Exhibit 4.2
LOAN AND SECURITY
AGREEMENT
This Loan and Security Agreement (
“Agreement” ) is dated this 30th day of April,
2002, by and among HealthEssentials Solutions, Inc., a Delaware
corporation ( “Borrower Agent” or
“HealthEssentials” ), NPPA of America, Inc., a
Delaware corporation ( “NPPA America” ), NPPA
National, LLC, a Texas limited liability company ( “NPPA
National” ), and such other Persons joined hereto as a
Borrower from time to time (collectively referred to as
“Borrowers” and each individually referred to as
a “Borrower” ), and Healthcare Business Credit
Corporation, a Delaware corporation as lender (
“Lender” ).
BACKGROUND
A Borrowers have requested that
Lender make available to them, on a joint and several basis, a
Credit Facility in the maximum amount of $12,000,000 which will be
secured by a first priority perfected security interest in the
Accounts and other Collateral of Borrowers. Lender is willing to
make the Credit Facility available to Borrowers pursuant to the
terms and provisions hereinafter set forth.
B The parties desire to set forth
the terms and conditions of their relationship in
writing.
NOW, THEREFORE, the parties hereto,
intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS AND
INTERPRETATION
1.1. Terms Defined : As used
in this Agreement, the following terms have the following
respective meanings:
“Account”
means (a) the third party
reimbursable portion of accounts receivable owing to a Borrower
arising out of the delivery by such Borrower of medical, surgical,
diagnostic or other professional or medical or dental services
and/or the supply of goods related to any of such services (whether
such services are supplied by a Borrower or a third party),
including all healthcare-insurance-receivables and all other rights
to reimbursement under any agreements with an Obligor, (b) all
accounts, general intangibles, rights, remedies, guarantees,
supporting obligations, letter of credit rights and security
interests in respect of the foregoing, all rights of enforcement
and collection, all books and records evidencing or related to the
foregoing, and all rights under this Agreement in respect of the
foregoing, (c) all information and data compiled or derived by such
Borrower in respect of such accounts receivable (other than any
such information and data subject to legal restrictions of patient
confidentiality), and (d) all proceeds of any of the
foregoing.
“Accounts Detail
File” has the
meaning set forth in Section 2.2(b) hereof.
“Acquisition”
means that acquisition of all of the
issued and outstanding capital
stock of Specialized and the
outstanding membership interests of MAJJ by HealthEssentials
pursuant to the terms and conditions of documentation acceptable to
Lender in its sole and absolute discretion.
“Advance(s)” means any monies advanced or credit extended,
including without limitation the Loans to or for the benefit of
Borrowers, or any of them by Lender, under the Credit
Facility.
“Advance
Rate” means 85% or
such other percentage(s) resulting from an adjustment pursuant to
Section 2.1(e) below.
“Affiliate” means with respect to any Person (the
“Specified Person”), (a) any Person which directly or
indirectly controls, or is controlled by, or is under common
control with, the Specified Person, and (b) any director or officer
(or, in the case of a Person which is not a corporation, any
individual having analogous powers) of the Specified Person or of a
Person who is an Affiliate of the Specified Person within the
meaning of the preceding clause (a). For purposes of the preceding
sentence, “control” of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, or
direct or indirect ownership (beneficially or of record) of, or
direct or indirect power to vote, 5% or more of the outstanding
shares of any class of capital stock of such Person (or in the case
of a Person that is not a corporation, 5% or more of any class of
equity interest).
“Authorized
Officer” means any
officer, manager, member and/or partner of a Borrower authorized by
specific resolution of Borrower to request Loans as set forth in
the incumbency certificate referred to in Section 4.1(d) of this
Agreement.
“Billing
Date” means (a) the
last Business Day of the week in which goods or the services giving
rise to the corresponding Account were rendered or provided in the
case of out-patient services and (b) the earlier of the discharge
date or the regular monthly billing date for billing the respective
Obligor, or if none, the last business day of a calendar month, in
the case of inpatient services.
“Borrowing
Base” means, at any
date, an amount equal to the lesser of (a) the Revolving Loan
Commitment, or (b) the product of (i) the applicable Advance Rate
then in effect, times (ii) the Estimated Net Value of all Eligible
Accounts as of such date.
“Borrowing Base
Deficiency” means,
as of any date, the amount, if any, by which (a) the aggregate
amount of all Advances outstanding as of such date exceeds (b) the
Borrowing Base as of such date.
“Borrowing Base
Excess” means, as
of any date, the amount, if any, by which (a) the Borrowing Base as
of such date exceeds (b) the aggregate amount of all Advances
outstanding as of such date.
“Borrowing Base
Report” has the
meaning set forth in Section 2.2(b) hereof.
“Business
Day” means any day
other than a Saturday, Sunday or any day on which banking
institutions in Philadelphia, Pennsylvania or New York City, New
York are
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permitted or required by law,
executive order or governmental decree to remain closed or a day on
which Lender is closed for business.
“CHAMPUS”
means the Civilian Health and
Medical Program of the Uniformed Service, a part of TRICARE, a
medical benefits program supervised by the U.S. Department of
Defense.
“Closing”
has the meaning set forth in Section
4.6 hereof.
“Closing
Date” has the
meaning set forth in Section 4.6 hereof.
“Collateral” has the meaning set forth in Section 3.1
hereof.
“Collateral Pledge
Agreements” has the
meaning set forth in Section 3.8 hereof.
“Collections”
means with respect to any Account,
all cash collections on such Account.
“Collection
Account” has the
meaning set forth in Section 2.7(a) hereof.
“Commercial
Lockbox” means a
lockbox in the name of Lender (or a nominee of Lender) and
maintained at the Lockbox Bank, or such other bank as is acceptable
to Lender, to which Collections on all Accounts, other than
Government Accounts, are sent.
“Commitment
Fee” has the
meaning set forth in Section 2.8 hereof.
