents; and (g) do not require the consent or approval
of any Governmental Authority or any other Person, except those referred to in
Section 2.1(g), all of which will have been duly obtained, made or complied with
prior to the Closing Date. Each of the Loan Documents shall be duly executed and
delivered by each Borrower and each Credit Party that is a party thereto and
each such Loan Document shall constitute a legal, valid and binding obligation
of each such Borrower and each such Credit Party enforceable against it in
accordance with its terms.
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3.4 Financial Statements and Projections. Except for the Projections, all
Financial Statements concerning Borrowers and their respective Subsidiaries, if
any, that are referred to below have been prepared in accordance with GAAP
consistently applied throughout the periods covered (except as disclosed therein
and except, with respect to unaudited Financial Statements, for the absence of
footnotes and normal year-end audit adjustments) and present fairly in all
material respects the financial position of the Persons covered thereby as at
the dates thereof and the results of their operations and cash flows for the
periods then ended.
(a) Financial Statements. The Financial Statements which have been
delivered by Borrower to Lender on or before the date hereof are comprised of:
(i) The audited consolidated and unaudited consolidating
balance sheets at December 31, 2004, and the related statements of income and
cash flows of Borrowers for the Fiscal Year then ended.
(ii) The unaudited balance sheet(s) at June 30, 2004 and the
related consolidated statement(s) of income and cash flows of Borrower for the
two Fiscal Quarters then ended.
(b) Pro Forma. The pro forma financial statements which have been
delivered by Borrowers to Lender on or before the date hereof were prepared by
Borrowers giving pro forma effect to the Related Transactions, was based on the
unaudited consolidated and consolidating balance sheets of Borrowers and their
Subsidiaries, and were prepared in accordance with GAAP (to the extent
applicable), with only such adjustments thereto as would be required in
accordance with GAAP.
(c) Projections. All Projections which have been delivered by
Borrowers to Lender on the date hereof were prepared by Borrowers in light of
IHHI's past experience and a review of the financial statements provided by
Seller with respect to each Hospital Facility, but including reasonably
estimated future payments of known contingent liabilities, and reflect
projections on a quarterly basis for the 2005 Fiscal Year and on an annual basis
for all periods thereafter through 2007. The Projections are based upon the same
accounting principles as those used in the preparation of the financial
statements described above with certain normalizing assumptions made by
Borrowers, and the estimates and assumptions stated therein, all of which
Borrowers believe to be reasonable and fair in light of current conditions and
current facts known to Borrowers and, as of the Closing Date, reflect Borrowers'
good faith and reasonable estimates of the future financial performance of
Borrowers for the period set forth therein.
3.5 Material Adverse Effect. Between the respective dates of organization
or formation for each Borrower and each Credit Party, and the Closing Date (and
between the Closing Date and the Initial Funding Date, if they are not the same
date): (a) to the best of each Borrower's knowledge, after due inquiry, and to
the best of each Credit Party's knowledge, there has not been any material
increase in contingent or noncontingent liabilities, liabilities for Charges, or
obligations with respect to long-term leases or unusual forward or long-term
commitments, in each case of each Borrower considered as a whole, (b) to the
best of each Borrower's knowledge, after due inquiry, and to the best of each
Credit Party's knowledge, there has not been any material decrease in the assets
of each Borrower or Credit Party, considered as a whole, (c) no contract, lease
or other agreement or instrument has been entered into by any Borrower or Credit
Party or has become binding upon any Borrower's or Credit Party's assets and, to
the knowledge of any Borrower or Credit Party, no law or regulation applicable
to any Borrower or any Credit Party or has been adopted that has had or could
reasonably be expected to have a Material Adverse Effect, (d) no Borrower or
Credit Party is in default and to the best of each Borrower's knowledge, after
due inquiry, and to the best of each Credit Party's knowledge, no third party is
in default under any material contract, lease or other agreement or instrument,
that alone or in the aggregate could reasonably be expected to have a Material
Adverse Effect. As of the date of this Agreement, to the best of each Borrower's
knowledge, after due inquiry, and to the best of each Credit Party's knowledge,
no event has occurred, that alone or together with other events, has had, or
could reasonably be expected to have, a Material Adverse Effect.
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3.6 Ownership of Collateral; Liens. As of the Closing Date, each Borrower
and each Credit Party owns or, after giving effect to the transactions
contemplated by the Asset Sale Agreement and those transactions described in the
Recitals to this Agreement, will own good and marketable title to all of its
Collateral. As of each of the Closing Date and the Initial Funding Date, none of
the Collateral is subject to any Liens other than Permitted Encumbrances, and
there are no facts, circumstances or conditions known to any Borrower or any
Credit Party that may result in any Liens (including Liens arising under
Environmental Laws or other Applicable Laws) other than Permitted Encumbrances.
Schedule 3.6 attached hereto sets forth a list of all real estate and leases
Borrowers will own or hold immediately after the Closing Date.
3.7 Labor Matters. Except as set forth on Disclosure Schedule 3.7, as of
each of the Closing Date and the Initial Funding Date, (a) no strikes or other
material labor disputes against any Borrower or any Credit Party are pending or,
to any Borrower's or Credit Party's knowledge, threatened; (b) hours worked by
and payment made to employees of each Credit Party comply with the Fair Labor
Standards Act and other Applicable Laws; (c) all payments due from any Borrower
or Credit Party for employee health and welfare insurance have been paid or
accrued as a liability on the books of such Credit Party; (d) no Borrower or
Credit Party is a party to or bound by any collective bargaining agreement,
management agreement, consulting agreement, employment agreement, bonus,
restricted stock, stock option, or stock appreciation plan or agreement or any
similar plan, agreement or arrangement unless true and complete copies of any
agreements described on Disclosure Schedule 3.7 have been delivered to Lender);
(e) there is no organizing activity involving any Borrower or any Credit Party
pending or, to any Borrower's or any Credit Party's knowledge, threatened by any
labor union or group of employees; (f) except as otherwise disclosed on
Disclosure Schedule 3.7, there are no representation proceedings pending or, to
any Borrower's or any Credit Party's knowledge, threatened with the National
Labor Relations Board, and no labor organization or group of employees of any
Borrower or any Credit Party has made a pending demand for recognition; and (g)
there are no material complaints or charges against any Borrower or any Credit
Party pending or, to the knowledge of any Borrower or any Credit Party,
threatened to be filed with any Governmental Authority or arbitrator based on,
arising out of, in connection with, or otherwise relating to the employment or
termination of employment by any Borrower or any Credit Party of any individual.
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in Disclosure Schedule 3.8, as of each of the
Closing Date and the Initial Funding Date, no Borrower (except IHHI) or any
Credit Party has any Subsidiaries (which is not a Credit Party), is engaged in
any joint venture or partnership with any other Person, or is an Affiliate of
any other Person. All of the issued and outstanding Stock of each Borrower and
each Credit Party is owned by each of the Shareholders and in the amounts set
forth in Disclosure Schedule 3.8. Except as set forth in Disclosure Schedule
3.8, as of each of the Closing Date and the Initial Funding Date, there are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Borrower or any Credit Party may be required to
issue, sell, repurchase or redeem any of its Stock or other equity securities or
any Stock or other equity securities of its Subsidiaries. All outstanding
Indebtedness and Guaranteed Indebtedness of each Borrower and each Credit Party
as of each of the Closing Date and the Initial Funding Date is identified and
permitted under Section 6.3, and all outstanding Funded Debt of each Credit
Party as of each of the Closing Date and the Initial Funding Date (except for
the Obligations) is described in Disclosure Schedule 6.3.
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3.9 Government Regulation. No Borrower or Credit Party is an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940. No Borrower or Credit Party is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, or any
other federal or state statute that restricts or limits its ability to incur
Indebtedness or to perform its obligations hereunder. The making of the Loans by
Lender to Borrowers, the application of the proceeds thereof and repayment
thereof and the consummation of the Related Transactions will not violate any
provision of any such statute or any rule, regulation or order issued by the
Securities and Exchange Commission or other Applicable Laws binding on any
Borrower or on any Credit Party.
3.10 Margin Regulations. No Borrower or Credit Party is engaged, nor will
it engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" as such terms are defined in Regulation U of the Federal Reserve Board as
now and from time to time hereafter in effect (such securities being referred to
herein as "Margin Stock"). No Borrower or Credit Party owns any Margin Stock,
and none of the proceeds of the Loans or other extensions of credit under this
Agreement will be used, directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock, for the purpose of reducing or retiring any
Indebtedness that was originally incurred to purchase or carry any Margin Stock
or for any other purpose that might cause any of the Loans or other extensions
of credit under this Agreement to be considered a "purpose credit" within the
meaning of Regulations T, U or X of the Federal Reserve Board. No Borrower or
Credit Party will take or permit to be taken any action that might cause any
Loan Document to violate any regulation of the Federal Reserve Board.
3.11 Taxes. Except as described in Disclosure Schedule 3.11, all Federal
and other material tax returns, reports and statements, including information
returns, required by any Governmental Authority to be filed by any Borrower or
by any Credit Party have been filed with the appropriate Governmental Authority,
and all Charges have been paid prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment thereof excluding
Charges or other amounts being contested in accordance with Section 5.2(b) and
unless the failure to so file or pay would not reasonably be expected to result
in fines, penalties or interest in excess of $100,000 in the aggregate. Proper
and accurate amounts have been withheld by each Borrower and each Credit Party
from its respective employees for all periods in full and complete compliance
with all applicable federal, state, local and foreign laws and such withholdings
have been timely paid to the respective Governmental Authorities. Disclosure
Schedule 3.11 sets forth as of the Closing Date and the Initial Funding Date
those taxable years for which any Borrower or any Credit Party's tax returns are
currently being audited by the IRS or any other applicable Governmental
Authority, and any assessments or threatened assessments in connection with such
audit, or otherwise currently outstanding. Except as described in Disclosure
Schedule (3.11), as of the Closing Date and the Initial Funding Date, no
Borrower or Credit Party has executed or filed with the IRS or any other
Governmental Authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any Charges.
None of the Borrowers or Credit Parties are liable for any Charges: (a) under
any agreement (including any tax sharing agreements) or (b) to each Borrower's
and each Credit Party's knowledge, as a transferee. As of the Closing Date and
the Initial Funding Date, no Borrower or Credit Party has agreed or been
requested to make any adjustment under IRC Section 481(a), by reason of a change
in accounting method or otherwise.
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3.12 ERISA.
(a) Disclosure Schedule 3.12 lists, as of the Closing Date and the
Initial Funding Date, for each Borrower (i) all ERISA Affiliates and (ii) all
Plans and separately identifies all Pension Plans, including Title IV Plans,
Multiemployer Plans, and all Retiree Welfare Plans. Copies of all such listed
Plans have been delivered to Lender. Except with respect to Multiemployer Plans,
each Qualified Plan has been determined by the IRS to qualify under Section 401
of the IRC, the trusts created thereunder have been determined to be exempt from
tax under the provisions of Section 501 of the IRC, and nothing has occurred
that would cause the loss of such qualification or tax-exempt status. Each Plan
is in compliance in all material respects with the applicable provisions of
ERISA, the IRC and its terms, including the timely filing of all reports
required under the IRC or ERISA. No Borrower nor ERISA Affiliate has failed to
make any material contribution or pay any material amount due as required by
either Section 412 of the IRC or Section 302 of ERISA or the terms of any such
Plan. No "prohibited transaction," as defined in Section 406 of ERISA and
Section 4975 of the IRC, has occurred with respect to any Plan, that would
subject any Borrower to a material tax on prohibited transactions imposed by
Section 502(i) of ERISA or Section 4975 of the IRC.
(b) Except as set forth in Disclosure Schedule 3.12: (i) no Title IV
Plan has any material Unfunded Pension Liability; (ii) no ERISA Event has
occurred or is reasonably expected to occur; (iii) there are no pending, or to
the knowledge of any Borrower, threatened material claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or
instituted against any Plan or any Person as fiduciary or sponsor of any Plan;
(iv) no Borrower or ERISA Affiliate has incurred or reasonably expects to incur
any material liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; and (v) within the last five years no Title IV Plan of any
Borrower or ERISA Affiliate has been terminated, whether or not in a "standard
termination" as that term is used in Section 4041 of ERISA, nor has any Title IV
Plan of any Borrower or any ERISA Affiliate (determined at any time within the
last five years) with material Unfunded Pension Liabilities been transferred
outside of the "controlled group" (within the meaning of Section 4001(a)(14( of
ERISA) of any Borrower or ERISA Affiliate (determined at such time).
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3.13 No Litigation. Except as set forth in Disclosure Schedule 3.13, no
action, claim, lawsuit, demand, investigation or proceeding is now pending or,
to the knowledge of any Borrower or any Credit Party, threatened against any
Borrower or any Credit Party, before any Governmental Authority or before any
arbitrator or panel of arbitrators (collectively, "LITIGATION"), (a) that
challenges the Seller's execution, delivery and performance of the Asset Sale
Agreement, or any Borrower or any Credit Party's right or power to enter into or
perform any of its obligations under the Loan Documents to which it is a party,
or the validity or enforceability of any Loan Document or any action taken
thereunder, or (b) that has a reasonable risk of being determined adversely to
any Borrower or any Credit Party and that, if so determined, could reasonably be
expected to have a Material Adverse Effect. Except as set forth on Disclosure
Schedule 3.13, as of the Closing Date and the Initial Funding Date there is no
Litigation pending or, to any Credit Party's knowledge, threatened, that seeks
damages in excess of One Hundred Thousand Dollars ($100,000) or injunctive
relief against, or alleges criminal misconduct of, any Credit Party.
3.14 Brokers. Except as set forth on Disclosure Schedule 3.14, no broker
or finder brought about the obtaining, making or closing of the Loans or the
Related Transactions, and no Credit Party or Affiliate thereof has any
obligation to any Person in respect of any finder's or brokerage fees in
connection therewith.
3.15 Intellectual Property. As of each of the Closing Date and the Initial
Funding Date, each Borrower and each Credit Party owns or has rights to use all
Intellectual Property necessary to continue to conduct its business as now
conducted by it or presently proposed to be conducted by it, and each Patent,
Trademark, registered Copyright and License is listed, together with application
or registration numbers, as applicable, in Disclosure Schedule 3.15. Each
Borrower and each Credit Party conducts its business and affairs without
infringement of or interference with any Intellectual Property of any other
Person which could reasonably be expected to have a Material Adverse Effect.
Except as set forth in Disclosure Schedule 3.15, no Borrower or Credit Party is
aware of any material infringement claim by any other Person with respect to any
Intellectual Property.
3.16 Full Disclosure. All representations and warranties made in any of
the Loan Documents by any Borrower or any Credit Party shall be made after
giving full effect to the transactions contemplated in the Asset Sale Agreement,
the Triple Net Lease, and the other transactions described in the Recitals to
this Agreement, to the extent applicable. No information contained in this
Agreement, any of the other Loan Documents, Financial Statements or Collateral
Reports or other written reports from time to time prepared by any Borrower or
any Credit Party and delivered hereunder or any written statement prepared by
any Credit Party and furnished by or on behalf of any Borrower or any Credit
Party to Lender pursuant to the terms of this Agreement contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. Projections
from time to time delivered hereunder are or will be based upon the estimates
and assumptions stated therein, all of which Borrowers and Credit Parties
believed at the time of delivery to be reasonable and fair in light of current
conditions and current facts known to Borrowers s as of such delivery date, and
reflect Borrowers' and Credit Parties' good faith and reasonable estimates of
the future financial performance of Borrowers and Credit Parties, respectively,
and of the other information projected therein for the period set forth therein.
The Liens granted to Lender pursuant to the Collateral Documents will at all
times be fully perfected first priority Liens in and to the Collateral described
therein, subject, as to priority, only to Permitted Encumbrances.
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3.17 Environmental Matters.
(a) Except as set forth in Disclosure Schedule 3.17, as of each of
the Closing Date and the Initial Funding Date, to their knowledge: (i) the
Borrowers and the Credit Parties are and have been in compliance with all
Environmental Laws, except for such noncompliance that would not result in
Environmental Liabilities which could reasonably be expected to exceed $100,000;
(ii) the Borrowers and the Credit Parties have obtained, and are in compliance
with, all Environmental Permits required by Environmental Laws for the
operations of their respective businesses as presently conducted or as proposed
to be conducted, except where the failure to so obtain or comply with such
Environmental Permits would not result in Environmental Liabilities that could
reasonably be expected to exceed $100,000, and all such Environmental Permits
are valid, uncontested and in good standing; (iii) no Borrower or Credit Party
is involved in operations or knows of any facts, circumstances or conditions,
including any Releases of Hazardous Materials, that are likely to result in any
Environmental Liabilities of such Credit Party which could reasonably be
expected to exceed $100,000; (iv) there is no Litigation arising under or
related to any Environmental Laws, Environmental Permits or Hazardous Material
that seeks damages, penalties, fines, costs or expenses in excess of $100,000 or
injunctive relief against, or that alleges criminal misconduct by, any Borrower
or any Credit Party; and (v) no notice has been received by any Borrower or any
Credit Party identifying it as a "potentially responsible party" or requesting
information under CERCLA or analogous state statutes, and to the knowledge of
the Borrowers and the Credit Parties, there are no facts, circumstances or
conditions that may result in any Borrower or any Credit Party being identified
as a "potentially responsible party" under CERCLA or analogous state statutes.
(b) Each Borrower and each Credit Party hereby acknowledges and
agrees that Lender (i) is not now, and has not ever been, in control of any of
such Borrower's or such Credit Party's assets (including its real estate) or any
Borrower's or Credit Party's affairs, and (ii) does not have the capacity
through the provisions of the Loan Documents or otherwise to influence any
Borrower's or any Credit Party's conduct with respect to the ownership,
operation or management of any of its real estate or compliance with
Environmental Laws or Environmental Permits.
3.18 Insurance. Disclosure Schedule 3.18 lists all insurance policies of
any nature maintained, as of each of the Closing Date and the Initial Funding
Date, for current occurrences by each Borrower and each Credit Party, as well as
a brief description thereof.
