Exhibit 10.28
AMENDED
AND RESTATED REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
between
PHC, INC. AND SUBSIDIANRIES
and
CAPITALSOURCE FINANCE LLC
Dated as of
June 13, 2007
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AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND SECURITY
AGREEMENT
THIS
REVOLVING CREDIT, TERM
LOAN AND SECURITY
AGREEMENT (the "Agreement")
dated as of June 13, 2007, is entered into between PHC, INC, a Massachusetts
corporation, PHC OF
MICHIGAN, INC., a Massachusetts corporation, PHC OF NEVADA,
INC., a Massachusetts corporation, PHC OF UTAH, INC., a Massachusetts
corporation, PHC OF
VIRGINIA, INC., a
Massachusetts
corporation,
WELLPLACE,
INC., a Massachusetts corporation, DETROIT BEHAVIORAL INSTITUTE, INC., a
Massachusetts
corporation,
NORTH POINT
- PIONEER, INC., a Massachusetts
corporation and
SEVEN HILLS HOSPITAL, INC., a Delaware corporation
(individually,
collectively and
jointly and severally,
the "Borrower") and
CAPITALSOURCE FINANCE LLC, a Delaware limited liability company
(the "Lender").
WHEREAS, pursuant to a
certain Revolving
Credit, Term Loan and Security
Agreement by and
between Borrower and
Lender dated as of October 19, 2004 (the
"Existing Credit
Agreement"),
Lender made
available to Borrower a revolving
credit facility (the "Revolving Facility") in a maximum principal
amount at any
time outstanding of up to Three Million Five Hundred Thousand and
No/100 Dollars
($3,500,000) (the
"Facility Cap") and a term loan in a maximum principal amount
of One Million Four
Hundred Thousand and No/100 Dollars ($1,400,000) (the
"Existing Term Loan"); and
WHEREAS, Borrower has
requested that Lender amend and restate the Existing
Credit Agreement
to continue the Revolving Facility and the outstanding
principal amount of
the Existing
Term Loan as provided herein and to make
available to Borrower
a multi-draw
term loan (the "Term
Loan") in an
initial
principal amount of Three Million and No/100 Dollars ($3,000,000) (the "Initial
Term Loan Amount") to consist of (a) the Existing Term Loan outstanding
immediately prior to
the effectiveness
of this Agreement (in
other words, the
Existing Term
Loan shall be continued as part of the Term Loan) and (b)
additional term loan
draws which Lender agrees to make to Borrower from time to
time following the Restatement Date; and
WHEREAS, Lender is willing to amend and restate the terms and
conditions of
the Existing Credit
Agreement to continue
the Revolving Facility
and make the
Term Loan available to Borrower upon the terms and subject to the
conditions set
forth herein.
NOW,
THEREFORE,
in consideration of the foregoing and
for other good and
valuable
consideration,
the receipt
and adequacy of which hereby are
acknowledged, Borrower
and Lender hereby agree that the Existing Credit
Agreement shall be amended and restated as follows:
I.
DEFINITIONS
1.1
General Terms
For
purposes of this Agreement, in addition to the definitions above and
elsewhere in this
Agreement,
the terms listed in
Appendix A hereto shall have
the meanings given
such terms in Appendix A, which is incorporated herein and
made a part hereof.
All capitalized terms used which are not specifically
defined shall have
meanings provided in Article 9 of the UCC
in effect on the
date hereof to the extent the same are used or defined therein.
Unless otherwise
specified herein or in Appendix A, any agreement or contract
referred to herein
or in Appendix A shall mean such agreement as modified,
amended or
supplemented
from time to time. Unless otherwise specified, as used in the Loan Documents
or
in any certificate,
report, instrument or other document made or delivered
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pursuant to any of the
Loan Documents,
all accounting terms not defined in
Appendix A elsewhere in this Agreement shall have the meanings given to such
terms in and shall be interpreted in accordance with GAAP.
II. ADVANCES, PAYMENT
AND INTEREST
2.1
The Revolving Facility
(a)
Subject to the provisions of this Agreement, Lender shall continue the
Existing Advances and
make Advances to Borrower under the Revolving Facility
from time to time
during the Term,
provided that,
notwithstanding
any other
provision of this
Agreement, the
aggregate amount of all Advances at any
one
time outstanding under the Revolving Facility shall not exceed
either of (a) the
Facility Cap and (b) the Availability. The Revolving Facility is a revolving
credit facility, which
may be drawn, repaid
and redrawn, from time
to time as
permitted under
this Agreement. Any determination as to whether there is
availability within
the Borrowing Base for
Advances shall be made by Lender in
its sole discretion
and is final and
binding upon Borrower.
Unless otherwise
permitted by Lender,
each Advance shall be in an amount of at least
$1,000.
Subject to the provisions of this Agreement, Borrower may request
Advances under
the Revolving Facility
up to and including the value, in U.S. Dollars, in an
amount equal to the Applicable Advance Rate of the Borrowing
Base, minus, if
applicable, amounts
reserved pursuant to this Agreement (such calculated amount
being referred to
herein as the
"Availability").
Advances under the Revolving
Facility automatically
shall be made for the payment of interest on the
Revolving Facility and
the Term Loan and other Obligations on the date when due
to the extent available and as provided for herein.
(b)
Lender has established the above-referenced
advance
rate for
Availability and,
in its sole credit judgment, may further adjust the
Availability and such advance rate by applying percentages (known as
"liquidity
factors") to Eligible
Receivables by payor class based upon Borrower's actual
recent collection history for each such payor class (i.e.,
Medicare, Medicaid,
commercial insurance,
etc.) in a manner
consistent with Lender's underwriting
practices and
procedures, including
without limitation Lender's review and
analysis of,
among other things, Borrower's historical returns, rebates,
discounts, credits and
allowances
(collectively, the
"Dilution Items").
Such
liquidity factors
and the advance rate for Availability may be adjusted by
Lender throughout the Term as warranted by Lender's underwriting practices and
procedures in its sole
credit judgment.
Also, Lender shall have the right to
establish from time to time, in its sole credit judgment, reserves against the
Borrowing Base,
which reserves shall have the effect of reducing
the amounts
otherwise eligible to
be disbursed to
Borrower under the
Revolving Facility
pursuant to this Agreement.
2.2 Revolving Facility
Maturity Date
All
amounts outstanding
under the Revolving
Facility and other
Revolving
Facility Obligations
shall be due and
payable in full, if not earlier in
accordance with this Agreement, on the earlier of (i) the
occurrence of an Event
of Default if required
pursuant hereto or Lender's demand upon an Event of
Default, and (ii)
October 19,
2011 (such
earlier date being the "Revolving
Facility Maturity Date"). The Revolving Facility shall be subject
to two (2) one
(1) year extensions, exercisable by written notice to Lender no
less than ninety
(90) days prior to the then current Revolving Facility Maturity Date;
provided
that no Default or Event of Default has occurred or is continuing. In
consideration for each extension of the Revolving Facility Maturity Date and as
a condition thereof
exercised by Borrower,
Borrower agrees to pay
to Lender a
nonrefundable extension fee in the amount of $20,000.00.
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2.3
Revolving Facility Disbursements; Requirement to Deliver
Borrowing
Certificate
So
long as no Default
or Event of
Default shall have occurred and be
continuing, Borrower Agent may give Lender irrevocable written
notice requesting
an Advance under the
Revolving Facility by
delivering to Lender not later than
11:00 a.m.
(New York City
time) at least one but
not more than four
Business
Days before
the proposed borrowing date of such requested Advance (the
"Borrowing Date"), a
completed Borrowing
Certificate and
relevant
supporting
documentation
satisfactory to
Lender, which shall
(i) specify
the proposed
Borrowing Date of such
Advance which shall be
a Business Day, (ii) specify the
principal amount of such requested Advance, (iii) certify the matters
contained
in Section
4.2, and (iv) specify the amount of any Medicare or Medicaid
recoupments and/or recoupments of any third-party payor being
sought, requested
or claimed,
or, to Borrower's knowledge, threatened against Borrower or
Borrower's Affiliates.
Each time a request
for an Advance is made, and, in any
event and regardless
of whether an Advance
is being requested,
on Tuesday of
each week during the Term (and more frequently if Lender shall so
request) until
the Obligations
are indefeasibly paid in cash in full and this
Agreement is
terminated, Borrower
Agent shall deliver to Lender a Borrowing Certificate
accompanied by (A) a separate detailed aging and categorizing of
Borrower's (i)
accounts receivable
and (ii) if requested by Lender, accounts payable and (B)
such other supporting
documentation with respect to the figures and information
in the Borrowing Certificate as Lender shall reasonably request
from a credit or
security perspective or otherwise. On each Borrowing Date, Borrower
irrevocably
authorizes Lender to
disburse the proceeds of the requested Advance to the
appropriate Borrower's account(s) as set forth on Schedule 2.3, in
all cases for
credit to the
appropriate Borrower
(or to such other
account as to which
the
Borrower Agent shall
instruct Lender) via
Federal funds wire transfer no later
than 4:00 p.m. (New York City time).
2.4
Revolving Facility
Collections;
Repayment; Borrowing Availability and
Lockbox
Each
of PHC-Michigan
and PHC-Utah (and each
other Borrower whose Accounts
may be included at any time in the future within the Borrowing Base, and all
Borrowers at the
direction of Lender
following the
occurrence of an Event
of
Default) shall
maintain one or more lockbox accounts (individually and
collectively, the "Lockbox Account") with one or more banks
acceptable to Lender
(each, a "Lockbox
Bank"), and shall
execute with each Lockbox Bank one or more
agreements acceptable
to Lender
(individually and
collectively, the
"Lockbox
Agreement"), and such
other agreements
related thereto as
Lender may require.
