SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 10, 2002
CURATIVE HEALTH SERVICES, INC.
(Exact name of registrant as specified in its charter)
Minnesota 000-19370 41-1503914
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
150 Motor Parkway, Hauppauge, NY 11788-5145
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (631) 232-7000
5051 Highway 7, Ste. 100, St. Louis Park, MN 55416
(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets
On June 10, 2002, Infinity Infusion, LLC and Infinity Infusion II, LLC
(together, "Buyers"), both Delaware limited liability companies and wholly owned
subsidiaries of Curative Health Services, Inc. ("Curative"), entered into an
agreement to acquire all of the outstanding partnership interests of Infinity
Infusion Care, Ltd. ("Infinity") pursuant to a Purchase Agreement by and among
Curative, Buyers and the partners of Infinity, dated as of June 10, 2002.
Through its acquisition of Infinity, Curative will acquire all of the assets of
Infinity including customer and supplier contracts, licenses, inventory, real
estate leases and office equipment. The consideration to be paid by Curative
will consist of $18,000,000 cash and a $6,000,000 promissory note convertible
into 373,111 shares of Curative common stock. The purchase price for Infinity
was determined through arms'-length negotiations between Curative and the
partners of Infinity. The cash portion of the consideration was funded in part
by cash on hand and in part by borrowing on Curative's credit lines with
Healthcare Business Credit Corporation. A copy of the Purchase Agreement is
filed as an exhibit to this 8-K.
Infinity's business focuses on the specialty infusion market primarily in
immunoglobulin ("IVIG") therapy. IVIG therapy is prescribed for individuals
whose immune systems cannot function sufficiently to fight infectious or
inflammatory diseases. Most commonly, IVIG therapy is used for primary immune
deficiencies and autoimmune disorders. Curative intends to continue to use the
acquired assets in the same capacity.
The foregoing is a summary of certain terms and conditions, is not
intended to be complete and is qualified by reference to the Purchase Agreement
and press release describing the transaction, which are filed as exhibits to
this Form 8-K, and which are hereby incorporated herein by reference.
Item 5. Other Events and Regulation FD Disclosure
On May 17, 2002, Curative entered into an Amended and Restated Loan and
Security Agreement with Healthcare Business Credit Corporation, which agreement
provides Curative with a $35 million credit facility, consisting of a $25
million revolving line of credit and a four-year $10 million term loan facility.
A copy of the credit agreement is filed as an exhibit to this 8-K.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Not required.
(b) Pro Forma Financial Information
Not required.
(c) Exhibits
Exhibit Description of Exhibit
99.1 Press Release dated June 11, 2002
99.2 Purchase Agreement by and among Infinity
Infusion, LLC and Infinity Infusion II,
LLC, Curative Health Services, Inc. and
the partners of Infinity Infusion Care,
Ltd., dated as of June 10, 2002
99.3 Amended and Restated Loan and Security
Agreement by and among Curative Health
Services, Inc., eBioCare.com, Inc.,
Hemophilia Access, Inc., Apex Therapeutic
Care, Inc. and Healthcare Business Credit
Corporation, dated as of May 17, 2002
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
CURATIVE HEALTH SERVICES, INC.
Date: June 11, 2002 By /s/ Thomas Axmacher
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Thomas Axmacher
Chief Financial Officer
EXHIBIT INDEX
Exhibit Description of Exhibit
99.1 Press Release dated June 11, 2002
99.2 Purchase Agreement by and among Infinity Infusion, LLC and Infinity
Infusion II, LLC, Curative Health Services, Inc. and the partners
of Infinity Infusion Care, Ltd., dated as of June 10, 2002
99.3 Amended and Restated Loan and Security Agreement by and among
Curative Health Services, Inc., eBioCare.com, Inc., Hemophilia
Access, Inc., Apex Therapeutic Care, Inc. and Healthcare Business
Credit Corporation, dated as of May 17, 2002
Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact:
Thomas Axmacher Richard Moyer
Chief Financial Officer Investor Relations
Curative Health Services Cameron Associates
631-232-7015 212-554-5466
taxmacher@curativehealth.com richard@cameronassoc.com
Curative Health Services Announces Acquisition of Infinity Infusion Care, Inc.
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Curative sees $.07 accretion for second half of 2002; raises 2002 earnings per
share guidance to $.90-$.92
HAUPPAUGE NY - June 11, 2002 - Curative Health Services, Inc. (NASDAQ: CURE),
announced today it has entered into an agreement to acquire Infinity Infusion
Care, Ltd. ("Infinity"), a distributor of specialty pharmaceuticals and a
provider of infusion therapy services based in Houston, Texas. The transaction
is expected to close in the next 30 days. Financial terms of the transaction
will be discussed on a conference call to be held at 11:00 am EDT today.
Founded in 1993, Infinity focuses on the specialty infusion market
primarily in immunoglobulin ("IVIG") therapy. IVIG therapy is prescribed for
individuals whose immune systems cannot function sufficiently to fight
infectious or inflammatory diseases. Most commonly, IVIG therapy is used for
primary immune deficiencies and autoimmune disorders.
The Company expects the Infinity acquisition to add $.07 cents to earnings
per share for the July to December period of 2002 and $.14 cents earnings per
share on an annualized basis. The Company now anticipates 2002 earnings per
share of between $.90 and $.92 cents per share. These projections exclude any
possible one-time charges related to the departure of the former CEO in the
first quarter.
"Combining Infinity's pharmacy distribution and comprehensive infusion
therapy business with our existing specialty pharmacy operations will both
strengthen and diversify our Specialty Pharmacy Services business unit," said
Joseph Feshbach, Chairman of Curative. "The addition of Infinity will provide
Curative with a platform for growth in the IVIG arena as well as other
infusables such as Remicade(R). The Infinity purchase is a continuation of our
strategy to aggressively grow the specialty pharmacy business through
acquisitions which provide meaningful earnings accretion."
The Company will be holding a conference call to discuss the acquisition
at 11:00 am EST today. To participate in the conference call, dial
1-800-915-4836 approximately 10 minutes prior to the start time. If you are
unable to participate, a digital replay of the call will be available from
Tuesday June 11, 2002 at 1:00 p.m. EDT until 12:00 p.m. EDT on June 18, 2002 by
dialing 1-800-428-6051 and using confirmation code # 246653. The live broadcast
of the acquisition conference call will be available online by going to
www.curative.com and selecting the investor relations link, on
www.streetevents.com and on www.companyboardroom.com. An online replay will be
available shortly after the call at those sites.
Infinity Q&A
Q: What is IVIG?
A: IVIG is intravenous immune globulin also known as gamma globulin. IVIG
contains concentrated levels of antibodies that have been derived from
pooled human plasma. IVIG is prescribed for individuals whose immune
systems cannot function sufficiently to fight infectious or inflammatory
diseases. Most commonly, IVIG therapy is used for primary immune
deficiencies and autoimmune disorders.
Q: How long has Infinity been in business?
A: Infinity was founded in 1993 and is licensed in approximately 20 states
with a focus on providing specialty pharmacy distribution and
comprehensive infusion therapy services for chronic conditions, including
those requiring intravenous immune globulin.
Q: How does Infinity provide its services?
A: Based in Houston (Texas), Infinity is a provider of pharmacy and nursing
services. The company operates an IV infusion suite and treats patients in
their homes, by direct or contract nursing services.
Q: How does Infinity's business fit with Curative's existing Specialty
Pharmacy Services business?
A: Infinity will both strengthen and diversify our Specialty Pharmacy
Services business unit. With this acquisition Curative will have a strong
presence in the growing specialty infusion therapy arena, particularly in
IVIG therapy.
Q: Will Infinity management be staying with the Company?
A: Key management will be retained under the terms of separately executed
employment agreements.
Q: What is the financial impact of the transaction?
A: Management anticipates that the acquisition will add $.07 cents to
earnings per share in 2002, and will provide $.14 cents to earnings per
share on an annualized basis. Following Q1 earnings release the Company
increased 2002 EPS guidance to $.83-$.85 cents. With the acquisition of
Infinity, management anticipates 2002 earnings per share of between $.90
and $.92 cents. These projections exclude any possible one-time charges
related to the departure of the former CEO in the first quarter.
Q: Will Curative continue its acquisition strategy?
A: Curative will continue to look for acquisitions which provide earnings
accretion and provide enhanced shareholder value.
About Curative Health Services
Curative Health Services (CURE) delivers superior clinical outcomes and
unmatched patient satisfaction for patients experiencing serious medical
conditions through two unique business units.
Curative's Specialty Pharmacy Services business unit provides services to help
patients manage the health care process, and offers related pharmacy products to
patients for chronic and critical disease states such as Hemophilia.
Curative Health Services' Specialty Healthcare Services business unit is an
industry leader in chronic wound care management, consistently achieving an
outcome success rate of more than 80 percent. Specialty Healthcare Services
provides a broad continuum of services to health care providers through a
nationwide network of Wound Care Center programs. This national network of
approximately 100 hospital-based Wound Care Center programs has offered
comprehensive treatment to over 300,000 patients, achieving more than a 95
percent patient satisfaction rate.
For more information, visit www.curative.com
----------------
This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors,
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements. Factors that might cause such differences include, but are not
limited to, the termination or non-renewal of a material number of contracts, an
inability to obtain new contracts, changes in the government regulations
relating to the Company's Specialty Healthcare Services or Specialty Pharmacy
Services business units, changes in the regulations governing third party
reimbursements for the Company's services, manufacturing shortages of products
sold by Curative's Specialty Pharmacy Services business unit and the other risks
and uncertainties detailed in the Company's filings with the Securities and
Exchange Commission. Readers of this release are referred to the Company's
Annual Report on Form 10-K for the year ended December 31, 2001, Form 10Q for
the quarter ended March 31, 2002, Amendment No. 3 to its Form S-3 filed May 23,
2002 and Form S-3 filed on May 28, 2002 for further discussion of these and
other factors that could affect future results.
###
Exhibit 99.2
PURCHASE AGREEMENT
by and among
CURATIVE HEALTH SERVICES, INC.,
INFINITY INFUSION, LLC,
INFINITY INFUSION II, LLC
and
IIC GP, LLC
AZAR I. DELPASSAND
DR. EBRAHIM DELPASSAND
TARA IMANI
MARYAM PANAHI
YASSaMIN NOROUZIAN
Dated as of June 10, 2002
TABLE OF CONTENTS
Page
Article I. SALE AND PURCHASE OF PARTNERSHIP INTERESTS........................1
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Section 1.1 Sale of Partnership Interests.................................1
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Section 1.2 Purchase Price................................................2
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Section 1.3 Closing.......................................................3
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Section 1.4 Sellers' Representative.......................................3
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Section 1.5 Working Capital Payment.......................................4
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Article II. REPRESENTATIONS AND WARRANTIES OF THE SELLERS....................6
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Section 2.1 Sellers' Residency; Power of the Sellers......................6
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Section 2.2 Ownership and Status of Partnership Interests.................7
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Section 2.3 No Conflicts or Litigation....................................7
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Section 2.4 Sellers' Agreements...........................................7
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Section 2.5 No Disclosure of Confidential Information.....................8
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Section 2.6 Representation by Counsel.....................................8
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Section 2.7 Investment....................................................8
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Section 2.8 Disclosure....................................................8
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Article III. REPRESENTATIONS AND WARRANTIES CONCERNING THE PARTNERSHIP.......8
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Section 3.1 Organization, Good Standing and Qualification.................9
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Section 3.2 Capitalization................................................9
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Section 3.3 Subsidiaries..................................................9
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Section 3.4 Governmental Filings; No Violations...........................9
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Section 3.5 Financial Statements.........................................10
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Section 3.6 Absence of Undisclosed Liabilities...........................10
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Section 3.7 No Material Adverse Changes..................................11
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Section 3.8 Certain Payments.............................................11
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Section 3.9 Absence of Certain Changes...................................11
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Section 3.10 Litigation...................................................12
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Section 3.11 Employee Benefits............................................13
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Section 3.12 Compliance with Laws; Permits................................14
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Section 3.13 Taxes........................................................16
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Section 3.14 Labor Matters................................................18
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Section 3.15 Intellectual Property........................................19
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Section 3.16 Certain Environment Matters; Medical Waste...................20
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Section 3.17 Title to Property............................................22
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Section 3.18 Contracts....................................................22
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Section 3.19 Insurance Matters............................................23
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Section 3.20 Affiliated Transactions......................................23
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Section 3.21 Changes in Suppliers and Third-Party Payors..................24
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Section 3.22 Indebtedness.................................................24
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Section 3.23 Inspections and Investigations...............................24
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Section 3.24 Fraud and Abuse; False Claims................................25
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Section 3.25 Rates and Reimbursement Policies.............................25
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Section 3.26 Patients and Orders..........................................25
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Section 3.27 Inventories..................................................25
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Section 3.28 Places of Business...........................................25
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Section 3.29 Controlled Substances........................................25
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Section 3.30 Guarantees, Warranties and Discounts.........................26
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Section 3.31 Bank Accounts; Signing Authority; Powers Of Attorney.........26
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Section 3.32 Brokers and Finders..........................................26
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Section 3.33 Transaction Costs............................................26
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Section 3.34 Disclosure...................................................26
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Article IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYERS.............27
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Section 4.1 Organization, Good Standing and Qualification................27
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Section 4.2 Corporate Authority and Approval.............................27
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Section 4.3 Brokers and Finders..........................................27
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Section 4.4 SEC Filings; Financial Statements............................28
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Section 4.5 Governmental Filings; No Violations..........................28
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Article V. COVENANTS........................................................28
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Section 5.1 Interim Operations of the Partnership........................28
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Section 5.2 Acquisition Proposals........................................30
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Section 5.3 Consents.....................................................30
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Section 5.4 Access.......................................................31
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Section 5.5 Supplemental Information.....................................31
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Section 5.6 Transaction Costs............................................31
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Section 5.7 Transfer Taxes...............................................32
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Section 5.8 Tax Matters..................................................32
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Section 5.9 Tax Information..............................................33
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Section 5.10 401(k) Plan..................................................33
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Section 5.11 Employee Benefits............................................33
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Section 5.12 Employee Matters.............................................33
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Section 5.13 Efforts to Close.............................................34
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Article VI. CONDITIONS......................................................34
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Section 6.1 Conditions to Obligations of Buyers..........................34
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Section 6.2 Conditions to Obligation of the Sellers......................36
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Article VII. TERMINATION....................................................38
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Section 7.1 Method of Termination........................................38
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Section 7.2 Effect of Termination........................................38
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Article VIII. SURVIVAL; INDEMNIFICATION.....................................39
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Section 8.1 Survival.....................................................39
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Section 8.2 Indemnification by the Sellers...............................39
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Section 8.3 Indemnification by Buyers....................................41
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Section 8.4 Limitations on Indemnification...............................41
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Section 8.5 Method of Asserting Claims...................................42
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Section 8.6 No Double Recovery...........................................45
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Section 8.7 No Special Damages...........................................45
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Section 8.8 Investigation and Due Diligence..............................45
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Section 8.9 Sole and Exclusive Remedy....................................45
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Article IX. MISCELLANEOUS AND GENERAL.......................................46
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Section 9.1 Modification or Amendment....................................46
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Section 9.2 Waiver.......................................................46
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Section 9.3 Counterparts.................................................46
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Section 9.4 Governing Law; Forum Selection...............................46
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Section 9.5 Notices......................................................47
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Section 9.6 Entire Agreement.............................................48
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Section 9.7 No Third Party Beneficiaries.................................48
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Section 9.8 Severability.................................................48
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Section 9.9 Interpretation...............................................48
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Section 9.10 Assignment...................................................49
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Section 9.11 Press Releases and Announcements.............................49
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Section 9.12 Definitions..................................................49
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Exhibits
Exhibit A Form of Escrow Note
Exhibit B Form of Non-Escrow Note
Exhibit C Opinion of Counsel
Exhibit D-1 Form of Delpassand Employment Agreement
Exhibit D-2 Form of Norouzian Employment Agreement
Exhibit D-3 Form of Panahi Employment Agreement
Exhibit E Form of Imani Consulting Agreement
Exhibit F Form of Noncompetition Agreement
Exhibit G Form of Escrow Agreement
Exhibit H Material Lease Terms
Exhibit I Form of Employment Agreement
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement"), dated as of June 10, 2002 by
and among Curative Health Services, Inc., a Minnesota corporation ("Parent"),
Infinity Infusion, LLC, a Delaware limited liability company and wholly owned
subsidiary of Parent (the "Buyer LLC1"), Infinity Infusion II, LLC, a Delaware
limited liability company and wholly owned subsidiary of Parent (the "Buyer
LLC2," and together with Buyer LLC1, the "Buyers") and the partners of Infinity
Infusion Care, Ltd., a Texas limited partnership (the "Partnership") identified
on the signature pages to this Agreement (the "Sellers"). Certain terms used in
this Agreement are defined in Section 10.12.(b).