3.19 Deposit and Disbursement Accounts. Disclosure Schedule 3.19 lists all
banks and other financial institutions at which each Borrower and each Credit
Party maintains deposit, commodities, investment or other accounts as of each of
the Closing Date and the Initial Funding Date, including any Disbursement
Accounts, and such Schedule correctly identifies the name, address and telephone
number of each depository, the name in which the account is held, a description
of the purpose of the account, and the complete account number therefor. The
Disclosure Schedule shall identify which deposit accounts of each entity are
used to receive Governmental Authority payments.
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3.20 Vendor Relations. As of each of the Closing Date and the Initial
Funding Date, there exists no actual or, to the knowledge of any Borrower or any
Credit Party, threatened termination or cancellation of, or any material adverse
modification or change in the business relationship of any Borrower or any
Credit Party with any supplier essential to its operations. As of the Closing
Date and at all times during the term of this Agreement, Borrowers shall be a
party to the Group Purchasing Contract.
3.21 Bonding; Licenses. Except as set forth on Disclosure Schedule 3.21,
as of the Closing Date and the Initial Funding Date, no Borrower or any Credit
Party is a party to or bound by any material surety bond agreement or material
bonding requirement with respect to products or services sold by it or any
trademark or patent license agreement with respect to products sold by it.
3.22 Solvency. Both before and after giving effect to (a) the Loans to be
made or incurred on the Initial Funding Date or such other date as Loans are
made or incurred, (b) the disbursement of the proceeds of such Loans pursuant to
the instructions of Borrower's Representative; (c) the consummation of the other
Related Transactions; and (d) the payment and accrual of all transaction costs
in connection with the foregoing, the Borrowers, taken as a whole, are and will
be Solvent.
3.23 WARN Act. Both IHHI and Seller are in full compliance with the
requirements of the Worker Adjustment and Retraining Notification Act, 29 U.S.C.
2101, et seq., as amended (the "WARN ACT"), and the California version of the
WARN Act, California Cal. Labor Code ss.1400 et seq.
3.24 Hart Scott Rodino Act. Both IHHI and Seller are in full compliance
with the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, 15 U.S.C. Section 18a (Section 7A of the Clayton Act).
3.25 Incorporation of Certain Representations and Warranties.
(a) Reference is hereby made to the following Sections of the Asset
Sale Agreement and to the corresponding disclosure schedules delivered in
connection therewith: Section 2.1 (Authorization), Section 2.2 (Binding
Agreement), Section 2.3 (Organization and Good Standing; No Violation), Section
2.4 (Contracts and Leases), Section 2.5 (Required Consents), Section 2.6
(Compliance with Laws and Contracts), Section 2.7 (Title Sufficiency), Section
2.8 (Certain Representations With Respect to the Hospitals), Section 2.9
(Brokers and Finders), Section 2.10 (Financial Statements), Section 2.11 (Legal
Proceedings), Section 2.12 (Employee Benefits), Section 2.13 (Personnel),
Section 2.14 (Insurance), Section 2.15 (Solvency), Section 2.16 (Taxes), and
Section 2.18 (Independent Auditor). The Borrowers and the Credit Parties hereby
represent and warrant to Lender that, based upon due inquiry and following the
completion of the Borrowers' and the Credit Parties' due diligence with respect
to Seller and the Hospital Facilities, they have no actual knowledge that any of
the listed representations and warranties are incomplete, inaccurate or
misleading in any material respect.
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(b) Reference is hereby made to the following Sections of the Asset
Sale Agreement and to the corresponding disclosure schedules delivered in
connection therewith: Section 3.1 (Authorization), Section 3.2 (Binding
Agreement), Section 3.3 (Organization and Good Standing), Section 3.4 (No
Violation), Section 3.5 (Brokers and Finders), Section 3.7 (Legal Proceedings),
Section 3.8 (No Knowledge of Seller's Breach), Section 3.9 (Ability to Perform),
Section 3.10 (Solvency), and Section 3.11 (Independent Auditor). The Borrowers
and the Credit Parties hereby represent and warrant to Lender that all such
representations and warranties are true, correct, complete and accurate as of
the date hereof.
3.26 Breach of Asset Sale Agreement. None of the Borrowers or the Credit
Parties is aware of any breach by either Seller or IHHI under the Asset Sale
Agreement, nor of any circumstances which, with the giving of notice or the
passage of time, would ripen into a breach by either party thereunder.
3.27 Operating Permits, Licenses and Consents. Immediately following the
full consummation of the transactions contemplated by the Asset Sale Agreement
and this Agreement, Borrowers shall have sufficient Governmental Authority
operating permits, licenses and consents necessary to fully operate the Hospital
Facilities in the same manner as they were operating by the entities comprising
Seller prior to the consummation of the Asset Sale Agreement.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices.
(a) Each Borrower and each Credit Party executing this Agreement
hereby agrees that from and after the Closing Date and until the Termination
Date, it shall deliver to Lender, the Financial Statements, notices, Projections
and other information at the times, to the Persons and in the manner set forth
in Annex D.
(b) Each Borrower hereby agrees that, from and after the Closing
Date and until the Termination Date, it shall deliver to Lender, the various
Collateral Reports and other reports at the times, to the Persons and in the
manner set forth in Annex D including all certifications required with respect
to Certified Cash balances.
4.2 Communication with Accountants. Each Borrower and each Credit Party
executing this Agreement authorizes Lender, and so long as an Event of Default
has occurred and is continuing, following reasonable notice to Borrowers, to
communicate directly with its independent certified public accountants, and
authorizes and shall instruct those accountants to communicate to Lender any and
all financial statements and supporting financial documentation relating to any
Borrower or any Credit Party with respect to the business, results of operations
and financial condition of any Borrower or any Credit Party.
5. AFFIRMATIVE COVENANTS
Each Borrower and each Credit Party executing this Agreement jointly and
severally agrees as to all Credit Parties that from and after the date hereof
and until the Termination Date:
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5.1 Maintenance of Existence and Conduct of Business. Each Borrower and
each Credit Party shall do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence and its material
rights; continue to conduct its business substantially as conducted prior to the
Closing Date, anticipated to be conducted, or as otherwise permitted hereunder;
at all times maintain, preserve and protect all of its assets and properties
necessary to the conduct of its business, and keep the same in good repair,
working order and condition in all material respects (taking into consideration
ordinary wear and tear) and from time to time make, or cause to be made, all
necessary or appropriate repairs, replacements and improvements thereto
consistent with industry practices.
5.2 Payment of Charges.
(a) Subject to Section 5.2(b), each Borrower and each Credit Party
shall pay and discharge or cause to be paid and discharged promptly all Charges
payable by it, including (i) Charges imposed upon it, its income and profits, or
any of its property (real, personal or mixed) and all Charges with respect to
Taxes, social security and unemployment withholding with respect to its
employees, (ii) lawful claims for labor, materials, supplies and services or
otherwise, and (iii) all storage or rental charges payable to warehousemen or
bailees in possession of any Collateral, in each case, before any thereof shall
become past due, except in the case of clauses (ii) and (iii) where the failure
to pay or discharge such Charges would not result in aggregate liabilities in
excess of $100,000.
(b) Each Borrower and each Credit Party may in good faith contest,
by appropriate proceedings, the validity or amount of any Charges, Taxes or
claims described in Section 5.2(a); provided, that (i) adequate reserves with
respect to such contest are maintained on the books of such Borrower and such
Credit Party, in accordance with GAAP; (ii) no Lien shall be imposed to secure
payment of such Charges (other than payments to warehousemen and/or bailees)
that is superior to any of the Liens securing the Obligations and such contest
is maintained and prosecuted continuously and with diligence and operates to
suspend collection or enforcement of such Charges; (iii) none of the Collateral
becomes subject to forfeiture or loss as a result of such contest; and (iv) such
Borrower and such Credit Party shall promptly pay or discharge such contested
Charges, Taxes or claims and all additional charges, interest, penalties and
expenses, if any, and shall deliver to Lender evidence reasonably acceptable to
Lender of such compliance, payment or discharge, if such contest is terminated
or discontinued adversely to such Borrower and such Credit Party or the
conditions set forth in this Section 5.2(b) are no longer met.
5.3 Books and Records. Each Borrower and each Credit Party shall keep
adequate books and records with respect to its business activities in which
proper entries, reflecting all financial transactions, are made in accordance
with GAAP (except as otherwise disclosed on the Financial Statements).
5.4 Insurance; Damage to or Destruction of Collateral.
(a) The Borrowers shall, at their sole cost and expense, maintain
the policies of insurance described on Disclosure Schedule 3.18 as in effect on
the date hereof or may obtain and maintain other policies of insurance in form
and amounts and with insurers reasonably acceptable to Lender. All policies of
insurance (or the loss payable and additional insured endorsements delivered to
Lender) that relate to coverage involving the Collateral shall contain
provisions pursuant to which the insurer agrees to provide thirty (30) days
prior written notice to Lender in the event of any non-renewal, cancellation or
amendment of any such insurance policy. If any Borrower at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above, or to pay all premiums relating thereto, Lender may at any time
or times thereafter obtain and maintain such policies of insurance and pay such
premiums and take any other action with respect thereto that Lender deems
advisable. Lender shall have no obligation to obtain insurance for any Borrower
or pay any premiums therefor. By doing so, Lender shall not be deemed to have
waived any Default or Event of Default arising from any Borrower's failure to
maintain such insurance or pay any premiums therefore. All sums so disbursed,
including reasonable attorneys' fees, court costs and other charges related
thereto, shall be payable on demand by Borrowers to Lender and shall be
additional Obligations hereunder secured by the Collateral, and shall bear
interest at the Default Rate until paid in full to Lender.
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(b) Lender reserves the right at any time upon any change in any
Borrower's risk profile (including any laws affecting the potential liability of
such Borrower) to require additional forms and limits of insurance to, in
Lender's reasonable opinion, adequately protect Lender's interests and Lien in
all or any portion of the Collateral and to ensure that each Borrower is
protected by insurance in amounts and with coverage customary for its industry.
If reasonably requested by Lender, each Borrower shall deliver to Lender from
time to time a report of a reputable insurance broker, reasonably satisfactory
to Lender, with respect to its insurance policies.
(c) Each Borrower shall deliver to Lender, in form and substance
reasonably satisfactory to Lender, endorsements to all general liability and
other liability policies naming Lender, as additional insured. Each Borrower
irrevocably makes, constitutes and appoints Lender (and all officers, employees
or Lenders designated by Lender), so long as any Default or Event of Default has
occurred and is continuing, as such Borrower's true and lawful Lender and
attorney-in-fact for the purpose of making, settling and adjusting claims under
all policies of insurance relating to coverage of the Collateral, endorsing the
name of such Borrower on any check or other item of payment for the proceeds of
such policies of insurance and for making all determinations and decisions with
respect to such policies of insurance. Lender shall have no duty to exercise any
rights or powers granted to it pursuant to the foregoing power-of-attorney.
Borrower's Representative shall promptly notify Lender of any loss, damage, or
destruction to the Collateral in the amount of $250,000 or more, whether or not
covered by insurance. After deducting from such proceeds (i) the expenses
incurred by Lender in the collection or handling thereof, and (ii) amounts
required to be paid to creditors (other than Lender) having Permitted
Encumbrances, Lender may, at its option, apply such proceeds to the reduction of
the Obligations in accordance with Section 1.2(c). Notwithstanding the
foregoing, if the casualty giving rise to such insurance proceeds could not
reasonably be expected to have a Material Adverse Effect, Lender shall permit
the applicable Borrower to replace, restore, repair or rebuild the property.
5.5 Compliance with Applicable Laws. Each Borrower and each Credit Party
shall comply with all federal, state, local and foreign laws and regulations
applicable to it, including those relating to ERISA, labor laws, and
Environmental Laws and Environmental Permits, except to the extent that the
failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
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5.6 Supplemental Disclosure. From time to time as may be reasonably
requested by Lender (which request will not be made more frequently than once
each calendar year absent the occurrence and continuance of an Event of Default)
or at each Borrower's and at each Credit Party's election from time to time, the
Borrowers and the Credit Parties shall supplement each Disclosure Schedule
hereto, or any representation herein or in any other Loan Document, with respect
to any matter hereafter arising that, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or that is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to any such Disclosure Schedule or representation shall amend,
supplement or otherwise modify any Disclosure Schedule or representation, or be
deemed a waiver of any Default or Event of Default resulting from the matters
disclosed therein, except as consented to by Lender in writing, and (b) no
supplement shall be required or permitted as to representations and warranties
that expressly relate only to the Closing Date and/or the Initial Funding Date
(except as set forth in the introduction to Section 3 hereof for purposes of
representations and warranties made as of the Initial Funding Date). Any
Borrower having a "commercial tort claim" (as defined in the Code) shall
promptly notify Lender of the existence thereof.
5.7 Intellectual Property. Each Borrower and each Credit Party will
conduct its business and affairs without infringement of or interference with
any Intellectual Property of any other Person.
5.8 Environmental Matters. Each Borrower shall and shall cause each Person
within its control to: (a) conduct its operations and keep and maintain its real
estate and interests in real estate in compliance with all Environmental Laws
and Environmental Permits; (b) implement any and all investigation, remediation,
removal and response actions that are appropriate or necessary to comply with
Environmental Laws and Environmental Permits pertaining to the presence,
generation, treatment, storage, use, disposal, transportation or Release of any
Hazardous Material on, at, in, under, above, to, from or about any of its real
estate in all material respects; (c) notify Lender promptly after such Borrower
becomes aware of any violation of Environmental Laws or Environmental Permits or
any Release on, at, in, under, above, to, from or about any real estate that is
reasonably likely to result in Environmental Liabilities of Borrowers in excess
of $100,000; and (d) promptly forward to Lender a copy of any order, notice,
request for information or any communication or report received by such Borrower
in connection with any such violation or Release or any other matter relating to
any Environmental Laws or Environmental Permits that could reasonably be
expected to result in Environmental Liabilities in excess of $100,000, in each
case whether or not the Environmental Protection Agency or any Governmental
Authority has taken or threatened any action in connection with any such
violation, Release or other matter. In addition, each Borrower shall be in full
compliance with the terms and provisions of the Environmental Indemnity
Agreement to which Lender and each of the Borrowers are a party and which
constitute part of the Loan Documents. If Lender at any time has a reasonable
basis to believe that there may be a violation of any Environmental Laws or
Environmental Permits by any Borrower or any Environmental Liability of Borrower
arising thereunder, or a Release of Hazardous Materials on, at, in, under,
above, to, from or about any of its real estate, that, in each case, could
reasonably be expected to have a Material Adverse Effect, then each Borrower
shall, upon Lender's written request (i) cause the performance of such
environmental audits including subsurface sampling of soil and groundwater, and
preparation of such environmental reports, at Borrowers' expense, as Lender may
from time to time reasonably request, which shall be conducted by reputable
environmental consulting firms reasonably acceptable to Lender and shall be in
form and substance reasonably acceptable to Lender, and (ii) if Borrowers shall
have not timely performed such environmental audits, permit Lender or its
representatives to have access to all real estate for the purpose of conducting
such environmental audits and testing as Lender reasonably deems appropriate,
including subsurface sampling of soil and groundwater. Borrowers shall reimburse
Lender for the costs of such audits and tests and the same will constitute a
part of the Obligations secured hereunder.
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5.9 Landlords' Agreements. With respect to any location where any material
amount of Collateral is stored or located, Lender may require Borrowers to
provide a reasonable landlord or mortgagee agreement or bailee letter as a
condition to the continued storage of the Collateral at such location(s). Each
Borrower shall timely and fully pay and perform its obligations under all leases
and other agreements with respect to each leased location or public warehouse
where any Collateral is or may be located.
5.10 Further Assurances. Each Borrower and each Credit Party executing
this Agreement agrees that it shall and shall cause each other Borrower and each
other Credit Party to, at such Borrower's or Credit Party's expense and upon the
reasonable request of Lender, duly execute and deliver, or cause to be duly
executed and delivered, to Lender such further instruments and do and cause to
be done such further acts as may be necessary or proper in the reasonable
opinion of Lender to carry out more effectively the provisions and purposes of
this Agreement and each Loan Document.
5.11 Cash. The Borrowers, in the aggregate, shall at all times maintain,
or cause to be maintained, Certified Cash in an aggregate amount of not less
than $1,000,000.
5.12 Qualified Cash. Borrowers shall deposit all net cash proceeds of
Collateral as Qualified Cash in a Qualified Cash Account subject to the right of
Borrowers to withdraw such cash proceeds. From and during the continuance of an
Event of Default, but subject to Section 5.13 below, Lender may exercise all
rights under the applicable Control Agreements relating to any Qualified Cash,
including the right to deliver applicable control exercise notices to each
applicable bank and securities intermediary and cause all such Qualified Cash to
be forwarded immediately to the Collection Account through daily sweeps (or as
otherwise directed by Lender).
5.13 Governmental Accounts. Notwithstanding anything to the contrary in
this Agreement, Lender and Borrowers agree that each of WMC-SA, WMC-A, Chapman
and Coastal shall have sole dominion and control over the Proceeds of any
Accounts which contain or constitute payments from federal or state healthcare
programs, including Medicare and Medi-Cal, for medical services provided by such
Borrower ("GOVERNMENTAL ACCOUNTS"). Lender and Borrowers further agree that: (a)
WMC-SA, WMC-A, Chapman and Coastal shall each have sole dominion and control
over their respective Deposit Accounts which contain or receive payments on
Governmental Accounts (the "GOVERNMENTAL DEPOSIT ACCOUNTS") (b) the Governmental
Deposit Accounts shall be maintained for the benefit of and in the name of
WMC-SA, WMC-A, Chapman and Coastal, as applicable, and (c) no other Person shall
have any control over the use of or any right to withdraw any amount from, the
Governmental Deposit Accounts other than WMC-SA, WMC-A, Chapman and Coastal, as
applicable. Each Borrower specifically agrees: (i) to provide Lender with a
description of each Deposit Account where a Governmental Deposit Account is
maintained, including without limitation, the name of the financial institution,
the address, the account number, the ABA Routing Number, and a contact person,
(ii) not to change Deposit Accounts from the financial institution(s) where such
Governmental Deposit Accounts are maintained as of the date hereof, and (iii) to
instruct such financial institution(s) to sweep each such Governmental Deposit
Account on a daily basis to a Lock Box Account identified by Lender. Each
Borrower represents and warrants to Lender that it has notified or will notify
each governmental payor of any Governmental Account to make all payments on
account of such Accounts only to the Governmental Deposit Accounts. The breach
of the foregoing obligations by any Borrower shall constitute an immediate Event
of Default hereunder for which there shall be no cure or grace period.