Each such Borrower shall ensure that all collections of their respective
Accounts (other than
accounts due from Private Payors and any amounts received
under contracts
held by PHC-Michigan or PHC-Utah but for which the services
relating thereto are
performed by
Wellplace) are paid
and delivered
directly
from Account Debtors and other Persons into the appropriate Lockbox
Account. The
Lockbox Agreements
shall provide that the Lockbox Banks immediately will
transfer all funds paid into the Lockbox Accounts into a depository
account or
accounts maintained
by Lender or an
Affiliate of Lender at such bank as Lender
may communicate
to each such
Borrower from time to time (the
"Concentration
Account"), except,
with respect only to
Accounts payable by
Medicaid/Medicare
Account Debtors, as
instructed by the applicable Borrower to whom such Accounts
are payable as
permitted pursuant to the applicable Lockbox Agreement and
provided that the
Lockbox Banks shall not transfer the funds paid into the
Lockbox Account of
Seven Hills to the
Concentration Account
until the date on
which Lender notifies
the Lockbox Bank and Borrower that a Default or Event of
Default has occurred.
Notwithstanding and
without limiting any other provision
of any Loan Document, Lender shall apply, on a daily basis, all funds
transferred into the Concentration Account pursuant to the Lockbox
Agreement and
this Section 2.4 in such order and manner as determined by Lender.
To the extent
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that any Accounts
collections of any
such Borrower or any
other cash payments
received by any such Borrower are not sent directly to the
appropriate
Lockbox
Account as required in this Section 2.4 but are received by any
such Borrower or
any of their
Affiliates, such
collections and
proceeds shall be held in trust
for the benefit of Lender and immediately remitted (and in any event within
two
(2) Business Days), in the form received, to the appropriate
Lockbox Account for
immediate transfer to the Concentration Account. Each Borrower
acknowledges and
agrees that compliance
with the terms of this
Section 2.4 is an essential term
of this Agreement, and that, in addition to and notwithstanding any
other rights
Lender may have hereunder, under any other Loan Document,
under applicable
law
or at equity,
upon each and every failure by any Borrower or any of their
Affiliates to comply
with any such terms
Lender shall be
entitled to assess a
non-compliance fee
which shall operate to increase the Applicable Rate by two
percent (2.0%) per annum during any period of non-compliance, whether or not a
Default or an Event of Default occurs or is declared, provided that nothing
shall prevent Lender
from considering
any failure to comply
with the terms of
this Section 2.4 to be a Default or an Event of Default.
All funds transferred
to the Concentration
Account for application to the Obligations under the
Revolving Facility
shall be applied to reduce the Obligations under the
Revolving Facility,
but, for purposes of calculating interest hereunder, shall
be subject to a four (4) Business Day clearance period. If as the result of
collections of Accounts and/or any other cash payments received by any Borrower
pursuant to this
Section 2.4 a credit balance exists with respect to the
Concentration Account, such credit balance shall not accrue
interest in favor of
any Borrower, but
shall be available to the appropriate Borrower in accordance
with the terms
of this Agreement. If applicable, at any time prior to the
execution of all or any of the Lockbox Agreements and operation of
all or any of
the Lockbox Accounts,
each Borrower and their Affiliates shall direct all
collections or proceeds it receives on Accounts or from other
Collateral to the
accounts(s) and in the manner specified by Lender in its sole
discretion.
2.5
The Term Loan
Subject to the terms and conditions set forth in this Agreement, Lender
agrees to make the Term Loan available to Borrower in the original principal
amount of the Term Loan Amount by continuing the outstanding
principal amount of
the Existing Term Loan
made by Lender under the Existing Credit Agreement and
advancing additional funds as provided in this Agreement,
so that as long as
no
Default or Event of
Default has occurred or is continuing, Borrower may,
commencing as of the
Restatement
Date from time to time
prior to the close of
business on the Term Loan Maturity Date, borrow, in one or more
Term Loan Draws,
an amount which, when
aggregated with the outstanding principal amount of the
Existing Term Loan
continued hereunder, does not exceed in the aggregate
the
Term Loan Amount in effect from time to time. The Term Loan is a revolving
credit facility, which
may be drawn, repaid
and redrawn, from time
to time as
permitted under this Agreement. So long as no Default or Event of
Default shall
have occurred and be
continuing,
Borrower Agent may give Lender irrevocable
written notice
requesting a Term Loan
Draw by delivering
to Lender not
later
than 11:00 a.m.
(Eastern Standard Time) at least one (1) but not more than four
(4) Business Days before the proposed borrowing date of such
requested Term Loan
Draw (the "Term Loan Borrowing Date"), a completed Borrowing Certificate and
relevant supporting
documentation
satisfactory
to Lender, which shall (i)
specify the proposed
Term Loan Borrowing
Date which shall be a
Business Day,
(ii) specify
the principal amount of such requested Term Loan Draw, (iii)
certify the
matters contained in Section 4.2 and Section 4.3. Subject to
contrary written
instructions from Borrower Agent, each Term Loan Draw shall be
disbursed on
the applicable Term Loan Borrowing Date to the Borrower's
account(s) as set forth on Schedule 2.3.
2.6
Repayment of Term
Loan; Maturity
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Payment of the outstanding principal balance of the Term Loan
(in addition
to the interest
payments in Section 3.2) and all other amounts (other than
interest) outstanding under the Term Loan shall be made as
follows:
(a) All Term Loan
Obligations
shall be due and
payable in full,
if
not earlier in accordance with this Agreement, on the earlier of
(i) the occurrence
and continuance of an Event of Default if
required pursuant
hereto or Lender's
demand upon the occurrence
and
continuance
of an Event of Default, (ii) a Revolver
Termination and (iii)
the last day of the Term, the earlier of
the foregoing
(i), (ii) or (iii) being the "Term Loan
Maturity
Date".
(b) The principal
balance of the Term Loan outstanding at any time in
excess of the Term Loan Amount in effect from time to time
shall
be immediately due and payable by Borrower without the necessity
of any demand, at the
Payment Office, whether or not a Default or
Event of Default has occurred or is continuing and shall be paid
in the manner
specified in Section 2.7. Advances shall be
automatically made
under the Revolving
Facility to pay any such
excess amounts
to the extent available and as provided for
herein.
2.7
Promise to Pay; Manner
of Payment
Borrower absolutely and unconditionally promises to pay principal,
interest
and all other amounts
payable hereunder, or under any other Loan Document,
without any right of rescission and without any deduction
whatsoever,
including
any deduction for any setoff, counterclaim or recoupment,
and notwithstanding
any damage to, defects
in or destruction of
the Collateral or any other event,
including obsolescence
of any property or
improvements.
All payments made
by
Borrower (other than
payments automatically
paid through
Advances under the
Revolving Facility as
provided herein),
shall be made only by wire transfer on
the date when due, without offset or counterclaim, in U.S. Dollars, in
immediately available
funds to such
account as may be
indicated in writing by
Lender to Borrower from time to time. Any such payment received after 2:00 p.m.
(New York City
time) on the date
when due shall be deemed received on the
following Business Day. Whenever any payment hereunder shall be
stated to be due
or shall become due and payable on a day other than a Business Day,
the due date
thereof shall be
extended to, and such payment shall be made on, the next
succeeding Business
Day, and such extension of time in such case shall be
included in the
computation of payment
of any interest (at
the interest rate
then in effect during such extension) and/or fees, as the case may
be.
2.8
Repayment of Excess
Advances
Any
balance of Advances
under the Revolving
Facility outstanding
at any
time in excess of the lesser of the Facility Cap or the Availability shall be
immediately due and payable by Borrower without the necessity of
any demand, at
the Payment Office, whether or not a Default or Event of Default
has occurred or
is continuing and shall be paid in the manner specified in Section
2.7.
2.9
Other Mandatory
Prepayments
In
addition to and without limiting any provision of any Loan
Document:
(a)
if a Change of Control
occurs, on or prior to
the first Business
Day
following the date of such Change of Control, Borrower shall prepay the Loans,
including,
without limitation,
all outstanding Advances and all other
Obligations, in full
in cash together with accrued interest thereon to the date
of prepayment and all
other amounts owing to
Lender under the Loan
Documents;
and
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(b)
if any Borrower sells any of its assets or properties, sells or issues
any securities (debt or equity)(other than private placements for
equity of PHC,
Inc. the terms and conditions of which do not violate any terms or
conditions of
this Agreement or the
other Loan Documents,
employee stock purchase plans,
warrants issued for
services and stock and stock options issued to employees in
the ordinary
course of business (including shares of stock issued upon the
exercise of such stock options)), capital stock or ownership
interests, receives
any capital contributions, receives any property damage insurance
award which is
not used to repair or
replace the property covered thereby or incurs any
Indebtedness except for Permitted Indebtedness, then it shall apply 100% of
the
proceeds thereof to
the prepayment of the Loans together with accrued interest
thereon and all other Obligations owing to Lender under the Loan
Documents, such
payment to be applied at such time and in such manner and order as
Lender shall
decide in its sole discretion.
2.10
Payments by Lender
Should any amount
required to be paid
under any Loan
Document be unpaid,
such amount may be paid by Lender, which payment shall be deemed a request
for
an Advance under the Revolving Facility as of the date such
payment is due, and
Borrower irrevocably authorizes disbursement of any such funds to
Lender by way
of direct payment of the relevant amount, interest or Obligations.
No payment or
prepayment of any
amount by Lender or any other Person shall entitle any Person
to be subrogated
to the rights of
Lender under any Loan
Document unless and
until the Obligations have been fully performed and paid
irrevocably in cash and
this Agreement has been terminated. Any sums expended by Lender as a
result of
any Borrower's or any
Guarantor's
failure to pay,
perform or comply with
any
Loan Document or any of the Obligations may be charged to
Borrower's account
as
an Advance under the Revolving Facility and added to the
Obligations.
2.11
Evidence of Loans
(a)
Lender shall maintain, in accordance with its usual practice,
electronic or written
records evidencing the
Indebtedness
and Obligations to
Lender resulting
from each Loan
made by Lender
from time to time,
including
without limitation,
the amounts of
principal and interest
payable and paid to
Lender from time to time under this Agreement. Lender and Borrower acknowledge
and agree that the Existing Advances under the Revolving Facility have been
evidenced by certain
Revolving Note dated October 19, 2004 in the
aggregate
principal amount of
Three Million Five Hundred Thousand Dollars ($3,500,000)
(the "Existing
Revolving Note") and that the Existing Term Loan has been
evidenced by a certain
Term Note dated
October 19, 2004 (the
"Existing Term
Note"). Lender
and Borrower acknowledge and agree that (i) the Existing
Revolving Note and the
Existing Term Note shall be cancelled by Lender and
returned to Borrower as of the Restatement Date but that the
cancellation of the
Existing Revolving
Notes shall not constitute a novation of the Existing
Advances and the Existing Term Loan or any other amounts
evidenced thereby and
(ii) all Advances
(including the Existing Advances) and the Term Loan shall
as
of the Restatement Date be evidenced as provided in this Section
2.11(a).