RECITALS
WHEREAS, IIC GP, LLC is the holder of a general partnership interest (the
"General Partnership Interest") in the Partnership (the General Partnership
Interest and the Limited Partnership Interests (as defined below) shall
collectively be referred to herein as the "Partnership Interests");
WHEREAS, Azar I. Delpassand, Dr. Ebrahim Delpassand, Tara Imani, Maryam
Panahi, and Yassamin Norouzian each is a holder of a limited partnership
interest (each, a "Limited Partnership Interest") in the Partnership;
----------------------------
WHEREAS, the Sellers constitute the holders of 100% of the issued and
outstanding Partnership Interests of the Partnership;
WHEREAS, the Sellers desire to sell to Buyers, and Buyers desire to
purchase from the Sellers, on the terms and subject to the conditions set forth
in this Agreement, all of the outstanding Partnership Interests in the
Partnership; and
WHEREAS, the consummation of the transactions contemplated herein will
result in significant economic benefit to each Seller.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
Article I.
SALE AND PURCHASE OF PARTNERSHIP INTERESTS
Section 1.1 Sale of Partnership Interests.
-----------------------------
(a) At the Closing, (i) Azar I. Delpassand, Dr. Ebrahim Delpassand, Tara Imani,
Maryam Panahi, and Yassamin Norouzian shall sell, convey, transfer and deliver
the Limited Partnership Interest owned by such Seller to Buyer LLC1, and shall
deliver to Buyer LLC1 certificates representing such Limited Partnership
Interests in the Partnership, duly endorsed in blank or otherwise in proper form
for transfer, free and clear of any Lien (other than restrictions on transfer
under the Securities Act and state securities laws); and (ii) Buyer LLC1 shall
purchase and accept the Limited Partnership Interests.
(b) At the Closing, (i) IIC GP, LLC shall sell, convey, transfer and deliver the
General Partnership Interest owned by such Seller to Buyer LLC2, and shall
deliver to Buyer LLC2 certificates representing such General Partnership
Interests in the Partnership, duly endorsed in blank or otherwise in proper form
for transfer, free and clear of any Lien (other than restrictions on transfer
under the Securities Act and state securities laws); and (ii) Buyer LLC2 shall
purchase the General Partnership Interests.
Section 1.2 Purchase Price.
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(a) Subject to adjustment as provided in Section 1.5, the aggregate purchase
price for the sale of all of the outstanding Partnership Interests (the
"Purchase Price") shall consist of (i) the Cash Consideration and (ii) the Note
Consideration.
(b) "Note Consideration" means one or more subordinated convertible notes (the
"Convertible Notes") of Parent in the aggregate principal amount of $6,000,000
convertible into an aggregate of 373,111 shares of common stock, par value $.01
per share of Parent (the "Underlying Shares"), substantially in the forms
attached hereto as Exhibit A and Exhibit B.
(c) "Cash Consideration" means an amount in cash, without interest, equal to
$18,000,000 minus each of the following: (i) any amounts which the Sellers'
Representative has given written instructions to Buyers to pay directly to the
holders of any Indebtedness or payment of any Transaction Costs, (ii) all
Transaction Costs, as set forth on Section 3.33 of the Disclosure Schedule,
which shall be updated by the Sellers two days prior to the Closing Date, (iii)
any change in control payments paid or payable by the Partnership in connection
with the transactions contemplated by this Agreement, and (iv) any withholding
obligation or other Taxes paid or payable by the Partnership in connection with
(iii) above.
(d) The Purchase Price shall be payable as follows:
(i) the Cash Consideration shall be payable by Buyers at the Closing to the
Sellers, pro rata in accordance with their respective Partnership
Interests in the Partnership as set forth in Section 3.2 of the
Disclosure Schedule, by release of the Escrow Funds (as defined in
subsection (e) hereof) and a payment of the remaining Cash
Consideration by a wire transfer of immediately available funds to the
Seller's account (pursuant to instructions which will be provided to
the Buyers by the Seller at least three Business Days prior to the
Closing).
(ii) the Note Consideration shall be delivered at the Closing to the Sellers
pro rata in accordance with their respective Partnership Interests in the
Partnership as set forth in Section 3.2 of the Disclosure Schedule. An
amount equal to 50% of the Note Consideration payable to each Seller
pursuant to the foregoing sentence shall be paid by issuing such Seller a
Convertible Note in the form of Exhibit A (the "Escrow Note") and the
remaining 50% of the Note Consideration payable to such Seller shall be
paid by issuing such Seller a Convertible Note in the form of Exhibit B
(the "Non-Escrow Note").
(e) On the date hereof, Buyers shall deposit an amount of the Cash Consideration
equal to $500,000 (the "Escrow Funds") into escrow pursuant to the terms of an
escrow agreement in substantially the form of Exhibit H hereto. The Escrow Funds
shall be disbursed in accordance with the provisions of the Escrow Agreement and
the provisions of Section 7.2.
Section 1.3 Closing. The closing of the transactions contemplated hereby (the
"Closing") shall take place (a) at the offices of Dorsey & Whitney LLP, 50 South
Sixth Street, Minneapolis, Minnesota, 55402 at 9:00 A.M. on the first Business
Day after the day on which the last to be fulfilled or waived of the conditions
set forth in Article VI (other than those conditions that by their nature are to
be satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions) shall be satisfied or waived in accordance with this Agreement;
provided, that, the Closing will not occur prior to a date that is ten Business
Days after the date hereof or (b) at such other place and time and/or on such
other date as the Sellers and Buyers may agree in writing (the "Closing Date").
Section 1.4 Sellers' Representative.
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(a) In order to efficiently administer the transactions contemplated hereby, the
Sellers hereby desire to designate Bijan Imani , as their representative, (in
such capacity, the "Sellers' Representative"). By execution of this Agreement,
Bijan Imani agrees to act as the Sellers' Representative.
(b) In the event that Bijan Imani, or his substitute as the Sellers'
Representative, dies, becomes unable to perform his responsibilities hereunder
or resigns from such position, then Azar I. Delpassand, or such other individual
as may be designated in writing within fifteen Business Days of such vacancy to
fill such vacancy by the Sellers holding, immediately prior to the Closing, a
majority of the outstanding Partnership Interests shall be the substituted
representative, shall provide written notice of the Buyers of the same, and
shall be deemed to be a Sellers' Representative for all purposes of this
Agreement and the documents delivered pursuant hereto.
(c) By virtue of the execution of this Agreement each Seller hereby agrees that:
(i) Bijan Imani is hereby designated as the Sellers' Representative to act as
the duly appointed agent for the Sellers for the limited purposes set
forth in this Section 1.4, and any substitute Sellers' Representative
shall be designated as set forth in Section 1.4(b);
(ii) the Sellers hereby authorize the Sellers' Representative, (A) to take all
action necessary against Buyers in connection with breaches of obligations
by Buyers under this Agreement, (B) to determine the Sellers to whom
consideration from Buyers shall be distributed and the amount of
consideration to be so distributed, (C) to give and receive all notices
required to be given under this Agreement after the Closing Date, (D) to
take any and all additional action as is contemplated to be taken by or on
behalf of the Sellers after the Closing Date by the terms of this
Agreement, including but not limited to any action under Article IX
hereof, and (E) to take any further action which the Sellers'
Representative shall consider necessary or desirable in connection with
this Agreement and the transactions contemplated hereby and, as such,
hereby grant the Sellers' Representative full power and authority to do
and perform each and every act and thing whatsoever requisite and
necessary to be done in and about the foregoing as fully as such Seller
might or could do if personally present, and has ratified and confirmed
all that the Sellers' Representative shall lawfully do or cause to be done
by virtue thereof;
(iii) all decisions and actions by the Sellers' Representative shall be binding
upon all of the Sellers and no Seller shall have the right to object,
dissent, protest or otherwise contest the same;
(iv) Parent and Buyers shall be able to rely conclusively on the instructions
and decisions of the Sellers' Representative as to any other actions
required or permitted to be taken by the Sellers' Representative
hereunder, and no party shall have any cause of action against Parent or
Buyers to the extent Parent or Buyers have relied upon the instructions or
decisions of the Sellers' Representative;
(v) all actions, decisions and instructions of the Sellers' Representative
shall be conclusive and binding upon all of the Sellers;
(vi) the provisions of this Section 1.4 are independent and severable, are
irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any Seller may have in
connection with the transactions contemplated by this Agreement;
(vii) remedies available at law for any breach of the provisions of this Section
1.4 are inadequate; therefore, Buyers shall be entitled to temporary and
permanent injunctive relief without the necessity of proving damages if
Buyers bring an action to enforce the provisions of this Section 1.4; and
(viii) the provisions of this Section 1.4 shall be binding upon the executors,
heirs, legal representatives, personal representatives, successor trustees
and successors of each Seller, and any references in this Agreement to a
Seller or the Sellers shall mean and include the successors to the
Seller's rights hereunder, whether pursuant to testamentary disposition,
the laws of descent and distribution or otherwise.
All reasonable, documented fees and expenses incurred by the Sellers'
Representative from and after the Closing Date shall be paid by the Sellers.
Section 1.5 Working Capital Payment.
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(a) The Purchase Price shall be decreased, on a dollar for dollar basis, to the
extent that the Working Capital of the Partnership as of the Closing (as defined
below) is less $1,461,782, determined in accordance with the procedures
contained in this Section 1.5. The amount of any such payment is referred to as
the "Working Capital Payment."
(b) For purposes of this Agreement, "Working Capital of the Partnership" shall
mean the accounts receivable, allowance for doubtful accounts, inventory and
accounts receivable--employees of the Partnership, less the accounts payable,
accrued payroll and retirement plan liabilities of the Partnership, each
determined in accordance with GAAP applied on a basis consistent with the
preparation of the Annual Financial Statements (except that inventory shall be
valued in accordance with the provisions of Section 1.5(c)), provided that any
amounts attributable to Indebtedness of the Partnership or to the investment
account of the Partnership with Brown & Company Securities shall not be included
in the calculation of Working Capital of the Partnership.
(c) At such time as Buyers and the Sellers' Representative may agree, but no
later than the day preceding the Closing Date (the "Inventory Date"), a physical
inventory of all pharmaceutical and biological inventory and disposable supplies
(the "Inventory") maintained by the Partnership shall be taken by the Sellers'
Representative or his agent and observed and checked by Buyers or their agent.
The Sellers' Representative shall cause a statement (the "Inventory Statement")
to be prepared in connection with the Inventory that lists, by product category
or as is otherwise customary, the number and cost of each item of Inventory, on
hand as of the Inventory Date. The cost of the Inventory shall be determined on
the basis of its historical cost, determined on a first in, first out basis,
except that Inventory that is not saleable in the Ordinary Course of Business,
including without limitation, Inventory with an expiration date at or prior to
the Closing Date shall have not be included in the Inventory. In the event of
any disparity between the Partnership's inventory records and the Inventory, the
Partnership's inventory records will be adjusted to conform to the listing of
Inventory quantities developed during the physical inventory. If the physical
inventories are undertaken other than on the date preceding the Closing Date,
such quantities will be adjusted for all transactions subsequent to the date of
the physical inventory and to and including the Closing Date. Inventory shall
not include any durable medical equipment.
(d) Within 30 days following the Closing Date, the Sellers' Representative shall
prepare and deliver to Parent and Buyers, a statement (the "Working Capital
Statement") setting forth in reasonable detail (i) the aggregate value of the
Inventory as shown on the Inventory Statement, (ii) the Working Capital of the
Partnership as of the Closing Date, and (iii) the amount of the Working Capital
Payment, if any.
(e) The Buyers will each cause the Partnership to provide the Sellers'
Representative access to those books and records and other documents of the
Partnership that are reasonably requested by the Sellers' Representative to
prepare the Working Capital Statement.
(f) The Sellers' Representative shall permit Buyers and Parent reasonable access
to the data and information on which the Working Capital Statement was prepared
and to any representatives and agents, including any accountants, who assisted
in the preparation, including without limitation access to any accountant's
working papers. Buyers and Parent shall be deemed to have accepted the Working
Capital Statement unless, within 30 Business Days after delivery of such Working
Capital Statement (the "Objection Period"), Buyers provide written notice to the
Sellers' Representative of any objection thereto (an "Objection Notice"),
setting forth in reasonable detail the item to which any objection relates and
the basis for such objection. If Buyers give an Objection Notice within the
Objection Period, then Buyers and the Sellers' Representative shall attempt in
good faith to resolve any dispute concerning the item(s) subject to such
objection.
(g) If Buyers and the Sellers' Representative have not been able to resolve a
dispute within 30 Business Days after the date of delivery of the Objection
Notice, Buyers and the Sellers' Representative shall, within an additional 10
days, retain an independent national accounting firm mutually agreed to by
Buyers and the Sellers' Representative with offices in New York City, New York,
to serve as arbitrator (the "Working Capital Arbitrator") to resolve such
dispute. In the event Buyers and the Sellers' Representative cannot mutually
agree on the identity of the Working Capital Arbitrator within such additional
10 day period, then within 3 days after such additional 10 day period, each of
the Sellers' Representative and Buyers shall pick an independent national
accounting firm and such two firms shall, within 3 additional days, select an
alternate independent national accounting firm to serve as the Working Capital
Arbitrator. The Working Capital Arbitrator's work shall be limited to resolving
the dispute arising in connection with the Working Capital Payment, the Working
Capital Statement and the Inventory Statement, including, without limitation,
determining the consistent application of the accounting principles employed;
provided, however, that the Working Capital Arbitrator shall not override any
provision in this Agreement. The Working Capital Arbitrator shall make a
decision concerning the dispute within 60 days of the Working Capital
Arbitrator's engagement. The decision of the Working Capital Arbitrator shall be
final and binding and unreviewable for error of any kind. Each party shall bear
its own costs in the resolution of any disputes, except that the fees and costs
of the Working Capital Arbitrator, if one is retained, shall be paid one-half by
the Sellers and one-half by the Buyers.
(h) Within five days after final determination of the amount of the Working
Capital Payment, if any, at Buyers' option (i) Buyers shall be entitled to
offset the amount of the Working Capital Payment from the Escrow Note; or (ii)
Sellers shall pay the Working Capital Payment to the Partnership by wire
transfer of immediately available funds.
Article II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As a material inducement to Parent and Buyers to enter into this
Agreement, with the understanding that Buyers and Parent will be relying thereon
in consummating the transactions contemplated hereunder, and except as set forth
in the disclosure schedule attached to this Agreement (the "Disclosure
Schedule"), which identify exceptions by specific Section references, each
Seller hereby severally represents and warrants to Buyers and Parent as follows:
Section 2.1 Sellers' Residency; Power of the Sellers. Seller is a resident of
the State of Texas. Seller has the full power, legal capacity and authority to
execute and deliver this Agreement and each of the other Related Documents or
any of the other exhibits hereto to which such Seller is a party and to perform
such Seller's obligations pursuant to this Agreement and each of the other
Related Documents or other exhibits hereto. IIC GP, LLC has all requisite
limited liability company power and authority and has taken all limited
liability company action necessary in order to execute, deliver and perform its
obligations under this Agreement and under each of the Related Documents to
which it is a party and to consummate the transactions contemplated hereby and
thereby. This Agreement constitutes and, when executed and delivered by or on
behalf of the Seller, each of the Related Documents will constitute, the legal,
valid and binding obligation of such Seller, enforceable against such Seller in
accordance with its terms, except as that enforceability may be (a) limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and (b) subject to
general principles of equity (regardless of whether that enforceability is
considered in a proceeding in equity or at law).
Section 2.2 Ownership and Status of Partnership Interests. Seller is the record
and beneficial owner of all of the issued and outstanding Partnership Interests
set forth next to his, her or its name on Section 3.2 of the Disclosure, in each
case free and clear of all Liens, other than restrictions on transfer under the
Securities Act and state securities laws . At the Closing, the Seller shall sell
good and valid title to his, her or its Partnership Interest to Buyers, free and
clear of all Liens (other than restrictions on transfer under the Securities Act
and state securities laws). Except as set forth in Section 3.2 of the Disclosure
Schedule, neither the Seller, nor, to the Seller's Knowledge, any other Person,
owns any other securities, or securities exercisable or convertible into
partnership interests, of the Partnership, and there are no agreements or other
rights or arrangements existing which provide for the sale, purchase, exchange
or other transfer by any such Seller of any of the Partnership Interests or any
other security, or securities exercisable or convertible into partnership
interests of the Partnership.
Section 2.3 No Conflicts or Litigation. Except as set forth in Section 2.3 of
the Disclosure Schedule, the execution, delivery and performance in accordance
with their respective terms by Seller of this Agreement and the Related
Documents does not and will not (a) violate or conflict with any Laws or Permits
to which the Seller or the Partnership is subject or give any governmental
entity or other Person the right to challenge any of the transactions
contemplated hereunder, (b) require any filings, authorizations, consents,
approvals or notices with or by any court, administrative agency, commission,
government or regulatory authority, domestic or foreign, (c) breach or
constitute a default under any agreement or instrument to which such Seller is a
party or by which such Seller or any of the Partnership Interests owned by such
Seller is bound, or (d) result in the creation or imposition of, or afford any
Person the right to obtain, any Lien upon any of the Partnership Interests owned
by such Seller. No civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings are pending or threatened to which such
Seller is or may become a party which (a) questions or involves the validity or
enforceability of such Seller's obligations under this Agreement or (b) seeks
(or reasonably may be expected to seek) (i) to prevent or delay the consummation
by such Seller of the transactions contemplated by this Agreement to be
consummated or (ii) Losses in connection with the consummation by such Seller of
the transactions contemplated by this Agreement.