“Concentration
Limits” means the
various financial tests, expressed as percentages of the then
current ENV of all Eligible Accounts, described on Schedule
1 as in effect from time to time.
“Contract”
means an agreement by which an
Obligor is obligated to pay for services rendered to patients of
Borrower.
“Credit
Facility” has the
meaning set forth in Section 2.1(a) hereof.
“Debt Service Coverage
Ratio” means the
ratio of (a) the sum of (i) net income, plus (ii) interest expense,
pins (iii) depreciation and amortization expenses to (b) the sum of
(i) cash interest expense, plus (ii) the current portion of
long-term debt, plus (iii) the current portion of lease payments
under capitalized leases, plus (iv) Scheduled Payments, plus (v)
Distributions, all as determined for Borrowers on a consolidated
basis in accordance with generally accepted accounting principles
consistently applied, on a rolling four quarter basis; provided,
however, that such calculation for the fiscal quarter ending June
30, 2002 shall be for the two (2) most recent quarterly periods
ending on such date, on a cumulative, annualized basis and such
calculation for the fiscal quarter ending September 30, 2002 shall
be for the three (3) most recent fiscal quarterly period ending on
such date, on a cumulative, annualized basis.
“Default
Rate” means 300
basis points above the interest rate otherwise applicable on the
Loans.
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“Defaulted
Account” means an
Account as to which (a) the initial ENV has not been received in
full as Collections within 150 days of the Billing Date, or (b)
Lender reasonably deems uncollectible because of the bankruptcy or
insolvency of the Obligor or any other reason.
“Depository
Agreement(s)” means
those certain Depository Agreements entered into in connection with
this Agreement among Borrowers, Lender and the Lockbox Bank,
relating to the Commercial Lockbox and the Government Lockbox, as
applicable.
“Distribution”
means (a) dividends or other
distributions on capital stock or other equity interests of a
Borrower; (b) the redemption, repurchase or acquisition of such
stock or equity interests or of warrants, rights or other options
to purchase such stock or equity interest; and (c) loans and/or
advances made to any Shareholders, members, managers, officers
and/or Affiliates.
“Download
Date” has the
meaning set forth in Section 2.2(b) hereof.
“Eligible
Account” means an
Account of a Borrower:
(a) which is a liability of an
Obligor which is (i) a commercial insurance company acceptable to
Lender, organized under the laws of any jurisdiction in the United
States, having its principal office in the United States, other
than those listed on Schedule 1 as ineligible, (ii) a Blue
Cross/Blue Shield Plan other than those listed on Schedule 1
as ineligible, (iii) CHAMPUS, Medicare, Medicaid or Veteran’s
Administration, or (iv) a HMO, PPO, or an institutional Obligor
acceptable to Lender, or any other type of obligor, not included in
the categories of obligors listed in the foregoing clauses (i) -
(iii), organized under the laws of any jurisdiction in the United
States, having its principal office in the United States, and is
listed on Schedule 1 as an eligible Obligor,
(b) the Obligor of which is not an
Affiliate of Borrower,
(c) the Obligor of which has
received a letter substantially in the form of Exhibit 4.2A,
(in the case of all Accounts other than Government Accounts), or a
letter substantially in the form of Exhibit 4.2B (in the
case of all Government Accounts),
(d) in an amount, as relating to an
individual patient, not less than $5 nor mote than $50,000,
denominated and payable in dollars in the United States,
(e) as to which the representations
and warranties of Section 5.21 hereof are true,
(f) which, if such Account is in the
form of a cost report receivable owing from any government agency,
Lender has agreed to include it in the Borrowing Base,
(g) which (i) does not arise from
the delivery of cosmetic surgery services and (ii) is not a
workers’ compensation claim (unless expressly approved by
Lender) and (iii) does not arise from any services delivered for
injury sustained in a motor vehicle accident (unless the Obligor on
such Account is a type of Obligor permitted pursuant to clause (a)
of this definition)
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and (iv) does not have an Obligor
who is the individual patient or person who received the goods or
services rendered,
(h) which is not outstanding more
than (1) one hundred fifty (150) days past the Billing Date in the
case of Accounts that have been billed, and (ii) forty-five (45)
days past the date the corresponding services and/or goods were
provided in the case of all Accounts which have not been billed;
provided however that in the case of Government Accounts which have
not been billed due to a Borrower not yet obtaining an appropriate
provider identification number for the nurse practitioner providing
the related services and/or goods, such Accounts are not
outstanding more than ninety (90) days past the date the
corresponding services and/or goods; provided further
that in no event may the Account be outstanding more than one
hundred ninety-five (195) days past the date the corresponding
services and/or goods were provided,
(i) to the extent such Account does
not include late charges or finance charges,
(j) the Account is from an Obligor
for which fifty percent (50%) or more of the Accounts owing from
such Obligor are outstanding more than one hundred fifty (150) days
past the Billing Date; and
(k) which complies with such other
criteria and requirements as may be specified from time to time by
Lender in its reasonable discretion.
“Estimated Net
Value” or
“ENV” means on any date of calculation with
respect to any Account an amount equal to the anticipated cash
collections as calculated by Lender using the Value Track
System TM (which system periodically adjusts
such amount to reflect Lender’s evaluation of the performance
of similar Accounts and to reflect payments received with respect
thereto), except that if Lender determines that all Obligor
payments with respect to an Account have been made or if an Account
has become a Defaulted Account, the ENV of such Account shall be
zero.
“Event of
Default” has the
meaning set forth in Section 8.1 hereof.
“Expenses”
has the meaning set forth in Section
9.5 hereof.
“Funding
Date” has the
meaning set forth in Section 2.2(a) hereof.
“GAAP”
means generally accepted accounting
principles, consistently applied.
“Government
Accounts” means
Accounts on which any federal or state governmental unit or any
intermediary for federal or state governmental unit is the
Obligor.