(b) The entries made in the electronic or written records maintained
pursuant to subsection (a) of this Section 2.11 (the "Register")
shall be prima
facie evidence,
absent manifest error, of the existence and amounts of the
Obligations and
Indebtedness
therein recorded; provided however, that the
failure of Lender to maintain such records or any error therein
shall not in any
manner affect the joint and several obligations of Credit Parties to repay the
Loans or Obligations in accordance with their terms.
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(c)
Lender will account to
Borrower monthly
with a statement of
Advances
under the Revolving Facility, and any charges and payments made
pursuant to this
Agreement, and in the
absence of manifest error, such accounting rendered by
Lender shall be deemed final, binding and conclusive
unless Lender is
notified
by Borrower in writing to the contrary within fifteen calendar days of Receipt
of such accounting,
which notice
shall be deemed an
objection only to items
specifically objected to therein.
(d)
Borrower agrees that:
(i)
upon written notice by Lender to Borrower that a Note or other
evidence
of Indebtedness
is requested by Lender to evidence the Loans and other
Obligations owing or
payable to, or to be made by, Lender, Borrower shall
promptly (and in any
event within three (3) Business Days of any such request)
execute and deliver to Lender an appropriate Note or Notes in form
and substance
reasonably acceptable to Lender and Borrower;
(ii)
all references to
Notes in the Loan
Documents shall mean
Notes, if
any, to the extent
issued (and not
returned to Borrower for cancellation)
hereunder, as the same may be amended, modified, divided,
supplemented, extended
or restated from time to time; and
(iii) upon Lender's
written request, and in any event within three (3)
Business Days of any such request, Borrower shall execute and deliver
to Lender
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new Notes and divide
the Notes in
exchange for then existing Notes in such
smaller amounts
or denominations as Lender shall specify in its sole and
absolute discretion;
provided, that the
aggregate principal amount of such new
Notes shall not exceed the aggregate principal amount of the Notes
outstanding
at the time such request is made; and provided, further, that such Notes that
are to be replaced
shall then be deemed
no longer outstanding
hereunder and
replaced by such new Notes and returned to Borrower within a reasonable period
of time after Lender's receipt of the replacement Notes.
2.12
Grant of Security Interest; Collateral
(a)
To secure the payment and performance of the Obligations, each
Borrower, each Guarantor, hereby grants to Lender a continuing
security interest
in and Lien upon, and pledges to Lender, all of its right, title
and interest in
and to the following
(collectively and each
individually, the
"Collateral"),
which security interest is intended to be a first priority security
interest:
(i)
all of such Borrower's
and Guarantor's
tangible personal property,
including without
limitation
all present and future
Inventory and Equipment
(including items of
equipment which are or become Fixtures), now owned or
hereafter acquired;
(ii)
all of such Borrower's and Guarantor's intangible personal property,
including without
limitation
all present and future Accounts, securities,
contract rights,
Permits, General Intangibles, Chattel Paper, Documents,
Instruments and
Deposit Accounts, Letter-of-Credit
Rights and Supporting
Obligations, rights to
the payment of money or other forms of consideration of
any kind, tax refunds,
insurance proceeds, now owned or hereafter acquired, and
all intangible and tangible personal property relating to or
arising out of any
of the foregoing;
(iii) all of such Borrower's and Guarantor's present and future Government
Contracts and rights thereunder and the related Government Accounts
and proceeds
thereof, now or
hereafter owned or
acquired by such
Borrower and
Guarantor;
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provided, however,
that Lender shall not have a security interest in any rights
under any Government
Contract of such
Borrower and Guarantor or in the related
Government Account
where the taking of such security interest would be a
violation of an express prohibition contained in the Government
Contract (for
purposes of this limitation, the fact that a Government
Contract is subject to,
or otherwise
refers to, Title 31,
Section 203 or Title
41, Section 15 of
the
United States Code shall not be deemed an express prohibition
against assignment
thereof) or is prohibited by applicable law; and
(iv)
any and all additions to any of the foregoing, and any and all
replacements, products and proceeds (including insurance proceeds)
of any of the
foregoing.
(b)
Notwithstanding
the foregoing
provisions of this
Section 2.13, such
grant of a security
interest shall not
extend to, and the term "Collateral"
shall not include, any
General Intangibles of Borrower or such Guarantor to the
extent that (i) such General Intangibles are not assignable or
capable of being
encumbered as a
matter of law or under the terms of any license or other
agreement applicable thereto (but solely to the extent that any
such restriction
shall be enforceable
under applicable law)
without the consent of the licensor
thereof or other
applicable party
thereto, and (ii) such
consent has not been
obtained; provided,
however, that the foregoing grant of a
security interest
shall extend to, and the term "Collateral" shall include, each of
the following:
(a) any General
Intangible
which is in the nature
of an Account or a right to
the payment of money or a proceed of, or otherwise related to the
enforcement or
collection of, any Account or right to the payment of money,
or goods which are
the subject of any
Account or right to
the payment of money,
(b) any and all
proceeds of any General Intangible that is otherwise excluded to
the extent that
the assignment, pledge or encumbrance of such proceeds is not so
restricted, and
(c) upon obtaining the
consent of any such licensor or other applicable party
with respect to any such otherwise excluded General Intangible, such General
Intangible as well as any and all proceeds thereof that might theretofore have
been excluded
from such grant of a security interest and from the term
"Collateral."
(c)
The payment and
performance of the
Obligations shall also
secured by
the provisions
of, and the
property described in, the Security Documents,
including, but not
being limited
to, (i) a mortgage deed or a deed of trust
dated the Closing Date and amended and restated as of the
Restatement Date
from
each of PHC-Michigan
and PHC-Virginia with respect to the Real Estate, a
leasehold mortgage or leasehold deed of trust dated the Closing
Date and amended
and restated as of the
Restatement Date from
PHC-Utah with respect to the Utah
Leasehold and a
leasehold mortgage or leasehold deed of trust dated the
Restatement Date from
Seven Hills
Hospital with respect to the Seven Hills
Leasehold (each, as such may be modified, amended or supplemented
from time to
time, individually and collectively, a "Mortgage"), (ii) a
collateral assignment
of leases, rentals and
property income dated the Closing Date and
amended and
restated as of the Restatement Date from each of PHC-Michigan
and PHC-Virginia
to Lender (each, as such may be modified, amended or supplemented
from time to
time, individually
and collectively, an "Assignment of Rents") and (iii)
an
assignment of
permits and licenses dated the Closing Date from each of
PHC-Michigan and
PHC-Virginia to Lender
with respect to the Real Estate (each,
as such may be modified, amended or supplemented from time to time,
individually
and collectively, a "Permit Assignment").
(d)
The payment and performance of the Obligations shall be
cross-guaranteed by
each Borrower pursuant to a cross guaranty agreement dated
the Closing Date or,
in the case of Seven
Hills Hospital,
a joinder thereto
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dated the Restatement
Date executed by each Borrower (each, as such may be
modified,
amended or
supplemented
from time to time, individually and
collectively, a "Cross Guaranty").
(e)
Reserved.
(f)
In addition to the foregoing, to secure the payment and
performance of
the Obligations, PHC
shall pledge to Lender all of the securities which it owns
in its Subsidiaries
pursuant, in the case of all Subsidiaries other than
Pivotal, to the Stock Pledge Agreement.
(g)
Upon the execution and delivery of this Agreement, and upon the proper
filing of the necessary financing statements, the recordation of the Patent,
Trademark and
Copyright Assignment in the United States Patent and
Trademark
Office and/or the United States Copyright Office, and proper delivery of the
necessary stock and
membership
interest certificates, without any further
action, Lender will
have a good, valid and
perfected first
priority Lien and
security
interest in
the Collateral, subject to no transfer or other
restrictions or
Liens of any kind in
favor of any
other Person except for
Permitted Liens. No financing statement relating to any of the
Collateral is on
file in any public office except those (i) on behalf of
Lender, and/or (ii)
in
connection with Permitted Liens.
2.13
Collateral Administration
(a)
All Collateral (except
Deposit Accounts) will
at all times be kept by
each Borrower at the locations set forth on Schedule 5.18B hereto
and shall not,
without thirty (30)
calendar days prior written notice to Lender, be moved
therefrom, and in any
case shall not be moved outside the continental United
States.
(b)
Each Borrower shall keep accurate and complete records of its Accounts
and all payments and collections thereon and shall submit such
records to Lender
on such periodic
bases as Lender may
request. In addition, if Accounts of
PHC-Michigan or
PHC-Utah (or any other
Borrower whose Accounts may be included
at any time in the future within the Borrowing Base) in an
aggregate face amount
in excess of $10,000
become ineligible because they fall within one of the
specified categories
of ineligibility
set forth in the
definition of Eligible
Receivables, each such
Borrower shall notify
Lender of such
occurrence on the
first Business Day following the discovery of such occurrence and the Borrowing
Base shall thereupon
be adjusted to reflect
such occurrence.
If requested by
Lender, each
Borrower shall execute and deliver to Lender formal written
assignments of all of
its Accounts
weekly or daily as Lender may request,
including all Accounts created since the date of the last
assignment,
together
with copies of claims, invoices and/or other information related
thereto. To the
extent that
collections from such
assigned accounts
exceed the amount of
the
Obligations, such
excess amount shall not accrue interest in favor of Borrower,
but shall be available to the Borrower upon Borrower's written
request.