Section 2.4 Sellers' Agreements. Except the Agreement of Limited Partnership of
the Partnership, Seller is not a party to any agreements, pooling agreements,
voting trusts or other similar agreements with respect to the ownership or
voting of such Seller's Partnership Interest in the Partnership.
Section 2.5 No Disclosure of Confidential Information. Seller has not disclosed
any material proprietary confidential information of the Partnership to any
Person other than Parent and Buyers and authorized representatives of Buyers,
other than pursuant to confidentiality agreements prohibiting the use or further
disclosure of such information, all of which agreements are in full force and
effect.
Section 2.6 Representation by Counsel. Seller represents and agrees that such
Seller: (a) has been represented by counsel; (b) has had the full right and
opportunity to consult with such Seller's counsel and other advisors and has
availed itself of this right and opportunity; (c) has carefully read and fully
understands this Agreement in its entirety and has had it fully explained to it
by such counsel; (d) is fully aware of the contents hereof and the meaning,
intent and legal effect thereof; and (e) is competent to execute this Agreement
and has executed this Agreement free from coercion, duress or undue influence.
Section 2.7 Investment. Seller (a) understands that the Convertible Notes and
the Underlying Shares have not been, and will not be registered under the
Securities Act of 1933, as amended (the "Securities Act") or under any state
securities laws, are being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering and will contain a
legend restricting transfer; (b) is acquiring the Convertible Notes, and
Underlying Shares solely for such Seller's own account for investment purposes,
and not with a view to the distribution thereof; (c) is, either alone, or with
the assistance of any professional advisors, a sophisticated investor with
knowledge and experience in business and financial matters; (d) has received
certain information concerning Buyers and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and the risks
inherent in holding the Convertible Notes and Underlying Shares; (e) is able to
bear the economic risk and lack of liquidity inherent in holding the Convertible
Notes and Underlying Shares; and (f) is an "Accredited Investor" as that term is
defined under Rule 501 of the Securities Act.
Section 2.8 Disclosure. The representations and warranties contained in this
Agreement, together with the Disclosure Schedule, taken as a whole, do not, or
will not at the Closing, contain any untrue statement of a material fact and do
not omit or will not, at the Closing, omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
or will be made, not misleading. Copies of all documents which have been
delivered or made available by the Seller to Buyers are true, correct and
complete copies thereof, and include all amendments, supplements or
modifications thereto or waivers thereunder.
Article III.
REPRESENTATIONS AND WARRANTIES CONCERNING THE PARTNERSHIP
As a material inducement to Buyers and Parent to enter into this
Agreement, with the understanding that Buyers and Parent will be relying thereon
in consummating the transactions contemplated hereunder, and except as set forth
in the Disclosure Schedule, which identify exceptions by specific Section
references, the Sellers, jointly and severally, hereby represent and warrant to
Buyers and Parent as follows:
Section 3.1 Organization, Good Standing and Qualification. The Partnership is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of Texas. The Partnership has all requisite partnership or
similar power and authority to own and operate its properties and assets and to
carry on its business as presently conducted and presently proposed to be
conducted and is qualified to do business and is in good standing in each
jurisdiction where the ownership or operation of its properties or conduct of
its business requires such qualification, except to the extent that it does not
cause a Material Adverse Effect. Section 3.1 of the Disclosure Schedule sets
forth those jurisdictions in which the Partnership is qualified to do business.
The Partnership has made available to Buyers a complete and correct copy of the
Partnership's certificate of limited partnership and partnership agreement or
other organizational documents ("Organizational Documents"), each as amended to
and as in effect as of the date hereof. The Partnership is in full compliance
with all provisions of its Organizational Documents.
Section 3.2 Capitalization. The authorized and outstanding Partnership Interests
of the Partnership are held by the Persons and in the amounts indicated on
Section 3.2 of the Disclosure Schedule. Section 3.2 of the Disclosure Schedule
also indicates whether each holder of a Partnership Interest is a general
partner or a limited partner. Except as set forth on Section 3.2 of the
Disclosure Schedule, there are no outstanding partnership interests or any
preemptive or other outstanding rights, options, warrants, conversion rights,
stock appreciation rights, agreements, arrangements or commitments to issue or
sell any partnership interests or other securities of the Partnership or any
securities or obligations convertible into or exchangeable into or exercisable
for, or giving any Person a right to subscribe for or acquire, any securities of
the Partnership, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. The Partnership does not have outstanding any
bonds, debentures, notes or other obligations, the holders of which have the
right to vote with the Sellers on any matter.
Section 3.3 Subsidiaries. The Partnership does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
Since the incorporation of Infinity Infusion Care, Inc., (the predecessor in
interest of the Partnership) the Partnership (and its predecessor in interest)
has not acquired the business of any other Person whether by merger, stock
purchase, asset purchase or other transaction structure.
Section 3.4 Governmental Filings; No Violations.
-----------------------------------
(a) Except with respect to pharmacy licenses and home healthcare licenses of the
Partnership listed on Section 3.12(a)(ii) of the Disclosure Schedule which are
in states other than Texas, no filing or registration with, or notification to,
and no permit, authorization, consent, approval or exemption of, or other action
by, any court, arbitrator or other foreign, federal, state or local
governmental, regulatory or other administrative body, authority, department,
commission, board, bureau, agency or instrumentality (collectively, a
"Governmental Entity") (each, a "Governmental Consent") or any other Person is
required to be obtained, made or given by the Partnership, or any Seller in
connection with the execution, delivery and performance by the Sellers of this
Agreement, the other Related Documents or the transactions contemplated hereby
or thereby, except as set forth in Section 3.4 of the Disclosure Schedule.
(b) Subject to obtaining Private Consents (as defined below) the execution,
delivery and performance of this Agreement by the Sellers does not, and the
consummation of the transactions contemplated hereby will not, constitute or
result in (i) a breach or violation of, or a default under, the Organizational
Documents of the Partnership, (ii) a breach or violation of, or a default under,
or the acceleration of any obligations or the creation of a Lien, on the assets
of the Partnership (with or without notice, lapse of time or both) pursuant to,
any written or oral agreement, lease, contract, note, mortgage, indenture, plan,
policy, license, arrangement or other obligation to which the Partnership is a
party or by which any of its assets or properties are bound or affected
(collectively, the "Contracts"), (iii) any change in the rights or obligations
of any party under any of those Contracts, or (iv) the impairment of the
Partnership's business or an adverse effect on any Licenses or approvals
necessary to enable the Partnership to carry on its business as presently
conducted. Section 3.4(b) of the Disclosure Schedule sets forth a list of
Contracts (by category and type, where applicable) pursuant to which consents or
waivers (the "Private Consents") are or may be required prior to consummation of
the transactions contemplated by this Agreement.
Section 3.5 Financial Statements. Section 3.5 of the Disclosure Schedule sets
forth a true and complete copy of (a) the unaudited balance sheet (the "Annual
Balance Sheet") of the Partnership as of December 31, 2001, and the unaudited
statement of operations, for the one year ended December 31, 2001 (each of the
balance sheet and statement of operations, including the notes thereto, the
"Annual Financial Statements"), and (b) the unaudited balance sheet of the
Partnership as of April 30, 2002 (the "Latest Balance Sheet") and the unaudited
statement of operations for the four month period ended April 30, 2002 (the
"Latest Financial Statements"), and (c) an aging schedule of the accounts
payable of the Partnership as of May 24, 2002 (together with the Annual
Financial Statements and the Latest Financial Statements, the "Financial
Statements"). The Financial Statements are based upon the books and records of
the Partnership, have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied during the periods indicated
and present fairly the financial position, results of operations and cash flows
of the Partnership at the respective dates and for the respective periods
indicated, except that the Latest Financial Statements may not contain all notes
and are subject to year-end adjustments, none of which are material.
Section 3.6 Absence of Undisclosed Liabilities. Except as reflected in the
Latest Balance Sheet, the Partnership has no liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or to become due,
whether known or unknown, and regardless of when asserted) arising out of
transactions or events previously entered into, or any action or inaction, or
any state of facts existing, with respect to or based upon transactions or
events occurring on or before the date hereof, except (i) liabilities which have
arisen after the date of the Latest Balance Sheet in the Ordinary Course of
Business (none of which is a material uninsured liability for breach of
contract, breach of warranty, tort, infringement, claim, lawsuit or otherwise),
or (ii) as otherwise set forth in Section 3.6 of the Disclosure Schedule.
Section 3.7 No Material Adverse Changes. Except as set forth in Section 3.7 of
the Disclosure Schedule, since the date of the Annual Financial Statements,
there has not been any change, effect, event or condition, individually or in
the aggregate, that has had, or with the passage of time could reasonably have,
a material adverse effect on the assets, condition (financial or otherwise),
operating results, customer, payor, referral source, employee or supplier
relations, or prospects of the Partnership (a "Material Adverse Effect").
Section 3.8 Certain Payments. Neither the Partnership nor any director, officer,
agent or employee of the Partnership or any other Person associated with or
acting for or on behalf of the Partnership, has directly or indirectly in
violation of any legal requirement in connection with the business of the
Partnership (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback or other payment to any Person, regardless of form, whether in
money, property or services, (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, or (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of the Partnership or any Affiliate thereof, or (b) established or
maintained any fund or asset that has not been recorded in the books and records
of the Partnership.
Section 3.9 Absence of Certain Changes. Except as disclosed in Section 3.9 of
the Disclosure Schedule and except as otherwise provided in or contemplated by
this Agreement, since the date of the Latest Balance Sheet, the Partnership has
conducted its business only in, and has not engaged in any transaction other
than in the Ordinary Course of Business and has not:
(a) changed or amended its Organizational Documents or altered the form in
which it is organized for state law or Tax purposes;
(b) borrowed any amount or discharged or satisfied any Lien or incurred or paid
any obligation or liability (absolute or contingent), other than current
liabilities shown on the Latest Financial Statements and current liabilities
incurred since that date in the Ordinary Course of Business (none of which is a
material uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim, lawsuit or otherwise);
(c) subjected any of its assets or properties to any Lien;
(d) sold, transferred, assigned, leased or otherwise disposed of or encumbered
any of its assets or properties, except for sales of inventory in the Ordinary
Course of Business or acquired any assets or properties, except in the Ordinary
Course of Business;
(e) declared, set aside or paid any distribution (whether in cash, equity
interest, or property or any combination thereof) in respect of its equity
interests or redeemed or otherwise acquired any of its equity interests or
split, combined or otherwise similarly changed its equity interests or
authorized the creation or issuance of or issued or sold any equity interest or
any securities or obligations convertible into or exchangeable therefor, or
given any person any right to acquire any equity interest, made, other than in
the Ordinary Course of Business, any other distribution or agreed to take any
such action;
(f) made any investment of a capital nature, whether by purchase of stock or
securities, contributions to capital, property transfers or otherwise, in any
partnership, limited liability company, corporation or other entity, or
purchased any property or assets other than inventory purchased in the Ordinary
Course of Business;
(g) canceled or compromised any debt or claim other than in the Ordinary
Course of Business;
(h) intentionally or knowingly waived or released any rights, including
without limitation, any intangible rights;
(i) made or granted any wage, salary or benefit increase applicable to any group
or classification of employees generally, or any individual director, officer or
employee, or entered into any employment contract with, made any loan to, or
entered into any transaction of any other nature with, any Seller, officer or
employee of the Partnership or related party of the Partnership or hired,
committed to hire or terminated any employee other than in the Ordinary Course
of Business;
(j) suffered any loss or damage (whether or not such loss or damage shall have
been covered by insurance) with a value in excess of $5,000;
(k) received notification of cancellation or threatened cancellation of, or
cancelled, amended or intentionally or knowingly waived any rights which,
individually or in the aggregate, would have a Material Adverse Effect on the
Partnership;
(l) made any change in any method of accounting or accounting practice;
(m) received notice or communication from any referral sources or patient who
has received products or services from the Partnership for more than 6 months or
client who has received products or services from the Partnership for more than
6 months of intent to discontinue or reduce prior levels of business;
(n) entered into any transaction except in the Ordinary Course of Business;
(o) conducted the business of the Partnership in any manner other than in the
Ordinary Course of Business, including, without limitation, maintenance of
inventory levels, collection of third party accounts receivable and payments of
accounts payable; or
(p) agreed, whether in writing or otherwise, to take any action described in
this Section 3.9.
Section 3.10 Litigation. Except as set forth in Section 3.10 of the Disclosure
Schedule, there are no civil, criminal or administrative actions, suits, claims,
hearings, investigations, proceedings, judgments, decrees, orders or injunctions
outstanding, pending or, to the Knowledge of the Sellers, threatened against the
Partnership and no event has occurred or circumstances exists that may give rise
to or serve as a basis for the commencement of any such actions, suits, claims,
hearings, investigations or proceedings.
Section 3.11 Employee Benefits.
-----------------
(a) Except as described in Section 3.11 of the Disclosure Schedule, the
Partnership does not now maintain or contribute to any pension, profit-sharing,
deferred compensation, bonus, stock option, share appreciation right, severance,
group or individual health, dental, medical, life insurance, survivor benefit,
or similar plan, policy, or arrangement, whether formal or informal, for the
benefit of any director, officer, consultant or employee, whether active or
terminated, of the Partnership. Each of the arrangements set forth in Section
3.11 of the Disclosure Schedule is hereinafter referred to as an "Employee
Benefit Plan." No Employee Benefit Plan is a defined benefit plan or a
multiemployer plan that is subject to Title IV of the Employee Retirement Income
Securities Act of 1974, as amended ("ERISA") and the Partnership and its ERISA
affiliates (as defined in section 4001(a)(14) or ERISA) have never maintained or
contributed to a defined benefit plan or a multiemployer plan.
(b) The Partnership has delivered to Buyers true, correct and complete copies of
each Employee Benefit Plan, and with respect to each such plan (i) any
associated trust, custodial, insurance or service agreements, (ii) any annual
report, actuarial report or disclosure materials (including specifically any
summary plan descriptions) submitted to any governmental agency or distributed
to participants or beneficiaries thereunder in the current calendar year, and
(iii) the most recently received Internal Revenue Service ("IRS") determination
letters and any governmental advisory opinions or rulings relating to the
tax-qualified status of the plan.
(c) Each Employee Benefit Plan is and has been maintained and operated in
material compliance with the terms of such plan and with the requirements
prescribed by any and all statutes, governmental or court orders, and
governmental rules or regulations in effect from time to time, including, but
not limited to ERISA and the Code. Each Employee Benefit Plan that is intended
to qualify under Section 401(a) of the Code and each trust forming part of an
Employee Benefit Plan which is intended to qualify under Section 501(c)(9) of
the Code is specifically so identified in Section 3.11 of the Disclosure
Schedule and has been determined by the IRS to be so qualified, and nothing has
occurred since the date of the last such determination as to each such plan or
trust that has resulted or is likely to result in the revocation of such
determination as to such plan or trust.
(d)
(i) There is no pending or, to the Knowledge of the Partnership, threatened,
legal action, proceeding or investigation, other than routine claims for
benefits or relating to qualified domestic relations orders, concerning
any Employee Benefit Plan, or any fiduciary or service provider thereof.
(ii) No Employee Benefit Plan or any party in interest with respect thereto,
has engaged in a prohibited transaction that could subject the Partnership
directly or indirectly to liability under Section 409 or 502(i) of ERISA
or Section 4975 of the Code.
(iii) Neither the Partnership nor any ERISA affiliate (as defined in Section
4001(a)(14) of ERISA) has any actual unsatisfied liabilities, or is
reasonably expected to incur any material liabilities that would
reasonably be expected to become a liability of Buyers, with respect to
death or medical benefits after such employee's separation from
employment, other than (x) benefits after separation set forth in the
Disclosure Schedule and (y) health care continuation benefits described in
Section 4980B of the Code or required under applicable law or group life
insurance continuation benefits under applicable state law.
(iv) The Partnership has not undertaken to maintain any Employee Benefit Plan
for any period of time and each such plan is terminable at the sole
discretion of the Partnership, subject only to such constraints as may be
imposed by applicable law.
(e) All amounts that should be accrued to date as liabilities of the Partnership
under or with respect to each Employee Benefit Plan for the current plan year of
the plan have been recorded on the books of the Partnership.
(f) Except as set forth on Section 3.11(f) of the Disclosure Schedule, the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not result in any material payment (whether of
severance pay or otherwise) becoming due from any Employee Benefit Plan to any
current or former director, officer, consultant, or employee of the Partnership
or result in the vesting (except with respect to any Seller Employee Benefit
Plan that is a qualified plan under the Code), acceleration of payment, or
increases in the amount of any material benefit payable to or in respect of any
such current or former director, officer, consultant, or employee.
Section 3.12 Compliance with Laws; Permits.
-----------------------------
(a) Licenses, Authorizations and Provider Programs.