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5.14 Operations of Hospital Facilities. Each of WMC-SA, WMC-A, Chapman and
Coastal shall have and maintain at all times from the Closing Date until the
Obligations have been paid in full, sufficient approvals, consents, and permits
from all necessary Governmental Authorities to fully operate the Hospital
Facilities in accordance with Applicable Laws. Borrowers shall use their best
efforts and use appropriate diligence to secure all approvals, consents and
permits as and when required by Applicable Laws to fully operate the Hospital
Facilities.
5.15 After-Acquired Property; Acquisition of Condominium Units or other
Real Property Interests. In the event from time to time any Borrower acquires
any interest in any real property or improvements that are not a part of the
"Property" as defined in either the Leasehold Deed of Trust or the Deed of
Trust, including without limitation any one or more of the Condominium Units
(hereinafter referred to as the "ADDITIONAL PROPERTY"), then such Borrower
agrees to promptly notify Lender reasonably prior to such acquisition and to
execute and deliver an amendment to the Leasehold Deed of Trust or the Deed of
Trust, as applicable, to reflect the addition of such Additional Property to the
Property subject thereto and the Lien of Lender thereon. Upon each such
acquisition, (a) the Leasehold Deed of Trust or the Deed of Trust shall
automatically be deemed amended to add the legal description of the Additional
Property to the legal description of the Property encumbered by the Leasehold
Deed of Trust or the Deed of Trust, as applicable; (b) the Leasehold Deed of
Trust or the Deed of Trust, as applicable, shall automatically be deemed and
shall become a senior Lien and encumbrance against the fee or leasehold title of
the Additional Property; (c) within ten (10) calendar days of demand from
Lender, such Borrower shall execute, acknowledge and deliver to Lender, and
Lender shall record, an amendment to the Leasehold Deed of Trust or the Deed of
Trust, as applicable, reflecting such Borrower's acquisition of the title to the
Additional Property and the lien of the Leasehold Deed of Trust or the Deed of
Trust, as applicable, as a first Lien and encumbrance against the fee or
leasehold title of the Additional Property, and (d) within ten (10) calendar
days of demand from Lender, at Borrowers' sole cost and expense, the acquiring
Borrower shall obtain such endorsements to the Title Policy (or a replacement
Title Policy) as Lender may reasonably require to insure that the Lien of the
Leasehold Deed of Trust or the Deed of Trust, as applicable, is and remains a
first Lien and encumbrance against the fee or leasehold title of the Additional
Property. In the event Borrowers fail or refuse to execute such amendment
required pursuant to clause (c) above within ten (10) calendar days after
Lender's demand therefor, each Borrower hereby grants to Lender a
power-of-attorney naming Lender as each such Borrower's attorney-in-fact to
execute and record such amendment in the official records of Orange County,
California, and to arrange for such title endorsements as Lender reasonably
requires. Such power-of-attorney is coupled with an interest and is therefore
irrevocable. All such reasonable expenditures incurred by Lender in performing
this paragraph shall be additional Obligations payable upon demand and delivery
of reasonable backup documentation, and shall bear interest at the Default
Interest Rate from the date of demand for payment until paid in full. Lender
hereby consents to the transfer of the Condominium Units from IHHI to PCHI,
subject to Lender's Lien, as described in this section.
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5.16 Capital Contributions by OC-PIN to IHHI. IHHI and Borrowers agree
that all future capital contributions to IHHI by OC-PIN shall be used by IHHI as
mandatory prepayments of the Line of Credit pursuant to Section 1.2(b) of this
Credit Agreement.
6. NEGATIVE COVENANTS
Each Borrower and each Credit Party jointly and severally agrees as to all
Borrowers and all Credit Parties that from and after the date hereof until the
Termination Date:
6.1 Mergers, Subsidiaries, Etc. No Borrower or any Credit Party shall
directly or indirectly, by operation of law or otherwise, (i) form or acquire
any Subsidiary in addition to the existing Subsidiaries of IHHI; or (ii) merge
with, consolidate with, acquire all or substantially all of the assets or Stock
of, or otherwise combine with or acquire, any Person.
6.2 Investments; Loans and Advances. No Borrower or Credit Party shall
make or permit to exist any investment in, or make, accrue or permit to exist
loans or advances of money to, any Person, through the direct or indirect
lending of money, holding of securities or otherwise (each, an "INVESTMENT"),
except that: (i) Borrowers may hold Investments constituting notes payable, or
stock or other securities issued by Account Debtors to Borrower pursuant to
negotiated agreements with respect to settlement of such Account Debtor's
Accounts in the ordinary course of business consistent with past practices; (ii)
Borrowers may invest the Qualified Cash in the Qualified Cash Accounts (A) as of
the Closing Date in the kinds and types of investments that they are then so
invested, and (B) thereafter, as to any new investments made after the Closing
Date in other kinds and types of investments as are in conformity with each
Borrower's investment policies previously adopted by its board of directors so
long as Lender's Liens remain perfected therein, (iii) Borrowers may invest its
their cash and cash equivalents (other than Qualified Cash in the Qualified Cash
Accounts) (A) as of the Closing Date in the kinds and types of investments that
they are then so invested, and (B) thereafter, as to any new investments made
after the Closing Date in other kinds and types of investments as are in
conformity with each Borrower's investment policies previously adopted by its
board of directors, and (iv) so long as no Default or Event of Default has
occurred and is continuing or would result therefrom, Borrowers or Credit
Parties may make investments in, and loans and advances to, any other Borrower
or Credit Party. All such investments in, and loans and advances to, a Borrower
or a Credit Party shall be unsecured and subordinate in repayment to the
repayment of all Obligations to Lender. Lender may require Borrowers and Credit
Parties to execute and deliver subordination agreements in form and substance
satisfactory to Lender to evidence such subordination arrangements.
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6.3 Indebtedness.
(a) No Borrower shall create, incur or assume any Indebtedness,
except (without duplication) (i) Indebtedness created after the date hereof by
conditional sale or other title retention agreements (including Capital Leases)
or in connection with purchase money Indebtedness with respect to Equipment and
Fixtures or other capital assets acquired by any Borrower in the ordinary course
of business; (ii) the Loans and the other Obligations; (iii) so long as no
Default or Event of Default has occurred and is continuing at the time of
incurrence thereof, unsecured Funded Debt or indebtedness to other Borrowers,
incurred after the Closing Date; (iv) unsecured Indebtedness (other than Funded
Debt) incurred in the ordinary course of the Borrowers' respective business; and
(v) existing Indebtedness, if any, described in Disclosure Schedule 6.3.
Notwithstanding the foregoing, any Borrower may make loans or advances to any
other Borrower so long as each Borrower continues to meet the requirements of
Section 6.3(a).
(b) No Borrower shall, directly or indirectly, voluntarily purchase,
redeem, defease or prepay any principal of, premium, if any, interest or other
amount payable in respect of any Funded Debt prior to its scheduled due date,
other than the Obligations, or indebtedness owed to other Borrowers by a
Borrower; provided, however, that no payments whatsoever shall be made on
account of indebtedness owed by one Borrower to another at any time when an
Event of Default has occurred and is continuing.
6.4 Employee Loans and Affiliate Transactions. No Borrower or any Credit
Party shall enter into or be a party to any transaction with any Affiliate
thereof except in the ordinary course of and pursuant to the reasonable
requirements of such Borrower's or Credit Party's business and upon fair and
reasonable terms that are no less favorable to such Borrower or Credit Party
than would be obtained in a comparable arm's length transaction with a Person
not an Affiliate of such Borrower or Credit Party.
(a) No Borrower or Credit Party shall enter into any lending or
borrowing transaction with any employees of any Borrower or any Credit Party,
except loans to its respective employees in the ordinary course of business
consistent with past practices for travel and entertainment expenses, relocation
costs, pension plan advances, and similar purposes.
6.5 Capital Structure and Business. No Borrower or Credit Party shall
amend its charter, articles, or bylaws in a manner that would materially
adversely affect the rights or remedies of Lender under the Loan Documents or
such Borrower or Credit Party's duty or ability to repay the Obligations. No
Borrower or Credit Party shall engage in any business other than the businesses
currently engaged in by it, anticipated to be conducted, or businesses
reasonably related thereto, and other business so long as such other businesses
do not constitute, individually or in the aggregate, a material portion of the
Borrowers' or Credit Parties' businesses, taken as a whole.
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6.6 Guaranteed Indebtedness. No Borrower or Credit Party shall create,
incur, or assume any Guaranteed Indebtedness unless such Guaranteed Indebtedness
would be permitted to be incurred directly by such Borrower or such Credit Party
pursuant to Section 6.3.
6.7 Liens. No Borrower or Credit Party shall create, incur, assume or
permit to exist any Lien on or with respect to any of the Collateral (whether
now owned or hereafter acquired) except for Permitted Encumbrances.
6.8 Sale of Collateral and Intellectual Property. No Borrower or Credit
Party shall sell, transfer, convey, assign, license or otherwise dispose of any
interest in Collateral, other than in the ordinary course of business or the
sale of Accounts other than the sale of Accounts pursuant to the Accounts
Purchase Agreement. No Borrower or Credit Party shall sell, transfer, convey,
assign, license or otherwise dispose of any interest in the Borrowers or Credit
Parties.
6.9 ERISA. No Borrower or Credit Party shall, or shall cause or permit any
ERISA Affiliate to, cause or permit to occur (i) an event that could result in
the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA or (ii) an ERISA Event to the extent such ERISA Event would reasonably be
expected to result in taxes, penalties and other liabilities in an aggregate
amount in excess of $100,000 in the aggregate.
6.10 Hazardous Materials. No Borrower or Credit Party shall cause or
permit a Release of any Hazardous Material on, at, in, under, above, to, from or
about any of its real estate where such Release would (a) violate in any
respect, or form the basis for any Environmental Liabilities under, any
Environmental Laws or Environmental Permits or (b) otherwise adversely impact
the value or marketability of any of its real estate or any of the Collateral,
other than such violations or Environmental Liabilities that could not
reasonably be expected to have a Material Adverse Effect.
6.11 Restricted Payments. During the term of this Agreement, no Borrower
shall make any Restricted Payment, except (a) dividends, distributions and
payments by a Borrower paid to another Borrower, (b) employee loans permitted
under Section 6.4(b), (c) so long as no Event of Default shall have occurred and
is continuing, dividends and distributions by IHHI to its Shareholders, and (d)
ordinary course payments to IHHI for services to other Borrowers.
6.12 Change of Corporate Name, State of Incorporation or Location; Change
of Fiscal Year. No Borrower or Credit Party shall (a) change its name as it
appears in official filings in the state of its incorporation or other
organization (b) change its chief executive office, principal place of business,
corporate offices or locations at which Collateral is held or stored, or the
location of its records concerning the Collateral, (c) change the type of entity
that it is, (d) change its organization identification number, if any, issued by
its state of incorporation or other organization, or (e) change its state of
incorporation or organization or incorporate or organize in any additional
jurisdictions, in each case without at least ten (10) days prior written notice
to Lender and provided that such Borrowers and Credit Parties shall have taken
such actions and executed such documents as Lender reasonably requests in
connection therewith to continue the perfection of any Liens in favor of Lender
in any Collateral, and provided further that, any change to such Borrowers'
respective jurisdictions of incorporation or organization, such new jurisdiction
shall be located in the United States. No Borrower or Credit Party shall change
its Fiscal Year without giving Lender at least thirty (30) days prior written
notice thereof.
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6.13 No Impairment of Intercompany Transfers. No Borrower or Credit Party
shall directly or indirectly enter into or become bound by any agreement,
instrument, indenture or other obligation (other than this Agreement and the
other Loan Documents) that could directly or indirectly restrict, prohibit or
require the consent of any Person with respect to the payment of dividends or
distributions or the making or repayment of intercompany loans by any Subsidiary
of IHHI to IHHI.
6.14 Limitations on Power of Managers of PCHI. So long as all of the
Obligations have not been paid in full, without the prior written consent of the
Lender, which may be given or withheld in its absolute and unfettered
discretion, neither of the Managers of PCHI shall have the power or authority to
cause, permit, consent or acquiesce to PCHI taking, making or engaging in any of
the following acts or activities without first obtaining the prior written
consent of both Managers and the Lender, and any such activity taken without the
prior written consent of both Managers shall constitute an Event of Default
hereunder:
(i) The sale, transfer, conveyance, assignment, hypothecation,
encumbrance or disposition of all or any part of PCHI's assets (including, but
not limited to, the Property);
(ii) The incurring of any debt;
(iii) The making of any change of any kind in the nature or
character of the business of PCHI as the same is currently conducted or as the
same is currently expected to be conducted;
(iv) The incurring of any contractual obligation with a total
cost to PCHI of $5,000.00 or more in the aggregate during in any consecutive
twelve (12) month period;
(v) The making of any capital expenditure of $5,000.00 or more
in the aggregate during in any consecutive twelve (12) month period;
(vi) The merger, consolidation, combination, or other similar
business venture of any kind of PCHI with any other Person;
(vii) The purchase, lease, sublease or acquisition of any
assets or equipment of any kind;
(viii) The execution of any new lease, sublease, rental
agreement or occupancy agreement with any Person at the Property;
(ix) The making of any amendment, modification, revision,
novation or other change of any kind to any lease, sublease, rental agreement or
occupancy agreement with any Person at the Property existing as of the date of
this Agreement;
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(x) The making of any amendment, modification, revision,
novation or other change of any kind to the Triple Net Hospital and Medical
Office Building Lease dated as of March 3, 2005 by and between PCHI (as
Landlord) and Integrated Healthcare Holdings, Inc. (as Tenant);
(xi) The making of any amendment, modification, revision,
novation or other change of any kind to its Operating Agreement;
(xii) The making or filing of any amendment, modification,
revision, novation or other change of any kind to the Articles of Organization
of PCHI on file with the California Secretary of State as of the date of this
Agreement;
(xiii) The execution of any license, permit, consent or other
authority to conduct business of any kind in any of the Properties not conducted
as of the date of this Agreement;
(xiv) The making of any amendment, modification, revision,
novation or other change of any kind to any license, permit, consent or other
authority to conduct business in any of the Properties existing as of the date
of this Agreement;
(xv) The making or taking of any act that would make it
difficult or impossible to carry on the ordinary business of PCHI, or the
failure to take any required act, the failure of which would make it difficult
or impossible to carry on the ordinary business of PCHI;
(xvi) The making or taking of any confession of a judgment
against PCHI;
(xvii) The making or taking of any act to dissolve PCHI;
(xviii) The filing of a petition in bankruptcy or the entering
into of an arrangement among creditors;
(xix) The entering into or execution of any contract,
agreement, understanding (whether oral or written, and whether binding or
non-binding) with any Affiliate of PCHI of any Affiliate of any Member of PCHI;
(xx) Admitting any Person as a Member of PCHI;
(xxi) Agreeing, permitting or consenting to the sale,
transfer, conveyance, assignment, hypothecation or encumbrance of any Economic
Interest, Interest, Information Rights, Membership Interests, Percentage
Interests, or Management and Voting Rights to any Person;
(xxii) Agreeing, permitting or consenting to the return of any
Capital Contribution or the making of any Distribution. Notwithstanding the
foregoing, so long as an Event of Default under the Note, Deed of Trust or other
Loan Documents has not occurred or continuing, the Managers shall have the right
to cause the Company to make Distributions in accordance with the provisions of
Section 5.2 of the Operating Agreement, subject to the right of Lender to
terminate the Managers right to make further Distributions upon the occurrence
of an Event of Default under the Loan Documents; and
(xxiii) Agreeing, permitting or consenting to the election or
appointment of any Person as an Officer or as a Manager.
PCHI shall cause its Operating Agreement to be amended on or before the Closing
Date to reflect the restrictions set forth in this Section.
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7. TERM
7.1 Termination. The financing arrangements contemplated hereby shall be
in effect until the earlier of the date when the Loans and other Obligations
have been paid in full and satisfied or the Maturity Date, and the Loans and all
other Obligations shall be automatically due and payable in full on such date
without demand by Lender.
7.2 Survival of Obligations Upon Termination of Financing Arrangements.
Except as otherwise expressly provided for in the Loan Documents, no termination
or cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the obligations, duties
and liabilities of the Borrower or the Credit Parties or the rights of Lender
relating to any unpaid portion of the Loans or any other Obligations, due or not
due, liquidated, contingent or unliquidated, or any transaction or event
occurring prior to such termination, or any transaction or event, the
performance of which is required after the Maturity Date. Except as otherwise
expressly provided herein or in any other Loan Document, all undertakings,
agreements, covenants, warranties and representations of or binding upon the
Borrower and the Credit Parties, and all rights of Lender, all as contained in
the Loan Documents, shall not terminate or expire, but rather shall survive any
such termination or cancellation and shall continue in full force and effect
until the Termination Date; provided, that the provisions of Section 11, the
payment obligations under Article 1, and the indemnities contained in the Loan
Documents shall survive the Maturity Date.
7.3 Accounts Purchase Agreement. Notwithstanding the termination of this
Agreement as contemplated by Section 7.1 above, or the foreclosure or other
enforcement by Lender of the Liens granted under the Credit Agreement and the
other Loan Documents, the Accounts Purchase Agreement and the other agreements,
instruments and documents relating thereto shall continue in full force and
effect until the Accounts Purchase Agreement expires or terminates as provided
therein.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an "Event of
Default" hereunder:
(a) Borrowers (i) fail to make any payment of principal of or
interest on the Loans or any of the other Obligations within five (5) calendar
days after the same is due and payable; provided, that if Borrowers fail to make
a payment within such period, interest at the Default Rate shall accrue from the
due date for such payment, or (ii) fails to pay or reimburse Lender for any
expense reimbursable hereunder or under any other Loan Document within ten (10)
calendar days following Lender's demand for such reimbursement or payment of
expenses.