“Government
Lockbox” means a
lockbox and/or deposit account in the name of Borrower(s)
maintained at the Lockbox Bank, or such other bank as is acceptable
to Lender, to which Collections on all Government Accounts are
sent.
“Hazardous
Substances” means
any substances defined or designated as hazardous or toxic waste,
hazardous or toxic material, hazardous or toxic substance or
similar
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term, by any environmental statute,
rule or regulation of any governmental entity presently in effect
and applicable to such real property.
“Indebtedness”
of a Person at a particular date
shall mean all liabilities and obligations of such Person
including, without limitation, those which in accordance with GAAP
would be classified upon a balance sheet as liabilities (except
capital stock and surplus earned or otherwise) all indebtedness,
debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required
prepayment dates of such indebtedness, and all indebtedness secured
by a lien on assets owned by such Person, whether or not such
indebtedness actually shall have been created, assumed or incurred
by such Person. Any indebtedness of such Person resulting from the
acquisition by such Person of any assets subject to any lien shall
be deemed, for the purposes hereof, to be the equivalent of the
creation, assumption and incurring of the indebtedness secured
thereby, whether or not actually so created, assumed or
incurred.
“Initial
Term” has the
meaning set forth in Section 2.1(d).
“JCAHO”
means the Joint Commission for
Accreditation of Healthcare Organizations, a nationally recognized
organization providing accreditations to hospitals and other
healthcare facilities, or any successor entity charged with
performing its functions.
“LIBOR
Rate” means an
annual rate equal to the annual rate in effect in the London
Interbank market applicable to one (1) month deposits of U.S.
dollars as reported in the Wall Street Journal on the second
Business Day preceding the date of determination. If the Wall
Street Journal is not published on such Business Day or does
not report such rate, such rate shall be reported by such other
publication or source as Lender may reasonably select provided that
Lender shall endeavor to promptly notify Borrower of such other
publication or source.
“Loan(s)”
means collectively the Revolving
Credit Loans and the Term Loan and each may also be referred to as
a “Loan”.
“Loan
Documents” means
this Agreement, the Revolving Credit Note, the Term Note,
Depository Agreements and all agreements relating to the Government
Lockbox and the Commercial Lockbox, all financing statements,
Subordination Agreements, the Collateral Pledge Agreements, the
Intellectual Property Security Agreement and any other agreements,
instruments, documents and certificates delivered in connection
with this Agreement.
“Loan
Request” has the
meaning set forth in Section 2.2(c) hereof.
“Lockbox
Bank” means PNC
Bank, National Association or such other bank that is acceptable to
Lender.
“MAJJ”
means MAJJ Enterprises, LLC, a
Florida limited liability company.
“Material Adverse
Effect” means (a) a
material adverse effect upon the business, Property, prospects, the
Collateral or financial condition of Borrowers or any of them or
(b) a material impairment of the ability of any Borrower to
perform, or Lender to enforce, the Obligations, or on any of
Lender’s rights hereunder.
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“Maturity
Date” has the
meaning set forth in Section 2.1(d).
“Maximum Credit
Limit” means an
amount, from time to time, equal to the Revolving Loan Commitment
plus the outstanding principal amount of the Term Loan minus all
principal payments scheduled or required to have been made, which
have not yet been made with respect to the Term Loan as of the date
of determination, not to exceed at any time $12,000,000 in the
aggregate.
“Obligations”
means all now existing or hereafter
arising debts, obligations, covenants, and duties of payment or
performance of every kind, matured or unmatured, direct or
contingent, owing, arising, due, or payable to Lender, by or from
Borrowers, or any of them, whether arising out of this Agreement or
any other Loan Document or otherwise, including, without
limitation, all obligations to repay principal of and interest on
all the Loans, and to pay interest, fees, costs, charges, expenses,
professional fees, and all sums chargeable to Borrowers, or any of
them, under the Loan Documents, whether or not evidenced by any
note or other instrument.
“Obligor”
means the party primarily obligated
to pay an Account.
“Person”
means any individual, corporation,
partnership, limited liability partnership, limited liability
company, association, trust, unincorporated organization, joint
venture, court or government or political subdivision or agency
thereof, or other entity.
“Permitted
Liens” has the
meaning set forth in Section 5.6.
“Pledgor”
means each Shareholder of
HealthEssentials.
“Property”
means an interest of Borrower in any
kind of property or asset, whether real, personal or mixed, or
tangible or intangible.
“Revolving Credit
Loan(s)” has the
meaning set forth in Section 2.1(a).
“Revolving Credit
Note” has the
meaning set forth in Section 2.1(b).
“Revolving Loan Applicable
Margin” means
initially 5.0%. The Revolving Loan Applicable Margin shall be
adjusted based upon the Debt Service Coverage Ratio as of the last
day of the fiscal quarter then most recently ended for which the
quarterly financial statements have been delivered pursuant to
Section 6.7, commencing with the audited financial statements of
Borrowers for the fiscal year ending December 31, 2002:
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Debt Service Coverage Ratio
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Revolving Loan
Applicable Margin
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Less than 1.50 to 1
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5.00
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%
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Equal to or greater than 1.5 to 1 but less than
or equal to 2.0 to 1
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4.75
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%
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Greater than 2.0 to 1
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4.50
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%
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For purposes of the foregoing (i)
the Debt Service Coverage Ratio shall be determined as of the end
of each fiscal quarter of Borrowers based on Borrowers’
financial statements delivered pursuant to Section 6.7 and (ii)
each change in the Revolving Loan Applicable Margin resulting from
a change in the Debt Service Coverage Ratio shall be effective
during the period commencing on and including the date of delivery
to Lender of such financial statements indicating such change and
ending on the day immediately preceding the effective date of the
next such change; provided however that the Debt Service Coverage
Ratio shall be deemed to be less than 1.50 to 1 if (A) Borrowers
fail to deliver the financial statements required to be delivered
by it pursuant to Section 6.7 during the period from the expiration
of the time for delivery thereof until such financial statements
are delivered or (B) an Event of Default (other than that caused by
a failure to deliver financial statements as described in clause
(A) above) or Unmatured Event of Default has occurred and is
continuing, all subject to the terms of Section 2.3(b).