----------------------------------------------
(i) (x) Except as disclosed in Section 3.12(a)(i) of the Disclosure
Schedule, the Partnership holds all licenses and other rights,
accreditations, permits, approvals and authorizations ("Permits")
-------
required by law, ordinance, regulation, ruling, guidance or manual of
any governmental regulatory authority or agent (collectively, "Laws")
----
necessary to operate its business as presently conducted and as
presently proposed to be conducted. (y) Except as disclosed on Section
3.12(a)(i) of the Disclosure Schedule, the Partnership is certified for
participation and reimbursement under Titles XVIII and XIX of the
Social Security Act (the "Medicare and Medicaid programs") (Medicare,
------------------------------
Medicaid, CHAMPUS and TriCare programs and such other similar federal,
state or local reimbursement or governmental programs for which the
Partnership is eligible are hereinafter referred to collectively as the
"Government Programs") and has current provider numbers and provider
-------------------
agreements for such Government Programs and with such private
non-governmental programs, including without limitation any private
insurance program, under which it directly or indirectly is presently
receiving payments (such non-governmental programs herein referred to
as "Private Programs").
----------------
(ii) Set forth on Section 3.12(a)(ii) of the Disclosure Schedule is a correct
and complete list of the Permits required by Laws for the Partnership to
operate its business as presently conducted and as presently proposed to
be conducted (including the name of the issuing agency and the expiration
date) and provider numbers and provider agreements under all Government
Programs and Private Programs, complete and correct copies of which have
been provided to Buyers. True, complete and correct copies of all surveys,
reviews and/or audits of the Partnership or its predecessors in interest
relating to the business conducted in connection with any Government
Program, Private Program or licensing or accrediting body during the past
two years have been provided to Buyers.
(b) Except as disclosed in Section 3.12(b) of the Disclosure Schedule, no
violation, default, order or legal or administrative proceeding exists with
respect to any of the items listed in Section 3.12(b) of the Disclosure
Schedule. The Partnership has not received any notice of any action pending or
recommended by any state or federal agencies having jurisdiction over the items
listed in Section 3.12(a) of the Disclosure Schedule, either to revoke, withdraw
or suspend any license, right or authorization, or to terminate the
participation of the Partnership in any Government Program or Private Program.
No event has occurred which, with the giving of notice, the passage of time, or
both, would constitute grounds for a material violation, order or deficiency
with respect to any of the items listed in Section 3.12(a) of the Disclosure
Schedule or to revoke, withdraw or suspend any such license, or to terminate or
modify the participation of the Partnership in any Government Program or Private
Program. There has been no decision not to renew any provider number or provider
agreement or third-party payor agreement of the Partnership. Except as listed in
Section 3.12(b) of the Disclosure Schedule, no consent or approval of, prior
filing with or notice to, or any action by, any governmental body or agency or
any other third party is required in connection with any such Permit, or
Government Program or Private Program, by reason of the transactions
contemplated hereby, and the continued operation of the Partnership's business
thereafter on a basis consistent with past practices.
(c) The Partnership has timely filed all reports and billings required to be
filed by it prior to the date hereof with respect to the Government Programs and
Private Programs, all fiscal intermediaries and other insurance carriers and all
such reports and billings are complete and accurate in all material respects and
have been prepared in compliance with all applicable Laws, governing
reimbursement and payment claims. True and complete copies of such reports and
billings for the most recent year have previously been made available to Buyers.
The Partnership has paid or caused to be paid all known and undisputed refunds,
overpayments, discounts or adjustments which have become due pursuant to such
reports and billings, has not claimed or received reimbursements from Government
Programs or Private Programs in excess of amounts permitted by law, and has no
liability under any Government Program or Private Program (known or unknown,
contingent or otherwise) for any refund, overpayment, discount or adjustment.
Except as set forth in Section 3.12(c) of the Disclosure Schedule, (i) there are
no pending appeals, adjustments, challenges, audits, inquiries, litigation or
notices of intent to audit with respect to such prior reports or billings, and
(ii) during the last two years the Partnership has not been audited, or
otherwise examined by any Government Program or Private Program. There are no
other reports required to be filed by the Partnership in order to be paid under
any Government Program or Private Program for services rendered, except for
reports not yet due.
(d) All activities of the Partnership, and its officers, directors, agents and
employees undertaken on behalf of the Partnership, have been, and are currently
being, conducted in compliance in all respects with all applicable Laws,
permits, licenses, certificates, governmental requirements, Government Program
manuals and guidance, orders and other similar items of any Governmental Entity
including, without limitation, all Laws pertaining to confidentiality of patient
information, occupational safety and health, workers' compensation,
unemployment, building and zoning codes (collectively, "Regulations"). The
Partnership has not violated or become liable for, or received a notice or
charge asserting any such violation or liability with respect to, any
Regulation, nor is there any facts or circumstances that could form the basis
for any such violation or liability. The Partnership is not relying on any
exemption from or deferral of any Regulation that would not be available to the
Partnership after the Closing.
(e) There are no pending changes in applicable Law or Regulations would prevent
the Partnership from conducting its business in substantially the same manner as
the business is currently conducted.
(f) Section 3.12(f) of the Disclosure Schedule lists all states in which the
Partnership currently has patients.
Section 3.13 Taxes. Except as set forth in Section 3.13 of the
-----
Disclosure Schedule:
(a) all Tax Returns required to be filed with respect to the Partnership are
true, correct, and complete in all material respects, have been timely filed
(including extensions), and no extension of time within which to file any such
Tax Return has been requested, which Tax Return has not since been filed;
(b) all Taxes shown on such Tax Returns or otherwise known by the Partnership to
be due or payable have been timely paid and all payments of estimated Taxes
required to be made with respect to the Partnership under Section 6655 of the
Code or any comparable provision of state, local or foreign law have been made
on the basis of the Partnership's good faith estimate of the required
installments;
(c) all Taxes of the Partnership which will be due and payable, whether now or
hereafter, for any period ending on, ending on and including, or ending before
the Closing Date, shall have been paid by or on behalf of the Partnership or
shall be reflected on the Partnership's books as an accrued Tax liability,
either current or deferred, the amount of which as of the Closing Date is set
forth in Section 3.13 of the Disclosure Schedule;
(d) no adjustment relating to any of such Tax Returns has been proposed in
writing by any Taxing Authority, except proposed adjustments that have been
resolved prior to the date hereof;
(e) there are no outstanding subpoenas or requests for information with respect
to any Tax Returns of the Partnership or the Taxes reflected on such Tax
Returns;
(f) all Taxes which the Partnership is required by law to withhold and collect
have been duly withheld and collected, and have been paid over, in a timely
manner, to the proper Taxing Authorities to the extent due and payable;
(g) no Liens for Taxes exist with respect to any of the assets or
properties of the Partnership, except for statutory Liens for Taxes not yet
due or payable;
(h) all Tax Returns for all taxable years prior to and including the taxable
year ended December 31, 1997 have been examined by the relevant Taxing
Authorities, or closed without audit by applicable statutes, and all
deficiencies proposed as a result of such examinations, if any, have been paid
or settled;
(i) there is no deficiency or refund litigation or any audit or examination
pending with respect to any Taxes and during the past three years no Taxing
Authority has given written notice of the commencement of any deficiency or
refund litigation or any audit or examination, with respect to any Taxes;
(j) the Partnership does not have outstanding any agreements or waivers
extending, or having the effect of extending, the statute of limitations with
respect to the assessment or collection of any Tax;
(k) the Partnership is not party to or bound by and does not owe any amount
pursuant to any tax-sharing agreement, tax indemnity obligation or similar
agreement, arrangement or practice with respect to Taxes (including any advance
pricing agreement, closing agreement or other agreement relating to Taxes with
any Taxing Authority);
(l) no property of the Partnership is property that is or will be required to be
treated as "tax-exempt use property" within the meaning of Section 168(h) of the
Code;
(m) the Partnership is not a party to any agreement, contract, or arrangement
that would result, separately or in the aggregate, in (i) the payment of any
"excess parachute payments" within the meaning of Section 280G of the Code by
reason of the transactions contemplated hereby or (ii) the payment of any form
of compensation or reimbursement for any Tax incurred by any Person arising
under Section 280G of the Code;
(n) neither the Partnership nor any of its Affiliates has been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(C)(1)(A)(ii) of the
Code;
(o) each of the Partnership and its Affiliates has reported in a manner for
which there is substantial authority or has adequately disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial underpayment of federal income Tax within the meaning of Section
6662 of the Code (or, with respect to Tax Returns filed after the date of this
Agreement and before the Closing Date, will report such positions in such a
manner or will adequately disclose them);
(p) for federal income tax purposes the Partnership (and any predecessor of
Partnership) has been a validly electing S corporation within the meaning of
Sections 1361 and 1362 of the Code at all times during its existence and the
Partnership will be a validly electing S corporation up to and including the day
before the Closing Date.
(q) for federal income tax purposes, all of the Partnership Interests are, and
have been at all times during the existence of the Partnership up to and
including the day before the Closing Date, stock of a validly electing S
corporation within the meaning of Sections 1361 and 1362 of the Code.
Section 3.14 Labor Matters.
-------------
(a) No charges with respect to or relating to the business of the Partnership
are pending before the Equal Employment Opportunity Commission, or any state or
local agency responsible for the prevention of unlawful employment practices,
and no such action has been threatened against the Partnership. Neither the
Partnership, nor the Sellers, have any information indicating that any
management or key employee of the Partnership intends to terminate his or her
employment with the Partnership.
(b) Section 3.14 of the Disclosure Schedule contains a complete and correct list
of (i) name, job title, current compensation paid or payable, vacation accrued
and services credited for purposes of vested and eligibility to participate
under any employee benefit plan, for each employee or consultant of the
Partnership, and (ii) all current employment, management, noncompete,
nonsolicitation, nondisclosure, confidentiality, trade secret, intellectual
property assignment or other consulting agreements (whether written or oral)
with any Persons employed or retained by the Partnership and which are not
terminable at will. True, complete and correct copies of all such written
agreements or written summaries of all oral agreements have been delivered to
Buyers.
(c) Since January 1, 1999, the Partnership has complied at all times with all
applicable Laws relating to employment and employment practices and those
relating to the calculation and payment of wages, including without limitation,
overtime, maximum hours of work, equal employment opportunity (including Laws
prohibiting discrimination and/or harassment on the basis of race, national
origin, religion, gender, disability, age, workers compensation or otherwise),
affirmative action and other hiring practices, occupational safety and health,
workers compensation, unemployment, the payment of social security and other
Taxes, and unfair labor practices under the National Labor Relations Act. At any
time within the last three years the Partnership has not been the subject of an
audit or investigation by any federal, state, or local agency charged with the
enforcement of these Laws (including, without limitation, the Department of
Labor Wage and Hour Division ("DOL/WHD"), Equal Employment Opportunity
Commission ("EEOC"), Office of Federal Contract Compliance Program ("OFCCP"),
Immigration and naturalization Service ("INS"), Occupational Safety and Health
Administration ("OSHA"), and the National Labor Relations Board ("NLRB")), nor
has the Company operated under any remedial order or consent decree issued by
such a federal, state, or local agency. There are no pending or, to the
Knowledge of the Sellers, threatened charges or lawsuits (whether initiated by a
current or former employee or governmental agency) against the Partnership
regarding such matters, and any such charges or lawsuits commenced against the
Partnership within the last three years (regardless of their resolution) have
been disclosed on Section 3.14(c) of the Disclosure Schedule. Section 3.14(c) of
the Disclosure Schedules also contains a complete and correct list of all
written federal, state, or local affirmative action plans or programs,
maintained by the Partnership, and true, complete and correct copies of the same
have been delivered to Buyers. The Partnership is not currently aware of any
effort among its employees to organize or by any union to represent its
employees, and any such efforts within the last three years have been disclosed
on Section 3.14(c) of the Disclosure Schedule. There are no workers'
compensation claims pending against the Partnership, and no Seller has any
knowledge of any facts that would give rise to such a claim.
Section 3.15 Intellectual Property.
---------------------
(a) Section 3.15(a) of the Disclosure Schedule lists all Registered Intellectual
Property owned by or licensed to the Partnership or used in the conduct of the
business of the Partnership as now conducted or proposed to be conducted.
(b) Section 3.15(b) of the Disclosure Schedule describes all other Intellectual
Property owned by or licensed to the Partnership or necessary to the Business.
The Intellectual Property in Section 3.15(a) and Section 3.15(b) of the
Disclosure Schedule ("Partnership Intellectual Property") constitutes all of the
intellectual property necessary for the conduct of the business of the
Partnership and its Subsidiaries.
(c) The Partnership owns all right, title and interest in and to, or in the case
of software has licenses to use, all Partnership Intellectual Property, free and
clear of any Lien.
(d) Section 3.15(d) of the Disclosure Schedule lists all proceedings before any
court or tribunal related to any of the Partnership Intellectual Property as of
the date hereof. As of the date hereof, no Partnership Intellectual Property is
the subject of any proceeding or outstanding decree, order, judgment, agreement
or stipulation that if adversely determined does or would restrict the use,
transfer or licensing thereof by the Partnership, or which may affect the
validity, scope, use or enforceability of such Intellectual Property, except as
set forth in Section 3.15(d) of the Disclosure Schedule.
(e) All Partnership Intellectual Property Rights are valid and enforceable and
the Partnership has no Knowledge of facts showing, and no party has asserted,
that any such rights are invalid or unenforceable. To the knowledge of the
Sellers, except as set forth in Section 3.15(e) of the Disclosure Schedule, no
Person has or is infringing on or misappropriating any Partnership Intellectual
Property. As of the date hereof, all such rights are in full force and effect
and all actions required to maintain them have been taken, including without
limitation payment of all fees, and filing of all documents with the relevant
authorities.
(f) Section 3.15(f) of the Disclosure Schedule lists all current agreements to
which the Partnership is a party with respect to Intellectual Property licensed
to any third party, or pursuant to which a third party has licensed or
transferred any Intellectual Property to the Partnership (collectively, the
"License Agreements"). Except as set forth in Section 3.15(f) of the Disclosure
Schedule, (i) the Partnership has not transferred ownership of, or granted any
license to, any Partnership Intellectual Property to any third party, and (ii)
there are no payments of any type payable by the Partnership to any Person by
reason of the ownership, development, use, license, distribution or other
disposition of the Partnership Intellectual Property.
(g) Except as set forth in Section 3.15(g) of the Disclosure Schedule, (i) the
License Agreements are valid and binding and in full force and effect and the
consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, termination or suspension of
such License Agreements, and (ii) the Partnership is in compliance therewith. To
the Knowledge of the Sellers, all other parties to such License Agreements are
in compliance therewith.
(h) The documentation relating to all trade secrets described in Section 3.15(b)
of the Disclosure Schedule is current, accurate and sufficient in detail and
content to identify and explain such trade secrets and to allow use in the
business without reliance on the knowledge of any individual. The Partnership
has the right to use all trade secrets and other proprietary information
currently used in the business and such information is not part of the public
knowledge and, to the Knowledge of the Sellers, has not been used or
appropriated either for the benefit of any third party or to the detriment of
the Partnership.
(i) The Partnership has a policy, which has been provided to Buyers, to protect
the secrecy, confidentiality and value of all trade secrets and proprietary
information and the Partnership, the Sellers, officers and employees have
complied with that policy. The Partnership has no Knowledge of any violation of
such policies or agreements (including, without limitation, any breach or
violation that materially lessens the value of any material trade secret of the
Partnership) or any breach that is reasonably likely to become material after
the Closing Date.
(j) No officer or director, or to the knowledge of the Sellers, employee or
consultant of the Partnership is obligated under or bound by any instrument, or
any judgment, decree, or order of any court or administrative agency, that (i)
conflicts or may conflict with his or her agreements and obligations to use his
or her best efforts to promote the interest of the Partnership, (ii) conflicts
or may conflict with the business or operations of the Partnership, or (iii)
restricts or may restrict the use or disclosure of any information that may be
useful to the Partnership.
(k) Except as set forth in Section 3.15(k) of the Disclosure Schedule, the
Partnership has not received any notice, and, to the Seller's Knowledge, no
complaint has been filed, alleging any infringement by the Partnership of any
Intellectual Property Rights of a third party, and, to the Sellers' Knowledge,
the Partnership has not infringed any such rights. To the Sellers' Knowledge, no
infringement has occurred or will occur with respect to products and services
currently being or previously sold by the Partnership or with respect to the
products or services currently under development (in their present state of
development) or with respect to the business.