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(b) Any Credit Party fails or neglects to perform, keep or observe
any of the provisions of Sections 1.2 (Prepayments), 1.5 (Cash Management),
5.4(a) (Insurance; Damage to or Destruction of Collateral), 5.11 (Cash), or 6
(Negative Covenants), or any of the provisions set forth in Annex B (Cash
Management System).
(c) Borrowers fail or neglect to perform, keep or observe any of the
provisions of Section 4.1 or any provisions set forth in Annexes B or C,
respectively, and the same shall remain unremedied in whole or in part for
fifteen (15) calendar days or more after the earlier of (i) such Borrower's or
Credit Party's, as applicable, actual knowledge thereof, or (ii) such Borrower's
or Credit Party's, as applicable, receipt of notice thereof from Lender.
(d) Any Borrower or any Credit Party fails or neglects to perform,
keep or observe any other provision of this Agreement (other than any provision
embodied in or covered by any other clause of this Section 8.1) and the same
shall remain unremedied in whole or in part for fifteen (15) calendar days or
more after the earlier of (i) such Borrowers' actual knowledge thereof or (ii)
such Borrowers' receipt of notice thereof from Lender.
(e) Any Borrower or any Credit Party fails or neglects to perform,
keep or observe any other provision of any of the other Loan Documents or any
Guaranty and the same shall remain unremedied in whole or in part for the
shorter of thirty (30) calendar days or beyond any applicable cure or grace
period provided for therein.
(f) A default or breach occurs under any other agreement, document
or instrument to which any Borrower or any Credit Party is a party that is not
cured within any applicable grace period therefore, and such default or breach
is not waived and such default or breach involves the failure to make any
payment when due in respect of any Indebtedness or Guaranteed Indebtedness
(other than the Obligations) of any Borrower or any Credit Party (including (x)
undrawn committed or available amounts and (y) amounts owing to all creditors
under any combined or syndicated credit arrangements); or (ii) an event,
condition or circumstance occurs that causes, or permits any holder of
Indebtedness or Guaranteed Indebtedness or a trustee to cause, Indebtedness or
Guaranteed Indebtedness or a portion thereof to become due prior to its stated
maturity or prior to its regularly scheduled dates of payment, or the holder of
such Indebtedness or Guaranteed Indebtedness or such trustee has the right to
demand cash collateral in respect of such Indebtedness or Guaranteed
Indebtedness, in each case, regardless of whether such right is exercised, by
such holder or trustee.
(g) A default shall occur or exist under the Triple Net Lease, and
the same shall remain unremedied in whole or in part for fifteen (15) calendar
days or more after the earlier of (i) such Borrower's or Credit Party's, as
applicable, actual knowledge thereof, or (ii) such Borrower's or Credit Party's,
as applicable, receipt of notice thereof from Lender.
(h) A default shall occur under any of the subleases or
sub-subleases of a Hospital Facility, and the same shall remain unremedied in
whole or in part for fifteen (15) calendar days or more after the earlier of (i)
such Borrower's or Credit Party's, as applicable, actual knowledge thereof, or
(ii) such Borrower's or Credit Party's, as applicable, receipt of notice thereof
from Lender.
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(i) A default shall occur under either of the Chapman Leases.
(j) A default shall occur under the deed of trust dated May 27, 2003
(naming Chapman Medical L.P., as Trustor and Fremont Investment & Loan as
Beneficiary), which deed of trust secures repayment of an $11,800,000 promissory
note and encumbers the same fee interest in the same real property that the
Chapman Leases each encumber.
(k) A default shall occur or exist under the Accounts Purchase
Agreement, and the same shall remain unremedied in whole or in part for fifteen
(15) calendar days or more after the earlier of (i) such Borrower's or Credit
Party's, as applicable, actual knowledge thereof, or (ii) such Borrower's or
Credit Party's, as applicable, receipt of notice thereof from Lender.
(l) Borrower or any Subsidiary shall fail to have in full force and
effect and in good standing each license or permit necessary to its continuing
operation as a hospital and acute care centers, as applicable, as operated on
the date hereof.
(m) Any of the Hospital Facilities shall no longer be accredited by
the California Department of Health or no longer have all other permits,
licenses and authorizations to conduct an acute care medical center and hospital
in the scope and manner operated by Seller.
(n) Any representation or warranty herein or in any Loan Document or
in any written statement, report, financial statement or certificate made or
delivered to Lender by any Borrower or any Credit Party is untrue or incorrect
in any material respect as of the date when made or deemed made.
(o) Assets of any Borrower or any Credit Party with a fair market
value of $100,000 or more are attached, seized, levied upon or subjected to a
writ or distress warrant, or come within the possession of any receiver,
trustee, custodian or general assignee for the benefit of creditors of any
Borrower or any Credit Party and such condition continues for thirty (30) days
or more.
(p) A case or proceeding is commenced against any Borrower or any
Credit Party seeking a decree or order in respect of such Borrower or such
Credit Party (i) under the Bankruptcy Code, or any other applicable federal,
state or foreign bankruptcy or other similar law, (ii) appointing a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
for such Borrower or such Credit Party or for any substantial part of any such
Borrower or such Credit Party's assets, or (iii) ordering the winding-up or
liquidation of the affairs of such Borrower or such Credit Party, and such case
or proceeding shall remain undismissed or unstayed for sixty (60) days or more
or a decree or order granting the relief sought in such case or proceeding is
granted by a court of competent jurisdiction.
(q) Any Borrower or any Credit Party (i) files a petition seeking
relief under the Bankruptcy Code, or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) consents to or fails to contest in
a timely and appropriate manner the institution of proceedings thereunder or the
filing of any such petition or the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) for such Borrower or such Credit Party or for any substantial part of
any such Borrower or such Credit Party's assets, (iii) makes a general
assignment for the benefit of creditors, (iv) takes any action in furtherance of
any of the foregoing; or (v) admits in writing its inability to, or is generally
unable to, pay its debts as such debts become due.
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(r) A final judgment or judgments for the payment of money in excess
of $100,000 in the aggregate at any time are outstanding against one or more of
the Borrowers or Credit Parties (which judgments are not covered by insurance
policies as to which liability has been accepted in writing by the insurance
carrier), and the same are not, within thirty (30) calendar days after the entry
thereof, discharged or execution thereof stayed or bonded pending appeal, or
such judgments are not discharged prior to the expiration of any such stay.
(s) Any material provision of any Loan Document for any reason
ceases to be valid, binding and enforceable in accordance with its terms (or any
Borrower or any Credit Party shall challenge the enforceability of any Loan
Document or shall assert in writing, or engage in any action or inaction based
on any such assertion, that any provision of any of the Loan Documents has
ceased to be or otherwise is not valid, binding and enforceable in accordance
with its terms), or any Lien created under any Loan Document ceases to be a
valid and perfected first priority Lien (except as otherwise permitted herein or
therein) in any of the Collateral purported to be covered thereby.
(t) Any Change of Control occurs for Borrower or any of its
Subsidiaries or any Credit Party.
(u) Any event occurs, whether or not insured or insurable, as a
result of which revenue-producing activities cease or are substantially
curtailed at facilities of any Borrower generating more than 25% of Borrowers'
consolidated revenues for the Fiscal Year preceding such event and such
cessation or curtailment, to the extent not commenced at other facilities of or
on behalf of Borrowers, continues for more than thirty (30) calendar days.
(v) A Material Adverse Effect shall exist as determined in the sole
judgment of Lender.
(w) Larry Anderson or Bruce Mogel or Jim Ligon shall no longer be
employees of IHHI and replacements acceptable to Lender in its reasonable
discretion are not employed within thirty (30) calendar days of the date that
either such Person is no longer employed by IHHI.
(x) The Group Purchasing Agreement shall be terminated or cancelled
and a substitute purchasing arrangement is not entered into by Borrowers within
thirty (30) calendar days following such termination or cancellation.
8.2 Remedies.
(a) If any Event of Default has occurred and is continuing, Lender
may, without notice, suspend the Line of Credit facility with respect to
additional Advances, whereupon any additional Advances may be made or incurred
in Lender's sole discretion, so long as such Event of Default is continuing. If
any Event of Default has occurred and is continuing, Lender may, without notice
except as otherwise expressly provided herein, increase the rate of interest
applicable to the Loans to the Default Rate.
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(b) If any Event of Default has occurred and is continuing, Lender
may, without notice: (i) terminate the Line of Credit facility with respect to
further Advances; (ii) reduce the Commitment from time to time; (iii) declare
all or any portion of the Obligations, including all or any portion of any Loan
to be forthwith due and payable, all without presentment, demand, protest or
further notice of any kind, all of which are expressly waived by Borrowers and
each other Credit Party; or (iv) exercise any rights and remedies provided to
Lender under the Loan Documents or any Guaranty, or at law or equity, including
all remedies provided under the Code; provided, that upon the occurrence of an
Event of Default specified in Sections 8.1(m) or (n), the Commitments shall be
immediately terminated and all of the Obligations, including the aggregate Line
of Credit Loan, shall become immediately due and payable without declaration,
notice or demand by any Person.
8.3 Waivers by Credit Parties. Except as otherwise provided for in this
Agreement or by applicable law, each Credit Party waives (including for purposes
of Section 12): (a) presentment, demand and protest and notice of presentment,
dishonor, notice of intent to accelerate, notice of acceleration, protest,
default (unless specifically required in this Agreement), nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Lender on which any Credit Party may in any way
be liable, and hereby ratifies and confirms whatever Lender may do in this
regard, (b) all rights to notice and a hearing prior to Lender's taking
possession or control of, or to Lender's replevy, attachment or levy upon, the
Collateral or any bond or security that might be required by any court prior to
allowing Lender to exercise any of its remedies, and (c) the benefit of all
valuation, appraisal, marshaling and exemption laws.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF LENDER
9.1 Assignment and Participations.
(a) Subject to the terms of this Section 9.1, Lender may make an
assignment to a Qualified Assignee of, or sell participations in, at any time or
times, the Loan Documents, Loans, and any Commitment or any portion thereof or
interest therein, including any Lender's rights, title, interests, remedies,
powers or duties thereunder. Any assignment by a Lender shall: (i) require the
execution of an assignment agreement (an "ASSIGNMENT AGREEMENT") substantially
in the form attached hereto as Exhibit 9.1(a) and otherwise in form and
substance reasonably satisfactory to, and acknowledged by, Lender; and (ii) be
conditioned on such assignee representing to Lender that it is purchasing the
applicable Loans to be assigned to it for its own account, for investment
purposes and not with a view to the distribution thereof. In the case of an
assignment by Lender under this Section 9.1, the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as Lender
hereunder. The original Lender shall be relieved of its obligations hereunder
with respect to its Commitments or assigned portion thereof from and after the
date of such assignment. Borrowers hereby acknowledge and agree that any
assignment shall give rise to a direct obligation of Borrowers to the assignee
and that the assignee shall be considered to be a "Lender." In the event Lender
assigns or otherwise transfers all or any part of the Obligations, Lender shall
so notify Borrowers shall, upon the request of Lender, execute a new note in
exchange for the Note (upon the same terms), if any, being assigned.
Notwithstanding the foregoing provisions of this Section 9.1(a), Lender may at
any time pledge the Obligations held by it and Lender's rights under this
Agreement and the other Loan Documents to a financial institution.
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(b) Any participation by Lender of all or any part of its
Commitments shall be made with the understanding that all amounts payable by
Borrower hereunder shall be determined as if Lender had not sold such
participation, and that the holder of any such participation shall not be
entitled to require Lender to take or omit to take any action hereunder except
actions directly affecting (i) any reduction in the principal amount of, or
interest rate payable with respect to, any Loan in which such holder
participates, (ii) any extension of the scheduled amortization of the principal
amount of any Loan in which such holder participates or the final maturity date
thereof, and (iii) any release of all or substantially all of the Collateral
(other than in accordance with the terms of this Agreement, the Collateral
Documents or the other Loan Documents). Solely for purposes of Sections 1.10
(Indemnity), 1.12 (Taxes), and 1.13 (Capital Adequacy; Increased Costs;
Illegality), Borrowers acknowledge and agree that a participation shall give
rise to a direct obligation of Borrowers to the participant (in each case
subject to the terms and conditions in such Sections applicable to Lender) and
the participant shall be considered to be a "Lender." Except as set forth in the
preceding sentence neither Borrowers nor any Credit Party shall have any
obligation or duty to any participant.
(c) Each Borrower and each Credit Party executing this Agreement
shall assist Lender under this Section 9.1 as reasonably required to enable
Lender to effectuate any such assignment or participation, including the
execution and delivery of any and all agreements, notes and other documents and
instruments as shall be requested and, if requested by Lender, the preparation
of informational materials for, and the participation of management in meetings
with, potential assignees or participants. Each Borrower and each Credit Party
executing this Agreement shall certify the correctness, completeness and
accuracy, in all material respects of all descriptions of the Borrowers and the
Credit Parties and their respective affairs contained in any selling materials
provided by them and all other information provided by them and included in such
materials.
(d) Lender may furnish any information concerning the Borrowers and
the Credit Parties in the possession of Lender from time to time to assignees
and participants (including prospective assignees and participants); provided
that Lender shall obtain from assignees or participants confidentiality
covenants substantially equivalent to those contained in Section 11.8.
(e) So long as no Event of Default has occurred and is continuing,
Lender shall assign or sell participations in any portion of its Loans or
Commitments to a potential Lender or participant, if, as of the date of the
proposed assignment or sale, the assignee Lender or participant would be subject
to capital adequacy or similar requirements under Section 1.13(a), or increased
costs under Section 1.13(b).
9.2 Lender's Reliance, Etc. Neither Lender nor any of its Affiliates nor
any of their respective directors, officers, employees or attorneys shall be
liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or the other Loan Documents, except for damages
caused by its or their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, Lender: (a) may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts; (b)
makes no warranty or representation to Borrowers and shall not be responsible to
Borrowers for any statements, warranties or representations made in or in
connection with this Agreement or the other Loan Documents; (c) shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of this Agreement or the other Loan
Documents on the part of any Borrower and any Credit Party or to inspect the
Collateral (including the books and records) of any Borrower and any Credit
Party; (d) shall not be responsible to Borrowers or any Credit Party for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; and (e) shall incur no liability
under or in respect of this Agreement or the other Loan Documents by acting upon
any notice, consent, certificate or other instrument or writing (which may be by
telecopy, telegram, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
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10. SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns. This Agreement and the other Loan Documents
shall be binding on and shall inure to the benefit of each Borrower and any
Credit Party, Lender, and their respective successors and assigns (including, in
the case of any Borrower and any Credit Party, a debtor-in-possession on behalf
of such Borrower and any Credit Party), except as otherwise provided herein or
therein. No Borrower and any Credit Party may assign, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder or under
any of the other Loan Documents without the prior express written consent of
Lender. Any such purported assignment, transfer, hypothecation or other
conveyance by any Borrower and any Credit Party without the prior express
written consent of Lender shall be void. The terms and provisions of this
Agreement are for the purpose of defining the relative rights and obligations of
each Borrower and any Credit Party and Lender with respect to the transactions
contemplated hereby and no Person shall be a third party beneficiary of any of
the terms and provisions of this Agreement or any of the other Loan Documents.
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement. The Loan Documents
constitute the complete agreement between the parties with respect to the
subject matter thereof and may not be modified, altered or amended except as set
forth in Section 11.2. Any letter of interest, commitment letter, fee letter or
confidentiality agreement, if any, between any Borrower or any Credit Party and
Lender or any of their respective Affiliates, predating this Agreement and
relating to a financing of substantially similar form, purpose or effect shall
be superseded by this Agreement.
11.2 Amendments and Waivers. Except for actions expressly permitted to be
taken by Lender, no amendment, modification, termination or waiver of any
provision of this Agreement or any other Loan Document, or any consent to any
departure by any Credit Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by Lender's and Borrower's
Representatives.
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(a) No amendment, modification, termination or waiver of or consent
with respect to any provision of this Agreement that waives compliance with the
conditions precedent set forth in Section 2.2 to the making of any Loan shall be
effective unless the same shall be in writing and signed by Lender's and
Borrower's Representatives. Notwithstanding anything contained in this Agreement
to the contrary, no waiver or consent with respect to any Default or any Event
of Default shall be effective for purposes of the conditions precedent to the
making of Loans unless the same shall be in writing and signed by Lender and
Borrower's Representative.
(b) No amendment, modification, termination or waiver shall, unless
in writing and signed by Lender: (i) increase the principal amount of Lender's
Commitment; (ii) reduce the principal of, rate of interest on any Loan; (iii)
extend any scheduled payment date (other than payment dates of mandatory
prepayments under Section 1.2(b) or the Stated Maturity Date; (iv) waive,
forgive, defer, extend or postpone any payment of interest; or (v) release any
Guaranty or, except as otherwise permitted herein or in the other Loan
Documents, release, or permit any Borrower or any Credit Party to sell or
otherwise dispose of, any Collateral. Each amendment, modification, termination
or waiver shall be effective only in the specific instance and for the specific
purpose for which it was given. No amendment, modification, termination or
waiver shall be required for Lender to take additional Collateral pursuant to
any Loan Document. No amendment, modification, termination or waiver of any
provision of any Note shall be effective without the written concurrence of the
holder of that Note. No notice to or demand on any Borrower or any Credit Party
in any case shall entitle such Borrower or such Credit Party to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
Section 11.2 shall be binding upon each holder of the Notes at the time
outstanding and each future holder of the Notes.
(c) Upon payment in full in cash and performance of all of the
Obligations (other than indemnification Obligations), termination of the
Commitments, and a release of all claims against Lender, and so long as no
suits, actions, proceedings or claims are pending against any Indemnified Person
asserting any damages, losses or liabilities that are Indemnified Liabilities,
Lender shall deliver to Borrower termination statements, Lien releases and other
documents necessary or appropriate to evidence the termination of the Liens
securing payment of the Obligations.