“Revolving Loan
Commitment” means
an amount equal to $10,000,000.
“Scheduled
Payments” RESERVED.
“Securities” has the meaning set forth in Section 6.14
hereof.
“Shareholder”
means, as applicable, a shareholder,
member or partner of each Borrower.
“Specialized”
means Specialized Home Health Care
Services of Central Florida, Inc., a Florida
corporation.
“Subordinated
Debt” means
Indebtedness or other obligations of a Borrower that is
subordinated to the Obligations of Borrowers to Lender on terms and
conditions that are satisfactory to Lender in its sole
discretion.
“Subordination
Agreement” means
any and all Subordination Agreements, with respect to any and/or
all of the Subordinated Debt or lien priority with respect to the
Collateral, including that certain Subordination Agreement dated as
of even date herewith by and among Lender, Bruckmann, Rosser,
Sherrill & Co., II, L.P. and HealthEssentials.
“Term
Loan” has the
meaning set forth in Section 2.1(a).
“Term Loan Maturity
Date” means the
earlier of
, 2002, the termination of the Credit Facility or the termination
of this Agreement.
“Term
Note” has the
meaning set forth in Section 2.1(c).
“Termination
Fee” has the
meaning set forth in Section 2.3(c).
“Intellectual Property
Security Agreement” means that certain Intellectual Property
Security Agreement dated as of even date herewith from
HealthEssentials to Lender, as may be amended or modified from time
to time.
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“TRICARE”
means the medical program for active
duty members, qualified family members, CHAMPUS eligible retirees
and their family members and survivors, of all uniformed
services.
“Uniform Commercial
Code” or
“UCC” means the Uniform Commercial Code as in
effect from time to time in the State of New Jersey.
“Unmatured Event of
Default” means an
event which with the passage of time, giving of notice or both,
would become an Event of Default.
“Unused Line
Fee” has the
meaning set forth in Section 2.3(d).
“Value Track
System TM ” means the proprietary business
system used by Lender to value and record the status of
Accounts.
1.2. Matters of Construction
: The terms “herein,” “hereof” and
“hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular section,
paragraph or subdivision. Any pronoun used shall be deemed to cover
all genders. Wherever appropriate in the context, terms used herein
in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations.
Unless otherwise provided, all references to any instruments or
agreements to which Lender is a party, including, without
limitation, references to any of the Loan Documents, shall include
any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
1.3. Accounting Principles :
Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation
or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with
GAAP, to the extent applicable, except as otherwise expressly
provided in this Agreement.
SECTION 2. THE
LOANS
2.1. Credit Facility -
Description :
(a) Subject to the terms and
conditions of this Agreement, Lender hereby establishes for the
joint and several benefit of Borrowers, a credit facility (
“Credit Facility” ) which shall include Advances
which may be extended by Lender to or for the benefit of Borrowers
from time to time hereunder in the form of revolving credit loans (
“Revolving Credit Loans” ), and at Closing in
the form of a term loan ( “Term Loan” ). The
aggregate outstanding amount of all Advances, shall not at any time
exceed the Maximum Credit Limit and the aggregate outstanding
amount of all Revolving Credit Loans shall not, at any time, exceed
the Borrowing Base. In no event shall the initial principal amount
of any Revolving Credit Loan be less than $25,000. Subject to such
limitation, the outstanding balance of all Revolving Credit Loans
may fluctuate from time to lime, to be reduced by repayments made
by Borrowers, to be increased by future Revolving Credit Loans
which may be made by Lender. If the aggregate outstanding amount of
all Revolving Credit Loans exceeds the Borrowing Base, or if the
aggregate outstanding amount of all Advances (whether in the form
of a Term Loan, Revolving
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Credit Loans or otherwise), exceeds
the Maximum Credit Limit, Borrowers shall immediately repay such
excess in full. Lender has the right at any time, and from time to
time, in its reasonable discretion (but without any obligation) to
set aside reasonable reserves against the Borrowing Base in such
amounts as it may deem appropriate. The Obligations of Borrowers
under the Credit Facility and this Agreement are joint and several
and shall at all times be absolute and unconditional.
(b) At Closing, Borrowers shall
execute and deliver a promissory note to Lender in the principal
amount of the Revolving Loan Commitment (as may be amended,
modified or replaced from time to time, the “Revolving Credit
Note”). The Revolving Credit Note shall evidence Borrowers
joint and several, absolute and unconditional obligation to repay
Lender for all Loans made by Lender under the Credit Facility, with
interest as herein and therein provided. Each and every Revolving
Credit Loan under the Credit Facility shall be deemed evidenced by
the Revolving Credit Note, which is deemed incorporated herein by
reference and made a part hereof. The Revolving Credit Note shall
be substantially in the form set forth in Exhibit 2.1(b)
attached hereto and made a part hereof.
(c) Upon the closing of the
Acquisition, the joinder of Specialized and MAJJ as joint and
several co-Borrowers hereunder (pursuant to documentation
acceptable to Lender in its sole and absolute discretion) and
subject to the terms of this Agreement, Lender shall make available
to Borrowers the Term Loan in the principal amount of $2,000,000.