(c)
Whether or not an Event of Default has occurred, upon prior written
notice to Borrower,
any of Lender's
officers, employees,
representatives
or
agents shall have the right, at any time during normal
business hours, in the
name of Lender, any designee of Lender or any Borrower,
to verify the
validity,
amount or any other matter relating to any Accounts of any
Borrower; provided
that such prior written notice to Borrower is not required if a
Default or Event
of Default has occurred and be continuing. Each Borrower shall cooperate fully
with Lender in an effort to facilitate and promptly conclude such verification
process.
(d)
To expedite
collection,
each Borrower shall endeavor in the first
instance to make
collection of its
Accounts for Lender.
Lender shall have the
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right at all times after the occurrence and during the continuance of an Event
of Default to notify (i) Account Debtors owing Accounts to any Borrower
other
than Medicaid/Medicare Account Debtors that their Accounts have
been assigned to
Lender and to
collect such Accounts directly in its own name and to charge
collection costs
and expenses, including reasonable attorney's fees, to
Borrower, and (ii)
Medicaid/Medicare
Account Debtors that such Borrower has
waived any and all defenses and counterclaims it may have or could
interpose in
any such action
or procedure brought by Lender to obtain a court order
recognizing the collateral assignment or security interest and lien
of Lender in
and to any Account or other Collateral and that Lender is seeking
or may seek to
obtain a court order recognizing the collateral assignment or security
interest
and lien of Lender
in and to all
Accounts and other Collateral payable by
Medicaid/Medicare Account Debtors.
(e)
As and when determined
by Lender in its sole
discretion, Lender
will
perform the
searches described in clauses (i) and (ii) below against each
Borrower and
Guarantor (the results of which are to be consistent with
Borrower's
representations and
warranties
under this Agreement), all at
Borrower's expense:
(i) UCC searches with the Secretary of State and local
filing offices
of each jurisdiction where any Borrower and/or Guarantor
maintains their respective executive offices, a place of business
or assets; and
(ii) judgment, federal tax lien and corporate and partnership tax
lien searches,
in each jurisdiction
searched under clause (i) above.
UCC searches
shall be
conducted at the expense of Borrower on a quarterly basis;
provided, that Lender
shall have the right to conduct such searches more frequently at its expense
and, if a Default or
Event of Default shall
have occurred,
at the expense of
Borrower.
(f)
Each of PHC-Michigan
and PHC-Utah (and any other Borrower whose
Accounts may be included at any time in the future within the Borrowing Base)
(i) shall provide
prompt written notice to its current bank to transfer all
items, collections and
remittances to the
Concentration
Account, (ii) shall
provide prompt
written
notice
to each Account Debtor (other than
Medicaid/Medicare
Account Debtors)
that Lender has been granted a lien and
security interest in, upon and to all Accounts applicable to such
Account Debtor
and shall direct each Account Debtor to make payments to the
appropriate Lockbox
Account, and each such
Borrower hereby authorizes Lender, upon any failure to
send such notices and directions within ten (10) calendar days
after the date of
this Agreement (or ten
(10) calendar days
after the Person
becomes an Account
Debtor), to send any
and all similar
notices and directions
to such Account
Debtors, and (iii)
shall do anything
further that may be lawfully required by
Lender to secure Lender and effectuate the intentions of the Loan
Documents. At
Lender's request,
each such Borrower
shall immediately
deliver to Lender
all
items for which Lender must receive possession to obtain a perfected security
interest and all notes, certificates, and documents of title,
Chattel Paper,
warehouse receipts,
Instruments, and any other similar instruments constituting
Collateral.
Notwithstanding any
provision of this subsection (f) to the
contrary, following
the occurrence of an
Event of Default each Borrower shall
comply with the provisions of this subsection (f) if directed by
Lender.
2.14
Power of Attorney
Lender is hereby
irrevocably made,
constituted and appointed the true and
lawful attorney for each Borrower (without requiring any of them to
act as such)
with full power of substitution to do the following: (i) endorse
the name of any
such Person upon any and all checks, drafts, money orders, and
other instruments
for the payment
of money that are payable to such Person and constitute
collections on its or
their Accounts;
(ii) execute in the
name of such Person
any financing statements, schedules, assignments,
instruments,
documents, and
statements that it is
or they or are
obligated to give Lender under any of the
Loan Documents to
enable Lender to
preserve or exercise any rights or remedies
in any Collateral;
and (iii) do such
other and further
acts and deeds in
the
name of such Person that Lender may deem necessary or desirable to enforce any
Account or other Collateral or to perfect Lender's security interest or lien in
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any Collateral.
In addition, if any such Person breaches its obligation
hereunder to direct payments of Accounts or the proceeds of any
other Collateral
to the appropriate Lockbox Account, Lender, as the irrevocably
made, constituted
and appointed
true and lawful attorney for such Person pursuant to this
paragraph, may, by the
signature or other act of any of Lender's
officers or
authorized signatories
(without requiring any of them to do so),
direct any
federal, state or
private payor or fiscal intermediary to pay proceeds of
Accounts or any other Collateral to the appropriate Lockbox
Account.
2.15
Acknowledgement of Joint and Several Liability
Each
Borrower acknowledges
that it is jointly and severally liable for all
of the Obligations under the Loan Documents. Each Borrower expressly
understands, agrees
and acknowledges that (i) Borrowers are all entities
affiliated by
common ownership, (ii) each Borrower desires to have the
availability of
one common credit facility instead of separate credit
facilities, (iii) each
Borrower has requested
that Lender extend such a common
credit facility
on the terms
herein provided, (iv) Lender will be lending
against, and relying
on a lien upon, all of
Borrowers' assets even
though the
proceeds of any particular loan made hereunder may not be advanced
directly to a
particular Borrower, (v) each Borrower will nonetheless benefit by
the making of
all such loans by Lender and the availability of a single credit facility of
a
size greater
than each could independently warrant, and (vi) all of the
representations,
warranties, covenants, obligations, conditions, agreements and
other terms contained
in the Loan Documents shall be applicable to and shall be
binding upon each Borrower. Each Borrower hereby appoints PHC (in
such capacity,
"Borrower Agent") to
act as agent on behalf of each Borrower and to deliver any
statement,
notice, authorization
or other writing required or permitted
hereunder or under any of the Loan Documents. Lender shall be entitled to
rely
upon any statement,
notice, authorization or other writing received from
Borrower Agent without
investigation
and each Borrower agrees that any such
statement, notice, authorization or other writing shall be binding
on it.
III. INTEREST, FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE
PRICE
3.1
Interest on the Revolving Facility
Commencing July 1,
2007, and continuing
until the later of the expiration
of the Term
and the Payment in Full and full performance of all of the
Obligations and termination of this Agreement interest on outstanding
Advances
under the Revolving
Facility shall be
payable monthly in
arrears on the first
day of each calendar
month at an annual rate of Prime Rate plus one-quarter of
one percentage point
(.25%) in accordance
with the procedures
provided for in
Section 2.7 and
Section 2.4, provided however, that, notwithstanding any
provision of any Loan Document, for the purpose of calculating
interest at any
time hereunder,
the Prime Rate shall be not less than 4.5%, in each case
calculated on the
basis of a 360-day year and for the actual number of calendar
days elapsed in each
interest calculation
period. The payment due under this
Section 3.1 on July 1, 2007 shall include any accrued and unpaid interest on
outstanding Advances
under the Revolving
Facility existing
under the Existing
Credit Agreement.
3.2
Interest on the Term Loan
Commencing July 1,
2007, and continuing
until the later of the expiration
of the Term
and the Payment in Full and full performance of all of the
Obligations and
termination
of this Agreement interest on the outstanding
principal balance of
the Term Loan shall be
payable monthly in
arrears on the
first day of
each calendar month at an annual rate of Prime Rate plus
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three-quarters of one
percentage point (.75%) in accordance with the procedures
provided for
in Section 2.7 and Section 2.4., provided however, that,
notwithstanding any
provision of any Loan Document, for the purpose of
calculating interest
at any time
hereunder,
the Prime Rate shall
be not less
than 5.5%, in each
case calculated
on the basis of a
360-day year and for the
actual number of
calendar days elapsed
in each interest
calculation
period.
Advances under
the Revolving Facility shall be made automatically for the
payment of
Obligations
under the Term Loan on
the date when due to the extent
available and as provided for herein. The payment due under this Section
3.2 on
July 1, 2007 shall
include any
accrued and unpaid interest on outstanding
principal amount of the Existing Term Loan under the Existing
Credit Agreement.
3.3
Commitment Fee
On
or before the
Restatement
Date, Borrower shall pay to Lender the
following as a nonrefundable commitment fees:
(a) .5% of the
Facility Cap in respect of the Revolving Facility;
(b) .5% of the Initial
Term Loan Amount; and
3.4
Collateral Management
Fee and Unused Line Fee
Borrower shall pay Lender as additional interest a monthly collateral
management fee (the
"Collateral
Management
Fee") equal to 0.042% per month
calculated on the
basis of the daily average amount of the balances
under the
Revolving Facility
outstanding
during the
preceding month. The Collateral
Management Fee shall
be payable
monthly in arrears on the first day of
each
successive calendar month (starting with the month in which the
Restatement Date
occurs). The payment
due under this Section
3.4 on July 1, 2007 shall include
any accrued and unpaid
Collateral
Management
Fee due and
payable under the
Existing Credit
Agreement as well as any accrued and unpaid Unused Line Fee (as
such term is defined in the Existing Credit Agreement) due and
payable under the
Existing Credit Agreement (which Unused Line Fee shall not be
charged under this
Agreement commencing as of the Restatement Date).
3.5
Finance Fee
If
Borrower makes any final prepayment or any payment in full of the
principal amount
of the Term
Loan or other
satisfaction
of the outstanding
balance of the Term Loan and/or the Term Loan is otherwise
terminated,
in each
case for any reason,
then, on such date, Borrower shall pay Lender (in addition
to any other Obligations relating to the Term Loan pursuant to the
terms of this
Agreement and any other Loan Document), an amount equal to the Term
Loan Finance
Fee Amount; provided,
however, that no fee
shall be due and payable under this
subsection (a) if the Term Loan Termination results from the refinancing of
the
Term Loan with the proceeds from a financing under a program sponsored by the
United States
Department
of Housing and Urban Development. Lender hereby
acknowledges that the Finance Fee (as such term is defined in
Section 3.4 of the
Existing Credit
Agreement) due and payable under the Existing Credit Agreement
in respect of the Existing Term Loan is hereby waived (the "Waived
Finance Fee")
and Borrower shall have no further obligation to pay the Waived
Finance Fee.