11.3 Fees and Expenses. Borrowers and Credit Parties shall reimburse
Lender for (i) all fees, costs and expenses (including the reasonable fees and
expenses of all of its outside attorneys, advisors, consultants and auditors)
and (ii) all fees, costs and expenses, including the reasonable fees, costs and
expenses of other advisors (including environmental and management consultants
and appraisers), incurred in connection with the negotiation, preparation and
filing and/or recordation of the Loan Documents and incurred in connection with
any amendment, modification or waiver of, consent with respect to, or
termination of, any of the Loan Documents or Related Transactions Documents or
advice in connection with the syndication and administration of the Loans made
pursuant hereto or its rights hereunder or thereunder;
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(a) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Lender, any Borrower, any Credit Party or any other
Person and whether as a party, witness or otherwise) in any way relating to the
Collateral, any of the Loan Documents or any other agreement to be executed or
delivered in connection herewith or therewith, including any litigation,
contest, dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case commenced by or against any or all of the
Borrowers and/or any or all of the Credit Parties or any other Person that may
be obligated to Lender by virtue of the Loan Documents; including any such
litigation, contest, dispute, suit, proceeding or action arising in connection
with any work-out or restructuring of the Loans during the pendency of one or
more Events of Default; provided that no Person shall be entitled to
reimbursement under this clause (b) in respect of any litigation, contest,
dispute, suit, proceeding or action to the extent any of the foregoing results
from such Person's gross negligence or willful misconduct;
(b) any attempt to enforce any remedies of Lender against any or all
of the Borrowers and/or any or all of the Credit Parties or any other Person
that may be obligated to Lender by virtue of any of the Loan Documents,
including any such attempt to enforce any such remedies in the course of any
work-out or restructuring of the Loans during the pendency of one or more Events
of Default;
(c) any workout or restructuring of the Loans during the pendency of
one or more Events of Default; and
(d) efforts to (i) monitor the Loans or any of the other
Obligations, (ii) evaluate, observe or assess any of the Borrowers or any of the
Credit Parties or their respective affairs, and (iii) verify, protect, evaluate,
assess, appraise, collect, sell, liquidate or otherwise dispose of any of the
Collateral; including, as to each of clauses (a) through (e) above, all
reasonable attorneys' and other professional and service providers' fees arising
from such services and other advice, assistance or other representation,
including those in connection with any appellate proceedings, and all reasonable
expenses, costs, charges and other fees incurred by such counsel and others in
connection with or relating to any of the events or actions described in this
Section 11.3, all of which shall be payable, on demand, by Borrowers to Lender.
Without limiting the generality of the foregoing, such expenses, costs, charges
and fees may include: fees, costs and reasonable expenses of attorneys,
accountants, environmental advisors, appraisers, investment bankers, management
and other consultants and paralegals; court costs and expenses; photocopying and
duplication expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram or telecopy charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or other advisory
services.
11.4 No Waiver. Lender's failure, at any time or times, to require strict
performance by the Borrowers and the Credit Parties of any provision of this
Agreement or any other Loan Document shall not waive, affect or diminish any
right of Lender thereafter to demand strict compliance and performance herewith
or therewith. Any suspension or waiver of an Event of Default shall not suspend,
waive or affect any other Event of Default whether the same is prior or
subsequent thereto and whether the same or of a different type. Subject to the
provisions of Section 11.2, none of the undertakings, agreements, warranties,
covenants and representations of any Borrower or any Credit Party contained in
this Agreement or any of the other Loan Documents and no Default or Event of
Default by any Borrower or any Credit Party shall be deemed to have been
suspended or waived by Lender, unless such waiver or suspension is by an
instrument in writing signed by the Lender's Representative, and directed to
Borrower's Representative specifying such suspension or waiver.
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11.5 Remedies. Lender's rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies that Lender may
have under any other agreement, including the other Loan Documents, by operation
of law or otherwise. Recourse to the Collateral shall not be required.
11.6 Severability. Wherever possible, each provision of this Agreement and
the other Loan Documents shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
or any other Loan Document shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or the
remaining provisions of this Agreement or such other Loan Document.
11.7 Conflict of Terms. Except as otherwise provided in this Agreement or
any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement
conflicts with any provision in any of the other Loan Documents, the provision
contained in this Agreement shall govern and control.
11.8 Confidentiality. Lender agrees to use commercially reasonable efforts
(equivalent to the efforts Lender applies to maintaining the confidentiality of
its own confidential information) to maintain as confidential all confidential
information provided to them by the Borrowers and the Credit Parties and
designated as confidential (provided, that, all non-public financial information
and financial projections provided by any Borrower or any Credit Party shall be
deemed confidential whether or not so designated as confidential) for a period
of two (2) years following receipt thereof, except that Lender may disclose such
information (a) to Persons employed or engaged by Lender so long as Lender has
policies relative to the maintenance of confidential information; (b) to any
bona fide assignee or participant or potential assignee or participant that has
agreed to comply with the covenant contained in this Section 11.8 (and any such
bona fide assignee or participant or potential assignee or participant may
disclose such information to Persons employed or engaged by them as described in
clause (a) above); (c) as required or requested by any Governmental Authority or
reasonably believed (based on advice of counsel) by Lender to be compelled by
any court decree, subpoena or legal or administrative order or process; (d) as,
on the advice of Lender's counsel, is required by law; (e) in connection with
the exercise of any right or remedy under the Loan Documents or in connection
with any Litigation relative to the Loan Documents or the transactions related
thereto to which Lender is a party; or (f) that ceases to be confidential
through no fault of Lender. Notwithstanding the foregoing, Lender shall not use
or disclose any patient related information which is protected under any federal
or California state privacy or confidentiality laws, unless such use or
disclosure would be legally permissible if done by a Hospital Facility directly.
If Lender is required in any proceeding, by any court decree, subpoena or legal
or administrative order or process, to disclose any such confidential
information, Lender will use commercially reasonable efforts to give Borrowers
and Credit Parties, as applicable, prompt written notice of such request so that
any Borrower or any Credit Party may seek an appropriate protective order. If in
the absence of a protective order, Lender is compelled in a proceeding to
disclose any such confidential information, Lender may disclose such portion of
such confidential information that it is compelled to disclose; provided,
however, that Lender shall use commercially reasonable efforts to provide
Borrowers and to Credit Parties, as applicable, written notice of the
information to be disclosed as far in advance of its disclosure as is
practicable.
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11.9 GOVERNING LAW.
(a) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN
DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS
OF THE UNITED STATES OF AMERICA. EACH BORROWER AND EACH CREDIT PARTY AND LENDER
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE STATE
OF NEVADA, CLARK COUNTY, CITY OF LAS VEGAS, SHALL HAVE EXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG THE BORROWERS AND THE
CREDIT PARTIES ON THE ONE HAND, AND LENDER, ON THE OTHER HAND, PERTAINING TO
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED,
THAT LENDER, BORROWERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM
THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CLARK COUNTY,
NEVADA; PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN
ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
LENDER. EACH BORROWER AND EACH CREDIT PARTY AND LENDER EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT, AND EACH BORROWER, EACH CREDIT PARTY AND LENDER HEREBY WAIVES ANY
OBJECTION THAT SUCH BORROWER OR SUCH CREDIT PARTY, OR LENDER MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH BORROWER, EACH CREDIT PARTY AND LENDER HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN
ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH
BORROWER, CREDIT PARTY OR TO LENDER AT THE ADDRESS SET FORTH IN ANNEX D OF THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
SUCH BORROWER'S, SUCH CREDIT PARTY'S OR LENDER'S ACTUAL RECEIPT THEREOF OR THREE
(3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.
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11.10 Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered: (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid; (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
11.10); (c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number indicated in Annex D or to such other address
(or facsimile number) as may be substituted by notice given as herein provided.
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Failure or delay in delivering copies of
any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than Borrower's Representative or Lender)
designated in Annex D to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
11.11 Section Titles. The Section titles and Table of Contents contained
in this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
11.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG LENDER, ANY BORROWER AND ANY CREDIT PARTY
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
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11.14 Press Releases and Related Matters. Each Credit Party executing this
Agreement agrees that neither it nor its Affiliates will in the future issue any
press releases or other public disclosure using the name of Lender or its
affiliates or referring to this Agreement, the other Loan Documents or the
Related Transactions Documents without at least two (2) Business Days' prior
notice to Lender and without the prior written consent of Lender (which consent
will not be unreasonably withheld) unless (and only to the extent that) such
Borrower or such Credit Party or Affiliate is required to do so under law,
regulation or any applicable exchange rules or OTC bulletin board rules, then,
in any event, such Borrower, such Credit Party or Affiliate will use
commercially reasonable efforts to consult with Lender before issuing such press
release or other public disclosure. Each Borrower and each Credit Party consents
to the publication by Lender of advertising material relating to the financing
transactions contemplated by this Agreement using any Borrower's name, product
photographs, logo or trademark, without the prior written consent of IHHI which
shall not be unreasonably withheld, delayed or conditioned. Lender may provide
to industry trade organizations information necessary and customary for
inclusion in league table measurements unless such disclosure would violate or
any applicable exchange rules or OTC bulletin board rules applicable to IHHI.
11.15 Reinstatement. This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against any
Borrower or any Credit Party for liquidation or reorganization, should any
Borrower or any Credit Party become insolvent or make a general assignment for
the benefit of any creditor or creditors or should a receiver or trustee be
appointed for all or any significant part of any Borrower's or any Credit
Party's assets, and shall continue to be effective or to be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
11.16 Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 11.9 and 11.13, with its counsel.
11.17 No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.
11.18 Limitation on Each Borrower's and Each Credit Party's Liability.
(a) Anything to the contrary notwithstanding, if any Fraudulent
Transfer Law (as hereinafter defined) is determined by a court of competent
jurisdiction to be applicable to the obligations of any Borrower or Credit Party
hereunder, such obligations of such Borrower or other Credit Party shall be
limited to a maximum aggregate amount equal to the largest amount that would not
render its obligations hereunder subject to avoidance as a fraudulent transfer
or conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "FRAUDULENT
TRANSFER LAWS"), in each case after giving effect to all other liabilities of
such Borrower or other Credit Party, contingent or otherwise, that are relevant
under the Fraudulent Transfer Laws (specifically excluding, however, any
liabilities of such Borrower or other Credit Party in respect of intercompany
indebtedness to IHHI or other affiliates of IHHI to the extent that such
indebtedness would be discharged in an amount equal to the amount paid by such
Borrower or other Credit Party hereunder, and after giving effect as assets to
the value (as determined under the applicable provisions of the Fraudulent
Transfer Laws) of any rights to subrogation, reimbursement, indemnification or
contribution of such Borrower or other Credit Party pursuant to applicable law
or pursuant to the terms of any agreement (including any such right of
contribution hereunder).
47
(b) Each Borrower and each Credit Party together desire to allocate
among themselves, in a fair and equitable manner, their respective obligations
under this Agreement and the other Loan Documents. Accordingly, in the event
that any payment or distribution is made on any date by any Borrower or any
other Credit Party hereunder or under any other Loan Document (a "FUNDING
PARTY") that exceeds its Fair Share (as defined below) as of such date, that
Funding Party shall be entitled to a contribution from each of the other
Borrowers and Credit Parties, as the case may be, in the amount of such other
Borrower's or Credit Party's Fair Share Shortfall as defined below) as of such
date, with the result that all such contributions will cause each such
Borrower's or other Credit Party's Aggregate Payments (as defined below) to
equal its Fair Share as of such date. As used herein, "FAIR SHARE" means, with
respect to a Borrower or other Credit Party as of any date of determination, an
amount equal to (i) the ratio of (x) the Adjusted Maximum Amount (as defined
below) with respect to such Credit Party to (y) the aggregate of the Adjusted
Maximum Amounts with respect to all Borrowers and other Credit Parties
multiplied by (ii) the aggregate amount paid or distributed on or before such
date by all Funding Parties under this Agreement and the other Loan Documents in
respect of the Obligations hereunder. "FAIR SHARE SHORTFALL" means, with respect
to a Borrower or other Credit Party as of the date of determination, the excess,
if any, of the Fair Share of such Person over the Aggregate Payments of such
Person. "ADJUSTED MAXIMUM AMOUNT" means, with respect to a Borrower or other
Credit Party, as of any date of determination, the maximum aggregate amount of
the obligations of such Person under this Agreement and the other Loan Documents
determined as of such date, in the case of any Borrower or other Credit Party,
provided, that, solely for purposes of calculating the "ADJUSTED MAXIMUM AMOUNT"
with respect to any Borrower or other Credit Party arising by virtue of any
rights to subrogation, reimbursement or indemnification or any rights to or
obligations of contribution hereunder shall not be considered as assets or
liabilities of such Person. "AGGREGATE PAYMENTS" means, with respect to a
Borrower or any other Credit Party, as of any date of determination, an amount
equal to (i) the aggregate amount of all payments and distributions made on or
before such date by such Person in respect of this Agreement and the other Loan
Documents, minus (ii) the aggregate amount of all payments received on or before
such date by such Person from the Borrowers and other Credit Parties as
contributions under this Section. The amounts payable as contributions hereunder
shall be determined as of the date on which the related payment or distribution
is made by the applicable Funding Party. The allocation among Borrowers and
other Credit Parties of their obligations as set forth in this section shall not
be construed in any way to limit the liability of any Borrower or Credit Party
hereunder.
48
12. SURETYSHIP WAIVERS
12.1 Suretyship Waivers. Because each Credit Party other than the
Borrowers is not a direct borrower from Lender under this Agreement, although
the Loan directly and indirectly benefits each Person comprising Borrowers and
the Credit Parties, it is possible that Borrowers and the Credit Parties could
be construed as a guarantor or surety of Borrowers and of each other and thereby
have certain rights and remedies accorded to them that were not intended to be
available to any of them. Accordingly, in order to induce the Lender to provide
the credit facilities and accommodations provided for herein, each Person which
is a Borrower or a Credit Party for itself agrees as follows:
(a) The waivers provided in this Section are intended to be
irrevocable and to apply to all present and future Obligations of Borrowers to
Lender, including those arising under successive transactions which shall either
continue the Obligations, increase or decrease them, or from time to time,
create new Obligations, after all or any prior Obligations have been satisfied,
and notwithstanding the dissolution, liquidation or bankruptcy of any Borrower,
any Guarantor of all or any portion of the Obligations, or other event or
proceeding affecting any Borrower or any Guarantor of any portion of the
Obligations.
(b) The Obligations of the Credit Parties hereunder are separate and
independent of (i) Borrowers' obligation to pay Lender principal and interest
under the Notes and the other Obligations hereunder, and (ii) the liabilities
and obligations of any Credit Party which is a Guarantor. A separate action or
actions may be brought and prosecuted against one or more Credit Parties whether
or not any action is brought and prosecuted against Borrowers, all other Credit
Parties, including any Credit Party which is a Guarantor, and whether or not a
particular Borrower and/or any Credit Party is or are joined in any such action
or actions. Each Borrower and each Credit Party waives the benefit of any
statute of limitations affecting the Obligations hereunder or the enforcement
thereof.
49
(c) Each Borrower and each Credit Party authorizes Lender, without
notice or demand and without affecting its liability hereunder, from time to
time to: (i) amend, alter, restate, replace, modify, renew, extend, accelerate
or otherwise change the time for payment or the terms of the Obligations with
Borrowers, including increase or decrease the rate of interest thereon or the
principal amount thereof; (ii) accept partial payments on the Obligations from
any one or more Borrowers or any Guarantor; (iii) accept new or additional
documents, instruments or agreements relative to the Obligations; (iv) take and
hold security or additional guaranties for the payment of the Obligations, and
amend, alter, exchange, substitute, transfer, enforce, waive, subordinate,
terminate, modify and release in any manner any such security or guaranties; (v)
apply such security and direct the order or manner of sale thereof as Lender in
its sole discretion may determine; (vi) release or substitute any one or more of
any Guarantors; (vii) settle, release on terms satisfactory to Lender (or by
operation of law or otherwise), compound, compromise, collect or otherwise
liquidate any indebtedness or security in any manner, consent to the transfer of
security and bid and purchase at any sale, without affecting or impairing the
Obligations of Borrowers or any Credit Party hereunder; or (viii) enforce any
other right or remedy granted to Lender under this Agreement or under any of the
other Loan Documents or under any Guaranty. No such action which Lender shall
take or fail to take in connection with this Agreement or any of the Loan
Documents, or any of them, or any security for the Obligations or other
undertakings of Borrowers, nor any course of dealing with Borrowers or any
Credit Party, or any course of dealing with any other person or legal entity,
shall release Borrowers' Obligations or any Credit Party's responsibility
hereunder, affect this Agreement or the other Loan Documents in any way, or
afford Borrowers or any Credit Party any recourse against Lender. Without
limiting the generality of the foregoing, Borrowers agree that this Agreement
shall extend and be applicable to each new or replacement note delivered by
Borrowers pursuant thereto without notice to or further consent from any Credit
Party.
(d) Borrowers and Credit Parties waive any right to require Lender
to: (i) proceed against any one or more Borrowers under the Note, against any
Guarantor, any other Credit Party, or against anyone else; (ii) proceed against
or exhaust any security for the Obligations, or to marshal assets or to marshal
assets of any Person in any particular order; (iii) except as required by
applicable law, give notice of the terms, time and place of any public or
private sale of any real or personalty securing the Obligations; or (iv) pursue
any other remedy in Lender's power whatsoever. Each Person which is a Borrower,
Guarantor or other Credit Party waives any defense arising by reason of any
disability or other defense of any Borrower, any Guarantor or any other Credit
Party, or by reason of the cessation from any cause whatsoever of the liability
of any Borrower, any Guarantor or any other Credit Party, or by reason of any
act or omission of Lender or other persons which directly or indirectly results
in or aids the discharge or release of any Borrower, any Guarantor or any other
Credit Party, or any of the Obligations or any security therefor by operation of
law or otherwise, or by reason of the amendment, modification, renewal,
extension or other change in any of the Obligations. Each Credit Party waives
all setoffs and counterclaims and all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor,
and notices of acceptance of this Agreement and of the existence, creation, or
incurring of new or additional Obligations, and all other notices and demands of
any kind and description now or hereafter provided for by any statute or rule of
law, except for such notices and demands as specifically required by this
Agreement. Each Borrower, each Guarantor and each other Credit Party expressly
waives any right whatsoever to, or right whatsoever to participate in, any
security now or hereafter held by Lender, reimbursement, indemnity, exoneration,
contribution or any other claim under local, state or federal law, including,
without limitation, 11 U.S.C. ?547, which it may now or hereafter have against
Borrower, any Guarantor or any other Credit Party, or any other Person directly
or contingently liable for the Obligations, or against or with respect to each
Borrowers' property (including, without limitation, any Collateral under any of
the Loan Documents) arising from the existence or performance of this Agreement
until all of the Obligations have been indefeasibly paid or satisfied in full.