Subject to the provisions of Section 2.5(f), the Term Loan shall be
repaid in full together with all accrued interest fees, costs and
Expenses on or before the Term Loan Maturity Date. At Closing,
Borrowers shall execute and deliver a promissory note to Lender in
the principal face amount of $2,000,000 (as may be amended,
modified or replaced from time to time, the “Term
Note” ). The Term Note shall evidence Borrowers’
joint and several and absolute and unconditional obligation to
repay the Term Loan to Lender and the Term Note is hereby deemed
incorporated herein by reference and made a part hereof. The Term
Note shall be substantially in the form set forth in Exhibit
2.1(c) attached hereto and made a part hereof.
(d) The term ( “Initial
Term” ) of the Credit Facility shall expire on
, 2007. All Revolving Credit Loans shall be repaid on or before the
earlier of the last day of the Initial Term or upon termination of
the Credit Facility or termination of this Agreement (
“Maturity Date” ). After the Maturity Date no
further Revolving Credit Loans shall be available from
Lender.
(e) From time to time, upon not less
than three (3) Business Days notice to Borrowers, Lender may adjust
the Advance Rate in order to reflect, in Lender’s reasonable
judgment, the experience with Borrowers (including by way of
illustration, to adjust for any known or potential offsets by
Medicare or Medicaid) or the aggregate amount or percentage of the
Collections with respect to the Accounts.
2.2. Funding Procedures
:
(a) Subject to the terms and
conditions of this Agreement and so long as no Event of Default or
Unmatured Event of Default has occurred hereunder, Lender will make
Revolving Credit Loans to Borrowers once a week, on a specified
Business Day of each week
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(such day to be mutually agreeable
to Borrowers and Lender) or on such other day of the week as
Borrowers may request (such day is referred to herein as the
“Funding Date”, whether or not Borrowers have requested
a Revolving Credit Loan to be made on such date).
(b) Not later than 11:00 A.M.
(Eastern Time) three (3) Business Days prior to each Funding Date (
“Download Date” ), Borrowers will deliver to
Lender the computer file data associated with the Accounts, which
shall include without limitation, the information (including
changes in the Obligor reimbursement rates and changes in federal
or state laws or regulations affecting payment for medical
services), required by Lender to enable Lender to process and value
the outstanding Accounts of Borrowers on Lender’s Value Track
System TM , as well as bill and collect such
Accounts following an Event of Default ( “Accounts Detail
File” ). Upon completion of the processing of the data
with respect to such Accounts, Lender will prepare and deliver to
Borrowers by no later than 5:00 p.m. (Eastern Time) on the first
Business Day following the Download Date (or if such Accounts
Detail File is not delivered until after 11:00 A.M. (Eastern Time)
on the Download Date, the second Business Day following the
Download Date), a report regarding the Borrowing Base then in
effect, which shall be substantially in the form of Exhibit
2.2(b) ( “Borrowing Base Report”
).
(c) On the Funding Date, Borrowers
will sign and return the Borrowing Base Report to Lender. If
Borrowers are requesting that a Revolving Credit Loan be made on
such Funding Date, Borrowers shall also deliver to Lender,
concurrently with the Borrowing Base Report, a written request for
such Loan substantially in the form of Exhibit 2.2(c) (a
“Loan Request” ). The Borrowing Base Report and
Loan Request may be delivered via telecopy and Borrowers
acknowledge that Lenders may rely on Borrowers signatures by
facsimile, which shall be legally binding upon
Borrowers.
(d) Subject to the terms and
conditions of this Agreement, if the Borrowing Base Report and Loan
Request are delivered to Lender before 11:00 A.M. on the Funding
Date, Lender will advance on the Funding Date (or the next Business
Day if the Borrowing Base Report and Loan Request are delivered
after 11:00 A.M. (Eastern Time)) to Borrowers a Revolving Credit
Loan in the amount equal to the lesser of (i) the amount of the
Revolving Credit Loan requested by Borrowers in the Loan Request,
or (ii) the Borrowing Base Excess as of such date. Any Advances
made by Lender hereunder (other than the Term Loan) shall be
treated for all purposes as, and shall accrue interest at the same
rate applicable to, Revolving Credit Loans.
(e) Lender’s determination of
the Estimated Net Value of the Eligible Accounts and other amounts
to be determined or calculated under this Agreement shall, in the
absence of manifest error, be binding and conclusive.
2.3. Interest and Fees
:
(a) Each Revolving Credit Loan shall
bear interest on the outstanding principal amount thereof from the
date made until such Revolving Credit Loan is paid in full, at a
rate per annum equal to the LIBOR Rate plus the Revolving Loan
Applicable Margin. Interest shall accrue on the outstanding balance
of the Term Loan at a per annum rate equal to the
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LIBOR Rate plus 9.0%. The interest
rate on all amounts outstanding under the Credit Facility shall be
adjusted weekly based on the LIBOR Rate as of each Funding
Date.
(b) If any Event of Default shall
occur and be continuing, the rate of interest applicable to each
Loan then outstanding shall be the Default Rate. The Default Rate
shall apply from the date of the Event of Default until the date
such Event of Default is waived, and interest accruing at the
Default Rate shall be payable upon demand.