3.6
Computation of Fees;
Lawful Limits
All
fees hereunder shall be computed on the basis of a year of 360 days
and
for the actual number of days elapsed in each calculation period,
as applicable.
In no contingency or
event whatsoever,
whether by reason of
acceleration
or
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otherwise, shall the
interest and other charges paid or agreed to be paid
to
Lender for the use,
forbearance or
detention of money hereunder exceed the
maximum rate
permissible
under applicable law which a court of competent
jurisdiction shall, in a final determination, deem applicable
hereto. If, due to
any circumstance
whatsoever,
fulfillment of any provision hereof, at the time
performance of such provision shall be due, shall exceed any
such limit, then,
the obligation to be so fulfilled shall be reduced to such lawful
limit, and, if
Lender shall have received interest or any other charges of any
kind which might
be deemed to be interest under applicable law in excess of the maximum
lawful
rate, then such
excess shall be applied first to any unpaid fees and
charges
hereunder, then to
unpaid principal balance owed by Borrower hereunder, and if
the then remaining
excess interest is greater than the previously unpaid
principal balance,
Lender shall promptly
refund such excess amount to Borrower
and the provisions hereof shall be deemed amended to provide for such
permissible rate. The
terms and provisions of this Section 3.6 shall control to
the extent any other provision of any Loan Document is inconsistent
herewith.
3.7
Default Rate of
Interest
Upon
the occurrence and during the continuation of an Event of Default,
the
Applicable Rate
of interest in effect at such time with respect to the
Obligations shall be increased by 5.0% per annum (the "Default
Rate").
3.8
Reserved
3.9
Debt Service
Reserve
Borrower and Lender
acknowledge that Borrower deposited with Lender on the
Closing Date the
amount of $30,000 in
order to fund the Debt
Service Reserve
Amount to be held by Lender in escrow. Upon the full performance and
satisfaction and indefeasible payment in full in cash of all the
Obligations and
the termination of this Agreement, Lender shall return to Borrower
that portion
of the Debt Service
Reserve Amount not
already used by Lender to make payments
of principal or interest pursuant to this Agreement.
Notwithstanding and without
limiting or being
limited by any other
provision of this
Agreement, upon
the
occurrence and continuation of an Event of Default, Lender shall
have the right,
in its sole
discretion, to use all
or any portion of the Debt Service Reserve
Amount to pay any amount or Obligation hereunder and/or under the Loans,
Notes
and other Loan
Documents, to be
applied at such time and in such
manner and
order as Lender shall decide in its sole discretion. After any cure
of any Event
of Default, if amounts
from the Debt Service
Reserve Amount have
been used by
Lender pursuant to the immediately preceding sentence, Borrower shall deposit
such additional
cash with Lender to be held by Lender in escrow in a
non-interest bearing
account to restore
the full amount of the Debt Service
Reserve Amount in such account.
3.10
Minimum Balance
Notwithstanding any
provision of this
Agreement to the
contrary, if the
consolidated average
daily amount of the balances under the Revolving Facility
and the Term Loan for any calendar month is less than One Million
Five Hundred
Thousand Dollars ($1,500,000) Borrower acknowledges and agrees that
Lender shall
be entitled to calculate interest and fees under
Sections 2.4, 3.1 and
3.4 for
such calendar month as if the average daily outstanding balance of
the Revolving
Facility for such calendar month was One Million Five Hundred
Thousand Dollars
($1,500,000).
Notwithstanding the foregoing, if for any calendar month the
sum
of the average daily
Availability for such month (as calculated by reference to
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the Borrowing
Certificates submitted to Lender and effective during such
month)
plus the Term Loan Amount in effect for such month (such sum being referred to
as the "Average Availability Amount") is less than $1,500,000, then
Lender shall
calculate interest
and fees under this
Section 3.10 for such month as if the
average daily
outstanding
balance of the
Revolving Facility was the Average
Availability Amount.
IV.
CONDITIONS PRECEDENT
4.1
Conditions to
Amendment and
Restatement,
Continuation
of Loans and
Closing
The
obligations
of Lender to
consummate
the transactions contemplated
herein and to amend and restate the Existing Credit Agreement and continue the
Existing Advances and
the Existing Term Loan
and make available the
Term Loan
are subject
to the satisfaction, in the sole judgment of Lender, of the
following:
(a)
(i) Each Borrower or
Borrower Agent on
behalf of Borrower
shall have
delivered to Lender
(A) the Loan Documents
to which it is a
party, each duly
executed by an authorized officer of Borrower and the other parties
thereto, and
(B) a Borrowing Certificate for any Advance under the Revolving
Facility or Term
Loan Draw to be
requested on the
Restatement Date
executed by an
authorized
officer of Borrower
Agent, and (ii) each
Guarantor shall have delivered to
Lender the Loan Documents to which such Guarantor is a party, each
duly executed
and delivered by such Guarantor or an authorized officer of such Guarantor,
as
applicable, and the other parties thereto;
(b)
all in form and substance satisfactory to Lender in its sole
discretion, Lender
shall have received (i) a report of Uniform Commercial Code
financing statement,
tax and judgment lien
searches performed
with respect to
each Borrower and
Guarantor in each
jurisdiction
determined by Lender
in its
sole discretion,
and such report shall
show no Liens on the Collateral (other
than Permitted Liens), (ii) each document (including, without limitation, any
Uniform Commercial
Code financing
statement) required by
any Loan Document or
under law or requested by Lender to be filed, registered or recorded to create
in favor of Lender, a
perfected first priority security interest upon the
Collateral and first
priority Lien (second priority in the case of the
Real
Estate owned by PHC-Virginia) on the Real Estate and the Utah
Leasehold, (iii)
evidence of each such filing, registration or recordation and of
the payment by
Borrower of any necessary fee, tax or expense relating thereto, (iv) objective
evidence that no part
of the Real Estate or the Utah Leasehold is located in a
flood hazard zone, (v)
such surveys,
environmental reports,
engineering
and
inspection reports and
appraisals as Lender may require in its sole discretion
with respect to the Real Estate or the Leasehold, (vi) evidence satisfactory to
Lender that the Real
Estate and the Utah
Leasehold complies
with applicable
codes and ordinances, is zoned for its current use, is served by
adequate public
utilities, is free of
mechanics and materialsman's liens and is not subject to
condemnation, and
(vii) an endorsement
to each ALTA
title insurance policy
insuring each Mortgage in form and substance satisfactory to Lender in its
sole
discretion;
(c)
Lender shall have received (i) the Charter and Good Standing
Documents,
all in form and
substance acceptable
to Lender, (ii) a certificate of the
corporate secretary or
assistant secretary of each Borrower and Guarantor dated
the Restatement
Date, as to the incumbency and signature of the Persons
executing the Loan Documents, in form and substance acceptable to Lender, and
(iii) the written legal opinion of counsel for each Borrower and
Guarantor,
in
form and substance satisfactory to Lender and its counsel;
(d)
Lender shall have received a certificate of the chief financial
officer
(or, in the absence of a chief financial officer, the chief executive officer)
for each of
PHC-Michigan and
PHC-Utah and for PHC
and its Subsidiaries
on a
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consolidated basis,
in form and
substance satisfactory to Lender (each, a
"Solvency Certificate"), certifying (i) the solvency of such Person
after giving
effect to the
transactions
and the Indebtedness contemplated by the Loan
Documents as of the
Restatement Date,
and (ii) as to such
Person's financial
resources and ability to meet its obligations and liabilities as they become
due, to the effect that as of the Restatement Date and after giving effect to
any funding under this Agreement on the Restatement Date: (A) the
assets of such
Person, at a Fair Valuation, exceed the total liabilities
(including contingent,
subordinated, unmatured and unliquidated liabilities) of such
Person, and (B) no
unreasonably small capital base with which to engage in its
anticipated business
exists with respect to such Person;
(e)
Lender shall have completed examinations, the results of which
shall be
satisfactory in form and substance to Lender, of the Collateral, the financial
statements and the books, records, business, obligations, financial condition
and operational state of each Borrower and Guarantor, and each such
Person shall
have demonstrated to Lender's satisfaction that (i) its operations
comply, in
all respects
deemed material by Lender, in its sole judgment, with all
applicable federal,
state, foreign and local laws,
statutes and
regulations,
(ii) its operations
are not the
subject of any governmental investigation,
evaluation or any
remedial action which could result in any expenditure or
liability deemed material by Lender, in its sole judgment, and (iii) it has no
liability (whether
contingent or
otherwise) that is deemed material by Lender,
in its sole judgment;
(f)
Lender shall
have received all fees, charges, expenses and other
amounts payable to
Lender on or prior to the Restatement Date pursuant to the
Loan Documents;
(g)
Lender shall have received true and correct copies of any and all
leases set
forth on Schedule 5.4, and such consents, approvals, estoppel
certificates and
agreements,
including,
without limitation, any applicable
Landlord Waivers and
Consents with respect to any and all leases
set forth on
Schedule 5.4, from such third parties as Lender and its counsel
shall determine
are necessary or
desirable with respect
to (i) the Loan
Documents and/or
the
transactions
contemplated thereby,
and/or (ii) claims
against any Borrower or
Guarantor, the Collateral or the Real Estate;
(h)
each Borrower shall be in compliance with Section 7.13(b) and Section
6.5, and Lender shall
have received
original certificates of all insurance
policies of each
Borrower confirming that they are in effect and that the
premiums due and owing
with respect
thereto have been paid
in full and naming
Lender as sole beneficiary or loss payee and additional insured, as
appropriate;
(i)
all corporate and other proceedings, documents, instruments and other
legal matters in
connection
with the transactions contemplated by the Loan
Documents (including,
but not limited to,
those relating to corporate and
capital structures of each Borrower) shall be satisfactory to
Lender;
(j)
Lender shall have
received, in form and substance satisfactory to
Lender, (i)
evidence of the repayment in full and termination of all
Indebtedness of Borrower to be repaid on the Restatement Date, if any, and all
related documents,
agreements
and instruments and of all Liens, security
interests and Uniform Commercial Code financing statements relating
thereto, and
(ii) release and
termination of any and
all Liens, security
interest and/or
Uniform Commercial Code financing statements in, on, against or with
respect to
any of the Collateral,
the Real Estate or the
Leasehold (other than
Permitted
Liens and the existing
first priority Lien against the Real Estate owned
by
PHC-Virginia);
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(k)
Each Borrower and each Guarantor shall have executed and filed IRS
Form
8821 with the
appropriate office of
the Internal
Revenue Service to include
Lender as an appointee thereon for all tax matters;
(l)
PHC shall have issued
the Warrant to CSE Equity Holdings LLC in form
and substance satisfactory to Lender;
(m)
Lender shall have received true and correct copies of any
amendments or
modifications to the Pivotal Acquisition Documents executed or delivered
since
the Closing Date, certified by a duly authorized officer of PHC;
and
(n)
Lender shall have received such other documents, certificates,
information or legal opinions as Lender may reasonably request,
all in form and
substance reasonably satisfactory to Lender.