50
(e) Each Borrower, each Guarantor and each other Credit Party
represents and warrants to Lender that: (i) this Agreement is executed at each
Borrower's, each Guarantor's and each other Credit Party's request; (ii) each
Borrower, each Guarantor and each other Credit Party has established adequate
means of obtaining from Borrowers on a continuing basis financial and other
information pertaining to Borrowers' respective businesses and Borrowers'
respective financial conditions; and (iii) each Borrower, each Guarantor and
each other Credit Party is now and will be completely familiar with the
business, operation and financial condition of Borrowers and its assets. Each
Borrower, each Guarantor and each other Credit Party hereby waives and
relinquishes any duty on the part of Lender to disclose to Borrowers any matter,
fact or thing relating to the business, operation or financial condition of
Borrowers and its assets now known or hereafter known by Lender during the life
of this Agreement. With respect to any present or future Obligations of
Borrowers to Lender, Lender need not inquire into the authority of Borrowers,
and any Obligations made or created in reliance upon the professed exercise of
such powers.
(f) So long as any of the Obligations under this Agreement remain
unpaid or undischarged, neither a Guarantor nor any other Credit Party will, by
paying any sum recoverable hereunder (whether or not demanded by Lender) or by
any means or on any other ground, (i) claim any set-off or counterclaim against
Borrowers, any Guarantor or any other Credit Party in respect of any Obligations
or other indebtedness by virtue of the right of subrogation, by operation of law
or otherwise; (ii) in any proceedings under federal bankruptcy law or insolvency
proceedings of any nature, assert its rights in competition with Lender in
respect of any payment hereunder because of any claims which a Borrower, any
Guarantor or other Credit Party may have against Borrowers or any other Credit
Party; or (iii) be entitled to have the benefit of any counterclaim or proof of
claim or dividend or payment by or on behalf of Borrowers, any other Credit
Party or other person, or the benefit of any of any other security for any
Obligation which, now or hereafter, Lender may hold or in which it may have any
share or interest.
12.2 Election of Remedies. If Lender may, under applicable law, proceed to
realize its benefits under any of the Loan Documents granting a Lien upon any
Collateral, whether owned by any Borrower or by any other Person, either by
judicial foreclosure or by non-judicial sale or enforcement, Lender may, at its
sole option, determine which of its remedies or rights it may pursue without
affecting any of its rights and remedies under this Section 12. If, in the
exercise of any of its rights and remedies, Lender shall forfeit any of its
rights or remedies, including its right to enter a deficiency judgment against
Borrowers or any other Person, whether because of any applicable laws pertaining
to "election of remedies" or the like, Borrowers hereby consent to such action
by Lender and waives any claim based upon such action, even if such action by
Lender shall result in a full or partial loss of any rights of subrogation that
any Borrower might otherwise have had but for such action by Lender. Any
election of remedies that results in the denial or impairment of the right of
Lender to seek a deficiency judgment against Borrowers shall not impair any
other Borrowers' obligation to pay the full amount of the Obligations. In the
event Lender shall bid at any foreclosure or trustee's sale or at any private
sale permitted by law or the Loan Documents, Lender may bid all or less than the
amount of the Obligations and the amount of such bid need not be paid by Lender
but shall be credited against the Obligations. The amount of the successful bid
at any such sale, whether Lender, or any other party is the successful bidder,
shall be conclusively deemed to be the fair market value of the Collateral and
the difference between such bid amount and the remaining balance of the
Obligations shall be conclusively deemed to be the amount of the Obligations
guaranteed under this Section 12, notwithstanding that any present or future law
or court decision or ruling may have the effect of reducing the amount of any
deficiency claim to which Lender might otherwise be entitled but for such
bidding at any such sale.
12.3 Joint and Several Liability. The payment and performance of all
Obligations shall constitute the joint and several obligations and each
Borrower, each Guarantor and each other Credit Party.
51
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
BORROWERS:
INTEGRATED HEALTHCARE HOLDINGS, INC.
By:
------------------------------------
Larry B. Anderson, President
WMC-SA, INC.
By:
------------------------------------
Larry B. Anderson, President
WMC-A, INC.
By:
------------------------------------
Larry B. Anderson, President
COASTAL COMMUNITIES HOSPITAL, INC.
By:
------------------------------------
Larry B. Anderson, President
[SIGNATURE PAGE CONTINUES]
CHAPMAN MEDICAL CENTER, INC.
By:
------------------------------------
Larry B. Anderson, President
52
CREDIT PARTIES:
PACIFIC COAST HOLDINGS INVESTMENT, LLC
By:
------------------------------------
Anil V. Shah, M.D., Manager
GANESHA REALTY, LLC
By:
------------------------------------
------------------------------------
[Printed Name & Title]
WEST COAST HOLDINGS, LLC
By:
------------------------------------
------------------------------------
[Printed Name & Title]
LENDER:
MEDICAL PROVIDER FINANCIAL CORPORATION II,
By:
------------------------------------
------------------------------------
[Printed Name & Title]
53
ANNEX A (RECITALS)
TO
CREDIT AGREEMENT
DEFINITIONS
Initially capitalized terms used in the Loan Documents shall have (unless
otherwise provided elsewhere in the Loan Documents) the following respective
meanings, and all references to Sections, Exhibits, Schedules or Annexes in the
following definitions shall refer to Sections, Exhibits, Schedules or Annexes of
or to the Agreement:
"Account Debtor" means any Person who may become obligated to any Credit
Party under, with respect to, or on account of, an Account, Chattel Paper or
General Intangibles (including a payment intangible).
"Accounts" means all "accounts," as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, including (a) all Accounts,
other receivables, book debts and other forms of obligations (other than forms
of obligations evidenced by Chattel Paper, or Instruments), (including any such
obligations that may be characterized as an account or contract right under the
Code), (b) all of each Credit Party's rights in, to and under all purchase
orders or receipts for goods or services, (c) all of each Credit Party's rights
to any goods represented by any of the foregoing (including unpaid sellers'
rights of rescission, replevin, reclamation and stoppage in transit and rights
to returned, reclaimed or repossessed goods), (d) all rights to payment due to
any Credit Party for Inventory sold, leased, licensed, assigned or otherwise
disposed of, for a policy of insurance issued or to be issued, for a secondary
obligation incurred or to be incurred, for energy provided or to be provided,
for the use or hire of a vessel under a charter or other contract, arising out
of the use of a credit card or charge card, or for services rendered or to be
rendered by such Credit Party or in connection with any other transaction
(whether or not yet earned by performance on the part of such Credit Party), (e)
all health care insurance receivables and (f) all collateral security of any
kind, given by any Account Debtor or any other Person with respect to any of the
foregoing.
"Accounts Purchase Agreement" means that certain Accounts Purchase
Agreement dated as of March 3, 2005, by and between certain Borrowers, as
sellers, and Medical Provider Financial Corporation I, as purchaser, pursuant to
which such Borrowers shall sell certain of their Accounts to such purchaser. The
payment and performance of the sellers obligations thereunder shall be secured
by a Lien on substantially all of Borrowers' assets pursuant to the terms of a
certain Security Agreement Accounts Purchase agreement dated as of the date
hereof by and among such sellers and Medical Provider Financial Corporation I.
"Advance" or "Loan" means the Acquisition Advance and any Line of Credit
Advance.
1
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, 10% or more of the Stock having ordinary voting
power in the election of directors of such Person, (b) each Person that
controls, is controlled by or is under common control with such Person, (c) each
of such Person's officers, directors, joint venturers and partners and (d) in
the case of Borrowers, the immediate family members, spouses and lineal
descendants of individuals who are Affiliates of any Borrower. For the purposes
of this definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that, with respect to the Credit Parties, the term
"Affiliate" shall specifically exclude Lender.
" Agreement " means this Credit Agreement by and among Borrower, the other
Credit Parties party thereto, and Lender, as the same may be amended,
supplemented, restated or otherwise modified from time to time.
"Appendices" has the meaning ascribed to it in the recitals to the
Agreement.
"Applicable Laws" means all federal, state and local laws, statutes,
codes, regulations, rules, acts, ordinances of all Governmental Authorities,
departments, commissions, boards, courts, authorities, agencies, officials and
officers, including without limitation, Environmental Laws, all building,
safety, health, use laws, the Fair Labor Standards Act, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, 15 U.S.C. Section 18a, the Worker Adjustment
and Retraining Notification Act, 29 U.S.C. 2101, et seq., as amended (the "WARN
ACT") , and the California version of the WARN Act, California Cal. Labor Code
ss.1400 et seq., and any deed restrictions or other requirements of record
applicable to the Collateral or to any Borrower or any Credit Party, or to their
respective businesses, applicable.
"Asset Sale Agreement" means that certain Asset Sale Agreement dated as of
September 29, 2004, by and among AHM CGH, Inc., a California corporation, Health
Resources Corporation of America- California, a Delaware corporation, UWMC
Hospital Corporation, a California corporation, SHL/O Corp., a Delaware
corporation, as Seller, and Integrated Healthcare Holdings, Inc., a Nevada
corporation, as Purchaser, as amended.
"Assignment Agreement" has the meaning ascribed to it in Section 9.1(a).
"Assignment of Leases and Rents" means those certain Absolute Assignments
of Leases and Rents with License Back executed by IHHI and each of its
Subsidiaries and by PCHI relating and encumbering their respective interests in
and to the leases and rents relating to each Hospital Facility. Each Assignment
of Leases and Rents is a Collateral Document.
"Bankruptcy Code" means the provisions of Title 11 of the United States
Code, 11 U.S.C. ss.101 et seq.
"Blocked Accounts" has the meaning ascribed to it in Annex C.
"Borrowers' Representative" means IHHI in its capacity as Borrowers'
Representative.
2
"Borrower" and "Borrowers" means, individually and collectively,
Integrated Healthcare Holdings, Inc., a Nevada corporation, WMC-SA, Inc., a
California corporation, WMC-A, Inc., a California corporation, Chapman
Medical Center, Inc., a California corporation, and Coastal Communities
Hospital, Inc., a California corporation.
"Business Day" means any day that is not a Saturday, a Sunday or a day on
which banks are required or permitted to be closed in the State Nevada.
"Capital Expenditures" means, with respect to any Person, all expenditures
(by the expenditure of cash or the incurrence of Indebtedness) by such Person
during any measuring period for any fixed assets or improvements or for
replacements, substitutions or additions thereto that have a useful life of more
than one year and that are required to be capitalized under GAAP.
"Capital Lease" means, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.
"Capital Lease Obligation" means, with respect to any Capital Lease of any
Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.
"Cash Collateral Account" has the meaning ascribed to it Annex B.
"Cash Equivalents" has the meaning ascribed to it in Annex B.
"Cash Management Systems" has the meaning ascribed to it in Section 1.5.
"Certified Cash" means the net amount of Dollars in unrestricted cash and
cash equivalents of the Credit Parties that is in Deposit Accounts or securities
accounts maintained (by a branch of a bank or securities intermediary) within
the United States and identified on Disclosure Schedule 3.19, as updated by
Borrowers from time to time, as "Certified Cash Accounts" which Certified Cash
Accounts are not subject to any Liens, statutory liens or rights of offset, any
overdraft, or any other charge or priority in favor of any Person other than
Lender or, for any Deposit Account or securities account, the rights of the
applicable bank or securities intermediary maintaining such Deposit Account or
securities account with respect to customary account charges relating thereto
(provided, that any amounts subject to any such rights in favor of any such bank
or securities intermediary shall be excluded from Certified Cash for purposes of
calculation of the amount thereof). For the avoidance of any doubt, the amount
of the Credit Parties' marketable securities and Qualified Cash at the time of
any determination shall be deemed to constitute Certified Cash but only to the
extent they are not subject to any Liens, statutory liens or rights of offset,
any overdraft, or any other charge or priority in favor of any Person other than
Lender.
3
"Change of Control" means any of the following: (a) any person or group of
persons (within the meaning of the Securities Exchange Act of 1934,) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934) of 25% or more of the issued and outstanding shares of capital Stock of
any Borrower or any Credit Party having the right to vote for the election of
directors of Borrowers under ordinary circumstances; (b) during any period of
twelve consecutive calendar months, individuals who at the beginning of such
period constituted the board of directors of any Borrower or other Credit Party
(together with any new directors whose election by the board of directors of
such Borrower or Credit Party whose nomination for election by the Shareholders
of such Borrower or such Credit Party was approved by a vote of the nominating
committee or at least two-thirds of the directors then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason other
than death or disability to constitute a majority of the directors then in
office; (c) IHHI ceases to own, directly or indirectly, and control all of the
economic and voting rights associated with all of the outstanding capital Stock
of the other Borrowers.
"Chapman Leases" means (a) the tenant's interest in the Hospital Lease
dated April 25, 1967 (as amended) for 2601 East Chapman Avenue, Orange, CA, and
(b) the tenant's interest in the Medical Office Building Lease dated August 25,
1967 at 2617 East Chapman Avenue, Orange, CA.
"Chapman Medical Center" means the real property and improvements located
at 2601 and 2617 East Chapman Avenue, Orange, California.
"Charges" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including taxes owed to the PBGC at the
time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Borrower or any Credit
Party, (d) any Borrower's or any Credit Party's ownership or use of any
properties or other assets, or (e) any other aspect of any Borrower's or any
Credit Party's business.
"Chattel Paper" means any "chattel paper," as such term is defined in the
Code, including electronic chattel paper, now owned or hereafter acquired by any
Borrower or any Credit Party.
"Closing and Funding Checklist" means the schedule, including all
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with the Agreement, the other Loan
Documents and the transactions contemplated thereunder, substantially in the
form attached hereto as Annex C.
"Closing Date" means March 3, 2005.
"Closing Date Side Letter" means that certain letter agreement, if deemed
necessary by Lender, by and among Lender, Borrowers and the Credit Parties
pursuant to which Borrowers and Credit Parties agree to take certain actions and
to deliver or cause to be delivered such agreements, instruments and documents
as Lender requires.
"Coastal Communities Hospital" means the real property and improvements
located at 2701 South Bristol Street and 1901 North College Avenue, Santa Ana,
California.
4
"Code" means the Uniform Commercial Code as the same may, from time to
time, be enacted and in effect in the State of California; provided, that to the
extent that the Code is used to define any term herein or in any Loan Document
and such term is defined differently in different Articles or Divisions of the
Code, the definition of such term contained in Article or Division 9 shall
govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of, or
remedies with respect to, Lender's or any Lender's Lien on any Collateral is
governed by the Uniform Commercial Code as enacted and in effect in a
jurisdiction other than the State of California, the term "Code" shall mean the
Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such
provisions.
"Collateral" means the property covered by the Security Agreement and the
other Collateral Documents and any other property, real or personal, tangible or
intangible, now existing or hereafter acquired, that may at any time be or
become subject to a security interest or Lien in favor of Lender, to secure the
Obligations.
"Collateral Documents" means the Deeds of Trust, Assignments of Leases and
Rents, Security Agreements, the Control Agreements, the Guaranties, the Pledge
Agreements, the Subordination Agreements, the UCC-1 Financing Statements, and
all similar agreements, documents and instruments entered into guaranteeing
payment of, or granting a Lien upon, real and personal property (and interests
in real and personal property), and perfecting the Liens, as security for
payment of, the Obligations.
"Collateral Reports" means the reports with respect to the Collateral
referred to in Annex C.
"Collection Accounts" means those certain accounts of Lender identified in
the Cash Management System in Annex C attached hereto, or such other account as
may be specified in writing by Lender as the "Collection Account."
"Commitment Termination Date" means the earliest of (a) thirty (30)
calendar days prior to the Stated Maturity Date; (b) the date of termination of
Lender's obligations to make Advances under the Line of Credit Note or permit
existing Loans to remain outstanding pursuant to Section 8.2(b), (c) the date of
prepayment in full by Borrowers of the Loans and the permanent reduction of all
Commitments to zero dollars ($0); (d) the Maturity Date.
"Commitment" means the aggregate of Lender's Commitment , which aggregate
commitment shall be Thirty Million Dollars ($30,000,000) on the Closing Date, as
such Commitment may be reduced, amortized or adjusted from time to time in
accordance with the Agreement.
"Condominium Units" means the fee interest in any one or more of the
commercial condominium units numbered 1 through 8, 11, 12, 118, 120, 121, 201
through 204, 213, 214, 216, 218 and 225 situated in the office building located
at 999 North Tustin Avenue, Santa Ana, California.
"Contracts" means all "contracts," as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party, in any event, including all
contracts, undertakings, or agreements (other than rights evidenced by Chattel
Paper, Documents or Instruments) in or under which any Credit Party may now or
hereafter have any right, title or interest, including any agreement relating to
the terms of payment or the terms of performance of any Account.
5
"Control Agreement" means a certain Control Agreement to be executed and
delivered by Lender (on behalf of itself and Medical Provider Financial
Corporation I, its affiliate), each Borrower and a depository approved by
Lender, pursuant to which such depository agrees to the control of certain
deposit accounts by the Lender in order to perfect the Lien granted to Lender
(for its benefit and the benefit of Medical Provider Financial Corporation I).
The term may also be used to apply to any control agreements relating to
securities accounts in which Lender acquires a Lien to secure the payment and
performance of the Obligations.
"Control Letter" means a letter agreement between Lender and (i) the
issuer of uncertificated securities with respect to uncertificated securities in
the name of any Borrower or any Credit Party, (ii) a securities intermediary
with respect to securities, whether certificated or uncertificated, securities
entitlements and other financial assets held in a securities account in the name
of any Borrower or any Credit Party, (iii) a futures commission merchant or
clearing house, as applicable, with respect to commodity accounts and commodity
contracts held by any Borrower or any Credit Party, whereby, among other things,
the issuer, securities intermediary or futures commission merchant limits any
security interest in the applicable financial assets in a manner reasonably
satisfactory to Lender, acknowledges the Lien of Lender, on such financial
assets, and agrees to follow the instructions or entitlement orders of Lender
without further consent by the affected Borrower or Credit Party.