Section 3.16 Certain Environment Matters; Medical Waste. Except as
------------------------------------------
disclosed in Section 3.16 of the Disclosure Schedule:
(a) the Partnership possesses, and is in compliance in all material respects
with, all Licenses and government authorizations and has filed all notices that
are required under local, state, province and federal Laws and Regulations
relating to protection of the environment, pollution control, product
registration and Hazardous Substances, and the Partnership is in compliance in
all respects with all Environmental Laws;
(b) the Partnership has not received notice of actual or threatened liability
under Environmental Laws and there are no facts or circumstances which could
form the basis for the assertion of any material claim against the Partnership
under any Environmental Laws or any similar local, state or foreign Law with
respect to any on-site or off-site location;
(c) the Partnership has not entered into or agreed to, nor does the Partnership
intend to enter into or agree to, any consent decree or order, and the
Partnership is not subject to any judgment, decree or judicial or administrative
order relating to compliance with, or the cleanup of Hazardous Substances under,
any applicable Environmental Laws;
(d) the Partnership has not been subject to any administrative or judicial
proceeding under any applicable Environmental Laws either now or any time during
the past five years;
(e) the Partnership is not subject to any material claim, obligation, liability,
loss, damage or expense of whatever kind or nature, contingent or otherwise,
incurred or imposed or based upon any provision of any Environmental Law and
arising out of any act or omission of the Partnership, its employees, agents or
representatives or arising out of the ownership, use, control or operation by
the Partnership of any plant, facility, site, area or property (including,
without limitation, any plant facility, site, area or property currently or
previously owned or leased by the Partnership) from which any Hazardous
Substances were released into the environment (the term "release" meaning any
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing into the environment, by the
Partnership and or any third party, and the term "environment" meaning any
surface or ground water, drinking water supply, soil, surface or subsurface
strata or medium, or the ambient air);
(f) the Partnership has previously provided Buyers with true, correct and
complete copies of all Medical Waste Shipping Documents of the Partnership
during the period from January 2002 until May 2002, and Section 3.16 of the
Disclosure Schedule sets forth the amount of all fines, penalties or assessments
paid within the last five years by the Partnership with respect to environmental
matters, including the date of payment and the basis for the assertions of
liability;
(g) to the Knowledge of the Sellers, none of the real properties leased by the
Partnership, nor any of the improvements or equipment thereon, contain any
asbestos, PCBs or underground storage tanks; and
(h) the Partnership is not the subject of any enforcement action by any
governmental authority under the Medical Waste Tracking Act, 42 U.S.C. ss. 6992
et seq., or any applicable federal, state or local governmental Law dealing with
the disposal of medical wastes ("Medical Waste Laws"). The Partnership has not
received any written or, to the Sellers' Knowledge, oral notice of any
investigation or inquiry by any governmental authority under the Medical Waste
Laws. The Partnership has obtained and is in material compliance with any
Licenses related to medical waste disposal required by the Medical Waste Laws,
and the operations and business of the Partnership have been in material
compliance with the Medical Waste Laws and any Environmental Law.
Section 3.17 Title to Property.
-----------------
(a) Except as set forth in Section 3.17 of the Disclosure Schedule, the
Partnership has good title to all of its properties and assets as set forth on
the Latest Balance Sheet, free and clear of all Liens, except (i) Liens for
Taxes not yet due and payable and (ii) rights of lessors under any leasehold
estates of the Partnership. The Partnership does not own any real property.
Section 3.17 of the Disclosure Schedule sets forth a true and correct list of
all leases, subleases or other agreements under which the Partnership is lessee
or lessor of any real property or has any interest in real property and, except
as set forth in Section 3.17 of the Disclosure Schedule, there are no rights or
options held by the Partnership, or any contractual obligations on its part, to
purchase or otherwise acquire (including by way of lease or sublease) any
interest in or use of any real property, nor any rights or options granted by
the Partnership, or any contractual obligations entered into by it, to sell or
otherwise dispose of (including by way of lease or sublease) any interest in or
use of any real property. All such leases, subleases and other agreements are in
full force and effect and constitute legal, valid and binding obligations of the
respective parties thereto, with no existing or claimed default or event of
default, or event which with notice or lapse of time or both would constitute a
default or event of default, by the Partnership, or, to the Knowledge of the
Sellers, by any other party thereto.
(b) All of the buildings, machinery, equipment and other tangible assets and
properties necessary for the conduct of the business of the Partnership are in
good condition and repair, ordinary wear and tear excepted, and are usable in
the Ordinary Course of Business. Each such asset is suitable for the purposes
for which it presently is used and presently is proposed to be used, is free
from defects (patent and latent), and has been maintained in accordance with
normal industry practice. The Partnership owns, or leases under valid leases,
all buildings, machinery, equipment and other tangible assets and properties
necessary for the conduct of its business as presently conducted and as
presently proposed to be conducted.
Section 3.18 Contracts.
---------
(a) Section 3.18 of the Disclosure Schedule accurately lists all of the
following Contracts of the Partnership (collectively, the "Material Contracts"):
(i) Contracts between the Partnership and any pharmacy or other provider or
supplier of health care services or products to patients;
(ii) Contracts with any suppliers or distributors of the Partnership's
products;
(iii) Contracts with any consultants;
(iv) Contracts with vendors for services relating to billing and
reimbursement;
(v) any Contract containing exclusivity, non-compete or non-solicit provisions
or which otherwise restricts the Partnership's ability to freely conduct
its business;
(vi) Contracts pertaining to confidentiality or non-disclosure;
(vii) Contracts terminable by any other party thereto upon a change of
control of the Partnership;
(viii) Contracts concerning a partnership or joint venture;
(ix) any Contract involving payments in excess of $1,000 per month or
$12,000 annually; and
(x) any other Contracts not entered into in the Ordinary Course of Business or
that are material to the business, condition (financial or otherwise),
results of operation or prospects of the Partnership.
(b) True, correct and complete copies of the written Contracts listed in Section
3.18 of the Disclosure Schedule have been made available to Buyers. Written
summaries of all oral Material Contracts have been provided to Buyers. The
Partnership is in compliance in all material respects with all terms and
provisions of all Material Contracts and all such Material Contracts are valid
and binding in accordance with their terms and in full force and effect with
respect to the Partnership and with respect to the other parties thereto, and no
breach or default by the Partnership or event which, with notice or lapse of
time or both, could constitute a breach or default by the Partnership, exists
with respect thereto and no party thereto has given notice or asserted to the
Partnership or any agent thereof, that the Partnership is in default thereunder
and no other party thereto is in breach or default thereunder.
(c) Section 3.18(c) of the Disclosure Schedule contains a complete and accurate
list, (setting forth in each case the relevant description, price, quantity and
date of purchase) of all drugs, biological agents, factors, therapies, products,
durable medical equipment and other medical supplies of the Partnership as of
May 3, 2002 and of all of the Partnership's Gammimune 10%, Gammimune 5%,
Sandoglobulin ZLB, Venoglobulin 10%, Remicade, Venoglobulin 5%, Gammagard and
Embrel as of May 31, 2002.
Section 3.19 Insurance Matters. The Partnership has previously provided Buyers
with true, complete and correct copies of all material fire and casualty,
general liability, business interruption, product liability and other insurance
policies maintained by the Partnership. All such policies are in full force and
effect and no event has occurred that would give any insurance carrier a right
to terminate any such policy. Since January 1, 2000, the Partnership has not
been denied or had any policy of insurance revoked or rescinded. All such
policies are adequate to insure against risks to which the Partnership and its
properties are exposed in such amounts and subject to such terms as are
commercially reasonable.
Section 3.20 Affiliated Transactions. Except as disclosed in Section 3.20 of the
Disclosure Schedule, no Affiliate of the Partnership has, or, since January 1,
1999, has had, any interest in any property (whether real, personal, or mixed
and whether tangible or intangible), used in or pertaining to the business of
the Partnership. Neither the Partnership nor any Affiliate of the Partnership
owns, or, since January 1, 1997, has owned, of record or as a beneficial owner,
an equity interest or any other financial or profit interest in any person that
has (a) had business dealings or a financial interest in any transaction with
the Partnership other than business dealings or transactions disclosed in
Section 3.20 of the Disclosure Schedule, each of which has been conducted in the
Ordinary Course of Business with the Partnership at substantially prevailing
market prices and on substantially prevailing market terms, or (b) engaged in
competition with the Partnership with respect to any line of products or
services of the Partnership in any market presently served by the Partnership.
Except as set forth in Section 3.20 of the Disclosure Schedule, no Affiliate of
the Partnership is a party to any Contract with, or has any claim or right
against, the Partnership in connection with the business of the Partnership.
Section 3.21 Changes in Suppliers and Third-Party Payors. None of the suppliers
supplying products, materials or drugs to the Partnership has provided any
notice (written or oral) to the Partnership that it intends to cease selling
such products, materials or drugs to the Partnership or to limit or reduce such
sales of the products to the Partnership or increase prices to the Partnership
and there is no fact which indicates that any third-party payor of the
Partnership intends to terminate, limit or reduce its business relations with
the Partnership in the event of a merger or other change of ownership of the
Partnership, or otherwise.
Section 3.22 Indebtedness. At the date hereof, the Partnership has no
Indebtedness outstanding except as set forth in Section 3.22 of the Disclosure
Schedule. The Partnership is not in default with respect to any outstanding
Indebtedness or any agreement, instrument or other obligation relating thereto
and no such Indebtedness or any agreement, instrument or other obligation
relating thereto purports to limit the issuance of any securities by the
Partnership, or (except as set forth in Section 3.22 of the Disclosure Schedule)
the operation of its businesses. Complete and correct copies of all agreements,
instruments and other obligations (including all amendments, supplements,
waivers and consents) relating to any Indebtedness of the Partnership have been
furnished to Buyers.
Section 3.23 Inspections and Investigations. Except as set forth and described
in Section 3.23 of the Disclosure Schedule: (a) neither the Partnership's right
nor the right of any licensed professional or other individual affiliated with
the Partnership to receive reimbursements pursuant to any Government Program or
Private Program has been terminated or otherwise adversely affected as a result
of any investigation or action whether by any federal or state governmental
regulatory authority or other third party; (b) neither the Partnership, nor any
licensed professional or other individual who is a party to a Contract, has,
during the past three years, been the subject of any inspection, investigation,
survey, audit, monitoring or other form of review by any governmental regulatory
entity, trade association, professional review organization, accrediting
organization or certifying agency based upon any alleged improper activity on
the part of such individual, nor has the Partnership received any notice of
deficiency during the past three years in connection with the operations of its
business; (c) there are not presently, and at the Effective Time there will not
be, any outstanding deficiencies or work orders of any governmental authority
having jurisdiction over the Partnership, or requiring conformity to any
applicable agreement, statute, regulation, ordinance or bylaw, including but not
limited to, the Government Programs and Private Programs; and (d) there is not
any notice of any claim, requirement or demand of any licensing or certifying
agency or other third party supervising or having authority over the Partnership
to rework or redesign any part thereof or to provide additional furniture,
fixtures, equipment, appliances or inventory so as to conform to or comply with
any existing law, code, rule, regulation or standard. Attached as part of
Section 3.23 of the Disclosure Schedule are copies of all reports,
correspondence, notices and other documents relating to any matter described or
referenced therein.
Section 3.24 Fraud and Abuse; False Claims. Neither the Partnership nor persons
and entities providing professional services in connection with the
Partnership's business have engaged in any activities which are prohibited under
42 U.S.C. s. 1320a-7, 1320a-7a, 1320a-7b, 1395nn, and 1396b, 31 U.S.C. s.
3729-3733, and the federal CHAMPUS/TRICARE statute (or other federal or state
statutes related to false or fraudulent claims) or the regulations promulgated
thereunder pursuant to such statutes, or related state or local statutes or
regulations, or which are prohibited by rules of professional conduct, including
but not limited to the following: (a) knowingly and willfully making or causing
to be made a false statement or representation of a fact in any application for
any benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a fact for use in determining rights to
any benefit or payment; (c) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with intent to
fraudulently secure such benefit or payment; and (d) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe or
rebate), directly or indirectly, overtly or covertly, in cash or in kind or
offering to pay or receive such remuneration (i) in return for referring an
individual to a person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by Medicare or
Medicaid or any other state or federally funded program, or (ii) in return for
purchasing, leasing, or ordering or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service or item for which payment may
be made in whole or in part by Medicare or Medicaid or any other state or
federally funded program.
Section 3.25 Rates and Reimbursement Policies. The Partnership does not have any
reimbursement or payment rate appeals, disputes or contested positions currently
pending before any governmental authority or any administrator of any Private
Programs.
Section 3.26 Patients and Orders. The Partnership has made available to Buyers a
list of all patients (which list shall not include any identifying information
of such patients) served by the Partnership during the period from March 2001
until March 2002 including the revenues of the Partnership associated with such
patients during that period.
Section 3.27 Inventories. All items of the Partnership's inventory will, on the
Closing Date, consist of items of a quality and quantity usable and saleable in
the Ordinary Course of Business and conform to generally accepted quality
standards in the industry. Except as set forth in Section 3.27 of the Disclosure
Schedule, none of the drugs in the Partnership's inventory have an expiration
date that is prior to the six-month anniversary of the date hereof.
Section 3.28 Places of Business. Since its formation, the Partnership has done
business only as Infinity Infusion Care, Ltd. and Infinity Infusion Care, Inc.
(including, in both cases, all predecessor or merged entities and all trade and
assumed names). Since its formation, the Partnership has conducted its business
only at those offices and warehouses identified in Section 3.28 of the
Disclosure Schedule, and maintains inventory only at those locations identified
in Section 3.28 of the Disclosure Schedule.
Section 3.29 Controlled Substances. Except as set forth in Section 3.29 of the
Disclosure Schedule, the Partnership and its officers and Sellers and, to the
Knowledge of Sellers, employees and persons who provide professional services
under agreements (whether oral or written) with the Partnership have not, in
connection with their activities directly or indirectly related to the
Partnership, engaged in any activities which are prohibited under the Federal
Controlled Substances Act, 21 U.S.C. ss. 801 et seq. or the regulations
promulgated pursuant to such statute or any related state or local statutes or
regulations concerning the dispensing and sale of controlled substances.
Section 3.30 Guarantees, Warranties and Discounts. Except as described in
Section 3.30 of the Disclosure Schedule: (a) the Partnership is not a party to
or bound by any agreement of guarantee, indemnification (other than agreements
that are entered into the Ordinary Course of Business and that contain
indemnification agreements), assumption or endorsement or any other like
commitment of the obligations, liabilities (contingent or otherwise) or
Indebtedness of any person; (b) the Partnership has not given any guarantee or
warranty in respect of any of the products sold or the services provided by it;
and (c) the Partnership is not required to provide any letters of credit, bonds
or other financial security arrangements in connection with any transactions
with its suppliers or customers.
Section 3.31 Bank Accounts; Signing Authority; Powers Of Attorney. Section 3.31
of the Disclosure Schedule sets forth a complete and accurate list of all bank,
brokerage and other accounts, and all safe-deposit boxes, of the Partnership and
the persons with signing or other authority to act with respect thereto. Except
as set forth on Section 3.31 of the Disclosure Schedule, the Partnership does
not have any account or safe deposit box in any bank, and no person has any
power, whether singly or jointly, to sign any checks on behalf of the
Partnership, to withdraw any money or other property from any bank, brokerage,
or other account of the Partnership, or to act under any agency or power of
attorney granted by the Partnership at any time for any purpose. Section 3.31 of
the Disclosure Schedule also sets forth the names of all persons authorized to
borrow money or sign notes on behalf of the Partnership.
Section 3.32 Brokers and Finders. Neither the Partnership nor any of its
Sellers, executive officers, directors or employees has employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finders
fees in connection with the transactions contemplated in this Agreement except
that the Partnership has retained The Braff Group as its financial advisor, the
arrangements with respect to which are set forth in Section 3.32 of the
Disclosure Schedule.
Section 3.33 Transaction Costs. Section 3.33 of the Disclosure Schedule is a
complete and accurate listing of all Transaction Costs incurred or to be
incurred by or on behalf of the Partnership. There is no agreement, commitment,
understanding or basis for any Transaction Costs other than those set forth on
Section 3.33 of the Disclosure Schedule. Any Transaction Costs not set forth on
Section 3.33 of the Disclosure Schedule are the sole responsibility of the
Sellers and will be promptly paid by the Sellers (and not the Partnership or
Buyers) in full when due. Section 3.33 of the Disclosure Schedule shall be
updated by the Sellers within two days of the Closing Date.
Section 3.34 Disclosure. The representations and warranties contained in this
Agreement, together with the Disclosure Schedule, taken as a whole, do not, or
will not, at the Closing, contain any untrue statement of a material fact and do
not omit or will not, at the Closing, omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
or will be made, not misleading. Copies of all documents which have been
delivered or made available to Buyers are true, correct and complete copies
thereof, and include all amendments, supplements or modifications thereto or
waivers thereunder.
Article IV.
REPRESENTATIONS AND WARRANTIES
OF PARENT AND BUYERS
As a material inducement to the Sellers to enter into this Agreement, with
the understanding that the Sellers will be relying thereon in consummating the
transactions contemplated hereunder, Parent and Buyers hereby represents and
warrants, jointly and severally, to the Sellers that:
Section 4.1 Organization, Good Standing and Qualification. Each of Parent and
Buyer Co. is a corporation duly incorporated and validly existing under the laws
of the state of their incorporation. Buyer LLC is a limited liability company
duly formed and validly existing under the laws of the state of its formation.
Parent and Buyers each has all requisite corporate or similar power and
authority to own and operate their respective properties and assets and to carry
on their respective business as presently conducted.
Section 4.2 Corporate Authority and Approval.