(c) Should the Credit Facility be
terminated for any reason prior to the last day of the Initial
Term, in addition to repayment of all such Obligations (including,
without limitation, accrued and unpaid interest, fees, costs and
Expenses) then outstanding and termination of Lender’s
commitment hereunder, Borrowers shall unconditionally be obligated
to pay at the time of such termination and/or prepayment, a fee (
“Termination Fee” ) in an amount equal to the
following percentage of the Revolving Loan Commitment 3.0%, if such
early termination occurs on or prior to the first anniversary -of
the Closing Date, 2.0% if such early termination occurs after the
first anniversary of the Closing Date, but on or prior to the
second anniversary of the Closing Date, and l.0%, if such early
termination occurs after the second anniversary of the Closing Date
but prior to the Maturity Date. Each Borrower acknowledges that the
Termination Fee is an estimate of Lender’s damages in the
event of early termination and is not a penalty. In the event of
termination of the Credit Facility, all of the Obligations shall be
immediately due and payable upon the termination date stated in any
notice of termination. All undertakings, agreements, covenants,
warranties and representations of Borrowers contained in the Loan
Documents shall survive any such termination, and Lender shall
retain its liens in the Collateral and all of its rights and
remedies under the Loan Documents notwithstanding such termination
until Borrowers have paid the Obligations to Lender, in full, in
immediately available funds, together with the applicable
Termination Fee, if any. Notwithstanding the payment in full of the
Obligations, Lender shall not be required to terminate its security
interests in the Collateral unless, with respect to any loss or
damage Lender may incur as a result of dishonored checks or other
items of payment received by Lender from Borrowers or any Obligor
and applied to the Obligations, Lender shall, at its option, (i)
have received a written agreement executed by Borrowers and by any
Person whose loans or other advances to Borrowers are used in whole
or in part to satisfy the Obligations, indemnifying Lender from any
such loss or damage; or (ii) have retained such monetary reserves
and security interests on the Collateral for such period of lime as
Lender, in its reasonable discretion, may deem necessary to protect
Lender from any such loss or damage.
(d) Borrower shall unconditionally
pay to Lender a fee (“Unused Line Fee”) equal to
three-eighths of one percent (.375%) per annum of the unused
portion of the Credit Facility. The unused portion of the Credit
Facility shall be the difference between the Revolving Loan
Commitment and the average daily outstanding balance of the
Revolving Credit Loans during each month (or portion thereof),
which fees shall be calculated and payable monthly, in arrears, and
shall be due and payable on the first Funding Date of each calendar
month.
2.4. Additional Interest
Provisions :
(a) Calculation of Interest :
Interest on the Loans shall be based on a year of three hundred
sixty (360) days and charged for the actual number of days
elapsed.
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(b) Continuation of Interest
Charges : All contractual rates of interest chargeable on
outstanding Loans shall continue to accrue and be paid even after
default, maturity, acceleration, judgment, bankruptcy, insolvency
proceedings of any kind or the happening of any event or occurrence
similar or dissimilar.
(c) Applicable Interest
Limitations : In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder and charged or
collected pursuant to the terms of this Agreement exceed the
highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable
hereto. In the event that such court determines Lender has charged
or received interest hereunder in excess of the highest applicable
rate, Lender shall, in its sole discretion, apply and set off such
excess interest received by Lender against other Obligations due or
to become due and such rate shall automatically be reduced to the
maximum rate permitted by such law.
2.5. Payments :
(a) All accrued interest on the
Revolving Credit Loans shall be due and payable weekly on the
Funding Date, all accrued interest on the Term Loan shall be due
and payable monthly on the first Business Day of each calendar
month and any Unused Line Fees shall be due and payable monthly on
the first Funding Date of each month with respect to Unused Line
Fees which accrued during the prior month.
(b) If at any time the aggregate
principal amount of all Revolving Credit Loans outstanding exceeds
the Borrowing Base then in effect, or, the aggregate of all Loans
exceeds the Maximum Credit Limit, Borrowers shall immediately make
such principal prepayments (subject to the terms of Sections 2.3(c)
and 2.3(d)) of the Revolving Credit Loans or the Term Loan (in the
inverse order of maturity), as applicable, as is necessary to
eliminate such excess.
(c) The entire principal balance of
all of the Advances, together with all unpaid accrued interest
thereon and the Termination Fee, if any, any unpaid and Unused Line
Fees, shall be due and payable on the Maturity Date.
(d) Subject to the terms of Sections
2.3(c) and 2.3(d) above, Borrowers may prepay the principal of the
Revolving Credit Loans on any Funding Date by giving Lender written
notice of the proposed prepayment two Business Days prior to such
Funding Date.
(e) Borrowers may prepay the Term
Loan at any time without penalty or premium by giving Lender
written notice of the proposed prepayment five (5) Business Days
prior to such prepayment. Borrowers authorize Lender to apply funds
in the Collection Account to the applicable principal and interest
payments due and payable under the Term Loan which have not been
received by Lender, as of the first Funding Date of the month in
which such payment is due.
(f) If Borrower sells any of the
Collateral or if any of the Collateral is lost or destroyed or
taken by condemnation, Borrower shall pay to Lender, unless
otherwise agreed to by Lender, or as otherwise expressly authorized
by this Agreement, as and when received by
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Borrower and as a mandatory
prepayment of the outstanding Loans, until paid and satisfied in
full, a sum equal to the proceeds (including insurance proceeds)
received by Borrower from such sale, loss or destruction. Any such
prepayment (other than from the sale of Accounts) shall be applied
first to the Term Loan, in the inverse order of maturity and then
to the Revolving Credit Loans.
(g) All payments and prepayments
shall be applied first to any unpaid interest and fees and
thereafter to the principal of the Loans and to other amounts due
Lender, in the order provided in Section 2.7(f) hereof. Except as
otherwise provided herein, all payments of principal, interest,
fees, or other amounts payable by Borrowers hereunder shall be
remitted to Lender in immediately available funds not later than
11:00 a.m. (Eastern Time) on the day due. Whenever any payment is
stated as due on a day which is not a Business Day, the maturity of
such payment shall be extended to the next succeeding Business Day
and interest shall continue to accrue during such
extension.
2.6. Use of Proceeds : The
extensions of credit under and proceeds of the Credit Facility
shall be used to repay certain existing indebtedness of Borrowers
and for working capital and general corporate purposes.
2.7. Lockboxes and
Collections :
(a) Borrowers will enter into
lockbox agreements in respect of the Government Lockbox and
Commercial Lockbox in such form and with the Lockbox Bank or such
other bank as is acceptable to Lender. Borrowers shall instruct the
bank maintaining the Government Lockbox and the Commercial Lockbox
to initiate, or accept an initiation from Lender which effectuates,
a daily transfer of all available funds to an account of Lender to
be designated by Lender (the “Collection
Account” ).