4.2
Conditions to Each Advance
The
obligations
of Lender to make any Advance are subject to the
satisfaction, in the
sole judgment
of Lender, of the following additional
conditions precedent:
(a)
Borrower Agent shall have delivered to Lender a Borrowing
Certificate
for the Advance executed by an authorized officer of Borrower
Agent, which shall
constitute a representation and warranty by Borrower as of the
Borrowing Date of
such Advance
that the conditions contained in this Section 4.2 have been
satisfied; provided,
however, that any determination as to whether to fund
Advances or extensions of credit shall be made by Lender in its
sole discretion;
(b)
each of the
representation
and warranties made by Borrower in or
pursuant to this Agreement shall be accurate, before and after giving effect
to
such Advance;
(c)
no Default or Event of Default shall have occurred or be
continuing or
would exist after giving effect to the Advance under the Revolving Facility on
such date;
(d)
immediately
after giving
effect to the
requested Advance under the
Revolving Facility ,
the aggregate
outstanding
principal amount of Advances
under the Revolving
Facility shall not exceed either the Availability and the
Facility Cap;
(e)
except as disclosed in the historical financial statements, there
shall
be no liabilities
or obligations with respect to Borrower of any nature
whatsoever which, either individually or in the aggregate,
would reasonably
be
likely to have a Material Adverse Effect; and
(f)
Lender shall have
received all fees,
charges and expenses
payable to
Lender on or prior to such date pursuant to the Loan Documents.
4.3
Conditions to Term Loan Draws
In
addition to the
satisfaction of the conditions set forth in Section 4.1
hereof, the
obligation
of the Lender to make
any Term Loan Draw is subject to
the satisfaction of the following conditions precedent:
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(a)
Borrower Agent shall have delivered to Lender a Borrowing
Certificate
for the Term Loan Draw
executed by an
authorized officer of
Borrower Agent,
which shall constitute a representation and warranty by Borrower as of the
Term
Loan Borrowing
Date for such Term
Loan Draw that the
conditions contained
in
this Section 4.3 have been satisfied; provided, however, that any
determination
as to whether
the conditions contained in this Section 4.3 and the other
conditions set forth in this Agreement to Lender's obligation to make Term Loan
Draw have been satisfied shall be made by Lender in its sole
discretion;
(b)
each of the
representations and
warranties
made by Borrower in or
pursuant to this Agreement shall be accurate, before and after giving effect
to
such Term Loan Draw;
(c)
no Default or Event of Default shall have occurred or be
continuing or
would exist after giving effect to the Term Loan Draw on such
date;
(d)
immediately
after giving effect to
the requested Term
Loan Draw, the
aggregate outstanding
principal amount of the Term Loan
shall not exceed
the
Term Loan Amount in effect from time to time;
(e)
except as disclosed in the historical financial statements, there
shall
be no liabilities
or obligations with respect to Borrower of any nature
whatsoever which, either individually or in the aggregate,
would reasonably
be
likely to have a Material Adverse Effect; and
(f)
Lender shall have
received all fees,
charges and expenses
payable to
Lender on or prior to such date pursuant to the Loan Documents.
V. REPRESENTATIONS AND WARRANTIES
Each
Borrower and Guarantor, jointly and severally, represents and
warrants
as of the date hereof,
the Restatement Date, each Borrowing Date and, if
applicable, the date of any funding of the Loans as follows:
5.1
Organization and
Authority
Each
Borrower and Guarantor is a corporation or limited liability company
duly organized,
validly existing and in good standing under the laws of its
state of formation.
Each Borrower and Guarantor (i) has all requisite corporate
power and authority to own its properties and assets and to carry on its
business as now being conducted and as contemplated in the Loan
Documents, (ii)
is duly qualified to
do business in every
jurisdiction in which
failure so to
qualify could
reasonably be expected
to have a Material
Adverse Effect,
and
(iii) has all requisite power and authority (A) to execute,
deliver and
perform
the Loan Documents
to which it is a
party, (B) to
borrow hereunder, (C) to
consummate the transactions contemplated under the Loan Documents,
and (D) to
grant the Liens with regard to the Collateral pursuant to the
Security Documents
to which it is a party. No Borrower or Guarantor is an "investment company"
registered or required
to be registered
under the Investment Company Act of
1940, as amended, or is controlled by such an "investment
company."
5.2
Loan Documents
The
execution, delivery
and performance by
each Borrower and Guarantor of
the Loan Documents to which it is a party, and the consummation of the
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transactions
contemplated thereby,
(i) have been duly authorized by all
requisite action of
each such Person and have been duly executed and delivered
by or on behalf of each such Person; (ii) do not violate any
provisions of (A)
applicable law, statute, rule, regulation, ordinance or tariff, (B)
any order of
any Governmental Authority binding on any such Person or any of
their respective
properties, or (C) the
certificate
of incorporation or bylaws (or any other
equivalent governing agreement or document) of any such Person, or
any agreement
between any such Person and its respective stockholders, members, partners or
equity owners
or among any such stockholders, members, partners or equity
owners; (iii) are not in conflict with, and do not result in a
breach or default
of or constitute an event of default, or an event, fact, condition or
circumstance which, with notice or passage of time, or both, would
constitute or
result in a conflict,
breach, default or event of default under, any indenture,
agreement or other
instrument to which any such Person is a party, or by which
the properties
or assets of such
Person are bound,
the effect of which
could
reasonably be expected
to have a Material
Adverse Effect;
(iv) except as set
forth herein,
will not result in the
creation or imposition of any Lien of any
nature upon any of the
properties or assets of any such Person, and (v) except
as set forth
on Schedule 5.2, do not require the consent, approval or
authorization
of, or filing, registration or qualification with, any
Governmental Authority or any other Person. When executed and
delivered, each of
the Loan Documents to which each Borrower or Guarantor is a party will
constitute the legal,
valid and binding
obligation
of each such
Borrower or
Guarantor, enforceable against such Borrower or Guarantor in
accordance with its
terms, subject
to the effect of any applicable bankruptcy, moratorium,
insolvency,
reorganization or other similar law affecting the enforceability
of
creditors' rights
generally and to the
effect of general
principles of equity
which may limit the availability of equitable remedies (whether in a
proceeding
at law or in equity).
5.3
Subsidiaries,
Capitalization and Ownership Interests
Schedule 5.3
states the
authorized
and issued capitalization of each
Borrower and
Guarantor,
the number and class of equity securities and/or
ownership, voting or
partnership or membership interests issued and outstanding
of each Borrower and Guarantor and, for each Borrower and
Guarantor other
than
PHC, the record and beneficial owners thereof (including
options, warrants and
other rights to acquire any of the foregoing) and, for PHC, the
holders of 5% or
more of any class of equity securities thereof. The outstanding equity
securities and/or ownership, voting or membership interests of each
Borrower and
Guarantor have been
duly authorized
and validly issued and
are fully paid and
nonassessable. Each
Person listed on
Schedule 5.3 owns beneficially and of
record all the
equity securities and/or ownership, voting or partnership
interests of each Borrower and Guarantor (other than PHC) such Person is
listed
as owning free and clear of any Liens other than Liens created by the Security
Documents. Schedule
5.3 also lists the
directors,
members, managers and/or
partners of each
Borrower and
Guarantor. Except as
listed on Schedule 5.3, no
Borrower or Guarantor owns an interest or participates or engages in any joint
venture, partnership or similar arrangements with any Person.
5.4
Properties
Except as set forth on Schedule 5.4, each Borrower and Guarantor
(i) is the
sole owner and has good, valid and marketable title to, or a valid leasehold
interest in, all of its properties and assets, including the Collateral and
the
Real Estate, whether
personal or real,
subject to no transfer
restrictions or
Liens of any kind except for Permitted Liens, and (ii) is in compliance in
all
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material respects
with each lease to
which it is a party or
otherwise bound.
Schedule 5.4 lists all real properties (and their locations) owned or leased by
or to, and all other
assets or property
that are leased or
licensed by, such
Borrower or Guarantor and all leases (including leases of leased real
property)
covering or with
respect to such
properties and
assets. Each Borrower and
Guarantor enjoys
peaceful and undisturbed possession under all such leases
and
such leases are all the leases necessary for the operation of such properties
and assets, are valid and subsisting and are in full force and
effect.