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(a) Parent has all requisite corporate power and authority and has taken all
corporate action necessary in order to execute, deliver and perform its
obligations under this Agreement and under each of the Related Documents to
which it is a party and to consummate the transactions contemplated hereby and
thereby. Buyers have all requisite limited liability company power and authority
and have taken all limited liability company action necessary in order to
execute, deliver and perform its obligations under this Agreement and under each
of the Related Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. This Agreement and each Related
Document to which it is a party is a valid and binding obligation of each of
Parent and Buyers, enforceable against it in accordance with its terms, except
as that enforceability may be (i) limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and (ii) subject to general principles of equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law).
(b) The Board of Directors of Parent and the Board of Managers of each Buyer
have approved this Agreement and the transactions contemplated hereby.
Section 4.3 Brokers and Finders. Neither Parent nor Buyers nor any of their
executive officers, directors or employees has employed any broker or finder or
has incurred any liability for any brokerage fees, commissions or finders fees
in connection with the transactions contemplated by this Agreement.
Section 4.4 SEC Filings; Financial Statements.
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(a) Parent has filed all forms, reports, schedules, statements and other
documents required to be filed by it from December 31, 2000 to the date hereof
(collectively, as supplemented and amended since the time of filing, the "SEC
Reports") with the Securities and Exchange Commission (the "SEC"). The SEC
Reports (i) were prepared in all material respects in compliance with all
applicable requirements of the Securities Act, and the rules and regulations
promulgated thereunder, and the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder (the "Exchange Act"), as the
case may be and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The representation
in clause (ii) of the preceding sentence does not apply to any misstatement or
omission in any SEC Report filed prior to the date of this Agreement which was
superseded by a subsequent SEC Report filed prior to the date of this Agreement.
(b) The audited consolidated financial statements and unaudited consolidated
interim financial statements of Parent and its subsidiaries included or
incorporated by reference in such SEC Reports have been prepared in accordance
with all applicable rules of the SEC and GAAP, consistently applied during the
periods involved (except as may otherwise be indicated in the notes thereto) in
accordance with Parent's historical practices insofar as such practices are
consistent with GAAP, and present fairly, in all material respects, the
financial position and results of operations and cash flows of Parent and its
subsidiaries on a consolidated basis at the respective dates and for the
respective periods indicated (except, in the case of all such financial
statements that are interim financial statements, for normal year-end
adjustments).
Section 4.5 Governmental Filings; No Violations. The execution, delivery and
performance of this Agreement by Parent and the Buyers does not, and the
consummation of the transactions contemplated hereby will not, constitute or
result in (i) a breach or violation of, or a default under the Articles of
Incorporation or Bylaws of Parent or the Certificate of Formation or Operating
Agreement of Buyers, (ii) a breach or violation of, or a default under any
agreement which is filed as an exhibit to the SEC Reports.
Article V.
COVENANTS
Section 5.1 Interim Operations of the Partnership. The Sellers covenant and
agree that after the date hereof and prior to the Closing Date (except as
otherwise expressly contemplated by this Agreement), without the prior written
consent of Buyers:
(a) the business of the Partnership will be conducted only in the Ordinary
Course of Business and in compliance with applicable Laws, Regulations, and
contractual obligations;
(b) the Partnership will not merge, amalgamate or consolidate with any
corporation, or acquire all or substantially all of the business or assets of
any other Person, business organization, entity or enterprise, or acquire
ownership or control of any capital stock, bonds, or other securities of, or any
property interest in, any business organization, entity or enterprise or acquire
control of the management or policies thereof;
(c) except as set forth on Section 5.1 of the Disclosure Schedule and as
otherwise required by this Article V, the Partnership shall not:
(i) assume, guarantee, endorse or otherwise become liable with respect to the
obligations of any Person, business organization, entity or enterprise,
except for endorsements for collection of negotiable instruments in the
Ordinary Course of Business;
(ii) make any loan or advance to, or assume, guarantee, endorse or otherwise
become liable with respect to the capital stock or dividends of, any
Person, business organization, entity or enterprise, in each case except
in the Ordinary Course of Business;
(iii) enter into any transaction with or create or assume any obligation or
liability to, any Seller or any Affiliate, agent or relative of any Seller
of the Partnership;
(iv) cancel or compromise any debt or claim, except in the Ordinary Course
of Business, or waive any rights of substantial value;
(v) change any of its banking arrangements or grant any powers of attorney;
(vi) make any Tax election or settle or compromise any Tax liability;
(vii) make any capital expenditures, except those made in the Ordinary Course of
Business which do not exceed $10,000 in the aggregate;
(viii)enter into or assume any contract, agreement or commitment which,
by reason of its size, term or other factor, is not in the Ordinary
Course of Business;
(ix) delay the payment of its accounts payable in a manner not consistent
with past practice; or
(x) take any action, or omit to take any action, which would have, or could
reasonably be expected to have, a Material Adverse Effect on the
Partnership.
(d) the Partnership shall use its commercially reasonable efforts in a manner
consistent with past practice to preserve the business organization of the
Partnership intact and to keep available the services of the present employees
and agents of the Partnership and to preserve the good will of customers,
suppliers, referral sources, employees, agents, third-party payors and others
having business relations with the Partnership;
(e) the Partnership shall use its commercially reasonable efforts to maintain
all assets owned, leased or regularly used by it in good operating condition and
repair, ordinary wear and tear excepted, and will maintain existing insurance
coverage on such assets as well as other existing insurance coverage;
(f) the Partnership shall maintain its books, accounts and records in the usual
and ordinary manner, on a basis consistent with prior years;
(g) the Partnership and Sellers shall not revoke the Partnership's election to
be taxed as an S corporation within the meaning of Sections 1361 and 1362 of the
Code. The Partnership and Sellers shall not take or allow any action other than
the sale of the Partnership Interests pursuant to this Agreement that would
result in the termination of the Partnership's status as a validly electing S
corporation within the meaning of Sections 1361 and 1362 of the Code; and
(h) Except as set forth in Section 5.1(h) of the Disclosure Schedule, the
Partnership shall not take any action referred to in Section 3.9; provided,
that, (i) the occurrence of an action covered by Section 3.9(j) or (m) or
receipt of a notification under Section 3.9(k) will not be considered to be a
violation of this Section 5.1 (provided, further, that this Section 5.1(h) shall
not relieve the Sellers from their obligations under Section 5.5 or operate as a
waiver of Buyers' rights under Section 6.1(a)); and (ii) the Sellers may make
weekly distributions up to an aggregate amount as set forth in Section 5.1(i) of
the Disclosure Schedule as long as Sellers provide prior notice of any such
distribution, including the amount of such distribution and Buyers consent to
such distribution (such consent only to be withheld if in Buyers' reasonable
judgment the Partnership's Working Capital would be less than $1,461,782 after
giving effect to all distributions made pursuant to this Section 5.1(h)(ii)).
Section 5.2 Acquisition Proposals. From the date hereof until the termination of
this Agreement in accordance with Article VII, the Sellers shall not authorize
or permit any officer, director or employee of, or any financial advisor,
attorney, accountant or other advisor or representative retained by, the
Partnership or the Sellers to solicit offers for, respond to inquiries,
initiate, encourage (including by way of furnishing information), endorse, enter
into discussions with any party or enter into any agreement with respect to, or
take any other action to knowingly facilitate, any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal. The Partnership shall promptly advise Buyers of any
Acquisition Proposal or any offers, inquiries, indications of interest or
discussions with respect thereto, including the name of the proposed acquirer
and the material terms of the Acquisition Proposal but in any event within one
Business Day. As used in this Agreement, "Acquisition Proposal" means any tender
or exchange offer, or proposal, other than the proposal contemplated herein, for
a merger, share exchange, or other business combination or any proposal or offer
to acquire in any manner a substantial equity interest in or a substantial
portion of the assets of the Partnership.
Section 5.3 Consents. The Sellers shall cause the Partnership to use its
reasonable best efforts to obtain the Private Consents and the Governmental
Consents prior to the Closing Date. The Sellers shall cause the Partnership to
use its reasonable best efforts to obtain any consents required in connection
with any pharmacy licenses or home healthcare licenses to the extent requested
by Parent or the Buyers. Parent and Buyers shall use their reasonable best
efforts to obtain any consents required in connection with any pharmacy licenses
or home healthcare licenses necessary to satisfy the provisions of Article VI
hereof. After the Closing, the Sellers will cooperate with the Buyers to make
any other filings with any Governmental Entities in connection with any pharmacy
licenses or home healthcare licenses to the extent requested by Parent or the
Buyers.
Section 5.4 Access.
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(a) Between the date hereof and the Closing Date, the Sellers shall cause the
Partnership to afford to Buyers and their authorized representatives full access
during business hours and upon reasonable notice to the offices, properties,
books, records, and officers and other items of the Partnership, and the work
papers of their independent accountants, relating to work done by such
accountants with respect to the Partnership, and otherwise provide such
assistance as is reasonably requested by Buyers in order that Buyers may have a
full opportunity to make such investigation and evaluation as it shall
reasonably desire to make of the business and affairs of the Partnership. In
addition, the Sellers shall cause the Partnership to cooperate fully (including
providing introductions where necessary) with Buyers to enable Buyers to contact
such third parties, including customers, patients, referral sources, prospective
customers, prospective patients, prospective referral sources, agencies, vendors
or suppliers of the Partnership, as Buyers deems reasonably necessary to
complete its due diligence; provided, that, (i) a representative of Sellers will
be entitled to be present at any meeting with any referral sources and (ii)
Buyers shall not be entitled to contact any employees of the Partnership (other
than the Sellers) without the prior consent of the Sellers' Representative
(which consent shall not be unreasonably withheld). All requests for information
made pursuant to this Section 5.4(a) shall be directed to such Person as may be
designated by the Sellers' Representative.
(b) Between the date hereof and the Closing Date, the Sellers shall cause the
Partnership to deliver to Buyers monthly unaudited consolidated balance sheets
and statements of earnings of the Partnership, prepared in a manner consistent
with prior periods. Between the date hereof and the Closing Date, on a bi-weekly
basis, the Sellers shall cause the Partnership to deliver to Buyers an unaudited
report setting forth the amount of any cash distributions since the date of the
financial statements most recently provided to the Buyers and a list of current
accounts payable and current accounts receivable; provided, that a current list
of accounts receivable need only be provided on a weekly basis.
Section 5.5 Supplemental Information. The Partnership shall notify Buyers of any
emergency or other change other than in the Ordinary Course of Business of the
Partnership or the commencement or threat of any litigation. Each Seller shall
promptly notify Buyers in writing if any Seller should discover that any
representation or warranty made in this Agreement by such Seller or on behalf of
the Partnership was when made, or has subsequently become, untrue in any
respect. No disclosure pursuant to this Section 5.5 will be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any inaccuracy,
misrepresentation, breach of warranty or breach of agreement.
Section 5.6 Transaction Costs. After the Closing, the Buyers shall cause the
Partnership to promptly pay when due (i) all previously disclosed Transaction
Costs that have been deducted from the Purchase Price that were not paid prior
to the Closing Date, and (ii) and any Transaction Cost that was not deducted
from the Purchase Price but for which Buyers have received payment pursuant to
Article VIII.
Section 5.7 Transfer Taxes. The Sellers agree to pay all applicable transfer,
sales, stamp or other Taxes, if any, associated with the sale of the Partnership
Interests to Buyers.
Section 5.8 Tax Matters. The following provisions shall govern the allocation of
responsibility as between Buyers, Sellers and the Partnership for certain tax
matters following the Closing Date:
(a) Each Seller shall jointly and severally indemnify the Partnership and Buyers
and hold them harmless from and against any loss, claim, liability, expense or
other damage attributable to (i) any and all Taxes (or the non-payment thereof)
of the Partnership for all taxable periods ending on or before the Closing Date
and the portion through the end of the Closing Date for any taxable period that
includes (but does not end on) the Closing Date (a "Pre-Closing Tax Period") but
not including, for this purpose, any federal income Taxes of the Partnership for
any Pre-Closing Tax Period during which the Partnership is a member of the
affiliated group of corporations filing a consolidated return for federal income
tax purposes, the common parent of which is Parent, and (ii) any and all Taxes
of any Person (other than the Partnership) imposed on the Partnership as a
transferee or successor, by contract or pursuant to any law, rule or regulation,
which Taxes relate to an event or transaction occurring before the Closing Date;
provided, however, that Sellers shall be liable only to the extent that such
Taxes exceed the amount, if any, reserved for such Taxes (excluding any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) on the face of the Latest Balance Sheet (rather than in any notes
thereto). Sellers shall reimburse Buyers for any Taxes of the Partnership which
are the responsibility of Sellers pursuant to this Section 5.8(a) within fifteen
(15) Business Days after payment of such Taxes by Buyers or Partnership.
(b) In the case of any taxable period that includes (but does not end on) the
Closing Date, (a "Straddle Period"), the amount of any Taxes based on or
measured by income or receipts of the Partnership for the Pre-Closing Tax Period
shall be determined based on an interim closing of the books as of the close of
business on the Closing Date and the amount of other Taxes of the Partnership
for a Straddle Period which relate to the Pre-Closing Tax Period shall be deemed
to be the amount of such Tax for the entire taxable period multiplied by a
fraction the numerator of which is the number of days in the taxable period
ending on the Closing Date and the denominator of which is the number of days in
such taxable period.
(c) The Sellers will prepare and file, or will cause to be prepared and filed,
all Partnership Tax Returns for all taxable periods ending prior to the Closing
Date that are required to be filed after the Closing Date, including the federal
income tax return relating to the Partnership's short taxable year described in
Section 1362(e)(1)(A) of the Code, and the Sellers shall timely pay all Taxes
shown as due on such Tax Returns. All such Tax Returns shall be provided to the
Buyer for its timely review and comment not less than 15 Business Days prior to
the due date for any such Tax Return, taking into account all timely filed
extensions.
(d) Except as set forth in Sections 5.8(a), 5.8(b) and 5.8(c), and subject to
the provisions of Section 8.2(a)(vi) of this Agreement, the Sellers will have no
liability, and will not be required to indemnify the Partnership or the Buyer,
for any Taxes incurred by the Partnership on and after the Closing Date.
Section 5.9 Tax Information. The Sellers and Buyers will provide each other with
such cooperation and information as each of them reasonably may request of the
other in filing any return, amended return or claim for refund of Taxes,
determining a liability for Taxes or a right to a refund of Taxes or in
conducting any audit or proceeding in respect of Taxes of the Partnership. Such
cooperation and information shall include providing copies of relevant returns
of Taxes of the Partnership or portions thereof, together with associated
schedules and related work papers and documents relating to rulings or other
determinations by Taxing Authorities. Each party shall make its employees
available on a mutually convenient basis to provide explanation of any documents
or information provided hereunder and shall retain and provide records and
information reasonably relevant to any such return preparation, liability
determination, refund request, audit or other proceeding.
Section 5.10 401(k) Plan. Prior to the Closing, the Partnership shall amend its
401(k), as necessary, to comply with all applicable provisions of ERISA and the
Code including, without limitation, amendments necessary to bring the plan into
compliance with the Uruguay Round Agreements Act, the Uniformed Services
Employment and Reemployment Rights Act of 1994, the Small Business Job
Protection Act of 1996, the Taxpayer Relief Act of 1997, the Internal Revenue
Service Restructuring and Reform Act of 1998, the Community Renewal Tax Relief
Act of 2000 and the Economic Growth and Tax Relief Reconciliation Act of 2001.
Effective as of a date prior to Closing, the Partnership shall terminate its
401(k) plan and shall cause all active participants to become fully (100%)
vested in their plan accounts as of such termination date.
Section 5.11 Employee Benefits. Immediately after the Closing, Parent shall
cause the Partnership to become a participating employer in Parent's 401(k)
plan, and all employees of the Partnership shall be eligible to participate in
Parent's 401(k) plan in accordance with the plan's terms; provided, however,
that an employee's service with the Partnership prior to the Closing shall be
counted for purposes of determining eligibility and vesting service under
Parent's 401(k) plan. After the Closing, Buyers shall continue to maintain the
Partnership's Employee Benefits Plans (except the 401(k) Plan) until it is
economically and administratively feasible to provide participation in
comparable plans of the Buyers or Parent. Immediately prior to the Closing, the
Partnership shall pay to its employees the cash value equivalent of the
employees' vacation accrued but not taken as of the date of such payment, in
full satisfaction of such employee's vacation. At such time that the employees
of the Partnership are eligible for such plans of the Buyers or Parent, each
such employee's service with the Partnership, Buyer and Parent shall be counted
for all purposes and such employees shall be given credit for any deductible
that he had incurred during the year in which he or she became eligible for the
Buyer or Parent plans.
Section 5.12 Employee Matters. At or promptly after the Closing, Buyers shall
cause the Partnership to offer to enter into an employment agreement in the form
of Exhibit I hereto with each of Christopher Mach, Elsa Guerra, Susan Cork,
Daksha Parikh, Farad Torabi and Renee Boyette. Sellers agree that to use their
reasonable best efforts (which shall not require any Seller to pay any monetary
amounts) to cause each of Christopher Mach, Elsa Guerra, Susan Cork, Daksha
Parikh, Farad Torabi and Renee Boyette to enter into an employment agreement in
the form of Exhibit I hereto with the Partnership as soon as practicable.