"Copyright License" means any and all rights now owned or hereafter
acquired by any Borrower or any Credit Party under any written agreement
granting any right to use any Copyright or Copyright registration.
"Copyrights" means all of the following now owned or hereafter adopted or
acquired by any Credit Party: (a) all copyrights and General Intangibles of like
nature (whether registered or unregistered), all registrations and recordings
thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright Office
or in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.
"Credit Parties" means PCHI, West Coast Holdings, LLC, and Ganesha Realty,
LLC, any Guarantors, and any pledgors under any Pledge Agreements, and any
Person who is a party to any subordination agreement for the benefit of Lender,
and the successors and assigns or heirs and personal representatives, as
applicable of each of the foregoing.
"Deed of Trust" means those certain separate Deeds of Trust with
Assignments of Rents and Fixture Filing executed by IHHI relating and
encumbering its interests in and to each Hospital Facility. Each Deed of Trust
is a Collateral Document.
"Default" means any event that, with the passage of time or notice or
both, would, unless cured or waived, become an Event of Default.
"Default Rate" has the meaning ascribed to it in Section 1.4(d).
6
"Deposit Accounts" means all "deposit accounts" as such term is defined in
the Code, now or hereafter held in the name of any Credit Party.
"Deposit Account Security Agreement" means that certain Deposit Account
Security Agreement dated as of the date hereof and one of the Loan Documents, by
and among Lender, Medical Provider Financial Corporation I, and each Borrower.
"Disbursement Accounts" has the meaning ascribed to it in Annex C.
"Disclosure Schedules" means the Schedules prepared by Borrowers and
denominated as Disclosure Schedules (1.3) through (6.7) in the Index to the
Agreement.
"Documents" means all "documents," as such term is defined in the Code,
now owned or hereafter acquired by any Borrower or any Credit Party, wherever
located.
"Dollars" or "$" means lawful currency of the United States of America.
"Environmental Laws" means all applicable federal, state, local and
foreign laws, statutes, ordinances, codes, rules, standards and regulations,
now or hereafter in effect, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or administrative
order, consent decree, order or judgment, imposing liability or standards of
conduct for or relating to the regulation and protection of human health,
safety, the environment and natural resources (including ambient air, surface
water, groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species and vegetation). Environmental Laws include the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(42 U.S.C. (s)(s) 9601 et seq.) ("CERCLA"); the Hazardous Materials
Transportation Authorization Act of 1994 (49 U.S.C. (s)(s) 5101 et seq.);
the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. (s)(s) 136
et seq.); the Solid Waste Disposal Act (42 U.S.C. (s)(s) 6901 et seq.); the
Toxic Substance Control Act (15 U.S.C. (s)(s) 2601 et seq.); the Clean Air
Act (42 U.S.C. (s)(s) 7401 et seq.); the Federal Water Pollution Control Act
(33 U.S.C. (s)(s) 1251 et seq.); the Occupational Safety and Health Act (29
U.S.C. (s)(s) 651 et seq.); and the Safe Drinking Water Act (42 U.S.C.
(s)(s) 300(f) et seq.), and any and all regulations promulgated thereunder,
and all analogous state, local and foreign counterparts or equivalents and
any transfer of ownership notification or approval statutes.
"Environmental Liabilities" means, with respect to any Person, all
liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising under
or related to any Environmental Laws, Environmental Permits, or in connection
with any Release or threatened Release or presence of a Hazardous Material
whether on, at, in, under, from or about or in the vicinity of any real or
personal property.
7
"Environmental Permits" means all permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Authority
under any Environmental Laws.
"Equipment" means all "equipment," as such term is defined in the Code,
now owned or hereafter acquired by any Borrower or any Credit Party, wherever
located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulations promulgated thereunder.
"ERISA Affiliate" means, with respect to any Credit Party, any trade or
business (whether or not incorporated) that, together with such Credit Party,
are treated as a single employer within the meaning of Sections 414(b), (c), (m)
or (o) of the IRC.
"ERISA Event" means, with respect to any Credit Party or any ERISA
Affiliate, (a) with respect to a Title IV Plan, any event described in Section
4043(c) of ERISA for which notice to the PBGC has not been waived; (b) the
withdrawal of any Credit Party or ERISA Affiliate from a Title IV Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer, as defined in Section 4001(a)(2( of ERISA; (c) the complete or partial
withdrawal of any Credit Party or any ERISA Affiliate from any Multiemployer
Plan; (d) the filing of a notice of intent to terminate a Title IV Plan in a
distress termination described in Section 4041(c) of ERISA or the treatment of a
plan amendment as a termination under Section 4041 of ERISA; (e) the institution
of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC;
(f) with respect to a Title IV Plan, the existence of an "accumulated funding
deficiency" (as defined in Section 412 of the IRC or Section 302 of ERISA)
whether or not waived, or the failure to make by its due date a required
installment under Section 412(m) of the Code or the failure to make any required
contribution to a Multiemployer Plan; (g) the filing pursuant to Section 412(d)
of the Code or Section 303(d) of ERISA of an application for a waiver of the
minimum funding standard with respect to a Title IV Plan; (h) the making of any
amendment to any Title IV Plan which could result in the imposition of a lien or
the posting of a bond or other security; (i) with respect to a Title IV Plan an
event described in Section 4062(e) of ERISA; (j) any other event or condition
that would reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Title IV Plan or Multiemployer Plan or for the imposition of liability under
Section 4069 or 4212(c) of ERISA; (k) the termination of a Multiemployer Plan
under Section 4041A of ERISA or the reorganization or insolvency of a
Multiemployer Plan under Section 4241 or 4245 of ERISA; (1) the loss of a
Qualified Plan's qualification or tax exempt status; or (m) the termination of a
Plan described in Section 4064 of ERISA.
"Event of Default" has the meaning ascribed to it in Section 8.1.
"Fair Labor Standards Act" means the Fair Labor Standards Act, 29 U.S.C.
ss.ss.201 et seq.
"Fees" means any and all fees payable to Lender pursuant to the Agreement
or any of the other Loan Documents, including but not limited to the Origination
Fee and Lender's Costs.
8
"Financial Statements" means the consolidated and consolidating income
statements, statements of cash flows and balance sheets of Borrowers delivered
in accordance with Section 3.4.
"Fiscal Month" means any of the monthly accounting periods of Borrowers.
"Fiscal Quarter" means any of the quarterly accounting periods of
Borrowers, ending on March 31, June 30, September 30 and December 31 of each
year.
"Fiscal Year" means any of the annual accounting periods of Borrowers
ending on December 31 of each year.
"Fixtures" means all "fixtures" as such term is defined in the Code, now
owned or hereafter acquired by any Borrower or any Credit Party.
"Funded Debt" means, with respect to any Person, without duplication, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness and that by its terms matures more than one
year from, or is directly or indirectly renewable or extendible at such Person's
option under a line of credit (including the Line of Credit provided for herein)
or similar agreement obligating the lender or lenders to extend credit over a
period of more than one year from the date of creation thereof, and specifically
including Capital Lease Obligations, current maturities of long term debt, Line
of Credit and short term debt extendible beyond one year at the option of the
debtor, and also including, in the case of Borrowers, the Obligations and,
without duplication, Guaranteed Indebtedness consisting of guaranties of Funded
Debt of other Persons.
"GAAP" means generally accepted accounting principles in the United States
of America consistently applied, as such term is further defined in this Annex
A.
"General Intangibles" means all "general intangibles," as such term is
defined in the Code, now owned or hereafter acquired by any Borrower or any
Credit Party, including all right, title and interest that such Borrower or any
such Credit Party may now or hereafter have in or under any Contract, all
payment intangibles, customer lists, Licenses, Copyrights, Trademarks, Patents,
and all applications therefore and reissues, extensions or renewals thereof,
rights in Intellectual Property, interests in partnerships, joint ventures and
other business associations, licenses, permits, copyrights, trade secrets,
proprietary or confidential information, inventions (whether or not patented or
patentable), technical information, procedures, designs, knowledge, know-how,
software, data bases, data, skill, expertise, experience, processes, models,
drawings, materials and records, goodwill (including the goodwill associated
with any Trademark or Trademark License), all rights and claims in or under
insurance policies (including insurance for fire, damage, loss and casualty,
whether covering personal property, real property, tangible rights or intangible
rights, all liability, life, key man and business interruption insurance, and
all unearned premiums), uncertificated securities, choices in action, deposit,
checking and other bank accounts, rights to receive tax refunds and other
payments, rights to receive dividends, distributions, cash, Instruments and
other property in respect of or in exchange for pledged Stock and Investment
Property, rights of indemnification, all books and records, correspondence,
credit files, invoices and other papers, including without limitation all tapes,
cards, computer runs and other papers and documents in the possession or under
the control of such Credit Party or any computer bureau or service company from
time to time acting for such Borrower or such Credit Party.
9
"Goods" means all "goods" as defined in the Code, now owned or hereafter
acquired by any Borrower or any Credit Party, wherever located, including
embedded software to the extent included in "goods" as defined in the Code.
"Governmental Authority" means any nation or government, any state,
county, city, or other political subdivision thereof, and any agency, department
or other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Group Purchasing Agreement" collectively, means (a) that certain Master
Contracting Services Agreement dated December 1, 2004, between Broadlane, Inc.
and IHHI, and (b) that certain Master Maintenance and Services Agreement dated
December 1, 2004, between Broadlane, Inc., and IHHI.
"Guaranteed Indebtedness" means as to any Person, any obligation of such
Person guaranteeing, providing comfort or otherwise supporting any Indebtedness,
lease, dividend, or other obligation ("primary obligation") of any other Person
(the "primary obligor") in any manner, including any obligation or arrangement
of such Person to (a) purchase or repurchase any such primary obligation, (b)
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, (d) protect the beneficiary of such arrangement from loss (other
than product warranties given in the ordinary course of business) or (e)
indemnify the owner of such primary obligation against loss in respect thereof.
The amount of any Guaranteed Indebtedness at any time shall be deemed to be an
amount equal to the lesser at such time of (x) the stated or determinable amount
of the primary obligation in respect of which such Guaranteed Indebtedness is
incurred and (y) the maximum amount for which such Person may be liable pursuant
to the terms of the instrument embodying such Guaranteed Indebtedness, or, if
not stated or determinable, the maximum reasonably anticipated liability
(assuming full performance) in respect thereof.
"Guaranties" means, collectively, each guaranty executed by any Guarantor
in favor of Lender in respect of the Obligations, including without limitation
the Guaranty by PCHI and the Guaranty by OC-PIN.
"Guarantors" individually refers to either PCHI or OC-PIN, and
collectively refers to PCHI, OC-PIN and any other Guarantor of all or any
portion of the Obligations. Both PCHI and OC-PIN are also Credit Parties
hereunder.
"Hazardous Material" means any substance, material or waste that is
regulated by, or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance that is (a) defined as a
"solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws, or (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's),
or any radioactive substance.
10
"Hospital Facilities" means, collectively, Western Medical Center-Santa
Ana, Western Medical Center-Anaheim, Coastal Communities Hospital and Chapman
Medical Center.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred 6 months or more, but excluding
obligations to trade creditors incurred in the ordinary course of business that
are unsecured and not overdue by more than 6 months unless being contested in
good faith, (b) all reimbursement and other obligations with respect to letters
of credit, bankers' acceptances and surety bonds, whether or not matured, (c)
all obligations evidenced by notes, bonds, debentures or similar instruments,
(d) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations and the present value (discounted at the Index
Rate as in effect on the Closing Date) of future rental payments under all
synthetic leases, (f) all obligations of such Person under commodity purchase or
option agreements or other commodity price hedging arrangements, in each case
whether contingent or matured, (g) all obligations of such Person under any
foreign exchange contract, currency swap agreement, interest rate swap, cap or
collar agreement or other similar agreement or arrangement designed to alter the
risks of that Person arising from fluctuations in currency values or interest
rates, in each case whether contingent or matured, (h) all Indebtedness referred
to above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property or other assets (including accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, and (i) the Obligations.
"Indemnified Liabilities" has the meaning ascribed to it in Section 1.10.
"Indemnified Person" has the meaning ascribed to in Section 1.10.
"Initial Funding Date" has the meaning ascribed to it in Section 2.2(a).
"Instruments" means all "instruments," as such term is defined in the
Code, now owned or hereafter acquired by any Borrower or any Credit Party,
wherever located, and, in any event, including all certificated securities, all
certificates of deposit, and all promissory notes and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
"Intellectual Property" means any and all Licenses, Patents, Copyrights,
Trademarks, and the goodwill associated with such Trademarks.
11
"Interest Payment Date" means the first Business Day of each calendar
month to occur while any Loan is outstanding, and provided further that, in
addition to the foregoing, each of (x) the Commitment Termination Date, and (y)
the Maturity Date, shall each be deemed to be an "Interest Payment Date" with
respect to any interest that has then accrued under the Agreement.
"Inventory" means all "inventory," as such term is defined in the Code,
now owned or hereafter acquired by any Borrower or any Credit Party, wherever
located, and in any event including inventory, merchandise, goods and other
personal property that are held by or on behalf of any Borrower or any Credit
Party for sale or lease or are furnished or are to be furnished under a contract
of service, or that constitute raw materials, work in process, finished' goods,
returned goods, or materials or supplies of any kind, nature or description used
or consumed or to be used or consumed in such Borrower or such Credit Party's
business or in the processing, production, packaging, promotion, delivery or
shipping of the same, including all supplies and embedded software.
"Investment" has the meaning ascribed thereto in Section 6.2 hereof.
"Investment Property" means all "investment property" as such term is
defined in the Code now owned or hereafter acquired by any Borrower or any
Credit Party, wherever located, including (i) all securities, whether
certificated or uncertificated, including stocks, bonds, interests in limited
liability companies, partnership interests, treasuries, certificates of deposit,
and mutual fund shares; (ii) all securities entitlements of any Borrower or any
Credit Party, including the rights of any Borrower or any Credit Party to any
securities account and the financial assets held by a securities intermediary in
such securities account and any free credit balance or other money owing by any
securities intermediary with respect to that account; (iii) all securities
accounts of any Borrower or any Credit Party; (iv) all commodity contracts of
any Borrower or any Credit Party; and (v) all commodity accounts held by any
Borrower or any Credit Party.
"IRC" means the Internal Revenue Code of 1986 and all regulations
promulgated thereunder.
"IRS" means the Internal Revenue Service.
"Lender" means Medical Provider Financial Corporation II, a Nevada
corporation, and, if Lender shall decide to assign all or any portion of the
Obligations, such term shall include any assignee(s) of Lender.
"Lender's Costs" means all costs paid or incurred by Lender with respect
to the Loans and the Loan Documents, including but not limited to all attorneys'
fees and expenses of Lender's outside counsel.
"Letter-of-Credit Rights" means "letter-of-credit rights" as such term is
defined in the Code, now owned or hereafter acquired by any Borrower or any
Credit Party, including rights to payment or performance under a letter of
credit, whether or not such Borrower or any Credit Party, as beneficiary, has
demanded or is entitled to demand payment or performance.
12
"License" means any Copyright License, Patent License, Trademark License
or other license of rights or interests now held or hereafter acquired by any
Borrower or any Credit Party.
"Lien" means any agreement or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the Code or
comparable law of any jurisdiction).
"Line of Credit Advance" has the meaning ascribed to it in Section
1.1(b)(i).
"Line of Credit Loan" means, at any time, the aggregate amount of Line of
Credit Advances outstanding to Borrower.
"Line of Credit Commitment" means the aggregate commitment of Lender to
make Line of Credit Advances, which aggregate commitment shall be Thirty Million
Dollars ($30,000,000) on the Closing Date, as such amount may be adjusted, if at
all, from time to time in accordance with the Agreement.
"Line of Credit Note" has the meaning ascribed to it in Section
1.2(b)(ii).
"Litigation" has the meaning ascribed to it in Section 3.13.
"Loan Account" has the meaning ascribed to it in Section 1.09.
"Loan Documents" means the Agreement, the Notes, the Collateral Documents,
the Closing Date Side Letter and all other agreements, instruments, documents
and certificates identified in the Closing and Funding Checklist executed and
delivered to, or in favor of, Lender or any Lenders and including all other
pledges, powers of attorney, consents, assignments, contracts, notices, letter
of credit agreements and all other written matter whether heretofore, now or
hereafter executed by or on behalf of any Borrower or any Credit Party, or any
employee of any Borrower or any Credit Party, and delivered to Lender in
connection with the Agreement or the transactions contemplated thereby. Any
reference in the Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to the
Agreement or such Loan Document as the same may be in effect at any and all
times such reference becomes operative.
"Loan" means either the Acquisition Advance or the Line of Credit Loan, or
both.
"Lock Boxes" has the meaning ascribed to it in Annex B.
"Margin Stock" has the meaning ascribed to in Section 3.10.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, or financial or other condition of the Borrowers
considered as a whole, (b) Borrowers' ability to pay any of the Loans or any of
the other Obligations in accordance with the terms of the Agreement, (c) the
Collateral or Lender's Liens on the Collateral or the priority of such Liens, or
(d) Lender's rights and remedies under the Agreement and the other Loan
Documents.
13
"Material Subsidiary" means any Subsidiary of any Borrower generating more
than ten percent (10%) of the revenues of, or possessing more than ten percent
(10%) of the assets of, the Borrowers and their Subsidiaries on a consolidated
basis, or possessing assets with a fair market value of greater than $100,000.
"Maturity Date" means the first to occur of (i) the Commitment Termination
Date for the Line of Credit Loan, (ii) the Stated Maturity Date for all Loans,
or (iii) the occurrence or existence of a continuing Event of Default under any
of the Loan Documents.
"Maximum Amount" means, as of any date of determination, an amount equal
to total of the Acquisition Advance and the Commitment as of that date.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
3(37) or 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate
is making, is obligated to make or has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"Notes" means the Acquisition Note and the Line of Credit Note.