5.5
Other Agreements
Except as set forth on Schedule 5.5, no Borrower or Guarantor is (i) a
party to any judgment, order or decree or any agreement, document
or instrument,
or subject to any restriction, which would have a Material Adverse
Effect on its
ability to execute and deliver, or perform under, any Loan Document or to pay
the Obligations, (ii)
in default in the performance, observance or fulfillment
of any obligation, covenant or condition contained in any
agreement, document or
instrument to which it
is a party or to which any of its properties or assets
are subject, which
default, if not remedied within any applicable grace or cure
period could
reasonably be expected to have a Material Adverse Effect, nor is
there any event, fact,
condition or circumstance which, with notice or passage
of time or both, would
constitute or result in a conflict, breach, default or
event of default under, any of the foregoing which, if not remedied within
any
applicable grace or
cure period could reasonably be expected to have a Material
Adverse Effect;
or (iii) a party or
subject to any agreement, document or
instrument with respect to, or obligation to pay any, service or management fee
with respect to, the ownership, operation, leasing or performance
of any of its
business or any
facility, nor is there any manager
with respect to any such
facility.
5.6
Litigation
Except as set forth on Schedule 5.6, there is no action,
suit, proceeding
or investigation pending or, to their knowledge, threatened against
any Borrower
or any Guarantor that
(i) questions or could prevent the validity of any of the
Loan Documents or the
right of any Borrower or any Guarantor to enter into any
Loan Document, or to
consummate the
transactions
contemplated thereby,
(ii)
could reasonably be expected to have, either individually or in the
aggregate, a
Material Adverse Effect, or (iii) could reasonably be
expected to result in any
Change of Control or other change in the current ownership, control or
management of any
Borrower or any
Guarantor.
Except as set forth on
Schedule
5.6, no Borrower is aware that there is any basis for the
foregoing. No Borrower
or Guarantor is a party or subject to any order, writ, injunction, judgment or
decree of any Governmental Authority except as set forth on
Schedule 5.6. There
is no action, suit, proceeding or investigation initiated by any
Borrower or any
Guarantor currently
pending. No Borrower
or Guarantor has any existing accrued
and/or unpaid
Indebtedness
to any Governmental Authority or any other
governmental payor.
5.7 Hazardous Materials
Each
Borrower and Guarantor is in compliance in all material
respects with
all applicable Environmental Laws. No Borrower or Guarantor has
been notified of
any action,
suit, proceeding or investigation (i) relating in any way to
compliance by
or liability of any Borrower or any Guarantor under any
Environmental Laws,
(ii) which otherwise deals with any Hazardous Substance or
any Environmental Law, or (iii) which seeks to suspend,
revoke or terminate
any
license, permit or
approval necessary for
the generation,
handling, storage,
treatment or disposal of any Hazardous Substance.
5.8
Tax Returns;
Governmental Reports
Each
Borrower and Guarantor (i) has filed all federal, state, foreign (if
applicable) and local tax returns and other reports which are
required by law to
be filed by such Borrower or Guarantor, and (ii) has paid all taxes,
assessments, fees and other governmental charges, including,
without limitation,
payroll and
other employment related taxes, in each case that are due and
payable, except
only for items
that a Borrower or Guarantor is currently
contesting in good faith and that are described on Schedule
5.8.
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5.9
Financial Statements
and Reports
All
financial statements and financial information relating to each
Borrower and Guarantor that have been or may hereafter be delivered
to Lender by
any Borrower or
Guarantor are accurate
and complete and have been prepared in
accordance with GAAP
consistently
applied with prior
periods. No Borrower
or
Guarantor has any material obligations or liabilities of any
kind not disclosed
in such financial
information
or statements, and since the date of the most
recent financial
statements
submitted to Lender, there has not occurred any
Material Adverse
Change, Material
Adverse Effect or Liability Event or, to any
Borrower's or
Guarantor's knowledge,
any other event or
condition that
could
reasonably be expected to have a Material Adverse Effect or
Liability Event.
5.10
Compliance with Law
Each
Borrower and Guarantor (i) is in compliance with all laws, statutes,
rules, regulations,
ordinances
and tariffs of any Governmental Authority
applicable to such Borrower or Guarantor and/or such Borrower's or Guarantor's
business, assets
or operations, including, without limitation, applicable
requirements of the
Standards for Privacy of Individually Identifiable Health
Information which were promulgated pursuant to the Health Insurance
Portability
and Accountability Act of 1996 ("HIPAA"), ERISA and Healthcare
Laws, and (ii) is
not in violation of
any order of any
Governmental Authority
or other board or
tribunal, except where
noncompliance
or violation could not reasonably be
expected to have a Material Adverse Effect. There is no event, fact,
condition
or circumstance which, with notice or passage of time, or both,
would constitute
or result in any noncompliance with, or any violation of, any of
the foregoing,
in each case except where noncompliance or violation could not reasonably be
expected to have a
Material Adverse
Effect. No Borrower or Guarantor has
received any notice that such Borrower or Guarantor is not in
compliance in any
respect with any of the requirements of any of the foregoing. No Borrower or
Guarantor has (a) engaged in any Prohibited Transactions as defined in Section
406 of ERISA and Section 4975 of the Internal Revenue Code of 1986, as
amended,
and the rules and
regulations
promulgated
thereunder, (b) failed
to meet any
applicable minimum funding requirements under Section 302 of ERISA
in respect of
its plans and no
funding requirements
have been postponed or delayed, (c)
knowledge of any event
or occurrence
which would
cause the Pension Benefit
Guaranty Corporation
to institute proceedings under Title IV of ERISA to
terminate any of the employee benefit plans, (d) fiduciary
responsibility
under
ERISA for investments
with respect to any plan existing for the benefit of
Persons other
than its employees or former employees, or (e) withdrawn,
completely or partially, from any multi-employer pension plans so as to incur
liability under the MultiEmployer Pension Plan Amendments of 1980.
With respect
to each Borrower,
there exists no event described in Section 4043 of ERISA,
excluding Subsections
4043(b)(2) and
4043(b)(3) thereof,
for which the thirty
(30) day notice
period contained in 12 C.F.R. Section 2615.3 has not been
waived. Each Borrower
and Guarantor has maintained in all material respects all
records required to be
maintained by the Joint Commission on Accreditation of
Healthcare
Organizations, the
Food and Drug
Administration, Drug
Enforcement
Agency and State
Boards of Pharmacy
and the federal
and state Medicare and
Medicaid programs as
required by the Healthcare Laws and, to the best knowledge
of each such Borrower or Guarantor, there are no presently existing
circumstances which likely would result in material violations of
the Healthcare
Laws. There is no Liability Event.
5.11
Intellectual Property
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Except as set forth on
Schedule 5.11, no Borrower or Guarantor owns,
licenses or
utilizes, and is a party to, any
patents, patent applications,
trademarks, trademark
applications,
service
marks, registered copyrights,
copyright
applications,
copyrights, trade
names, trade secrets,
software or
licenses (collectively, the "Intellectual Property").
5.12
Licenses and Permits; Labor
Each
Borrower and Guarantor is in compliance with and owns, or is licensed
or otherwise authorized to use, all Permits and Intellectual
Property necessary
or required by applicable law or Governmental Authority for the
operation of its
businesses. All of the
foregoing are in full
force and effect and not in known
conflict with the rights of others. No Borrower or Guarantor is (i)
in breach of
or default under the provisions of any of the foregoing, nor is
there any event,
fact, condition or
circumstance which,
with notice or passage of time or both,
would constitute or
result in a conflict,
breach, default or
event of default
under, any of the
foregoing which, if
not remedied within any applicable grace
or cure period could
reasonably be expected to have a Material Adverse Effect,
(ii) a party to or subject to any agreement, instrument or restriction
that is
so unusual or burdensome that it might have a Material Adverse Effect, and/or
(ii) and has been
involved in any
labor dispute, strike, walkout or union
organization which
could reasonably
be expected to have a Material Adverse
Effect
5.13
No Default
There does not exist any Default or Event of Default.
5.14
Disclosure
Neither any Loan Document nor any other agreement, document, certificate,
or statement furnished to Lender by or on behalf of any Borrower or
Guarantor in
connection with the
transactions
contemplated by the
Loan Documents, nor
any
representation or
warranty made by any Borrower or Guarantor in any Loan
Document, contains any
untrue statement of
material fact or omits to state any
fact necessary to make the statements therein not materially
misleading.
There
is no fact known to
any Borrower
which has not been disclosed to Lender in
writing which could reasonably be expected to have a Material
Adverse Effect.
5.15
Existing Indebtedness; Investments, Guarantees and Certain
Contracts
Except as contemplated
by the Loan Documents
or as otherwise set forth on
Schedule 5.15, no Borrower or Guarantor (i) has outstanding
Indebtedness,
(ii)
is subject or party to any mortgage, note, indenture, indemnity or
guarantee of,
with respect to or evidencing any Indebtedness of any other Person, or (iii)
owns or holds any equity or long-term debt investments in, and does
not have any
outstanding advances to or any outstanding guarantees for the
obligations of, or
any outstanding
borrowings
from, any Person.
Each Borrower and
Guarantor has
performed all
material obligations required to be performed by Borrower and
Guarantor pursuant to
or connection with any
items listed on Schedule 5.15 and
there has occurred no
breach, default or
event of default under
any document
evidencing any such items or any fact, circumstance, condition or event which,
with the giving of notice or passage of time or both, would
constitute or result
in a breach, default or event of default thereunder.
5.16
Other Agreements
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Except as set forth on Schedule 5.16, (i) there are no existing or
proposed
agreements, arrangements, understandings or transactions between
any Borrower or
Guarantor and any of such Borrower's or Guarantor's officers,
members, managers,
directors,
stockholders,
partners, other
interest holders, employees or
Affiliates or any members of their respective immediate families,
and (ii) none
of the foregoing
Persons are directly
or indirectly,
indebted to or have
any
direct or indirect
ownership, partnership
or voting interest in, to any such
Borrower's or Guarantor's knowledge, any Affiliate of any Borrower
or any Person
that competes with any
Borrower or Guarantor
(except that any such Persons may
own stock in (but not
exceeding two (2%)
percent of the
outstanding
capital
stock of) any publicly
traded company that may compete with any Borrower or
Guarantor.
5.17
Insurance
Each
Borrower and
Guarantor has in full force and effect such
insurance
policies as are
customary in its
industry and as may be
required pursuant
to
Section 6.5 hereof.
All such insurance
policies are listed and described on
Schedule 5.17.