Section 5.13 Efforts to Close. Subject to the rights of Buyers and Sellers
hereunder, Buyers and Sellers shall use their respective reasonable best efforts
to take all actions and to do all things necessary to consummate the
transactions contemplated by this Agreement (including satisfaction, but not
waiver, of the Closing conditions set forth in Sections 6.2 and 6.1, as
applicable). Sellers agree to cause Forum Twenty-Two Enterprises, L.P. (the
"Lessor") to negotiate, and Buyers agree to negotiate in good faith the terms of
the Lease containing the material terms set forth in Exhibit H with respect to
the premises located at 9701 Richmond Avenue, Houston, Texas.
Article VI.
CONDITIONS
Section 6.1 Conditions to Obligations of Buyers. The obligation of Parent and
Buyers to consummate the transactions contemplated by this Agreement is subject
to the fulfillment or waiver by Buyers at or prior to the Closing of the
following conditions:
(a) Representations and Warranties. The representations and warranties of the
Sellers set forth in this Agreement shall be true and correct in all material
respects (except that any representations or warranties qualified by materiality
or Material Adverse Effect shall be true and correct in all respects) as of the
Closing Date as though then made and as though the Closing Date had been
substituted for the date of this Agreement throughout such representations and
warranties, except for any representations and warranties made as of a specified
date (other than the date hereof), which representations and warranties shall
only need to have been true and correct on and as of such date.
(b) Performance of Obligations. The Sellers shall have performed in all material
respects all obligations required to be performed by them under this Agreement
at or prior to the Closing Date.
(c) No Material Adverse Effect. There shall have been no changes that have had
or, with the passage of time could reasonably have a Material Adverse Effect on
the Partnership since the date of this Agreement.
(d) Consents. The Sellers shall have caused the Partnership to obtain all
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Private Consents referred to in Section 3.4(b).
(e) Regulatory Consents. All notices, reports and other filings required to be
made prior to the Closing Date by the Sellers, the Partnership and its
Affiliates, or Buyers, and all consents, registrations, approvals, permits and
authorizations required to be obtained prior to the Closing Date by the Sellers,
the Partnership and its Affiliates, or Buyers, from any governmental entity or
agent, in connection with the execution and delivery of this Agreement, the
Related Documents and the other exhibits hereto and the consummation of the
transactions contemplated by this Agreement shall have been made or obtained,
except where the failure to make any such filings or obtain any such
governmental consents would not have a Material Adverse Effect on Buyers, their
Affiliates or the Partnership.
(f) Government Action. There shall not be threatened, instituted or pending any
order, action or proceeding by, or any decree, statute, law ordinance, rule or
regulation entered, enacted, promulgated, enforced or issued before, any
Governmental Entity (i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions; (ii) imposing or seeking to impose material
limitations on the ability of Buyers or any of their Affiliates to acquire or
hold or to exercise full rights of ownership of any securities of the
Partnership; (iii) imposing or seeking to impose material limitations on the
ability of Buyers or their Affiliates to combine and operate the business and
assets of the Partnership; (iv) seeking to prohibit direct or indirect ownership
or operation by Buyers or any of their Affiliates of all or a material portion
of the business or assets of the Partnership, or to compel Buyers or any of
their Affiliates or the Partnership to dispose of or to hold separately all or a
material portion of the business or assets of Buyers and their Affiliates or of
the Partnership, as a result of the transactions contemplated hereby; (v)
seeking to invalidate or render unenforceable any material provision of this
Agreement or any of the Related Documents; (vi) requiring or seeking to require
divestiture by Buyers of any portion of the business, assets or property of the
Partnership or of Buyers; or (vii) otherwise relating to and materially
adversely affecting the transactions contemplated hereby.
(g) Prohibitions. There shall not be any action taken, or any Law enacted,
entered, enforced, promulgated, issued or deemed applicable to the transactions
contemplated hereby by any governmental entity which would reasonably be
expected to result, directly or indirectly, in any of the consequences referred
to in Section 6.1(f).
(h) Opinion. Buyers shall have received the opinion of Fulbright &
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Jaworski, L.L.P., counsel to the Sellers, dated the Closing Date
substantially in the form of Exhibit C.
(i) At the Closing Date, the Partnership shall deliver to Buyers all of the
following:
(i) a certificate executed by each Seller stating that the conditions
precedent set forth in subsections (a), (b) and (c) above have been
satisfied;
(ii) copies of the Private Consents and the governmental consents referred to
in subsections (d) and (e) above or, in the case of governmental consents,
evidence that reasonably establishes that they have been obtained;
(iii) evidence that the Partnership has terminated its 401(k) plan prior to
Closing;
(iv) evidence of payment of outstanding Indebtedness and release of all Liens
set forth in Section 3.17 of the Disclosure Schedule in form and substance
reasonably satisfactory to Buyers;
(v) copies of (A) the certificate of limited partnership of the Partnership,
certified by the Secretary of State of the State of Texas, and (B)
Certificates of Good Standing from the Secretary of State of each State in
which the Partnership is incorporated or required to be qualified to do
business, evidencing the good standing of the Partnership in each such
jurisdiction;
(vi) an executed Subordination Agreement (as defined in the Convertible
Note) from each Seller;
(vii) an executed employment agreement, in the form attached hereto as Exhibits
D-1, D-2 and D-3, from Azar Delpassand, Mehrdad Norouzian, and Maryam
Panahi, respectively;
(viii) an executed consulting agreement, in the form attached hereto as
Exhibit E, from Bijan Imani;
(ix) an executed noncompetition agreement, in the form attached hereto as
Exhibit F, from each Seller;
(x) an amended and restated lease, with respect to the Partnership's premises
located at 9701 Richmond Avenue, Houston, Texas, in a form mutually
agreeable to Buyers and Sellers' Representative, containing the material
terms set forth in Exhibit H, executed by the Lessor; and
(xi) such other certificates and instruments as Buyers may reasonably request
related to the transactions contemplated hereby.
Section 6.2 Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions contemplated hereby is subject to the
satisfaction or waiver by the Sellers' Representative at or prior to the Closing
Date of the following conditions:
(a) Representations and Warranties. The representations and warranties of Parent
and Buyers set forth in this Agreement shall be true and correct in all material
respects (except that any representations or warranties qualified by materiality
shall be true and correct in all respects) as of the Closing Date as though then
made and as though the Closing Date had been substituted for the date of this
Agreement throughout such representations and warranties, except for any
representations and warranties made as of a specified date (other than the date
hereof), which representations and warranties shall only need to have been true
and correct on and as of such date.
(b) Performance of Obligations. Buyers shall have performed in all material
respects all obligations required to be performed by it under this Agreement at
or prior to the Closing Date.
(c) No Material Adverse Effect. There shall have been no changes that have had
or, with the passage of time could reasonably have a material adverse effect on
the assets, condition (financial or otherwise), operating results, customer,
payor, referral source, employee or supplier relations, or prospects of Parent
and its subsidiaries, taken as a whole, since the date of this Agreement.
(d) Regulatory Consents. All notices, reports and other filings required to be
made prior to the Closing Date by the Sellers, the Partnership and its
Affiliates, or Buyers, and all consents, registrations, approvals, permits and
authorizations required to be obtained prior to the Closing Date by the Sellers,
the Partnership and its Affiliates, or Buyers, from any governmental entity or
agent, in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement shall have been
made or obtained, except where the failure to make any such filings or obtain
any such governmental consents would not have a Material Adverse Effect on the
Partnership.
(e) Government Action. There shall not be threatened, instituted or pending any
order, action or proceeding by, or any decree, statute, law ordinance, rule or
regulation entered, enacted, promulgated, enforced or issued before, any
Governmental Entity (i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions; (ii) seeking to invalidate or render
unenforceable any material provision of this Agreement or any of the Related
Documents; (iii) otherwise relating to and materially adversely affecting the
transactions contemplated hereby.
(f) Prohibition. There shall not be any action taken, or any Law enacted,
entered, enforced, promulgated, issued or deemed applicable to the transactions
contemplated hereby by any governmental entity which would reasonably be
expected to result, directly or indirectly, in any of the consequences referred
to in Section 5.2(d).
(g) At the Closing Date, Buyers shall deliver to the Sellers all of the
following:
(i) the Note Consideration and the Cash Consideration;
(ii) a certificate of an appropriate officer of the Parent and Buyers stating
that the conditions precedent set forth in subsections (a) and (b) above
have been satisfied;
(iii) a side letter of Parent in respect of the Convertible Notes;
(iv) an employment agreement for Azar Delpassand, Mehrdad Norouzian, and Maryam
Panahi, in the form attached hereto as Exhibits D-1, D-2 and D-3,
respectively, executed by the Partnership;
(v) a consulting agreement, in the form attached hereto as Exhibit E, for
Bijan Imani, executed by Buyers;
(vi) an amended and restated lease, with respect to the Partnership's premises
located at 9701 Richmond Avenue, Houston, Texas, in a form mutually
agreeable to the Buyers and the Sellers' Representative, containing the
material terms set forth in Exhibit H, executed by the Partnership; and
(vii) such other certificates and instruments as Sellers' Representative
reasonably requests related to the transactions contemplated hereby.
Article VII.
TERMINATION
Section 7.1 Method of Termination. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned only as follows:
(a) By the mutual written consent of Sellers' Representative and Buyers;
(b) By Sellers' Representative on the one hand or Buyers on the other hand if
the other party or parties shall have failed to comply in any material respect
with any of its or their covenants or agreements contained in this Agreement
required to be complied with prior to the date of such termination, which
failure to comply has not been cured within 30 days following receipt by such
party of written notice from the non-breaching party or parties of such failure
to comply;
(c) By Sellers' Representative on the one hand or Buyers on the other hand if
there has been (i) a breach by the other party or parties of any representation
or warranty that is not qualified by materiality which has the effect of making
such representation or warranty not true and correct in all material respects or
(ii) a breach by the other party of any representation or warranty that is
qualified as to materiality, in each case which breach has not been cured within
30 days following receipt by the breaching party or parties from the
non-breaching party or parties of written notice of the breach;
(d) By Sellers' Representative after August 3, 2002, if any of the conditions
set forth in Section 6.2 hereof, to which the Sellers' obligations are subject,
have not been fulfilled or waived, unless such fulfillment has been frustrated
or made impossible by any act or failure to act of the Sellers;
(e) By Buyers after August 3, 2002, if any of the conditions set forth in
Section 6.1 hereof, to which Buyers are subject, have not been fulfilled or
waived, unless such fulfillment has been frustrated or made impossible by any
act or failure to act of Buyers;
(f) By Buyers, if there has been any breach of Section 5.2 of this
Agreement; or
(g) By Sellers' Representative or Buyers if a court or governmental entity of
competent jurisdiction institutes an order prohibiting the consummation of the
transactions contemplated by this Agreement, provided that the order is not the
result of an action or proceeding instituted by the terminating party.
Section 7.2 Effect of Termination. In the event of a termination of this
Agreement pursuant to Section 7.1. hereof, each party shall pay the costs and
expenses incurred by such party in connection with this Agreement, and no party
(or any of its officers, directors, employees, agents, representatives,
stockholders or partners) shall be liable to any other party for any costs,
expenses, damage or loss of anticipated profits hereunder. Upon termination of
this Agreement by the Seller's Representative pursuant to the provisions of
Section 7.1(b) or Section 7.1(c), the Escrow Fund shall be promptly distributed
to the Sellers as liquidated damages, and upon any other termination of the
Agreement, the Escrow Fund shall be promptly distributed to Buyers. In the event
of any termination of this Agreement, all provisions of this Agreement except
for Article VIII and this Section 7.2 shall forthwith become void and have no
effect, without any liability hereunder on the part of any party or its
directors, officers or stockholders.
Article VIII.
SURVIVAL; INDEMNIFICATION
Section 8.1 Survival.
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(a) Notwithstanding any investigation made by or on behalf of any of the parties
hereto or the results of any such investigation and notwithstanding the
participation of such party in the Closing, the representations and warranties
contained in this Agreement, and the indemnification obligations of the parties
with respect thereto, shall survive the Closing 18-months after the Closing
Date; provided, however, that (a) the representations and warranties contained
in Sections 2.2, 2.3, 2.4, 3.1, 3.2 and 3.33 and the indemnification obligations
of the parties with respect thereto, shall survive indefinitely, and (b) the
representations and warranties contained in Sections 3.8, 3.11, 3.12(a),
3.12(b), 3.12(c), 3.13, 3.16, 3.23, 3.24 and 3.25 and the indemnification
obligations of the parties with respect thereto, shall survive for six months
after the expiration of the statute of limitations governing the respective
matters set forth therein. Notwithstanding the foregoing, any representation or
warranty, and the indemnification obligations with respect thereto, that would
otherwise terminate in accordance with this Section 8.1 shall continue to
survive, if notice of a claim shall have been timely given under Section 8.7 on
or prior to such termination date, until such claim has been satisfied or
otherwise resolved as provided in this Article VIII.
(b) Except as otherwise expressly set forth herein, each of the covenants set
forth in this Agreement, and the indemnification obligations of the parties with
respect thereto, shall survive the Closing indefinitely.
Section 8.2 Indemnification by the Sellers.
(a) Subject to the limitations set forth in Section 8.4 and elsewhere in this
Agreement, from and after Closing, the Sellers hereby jointly and severally
agree to indemnify Parent, Buyers, the Partnership and their respective
successors, affiliates, officers, directors, employees, agents and shareholders
(collectively, the "Buyers Indemnified Parties"), and hold them harmless against
any fine, penalty, claim, loss, liability, deficiency, damage, amount paid in
settlement, expense or cost (including all costs of investigation, defense,
legal fees and expenses), whether or not actually incurred or paid prior to the
expiration of the indemnification obligation of the Sellers hereunder
(collectively, "Losses"), which any of the Buyers Indemnified Parties may
suffer, sustain or become subject to, as a result of:
(i) any misrepresentation in any of the representations or any breach of the
warranties contained in Article III of this Agreement or in any exhibits,
schedules, certificates or other documents delivered or to be delivered by
or on behalf of the Partnership and the Sellers pursuant to the terms of
this Agreement or the Related Documents, without giving effect to any
qualifications as to materiality contained in such representations and
warranties;
(ii) any breach of, or failure to perform, any agreement or covenant of the
Partnership or the Sellers contained in this Agreement or any of the
Related Documents other than the Noncompetition Agreement;
(iii) any Claims or threatened Claims against a Buyers Indemnified Party arising
in connection with the actions or inactions of the Partnership or Sellers
or the officers, directors, partners, employees or agents of the
Partnership with respect to the business of the Partnership or its
predecessors in interest or its real property or other assets prior to the
Closing;
(iv) any of the items listed on Section 8.2 of the Disclosure Schedule;
(v) any Transaction Costs not set forth on Section 3.33 of the Disclosure
Schedule;
(vi) any liability of the Partnership or the Sellers for Taxes (including
penalties and interest) incurred in connection with or as a result of the
conversion of the Partnership to a limited partnership under Texas law,
regardless of the taxable period to which such Taxes are attributable; or
(vii) any transfer, documentary, sales, use, stamp, registration and other such
Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement and the Related Documents and the
transactions contemplated hereby and thereby that are required to be paid
by the Partnership or the Sellers (subsections (i) - (vii) together with
subsections (b) and (c) below, collectively, "Buyers Losses").
(b) The Sellers hereby jointly and severally agree to indemnify the Buyers
Indemnified Parties and hold them harmless against any Losses which any of the
Buyers Indemnified Parties may suffer, sustain or become subject to, as a result
of the inability to collect by the six month anniversary of the Closing Date any
accounts receivable of the Partnership outstanding as of the Closing Date (the
"Closing Receivables"); provided that the following conditions have been met:
(i) the Sellers shall not be responsible for any indemnification under this
Section 8.2(b) until the total amount of uncollected Closing Receivables exceeds
an amount equal 16% of the total amount of the Closing Receivables (the "Closing
Receivables Reserve") and then Sellers shall only be responsible for providing
indemnification in excess of the amount of the Closing Receivables Reserve; and
(ii) at the request of Sellers, the Partnership shall transfer an amount of
uncollected Closing Receivables, comprised of particular accounts as selected by
the Partnership in its sole discretion, to the Sellers equal to the amount of
the indemnification payment owed by the Sellers the ("Transferred Receivables").
In the event that the Partnership transfers Transferred Receivables to the
Sellers, the Sellers shall cooperate and coordinate with the Partnership in
connection with the collection of the Transferred Receivables such that the
collection of such Transferred Receivables will not unreasonably disturb or
interfere with any customer relationships of the Partnership. In the event that
the Partnership transfers Transferred Receivables to the Sellers, the Buyers
shall cause the Partnership to cooperate and coordinate with the Sellers, at the
Sellers' sole cost and expense, in connection with the collection of the
Transferred Receivables by Sellers; provided, that the Partnership shall not be
required to take any action (or permit the Sellers to take any action) that
would unreasonably disturb or interfere with any customer relationships of the
Partnership.
(c) Each Seller hereby severally and not jointly agrees to indemnify the Buyers
Indemnified Parties and hold them harmless against any Losses which any of the
Buyers Indemnified Parties may suffer, sustain or become subject to, as a result
of such Seller's misrepresentation in the representations or any breach of the
warranties contained in Article II of this Agreement.