(b) Borrowers will cause all
Collections with respect to all of the Accounts, other than
Government Accounts, to be sent directly to the Commercial Lockbox,
and will cause all Collections with respect to all of the
Government Accounts to be sent directly to the Government Lockbox
(which may be effectuated by electronic transfer directly to the
Government Lockbox). In the event that a Borrower receives any
Collections that should have been sent to the Commercial Lockbox or
the Government Lockbox, such Borrower will, promptly upon receipt
and in any event within one Business Day of receipt, forward such
Collections directly to the Commercial Lockbox or Government
Lockbox, as applicable, in the form received, and if requested by
Lender, promptly notify Lender of such event. Until so forwarded,
such Collections not generated from Government Accounts shall be
held in trust for the benefit of Lender.
(c) No Borrower shall withdraw any
amounts from the accounts into which the Collections remitted to
the Commercial Lockbox are deposited nor shall any Borrower change
the procedures under the agreements governing the Commercial
Lockbox and related accounts.
(d) Borrowers will cooperate with
Lender in the identification and reconciliation on a weekly basis
of all amounts received in the Commercial Lockbox and
the
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Government Lockbox. If more than
five percent (5%) of the Collections since the most recent Funding
Date is not identified or reconciled to the satisfaction of Lender
within ten (10) Business Days of receipt, Lender shall not be
obligated to make further Loans until such amount is identified or
is reconciled to the reasonable satisfaction of Lender, as the case
may be. In addition, if any such amount cannot be identified or
reconciled to the satisfaction of Lender, Lender may utilize its
own staff or, if it deems necessary, engage an outside auditor, in
either case at Borrowers’ expense (which in the case of
Lender’s own staff shall be in accordance with Lender’s
then prevailing customary charges (plus expenses), to make such
examination and report as may be necessary to identify and
reconcile such amount.
(e) No Borrower will send to or
deposit in the Commercial Lockbox or the Government Lockbox any
funds other than payments made with respect to Accounts.
(f) Prior to the occurrence of an
Event of Default, on each Funding Date, Lender shall cause all
Collections which have been deposited in the Collection Account
since the last Funding Date to be disbursed in the following order
of priority:
(i) to Lender, any costs and
expenses of Lender required to be paid or reimbursed by Borrowers
under this Agreement or under any of the other Loan
Documents;
(ii) to Lender, an amount equal to
the unpaid accrued interest on the aggregate outstanding Advances
as of such Funding Date;
(iii) to Lender, an amount equal to
any unpaid accrued Non-use Fees, and Unused Line Fees which are
then due and payable as of such Funding Date;
(iv) to Lender, the amount of any
Borrowing Base Deficiency, if any;
(v) to Lender, the amount of any
Term Loan payments which are then due and payable and then to the
aggregate outstanding amount of the Revolving Credit Loans and any
and all other fees due and payable hereunder in such order as
Lender may determine in its discretion, and
(vi) subject to Section 2.3(c) and
2.3(d), to Lender, the amount of any prepayment of principal of
which Borrowers have given notice to Lender in accordance with
Section 2.5(d) hereof.
In addition, promptly upon request
of Borrowers, so long as no Event of Default shall have occurred,
Lender shall disburse to Borrowers the amount, if any, by which the
collected balance in the Collection Account exceeds the aggregate
outstanding principal amount of the Advances and all interest and
other amounts that will be payable on the next Funding Date.
Following the occurrence of an Event of Default, Lender may apply
all Collections to Borrowers’ Obligations in such order as
Lender may in its sole discretion determine.
2.8. Fees : As of the
Closing, Lender shall have fully earned a non-refundable commitment
fee ( “Commitment Fee” ) equal to $180,000 (it
being acknowledged that Lender has previously received $25,000 of
the Commitment Fee). Borrowers shall pay $135,000 of the Commitment
Fee to Lender on the Closing Date and the remaining $20,000 balance
of the
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Commitment Fee on the earlier of the Term Loan
Maturity Date or the repayment or refinancing of the Term
Loan.
SECTION 3.
COLLATERAL
3.1. Description : To secure
the payment, promptly when due, and the punctual performance, of
all of the Obligations, each Borrower assigns to Lender, and grants
to it a security interest in all of its right, title and interest
in and to the following property of such Borrower (collectively,
the “Collateral” );
(a) Accounts, Contract Rights,
Etc . - All now owned and hereafter acquired, created, or
arising accounts (including, without limitation, the Accounts),
accounts receivable, notes receivable, contract rights,
intellectual property, chattel paper, documents (including
documents of title), supporting obligations, letter of credit
rights, commercial tort claims, instruments and letters of
credit;
(b) Inventory - All now owned
or hereafter acquired, created or arising inventory of every nature
and kind, wherever located;
(c) General Intangibles - All
now owned and hereafter acquired, created or arising general
intangibles of every kind and description, including, but not
limited, to all existing and future payment intangibles, customer
lists, telephone lists and directories, choses in action, loans,
claims, books, records, patents and patent applications,
copyrights, trademarks, tradenames, tradestyles, trademark
applications, blueprints, drawings, designs and plans, trade
secrets, contracts, contract rights, distributorship agreements,
licenses, license agreements, formulae, tax and any other types of
refunds, rights (if any) to or in employee or other pension,
retirement or similar plans and any assets thereof (to the extent
permitted by applicable law and subject always to the rights of the
beneficiaries thereof), or any portion thereof, including, without
limitation, refunds for overpayments, distributions upon
termination, reversion of any surplus assets or otherwise, returned
and unearned insurance premiums, rights and claims under insurance
policies including without limitation, credit insurance and key man
life insurance policies, and computer information, software,
records and data;
(d) Equipment - All now owned
and hereafter acquired equipment, including, without limitation,
machinery, vehicles, furniture, leasehold improvements and
fixtures, wherever located, and all replacements, parts,
accessories, accessions, substitutions and additions
thereto;
(e) Deposit Accounts and Other
Property - All now existing and hereafter acquired or arising
deposit accounts, Commercial Lockboxes, Governmental Lockboxes,
Collection Accounts, investment accounts, commercial paper,
investment securities, investment property (including, without
limitation, all of HealthEssential’s right, title and
interest in and to the capital stock of NPPA America and all of
NPAA America’s right, title and interest in and to the
membership interests of NPPA National), and certificates of
deposit, of every nature, wherever located, and all funds received
thereby, deposited therein or associated therewith and all
documents and records associated therewith;
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(f) Property in Lender’s
Possession - All Property, now or hereafter in Lender’s
possession ;
(g) Other Property - All
other personal Property of Borrower not described above whether now
existing or hereafter acquired; and
(h) Proceeds - The
collections and proceeds (including, without limitation, insurance
proceeds), whether cash or non-cash, of all of the
foregoing.