"Notice of Line of Credit Advance" has the meaning ascribed to it in
Section 1.1(b)(i).
"Obligations" collectively means all loans, advances, debts, liabilities
and obligations for the performance of covenants, tasks or duties or for payment
of monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any
Borrower or any Credit Party to Lender, and all covenants and duties regarding
such amounts, of any kind or nature, present or future, whether or not evidenced
by any note, agreement, letter of credit agreement or other instrument, arising
under the Agreement or any of the other Loan Documents. This term includes all
principal, interest (including all interest that accrues after the commencement
of any case or proceeding by or against any Borrower or any Credit Party in
bankruptcy, whether or not allowed in such case or proceeding), Fees, expenses,
attorneys' fees and any other sum chargeable to any Borrower or any Credit Party
under the Agreement or any of the other Loan Documents.
"Origination Fees" means an origination fee in an amount equal to two
percent (2%) of the Commitment (i.e., Six Hundred Thousand Dollars ($600,000)),
and two percent (2%) of the Acquisition Loan (i.e., One Million Dollars
($1,000,000), for a total of One Million Six Hundred Thousand Dollars
($1,600.000).
"Patent License" means rights under any written agreement now owned or
hereafter acquired by any Borrower or any Credit Party granting any right with
respect to any invention on which a Patent is in existence.
"Patents" means all of the following in which any Borrower or any Credit
Party now holds or hereafter acquires any interest: (a) all letters patent of
the United States or of any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or of any
other country, including registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State, or any other country, and (b) all reissues,
continuations, continuations-in-part or extensions thereof.
14
"PBGC" means the Pension Benefit Guaranty Corporation.
"PCHI" means Pacific Coast Holding Investments, Inc., a California
limited liability company.
"Pension Plan" means a Plan described in Section 3(2) of ERISA.
"Permitted Encumbrances" means the following encumbrances relating to the
Hospital Facilities: (a) Liens for taxes or assessments or other governmental
Charges not yet due and payable or which are being contested in accordance with
Section 5.2(b); (b) pledges or deposits of money securing statutory obligations
under workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation (excluding Liens under ERISA); (c) zoning
restrictions, easements, licenses, or other restrictions on the use of any real
estate or other minor irregularities in title (including leasehold title)
thereto, so long as the same do not create a Material Adverse Effect, as
determined by Lender; (d) currently existing or hereafter created Liens in favor
of Lender or Lender's Affiliate; (e) any Lien held by an equipment lessor in the
equipment so leased; (f) all encumbrances shown in any title policy issued on
the Closing Date to Lender; (g) inchoate and unperfected workers' compensation,
mechanics' or similar liens arising in the ordinary course of business,
provided, that the same are satisfied in the ordinary course of business; (h)
carriers', warehousemen's, suppliers' or other similar possessory liens arising
in the ordinary course of business, provided, that the same are satisfied in the
ordinary course of business; (i) such other liens arising in the ordinary course
of business so long as such liens do not create a Material Adverse Effect; (j)
(for Coastal Communities Hospital, 2701 East Bristol Street, Santa Ana,
California), the exceptions shown on Schedule B as Nos. 1- 9, 11, 12 and 13 (as
may be affected by the ALTA survey to be delivered after the date hereof which
shall be approved by the Lender), as reflected on that certain Preliminary Title
Report dated as of February 2, 2005, Chicago Title Company Order No. 41026578B -
X52; (k) (for Coastal Communities Hospital, 1901 and 1905 North College Avenue,
Santa Ana, California), the exceptions shown on Schedule B as Nos. 1- 5, 7, 9,
10, 11, 12 (as may be affected by the ALTA survey to be delivered after the date
hereof which shall be approved by the Lender), and 13, as reflected on that
certain Preliminary Title Report dated as of February 2, 2005, Chicago Title
Company Order No. 41026578A - X52; (l) (for Western Medical Center/A, 1025 South
Anaheim Blvd., Anaheim, California), the exceptions shown on Schedule B as Nos.
1-18, 19, 22 and 23 (as may be affected by the ALTA survey to be delivered after
the date hereof which shall be approved by the Lender), 20 and 21 as reflected
on the certain Preliminary Title Report dated as of February 2, 2005, Chicago
Title Company Order No. 41026587 - X52; (m) (for Western Medical Center/SA, 1001
North Tustin Avenue, Santa Ana, California, the exceptions shown on Schedule B
as Nos. 1-4, 27-44, 46 - 59, 61, and 65 - 70 (No. 70 as may be affected by the
ALTA survey to be delivered after the date hereof which shall be approved by the
Lender) as reflected on that certain First Amended Preliminary Title Report
dated as of February 2, 2005 and revised February 26, 2005, Chicago Title
Company Order No. 41026631 - X52; (n) (for Chapman Medical Center, 2601 East
Chapman Avenue, Orange, California), the exceptions shown on Schedule B as Nos.
1-11, 14-24 and 30 (as may be affected by the ALTA survey to be delivered after
the date hereof which shall be approved by the Lender) as reflected on the
certain Preliminary Title Report dated as of February 2, 2005, Chicago Title
Company Order No. 41026576A - X52; and (o)(for Chapman Medical Center, 2617 East
Chapman Avenue, Orange, California), the exceptions shown on Schedule B as Nos.
1-9, 12-14, 19-21, 23, 24, 27 and 30 (as may be affected by the ALTA survey to
be delivered after the date hereof which shall be approved by the Lender) as
reflected on the certain Preliminary Title Report dated as of February 2, 2005,
Chicago Title Company Order No. 41026576B - X52.
15
"Person" means any individual, sole proprietorship, partnership, joint
venture, unincorporated organization, trust, business trust, association,
corporation, limited liability company, institution, public benefit corporation,
other entity or government (whether federal, state, county, city, municipal,
local, foreign, or otherwise, including any instrumentality, division, agency,
body or department thereof).
"Plan" means, at any time, an "employee benefit plan," as defined in
Section 3(3) of ERISA, that any Credit Party or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to or has maintained,
contributed to or had an obligation to contribute to at any time within the past
7 years on behalf of participants who are or were employed by any Credit Party
or ERISA Affiliate.
"Proceeds" means "proceeds," as such term is defined in the Code,
including (a) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to any Credit Party from time to time with respect to any of
the Collateral, (b) any and all payments (in any form whatsoever) made or due
and payable to any Credit Party from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority (or any Person acting under
color of governmental authority), (c) any claim of any Borrower or any Credit
Party against third parties (i) for past, present or future infringement of any
Patent or Patent License, or (ii) for past, present or future infringement or
dilution of any Copyright, Copyright License, Trademark or Trademark License, or
for injury to the goodwill associated with any Trademark or Trademark License,
(d) any recoveries by any Borrower or any Credit Party against third parties
with respect to any litigation or dispute concerning any of the Collateral
including claims arising out of the loss or nonconformity of, interference with
the use of, defects in, or infringement of rights in, or damage to, Collateral,
(e) all amounts collected on, or distributed on account of, other Collateral,
including dividends, interest, distributions and Instruments with respect to
Investment Property and pledged Stock, and (f) any and all other amounts, rights
to payment or other property acquired upon the sale, lease, license, exchange or
other disposition of Collateral and all rights arising out of Collateral.
"Projections" means each Borrower's forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, all prepared on a Borrower by
Borrower basis, if applicable, and otherwise consistent with the historical
Financial Statements of the Seller for each Hospital Facility with certain
normalizing assumptions made by Borrowers, together with appropriate supporting
details and a statement of underlying assumptions.
16
"Qualified Assignee" means (a) any Lender, any Affiliate of Lender and,
with respect to a lender that is an investment fund that invests in commercial
loans, any other investment fund that invests in commercial loans and that is
managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor, and (b) any commercial bank, savings and
loan association or savings bank or any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act of 1933) which
extends credit or buys loans as one of its businesses, including insurance
companies, mutual funds, lease financing companies and commercial finance
companies, in each case, which has a rating of BBB or higher from S&P and a
rating of Baa2 or higher from Moody's at the date that it becomes a Lender and
which, through its applicable lending office, is capable of lending to Borrowers
s without the imposition of any withholding or similar taxes; provided that no
Person proposed to become a Lender after the Closing Date and determined by
Lender to be acting in the capacity of a vulture fund or distressed debt
purchaser shall be a Qualified Assignee, and no Person or Affiliate of such
Person proposed to become a Lender after the Closing Date that holds
Subordinated Debt or Stock issued by any Credit Party shall be a Qualified
Assignee.
"Qualified Cash" means, as of any date of determination, the amount of
Certified Cash that is subject to perfection in favor of Lender pursuant to
Control Agreements (including, with respect to any such securities account, a
Control Letter and with respect to any Deposit Account, a blocked account
agreement) in form and substance satisfactory to Lender, which Control
Agreements shall provide, among other things, that the bank or securities
intermediary executing such agreement (i) has no rights of setoff or recoupment
or any other claim against such account, as the case may be, other than for
payment of its service fees and other charges directly related to the
administration of such account and, as applicable, for returned checks or other
items of payment, and (ii) agrees to follow the instructions or entitlement
orders of Lender without further consent by the affected Borrower or any Credit
Party, including, with respect to funds in any such account, upon the
instructions of Lender, to immediately forward by daily sweep all such funds to
the Collection Account or as otherwise directed by Lender.
"Qualified Cash Account" means any deposit account or securities account
that is subject to a Control Agreement in form and substance satisfactory to
Lender and holds Qualified Cash.
"Qualified Plan" means a Pension Plan that is intended to be tax-qualified
under Section 401(a) of the IRC.
"Qualifying Rating" means, for any Person, a corporate rating of at least
BB from S&P or at least Ba from Moody's.
"Related Transactions" means the borrowing of the Acquisition Loan and the
initial Advance under the Line of Credit Line on the Closing Date, the payment
of all fees, costs and expenses associated with all of the foregoing and the
execution and delivery of all of the Related Transactions Documents.
17
"Related Transactions Documents" means the Loan Documents and all other
agreements or instruments executed in connection with the Related Transactions.
"Release" means any release, threatened release, spill, emission, leaking,
pumping, pouring, emitting, emptying, escape, injection, deposit, disposal,
discharge, dispersal, dumping, leaching or migration of Hazardous Material in
the indoor or outdoor environment, including the movement of Hazardous Material
through or in the air, soil, surface water, ground water or property.
"Restricted Payment" means, with respect to any Borrower or any Credit
Party (a) the declaration or payment of any dividend or the incurrence of any
liability to make any other payment or distribution of cash or other property or
assets in respect of Stock; (b) any payment on account of the purchase,
redemption, defeasance, sinking fund or other retirement of such Borrower or
such Credit Party's Stock or any other payment or distribution made in respect
thereof, either directly or indirectly; (c) any payment or prepayment of
principal of, premium, if any, or interest, fees or other charges on or with
respect to, and any redemption, purchase, retirement, defeasance, sinking fund
or similar payment and any claim for rescission with respect to, any
Subordinated Debt; (d) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire Stock of such Borrower or such Credit Party now or
hereafter outstanding; (e) any payment of a claim for the rescission of the
purchase or sale of, or for material damages arising from the purchase or sale
of, any shares of such Borrower or such Credit Party's Stock or of a claim for
reimbursement, indemnification or contribution arising out of or related to any
such claim for damages or rescission; and (f) any payment of management fees (or
other fees of a similar nature) by such Borrower or such Credit Party to any
Shareholder of such Credit Party or its Affiliates. Notwithstanding the
foregoing, Restricted Payments shall exclude any payment, prepayment or
distribution made in Borrower Stock.
"Retiree Welfare Plan" means, at any time, a welfare plan (within the
meaning of Section 3(1) of ERISA) that provides for continuing coverage or
benefits for any participant or any beneficiary of a participant after such
participant's termination of employment, other than continuation coverage
provided pursuant to Section 4980B of the IRC or other similar state law and at
the sole expense of the participant or the beneficiary of the participant.
"Security Agreement" means each Security Agreement dated as of the date
hereof entered into by and between or among Lender and each Borrower and between
Lender and any Credit Party.
"Shareholder" means, with respect to any Person, each holder of Stock of
such Person.
"Software" means all "software" as such term is defined in the Code, now
owned or hereafter acquired by any Borrower or any Credit Party, other than
software embedded in any category of Goods, including all computer programs and
all supporting information provided in connection with a transaction related to
any program.
18
"Solvent" means, with respect to any Person on a particular date, that on
such date (a) the fair value of the property of such Person is greater than the
total amount of liabilities, including contingent liabilities, of such Person;
(b) the present fair salable value of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured; (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature; and (d) such
Person is not engaged in a business or transaction, and is not about to engage
in a business or transaction, for which such Person's property would constitute
an unreasonably small capital. The amount of contingent liabilities (such as
litigation, guaranties and pension plan liabilities) at any time shall be
computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can be reasonably be expected
to become an actual or matured liability.
"Stated Maturity Date" means March 2, 2007.
"Stock" means all shares, options, warrants, general or limited
partnership interests, membership interests or other equivalents (regardless of
how designated) of or in a corporation, partnership, limited liability company
or equivalent entity whether voting or nonvoting, including common stock,
preferred stock or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934).
"Subordinated Debt" means any unsecured Indebtedness of any Borrower
incurred after the Closing Date that is subordinated to the Obligations in a
manner and form reasonably satisfactory to Lender, as to right and time of
payment and as to any other rights and remedies thereunder.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which an aggregate of more than 50% of the outstanding Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of 50% or more of such Stock whether by proxy, agreement,
operation of law or otherwise, and (b) any partnership or limited liability
company in which such Person and/or one or more Subsidiaries of such Person
shall have an interest (whether in the form of voting or participation in
profits or capital contribution) of more than 50% or of which any such Person is
a general partner or may exercise the powers of a general partner. Unless the
context otherwise requires, each reference to a Subsidiary shall be a reference
to a Subsidiary of a Borrower.
"Supporting Obligations" means all "supporting obligations" as such term
is defined in the Code, including letters of credit and guaranties issued in
support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments,
or Investment Property.
"Taxes" means taxes, levies, imposts, deductions, Charges or withholdings,
and all liabilities with respect thereto, excluding taxes imposed on or measured
by the net income of Lender or a Lender by the jurisdictions under the laws of
which Lender are organized or conduct business or any political subdivision
thereof.
19
"Termination Date" means the date on which (a) the Loans have been repaid
in full, (b) all other Obligations due and payable under the Agreement and the
other Loan Documents have been discharged, and (c) none of Borrowers shall have
any further right to borrow any monies under the Agreement.
"Title IV Plan" means a Pension Plan (other than a Multiemployer Plan),
that is subject to Title IV of ERISA or Section 412 of the IRC, and that any
Credit Party or ERISA Affiliate maintains, contributes to or has an obligation
to contribute to on behalf of participants who are or were employed by any of
them.
"Trademark License" means rights under any written agreement now owned or
hereafter acquired by any Borrower or any Credit Party granting any right to use
any Trademark.
"Trademarks" means all of the following now owned or hereafter existing or
adopted or acquired by any Borrower or any Credit Party: (a) all trademarks,
trade names, corporate names, business names, trade styles, service marks,
logos, other source or business identifiers, prints and labels on which any of
the foregoing have appeared or appear, designs and general intangibles of like
nature (whether registered or unregistered), all registrations and recordings
thereof, and all applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof; (b) all
reissues, extensions or renewals thereof; and (c) all goodwill associated with
or symbolized by any of the foregoing.
"Triple Net Lease" means that certain Triple Net Lease dated as of the
date hereof by and between PCHI, as lessor, and IHHI, as lessee, providing for
the lease of the three Hospital Facilities to IHHI, and permitting subleases of
such three Hospital Facilities to by IHHI to WMC-SA, WMC-A, Coastal and Chapman.
"Unfunded Pension Liability" means, at any time, the aggregate amount, if
any, of the sum of (a) the amount by which the present value of all accrued
benefits under each Title IV Plan exceeds the fair market value of all assets of
such Title IV Plan allocable to such benefits in accordance with Title IV of
ERISA, all determined as of the most recent valuation date for each such Title
IV Plan using the actuarial assumptions for funding purposes in effect under
such Title IV Plan, and (b) for a period of five (5) years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Borrower or any Credit Party or any ERISA Affiliate as a result of such
transaction.
20
"Western Medical Center/Anaheim" means the real property and improvements
located at 1025 South Anaheim Boulevard, Anaheim, California.
"Western Medical Center/Santa Ana" means the real property and
improvements located at 1001 North Tustin Avenue and at 1301 North Tustin in
Santa Ana, California.
Unless otherwise specifically provided herein, any accounting term used in
the Agreement shall have the meaning customarily given such term in accordance
with GAAP, and all financial computations hereunder shall be computed in
accordance with GAAP consistently applied. That certain items or computations
are explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. All other undefined terms contained in any
of the Loan Documents shall, unless the context indicates otherwise, have the
meanings provided for by the Code to the extent the same are used or defined
therein; in the event that any term is defined differently in different Articles
or Divisions of the Code, the definition contained in Article or Division 9
shall control. Unless otherwise specified, references in the Agreement or any of
the Appendices to a Section, subsection or clause refer to such Section,
subsection or clause as contained in the Agreement. The words "herein," "hereof"
and "hereunder" and other words of similar import refer to the Agreement as a
whole, including all Annexes, Exhibits and Schedules, as the same may from time
to time be amended, restated, modified or supplemented, and not to any
particular Section, subsection or clause contained in the Agreement or any such
Annex, Exhibit or Schedule.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation"; the
word "or" is not exclusive; references to Persons include their respective
successors and assigns (to the extent and only to the extent permitted by the
Loan Documents) or, in the case of governmental Persons, Persons succeeding to
the relevant functions of such Persons; and all references to statutes and
related regulations shall include any amendments of the same and any successor
statutes and regulations. Whenever any provision in any Loan Document refers to
the knowledge (or an analogous phrase) of any Borrower or any Credit Party, such
words are intended to signify that such Borrower or such Credit Party has actual
knowledge or awareness of a particular fact or circumstance or that such
Borrower or such Credit Party, if it had exercised reasonable diligence, would
have known or been aware of such fact or circumstance.
21
ANNEX B (SECTION 1.2)
TO
CREDIT AGREEMENT
1