5.18
Names; Location of Offices, Records and Collateral
During the preceding
five years,
no Borrower or
Guarantor has
conducted
business under or used
any name (whether
corporate,
partnership
or assumed)
other than as shown on Schedule 5.18A. Each Borrower and Guarantor is the
sole
owner of all of its names listed on Schedule 5.18A, and any and all business
done and invoices issued in such names are such Borrower's or
Guarantor's sales,
business and invoices.
Each trade name of a
Borrower represents a
division or
trading style of such
Borrower or Guarantor. Each Borrower and Guarantor
maintains its
places of business and chief executive offices only at the
locations set forth on
Schedule 5.18B,
and all Accounts of
each such Borrower
and Guarantor arise,
originate and are
located, and all of
the Collateral and
all books and records in connection therewith or in any way relating
thereto or
evidence the Collateral are located and shall be only, in and at
such locations.
All of the Collateral is located only in the continental United
States.
5.19
Non-Subordination
The
Obligations are not subordinated in any way to any other
obligations of
any Borrower or Guarantor or to the rights of any other Person.
5.20
Accounts
In
determining which Accounts are Eligible Receivables, Lender may rely on
all statements
and representations made by a Borrower with respect to any
Account. Unless
otherwise indicated in writing to Lender, each Account of a
Borrower (i) is
genuine and in all
respects what is
purports to be and is not
evidenced by a
judgment, (ii) arises out of a completed, bona fide sale and
delivery of goods or
rendering of Services
by such Borrower in the ordinary
course of business
and in accordance with the terms and conditions of all
purchase orders, contracts, certifications, participations,
certificates of need
and other documents
relating thereto or
forming a part of the contract between
such Borrower and the Account Debtor, (iii) is for a liquidated amount
maturing
as stated in a claim or invoice covering such sale of goods or rendering of
Services, a copy of
which has been
furnished or is
available to Lender,
(iv)
together with Lender's security interest therein, is not and will not be in the
future (by voluntary
act or omission by any such Borrower), subject to any
offset, lien,
deduction,
defense, dispute, counterclaim or other adverse
condition, is
absolutely owing to
such Borrower and is
not contingent in
any
respect or for any reason (except Accounts owed or owing by
Medicaid/Medicare
Account Debtors
that may be subject to
offset or deduction
under applicable
law), (v) there are no facts, events or occurrences which in any
way impair the
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validity or
enforceability
thereof or tend to reduce the amount payable
thereunder from the face amount of the claim or invoice and
statements delivered
to Lender with respect thereto, (vi) to the best of each such Borrower's
knowledge, (A) the Account Debtor thereunder had the capacity to
contract at the
time any contract or
other document
giving rise
thereto was executed
and (B)
such Account
Debtor is solvent, (vii) to the best of each
such Borrower's
knowledge, subject to
subsection (x) below, there are no proceedings or actions
which are threatened
or pending against any
Account Debtor
thereunder
which
might result in any Material Adverse Change in such Account
Debtor's financial
condition or the collectability thereof, (viii) has been billed and
forwarded to
the Account Debtor for
payment in accordance
with applicable laws and is in
compliance and
conformance
with any requisite
procedures,
requirements
and
regulations governing
payment by such Account Debtor with respect to such
Account, and,
if due from a
Medicaid/Medicare
Account Debtor, is properly
payable directly to Borrower, (ix) each such Borrower has obtained
and currently
has all Permits necessary in the generation thereof, and (x) each such Borrower
has disclosed to Lender on each Borrowing Certificate the amount of
all Accounts
of such Borrower for which Medicare is the Account Debtor and
for which payment
has been denied and subsequently appealed pursuant to the procedure
described in
the definition
of Eligible
Receivables
hereof, and such Borrower is, except
where the failure to do so would not have a Material Adverse Effect, pursuing
all available appeals in respect of such Accounts.
5.21
Healthcare
Without limiting
or being limited by any other provision of any Loan
Document, each Borrower and Guarantor has timely filed or caused to
be filed all
cost and other reports
of every kind required
by law, agreement or
otherwise.
Subject to subsection
(x) of Section 5.20, there are no claims, actions or
appeals pending (and
no Borrower or
Guarantor has filed
any claims or reports
which could reasonably result in any such claims, actions or
appeals) before any
commission, board or agency or other Governmental Authority,
including, without
limitation, any intermediary or carrier, the Provider Reimbursement
Review Board
or the Administrator
of the Centers for
Medicare and Medicaid
Services, with
respect to any state or federal Medicare or Medicaid cost reports or claims
filed by such Borrower, or any disallowance by any
commission, board or
agency
or other Governmental
Authority in connection with any audit of such cost
reports. No
validation
review or program integrity review related to any
Borrower or the consummation of the transactions contemplated herein or to the
Collateral have
been conducted by any commission, board or agency or other
Governmental Authority in connection with the Medicare or Medicaid
programs, and
to the knowledge of each Borrower and Guarantor, no such reviews are scheduled,
pending or threatened
against or affecting
any of the
providers,
any of the
Collateral or the consummation of the transactions contemplated
hereby.
5.22
Survival
Each
Borrower and Guarantor makes the representations and warranties
contained herein with
the knowledge and
intention that Lender is relying and
will rely thereon. All
such representations
and warranties will survive the
execution and delivery of this Agreement, the making of the Advances under
the
Revolving Facility and the funding of the Term Loan.
VI. AFFIRMATIVE COVENANTS
Each
Borrower and Guarantor, jointly and severally, covenants and agrees
that, until full performance and satisfaction, and indefeasible payment in
full
in cash, of all the Obligations and termination of this
Agreement:
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6.1
Financial Statements, Borrowing Certificate, Reports and Other
Information
(a)
Financial Reports. In
addition to providing the Borrowing Certificate
in accordance
with Section 2.3, PHC shall furnish to Lender (i) as soon
as
available and in any event within the earlier of ninety (90)
calendar days after
the end of each fiscal year of PHC and its Subsidiaries or the date upon which
PHC files its report on Form 10-K with the United States Securities
and Exchange
Commission, audited
annual consolidated and consolidating financial statements
of PHC and its
Subsidiaries,
including the
notes thereto, consisting of a
consolidated and consolidating balance sheet at the end of such
completed fiscal
year and the related
consolidated
and consolidating statements of income,
retained earnings, cash flows and owners' equity for such completed
fiscal year,
which financial statements shall be prepared and certified without
qualification
by an independent
certified public
accounting firm
satisfactory to Lender and
accompanied by related
management letters,
if available,
and (ii) as soon
as
available and in any event within thirty-five (35) calendar days after the
end
of each calendar
month or earlier or in
the case of any
calendar month
which
coincides with the end of a fiscal quarter of PHC, the date upon
which PHC files
its report
on Form 10-Q with the United States Securities and Exchange
Commission, unaudited consolidated and consolidating financial
statements of PHC
and its Subsidiaries
consisting of a
balance sheet and
statements of
income,
retained earnings,
cash flows and owners' equity as of the end of the
immediately preceding
calendar month.
All such financial
statements shall
be
prepared in accordance with GAAP consistently applied with prior periods.
With
each such financial statement, PHC shall also deliver a certificate
of its chief
financial officer
in the form of
Exhibit B attached hereto (the "Monthly
Compliance
Certificate") stating
(A)(i) that such person has reviewed the
relevant terms of the Loan Documents and the condition of Borrower,
(ii) that no
Default or Event of Default has occurred or is continuing, or, if any of the
foregoing has occurred or is continuing, specifying the nature and status and
period of existence
thereof and the steps taken or proposed to be taken
with
respect thereto,
and (iii) that
Borrower is in
compliance with all
financial
covenants attached as
Annex I hereto and (B) the Average Census at Harbor Oaks
and Highland
Ridge, Borrower's EBITDAM, Cash Velocity of Harbor Oaks and
Highland Ridge,
and Borrower's Available Cash. Such certificate shall be
accompanied by the calculations necessary to show compliance with
the financial
covenants in a form satisfactory to Lender.
(b)
Other Materials. Each Borrower and Guarantor shall furnish to
Lender as
soon as available,
and in any event
within ten (10)
calendar days after the
preparation or
issuance thereof or at
such other time as set forth below: (i)
copies of such financial statements (other than those required to be
delivered
pursuant to Section
6.1(a)) prepared by,
for or on behalf of such Borrower or
Guarantor and any
other notes, reports
and other materials
related thereto,
including, without
limitation,
any pro forma
financial statements,
(ii) any
reports, returns, information, notices and other materials that
any Borrower or
Guarantor shall send
to its stockholders,
members, partners or other equity
owners at any time or
file with the
United States Securities and Exchange
Commission, (iii) all
Medicare and Medicaid cost reports and other document and
materials filed
by Borrower and any other reports, materials or other
information regarding or otherwise relating to Medicaid or Medicare
prepared by,
for or on behalf of Borrower, (iv) all reports, materials or other information
filed with or pertaining to any Account Debtor which could reasonably have a
Material Adverse
Effect, (v) promptly upon receipt thereof, copies of any
reports submitted to any Borrower or Guarantor by its independent
accountants in
connection with any
interim audit of the books of such Person or any of its
Affiliates and
copies of each management control letter provided by such
independent
accountants, and
(vi) such additional information, documents,
statements, reports
and other materials as Lender may reasonably request from a
credit or security perspective or otherwise from time to time.
(c)
Notices. Each Borrower
and Guarantor shall promptly, and in any event
within two (2)
calendar days after any such Borrower or Guarantor or any
authorized officer of
such Borrower or
Guarantor obtains
knowledge thereof,
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notify Lender in
writing of (i) any
pending or threatened
litigation,
suit,
investigation,
arbitration, dispute
resolution
proceeding or
administrative
proceeding brought or
initiated by such Borrower or Guarantor or otherwise
affecting or involving
or relating to Borrower or any of its property or assets
to the extent (A) the
amount in controversy exceeds $10,000, or (B) to the
extent any of the foregoing seeks injunctive relief, (ii) any Default or Event
of Default, which notice shall specify the nature and status
thereof, the period
of existence
thereof and what action is proposed to be taken with respect
thereto, (iii) any
other development,
event, fact,
circumstance or
condition
that c