3.2. Lien Documents : At
Closing and thereafter as Lender deems necessary, each Borrower
shall execute (if required) and deliver to Lender, or shall have
executed (if required) and delivered (all in form and substance
reasonably satisfactory to Lender):
(a) Financing Statements -
Financing statements pursuant to the UCC, which Lender may file in
the jurisdiction where Borrower is organized and in any
jurisdiction where any Collateral is or may be located and in any
other jurisdiction that Lender deems appropriate; and
(b) Other Agreements - Any
other agreements, documents, instruments and writings, including,
without limitation, security agreements, deposit account control
agreements, deeds of trust and assignment agreements, reasonably
required by Lender to evidence, perfect or protect Lender’s
liens and security interest in the Collateral or as Lender may
reasonably request from time to time, including, without
limitation, a waiver agreement from each landlord with respect to
any real property of Borrower, in form and substance satisfactory
to Lender.
3.3. Other Actions
:
(a) In addition to the foregoing,.
each Borrower shall do anything further that may be lawfully and
reasonably required by Lender to perfect Lender’s security
interests and to effectuate the intentions and objectives of this
Agreement, including, but not limited to, the execution (if
required) and delivery of continuation statements, amendments to
financing statements, security agreements, contracts and any other
documents required hereunder. At Lender’s request, each
Borrower shall also immediately deliver (with execution by such
Borrower of all necessary documents or forms to reflect
Lender’s security interest therein) to Lender, all items for
which Lender must or may receive possession to obtain a perfected
security interest.
(b) Lender is hereby authorized to
file financing statements naming Borrower as debtor, in accordance
with the Uniform Commercial Code as adopted in the State of New
Jersey, and if necessary, to the extent applicable, to otherwise
file financing statements without Borrower’s signature if
permitted by law. Borrower hereby authorizes Lender to file all
financing statements and amendments to financing statements
describing the Collateral in any filing office as Lender, in its
sole discretion may determine, including financing statements
listing “All Assets” in the Collateral description
therein as well as language indication that the acquisition by a
third party of any right, title or interest in or to the Collateral
without Lender’s consent shall be a violation of
Lender’s rights. Borrower agrees to comply with the
requirements of all federal and state laws and requests of Lender
in order for Lender to have and maintain a valid and
17
perfected first security interest in
the Collateral including, without limitation, executing and causing
any other person to execute such documents as Lender may require to
obtain Control (as defined in the UCC) over all deposit accounts,
electronic chattel paper, letter-of-credit rights and investment
property.
3.4. Searches : Lender shall,
prior to or at Closing, and thereafter as Lender may reasonably
request from time to time, at Borrowers’ expense, obtain the
following searches (the results of which are to be consistent with
the warranties made by Borrowers in this Agreement):
(a) UCC Searches : With
respect to each Borrower, UCC searches with the Secretary of State
and local filing office of each state where such Borrower maintains
its chief executive office, a place of business, or
assets;
(b) Judgments, Etc. :
Judgment, federal tax lien and corporate tax lien searches against
each Borrower, in all applicable filing offices of each state
searched under subparagraph (a) above.
3.5. Good Standing
Certificates : Borrowers shall, prior to or at Closing and at
its expense, obtain and deliver to Lender good standing or
equivalent certificates showing each Borrower to be in good
standing in its state of incorporation or organization and
authorized to transact business as a foreign corporation in each
other state or foreign country in which it is doing and presently
intends to do business for which such Borrower’s failure to
be so qualified might have Material Adverse Effect.
3.6. Filing Security
Agreement : A carbon, photographic or other reproduction or
other copy of this Agreement or of a financing statement is
sufficient as and may be filed in lieu of a financing
statement.
3.7. Power of Attorney : Each
of the officers of 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 (such power to be deemed coupled
with an interest): (a) endorse the name of such Borrower upon any
and all checks, drafts, money orders and other instruments for the
payment of monies that are payable to such Borrower and constitute
collections on the Collateral; (b) execute in the name of such
Borrower any financing statements, schedules, assignments,
instruments, documents and statements that such Borrower is
obligated to give Lender hereunder or is necessary to perfect
Lender’s security interest or lien in the Collateral; (c) to
verify validity, amount or any other matter relating to the
Collateral by mail, telephone, telecopy or otherwise; and (d) do
such other and further acts and deeds in the name of such Borrower
that Lender may reasonably deem necessary or desirable to enforce
its right with respect to any Collateral.
3.8. Collateral Pledge
Agreement : Borrowers shall cause to be executed collateral
pledge agreements in favor of Lender (each a “Collateral
Pledge Agreement”) in form and substance satisfactory to
Lender, pursuant to which (a) each Pledgor shall pledge its right,
title and interest in and to the capital stock of HealthEssentials,
(b) HealthEssentials shall pledge its right, title and interest in
and to the capital stock of NPPA America and (c) NPPA America shall
pledge its