(d) Each Seller hereby severally and not jointly agrees to indemnify the Buyers
Indemnified Parties and hold them harmless against any Losses which any of the
Buyers Indemnified Parties may suffer, sustain or become subject to as a result
of such Seller's breach of, or failure to perform, any agreement or covenant of
such Seller in the Noncompetition Agreement to which such Seller is a party.
(e) Once the occurrence of a breach of any representations or warranties has
been established, Losses shall be calculated without regard to whether such
breach caused a Material Adverse Effect on the Partnership.
Section 8.3 Indemnification by Buyers. Buyers agree to indemnify in full the
Sellers and hold them harmless against any Losses which the Partnership or any
Seller may suffer, sustain or become subject to as a result of (a) any
misrepresentation in any of the representations or any breach of the warranties
contained in Article IV of this Agreement or in any of the Related Documents,
without giving effect to any qualifications as to materiality contained in such
representations and warranties, (b) any breach of, or failure to perform, any
agreement or covenant of Buyers contained in this Agreement or any of the
Related Documents ("Seller Losses") or (c) any Claims or threatened Claims
against a Seller Indemnified Party arising in connection with the actions or
inactions of the Partnership or the officers, directors, partners, employees or
agents of the Partnership with respect to the business of the Partnership after
the Closing; except for (i) any Claim or threatened Claim to which a Buyers
Indemnified Party is entitled to indemnification pursuant to the provisions of
Section 8.2, or (ii) any Claim or threatened Claim which arises in connection
with the action or inaction of any of the Sellers, whether in such Seller's
capacity as an employee of the Partnership or otherwise.
Section 8.4 Limitations on Indemnification.
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(a) Notwithstanding the provisions of Section 8.2, the Sellers shall not be
required to indemnify or hold harmless any of the Buyers Indemnified Parties on
account of any Buyers Losses under Sections 8.2(a)(i), 8.2(a)(iii) and 8.2(c)
unless the aggregate liability of the Sellers in respect of all Buyers Losses
under such Sections exceeds $125,000 (the "Threshold Amount") and, then, only to
the extent of the excess. The aggregate liability of the Sellers for any Claims
arising under Sections 8.2(a)(i), 8.2(a)(iii) and 8.2(c) of this Agreement shall
not exceed an amount equal to $3,000,000 (the "Liability Amount"). The amount of
any Buyers Losses shall be reduced by (1) any amount actually received by a
Buyer Indemnified Parties with respect thereto under any insurance coverage or
from any other party alleged to be responsible therefor and (2) the amount of
any Tax benefit reasonably available to Buyer Indemnified Parties relating
thereto. The Sellers shall be subrogated to the rights of any Buyer Indemnified
Party in respect of any insurance policy of the Partnership in existence prior
to the Closing Date to the extent of any indemnification made by the Sellers.
Buyers and the Sellers agree that, except as set forth in Section 8.4(c),
indemnification on account of Buyers Losses under Sections 8.2(a)(i),
8.2(a)(iii) and 8.2(c) shall first be satisfied by an offset from the unpaid
principal amount, and in accordance with Section 8, of the Escrow Notes and in
the case of indemnification sought under Sections 8.2(a)(i) and 8.2(a)(iii) on a
pro rata basis from each Seller in accordance with such Seller's percentage
interest in the Partnership, but in no event shall exceed the Liability Amount.
(b) Notwithstanding the provisions of Section 8.3, Buyers shall not be required
to indemnify or hold harmless any of the Partnership or any of the Sellers on
account of any Seller Losses under Sections 8.3(a) and 8.3(c) unless the
aggregate liability of Buyers in respect of all Seller Losses exceeds the
Threshold Amount, and then only to the extent of the excess. The aggregate
liability of Buyers for any Claims arising under Sections 8.3(a) and 8.3(c) of
this Agreement shall not exceed the Liability Amount. The amount of any Seller
Losses shall be reduced by (a) any amount actually received by a Seller
Indemnified Parties with respect thereto under any insurance coverage or from
any other party alleged to be responsible therefor and (b) the amount of any Tax
benefit reasonably available to Seller Indemnified Parties relating thereto.
(c) The limitations set forth in clauses (a) and (b) of this Section 8.4 shall
not apply to (i) breaches or inaccuracies of the representations and warranties
contained in Sections 2.2, 2.3, 2.4, 3.1, 3.2, 3.8, 3.11, 3.12(a), 3.12(b),
3.12(c), 3.13, 3.16, 3.23, 3.24, 3.25 and 3.33, (ii) Losses by reason of any
claims brought on the basis of willful misconduct or any intention to deceive,
and (iii) any indemnity obligations set forth in Sections 8.2(a)(ii),
8.2(a)(iv), 8.2(a)(v), 8.2(a)(vi), 8.2(b), 8.2(d) and/or 8.3(b) and (iv) Claims
for Transaction Costs not set forth on Section 3.33 of the Disclosure Schedule.
Buyers and the Sellers agree that Buyers may, in its sole discretion, offset any
indemnification on account of Buyers Losses set forth in this Section 8.4(c)
from the unpaid principal amount of the Convertible Notes or may pursue any
other available remedies.
Section 8.5 Method of Asserting Claims. As used herein, an "Indemnified Party"
shall refer to a "Buyers Indemnified Party," or a "Seller Indemnified Party," as
applicable, the "Notifying Party" shall mean, with respect to the Buyer
Indemnified Parties, the Buyer and, with respect to Seller Indemnified Parties,
the Seller's Representative, and the "Indemnifying Party" shall refer to the
party (or parties) hereto obligated to indemnify such Notifying Party's
Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a defendant in or
party to any investigation, audit, action or proceeding, judicial or
administrative, instituted by any third party for the liability or the costs or
expenses of which are Buyer Losses or Seller Losses, as the case may be, the
Notifying Party shall give the Indemnifying Party prompt notice thereof. The
failure to give such notice shall not affect any Indemnified Party's ability to
seek reimbursement unless, and only to the extent that, such failure has
materially and adversely affected the Indemnifying Party's ability to defend
successfully a Claim. The Indemnifying Party shall be entitled to contest and
defend such Claim; provided, that the Indemnifying Party (i) has a reasonable
basis for concluding that such defense may be successful and (ii) diligently
contests and defends such Claim. Notice of the intention to so contest and
defend shall be given by the Indemnifying Party to the Notifying Party within 15
Business Days after the Notifying Party's notice of such Claim. Failure by the
Indemnifying Party to give such notice within such period shall be deemed to be
a decision by the Indemnifying Party not to contest and defend. Such contest and
defense shall be conducted by attorneys who are reasonably acceptable to the
Indemnified Party, retained by the Indemnifying Party. The Notifying Party shall
be entitled at any time, at its own cost and expense (which expense shall not
constitute a Loss unless the Notifying Party reasonably determines that because
of a conflict of interest, may not adequately represent, any interests of the
Indemnified Parties, and only to the extent that such expenses are reasonable),
to participate in such contest and defense and to be represented by attorneys of
its or their own choosing. If the Notifying Party elects to participate in such
defense, the Notifying Party will cooperate with the Indemnifying Party in the
conduct of such defense. Neither the Notifying Party nor the Indemnifying Party
may concede, settle or compromise any Claim without the consent of the other
party, which consents will not be unreasonably withheld. Notwithstanding the
foregoing, (i) if a Claim seeks relief other than the payment of monetary
damages, (ii) if the subject matter of a Claim relates to the ongoing business
of any of the Indemnified Parties, which Claim, if decided against any of the
Indemnified Parties, would materially adversely affect the ongoing business or
reputation of any of the Indemnified Parties, or (iii) the Indemnified Parties
would not be fully indemnified with respect to such Claim, then, in each such
case, the Indemnified Parties alone shall be entitled to contest, defend and
settle such Claim in the first instance and, if the Indemnified Parties do not
contest, defend or settle such Claim, the Indemnifying Party shall then have the
right to contest and defend (but not settle) such Claim.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party that does not involve a Claim, the Notifying Party shall
deliver a notice of such claim, and an estimate of the amount (if reasonably
practicable) of the applicable Buyer Losses or Seller Losses, as the case may be
with reasonable promptness to the Indemnifying Party, but in any event prior to
the expiration of the applicable survival period set forth in Section 8.1. If
the Indemnifying Party notifies the Notifying Party that it does not dispute the
claim described in such notice or fails to notify the Notifying Party within 30
Business Days after delivery of such notice by the Notifying Party whether the
Indemnifying Party disputes the claim described in such notice, the Buyer Losses
or Seller Losses, as the case may be, in the amount specified in the Notifying
Party's notice will be conclusively deemed a liability of the Indemnifying Party
and the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability
with respect to such claim, the Indemnifying Party and the Notifying Party will
proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through such negotiations within 30 days after the delivery of the
Notifying Party's notice of such claim, such dispute shall be resolved fully and
finally in New York City, New York by an arbitrator selected pursuant to, and an
arbitration governed by, the Commercial Arbitration Rules of the American
Arbitration Association, except that in the event of any conflict between those
rules and the arbitration provisions set forth herein, the provisions set forth
herein shall govern and control.
(c) Persons eligible to serve as arbitrator (the "Arbitrator") shall be members
of the AAA Large, Complex Case Panel or a CPR Panel of Distinguished Neutrals,
or who have professional credentials similar to those persons listed on such AAA
or CPR panels. The Sellers' Representative and Parent shall mutually agree upon
an Arbitrator, provided that if no such agreement is reached within five
Business Days, then the arbitrator shall be selected as follows: (i) the
Sellers' Representative shall select one arbitrator on or before the expiration
of the time period set forth in the preceding sentence, (ii) Parent shall select
one arbitrator on or before the expiration of the time period set forth in the
preceding sentence and (iii) the two arbitrators so selected shall, within five
Business Days of their selection, appoint a single arbitrator who shall be
unaffiliated with the parties hereto and with the arbitrators selected pursuant
to (i) and (ii) of this sentence who shall act as the Arbitrator. The Arbitrator
shall base the award on the applicable law and judicial precedent which would
apply if the Claim were decided by a United States District Judge, and the
Arbitrator shall have no authority to render an award which is inconsistent
therewith. The language of the arbitration, the submission of all writings, the
decision of the Arbitrator and the reasons supporting such decisions shall be in
English. The award shall be in writing and include the findings of fact and
conclusions of law upon which it is based. Unless the parties agree otherwise,
discovery will be limited to an exchange of directly relevant documents.
Depositions will not be taken except as needed in lieu of a live appearance or
upon mutual agreement of the parties. The Arbitrator shall resolve any discovery
disputes. Subject to the limitations contained in this Section 8.5, the
Arbitrator and counsel of record will have the power of subpoena process as
provided by law. The Arbitrator shall resolve the dispute within as soon as
reasonably practicable, based upon the schedule established by the Arbitrator,
but in any event the award of the Arbitrator shall be rendered within 120 days
following the selection of the Arbitrator. Judgment upon the award rendered by
such Arbitrator my be entered in any court of competent jurisdiction.
(d) Each party shall bear half of the fees and expenses of the Arbitrator,
unless the Arbitrator shall determine that fairness requires that such fees and
expenses be allocated among the parties in a different manner, including without
limitation, requiring the losing party to pay all such expenses.
(e) Any attorney-client privilege and other protection against disclosure of
privileged or confidential information, including without limitation any
protection afforded the work-product of any attorney, that could otherwise be
claimed by any party shall be available to, and may be claimed by, any such
party in any arbitration proceeding. No party waives any attorney-client
privilege or any other protection against disclosure of privileged or
confidential information by reason of any contained in or done pursuant to, the
arbitration provisions hereof.
(f) Notwithstanding any contrary provisions in this Section, any party hereto is
entitled to seek emergency, provisional or summary relief under applicable Law
with respect to any breach of this Agreement or any Related Document, and
accordingly such party may pursue injunctive relief with respect to any such
breach, including specific performance of any covenants, promises or agreements
or an order enjoining a party from any threatened, or from the continuation of
any actual breach of covenants, promises or agreements; provided, that, any such
emergency, provisional or summary relief must be sought in any state or federal
court located in Harris County, Texas. Immediately following the issuance of any
such relief, the parties agree to the stay of any judicial proceedings pending
mediation or arbitration of all underlying claims between the parties.
(g) The Sellers' Representative shall act on behalf of the Sellers with respect
to any notices or consents required to be given or received under this Article
VIII.
Section 8.6 No Double Recovery. Any liability for indemnification hereunder
shall be determined without duplication of monetary recovery by reason of the
state of facts giving rise to such liability constituting a breach of more than
one representation, warranty, covenant or agreement. This Section 8.6 shall not
prevent a party from arguing alternative theories of liability with respect to
any state of facts giving rise to a claim for indemnification.
Section 8.7 No Special Damages. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT
OR ANY RELATED DOCUMENT, NO PARTY SHALL BE LIABLE UNDER THIS ARTICLE VIII OR
OTHERWISE IN RESPECT OF THIS AGREEMENT OR ANY RELATED DOCUMENT FOR EXEMPLARY,
SPECIAL, PUNITIVE, INDIRECT, REMOTE, SPECULATIVE OR CONSEQUENTIAL DAMAGES EXCEPT
TO THE EXTENT ANY SUCH PARTY SUFFERS SUCH DAMAGES TO AN UNAFFILIATED THIRD PARTY
IN CONNECTION WITH A THIRD PARTY CLAIM, IN WHICH EVENT SUCH DAMAGES SHALL BE
RECOVERABLE.
Section 8.8 Investigation and Due Diligence. No investigation, examination,
audit, inspection or other due diligence prior to the Closing shall affect the
parties' respective rights to indemnification pursuant to this Agreement or any
Related Document; provided, that, the foregoing is not intended to affect the
representations, warranties and other agreements as modified by the Disclosure
Schedule.
Section 8.9 Sole and Exclusive Remedy. After the Closing, the rights set forth
in this Article VIII shall be each party's sole and exclusive remedies against
the other parties hereto for misrepresentations or breaches of covenants
contained in this Agreement or the Related Agreements, and in furtherance of the
foregoing, each of the parties on behalf of itself and its Affiliates, hereby
waives and releases the other parties hereto (and such other parties'
Affiliates) from, to the fullest extent permitted under any Laws, any and all
rights, claims and causes of action it or its Affiliates may have against the
other party hereto except as provided herein; provided, that this limitation
shall not apply in the event of fraud; and provided further any party hereto is
entitled to seek emergency, provisional or summary relief under applicable Law
with respect to any breach or threatened breach of this Agreement or the Related
Documents, and accordingly such party may pursue injunctive relief with respect
to any such breach, including specific performance of any covenants, promises or
agreements or an order enjoining a party from any threatened, or from the
continuation of any actual breach of covenants, promises or agreements.
Article IX.
MISCELLANEOUS AND GENERAL
Section 9.1 Modification or Amendment. Subject to the provisions of applicable
law, the parties hereto may modify or amend this Agreement, only by written
agreement executed and delivered by the Sellers' Representative, on behalf of
all Sellers, and a duly authorized officer of the Buyers specifically stating
that it amends this Agreement.
Section 9.2 Waiver. The conditions to each of the parties' obligations to
consummate the transactions contemplated hereby are for the sole benefit of such
party and may be waived by such party in whole or in part to the extent
permitted by applicable law. No course of dealing between or among any persons
having any interest in this Agreement will be deemed effective to modify or
amend any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
Section 9.3 Counterparts. This Agreement may be executed in any number of
original or facsimile counterparts, each such counterpart being deemed to be an
original instrument, and all such counterparts shall together constitute the
same agreement.
Section 9.4 Governing Law; Forum Selection.
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(a) This Agreement shall be deemed to be made in and in all respects shall be
interpreted, construed and governed by and in accordance with the law of the
state of New York without regard to the conflict of law principles thereof.
(b) FOR PURPOSES OF SECTION 8.5(f), EACH PARTY (i) CONSENTS TO SUBMIT ITSELF TO
THE PERSONAL JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE STATE OF TEXAS, OR
ANY TEXAS STATE COURT LOCATED IN HARRIS COUNTY, IF ANY DISPUTE ARISES OUT OF
THIS AGREEMENT, (ii) AGREES THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH
PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT
AND (iii) AGREES THAT IT WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT IN
ANY COURT OTHER THAN SUCH A FEDERAL COURT SITTING IN THE STATE OF TEXAS OR TEXAS
STATE COURT SITTING IN HARRIS COUNTY.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.4.
Section 9.5 Notices. All notices, demands and other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given (a) when personally delivered, (b)
when receipt is acknowledged, if sent by facsimile, telecopy or other electronic
transmission device; provided, however, that if receipt is acknowledged after
normal business hours of the recipient, notice shall be deemed to have been
given on the next Business Day, (c) one day after deposit with a nationally
recognized overnight courier, specifying next day delivery or (d) three days
after being sent by registered or certified mail, postage prepaid, return
receipt requested; provided, however, that notices of any claims pursuant to
Section 8.5(b) must first be given either by certified mail, postage prepaid,
return receipt requested or by deposit with a nationally recognized overnight
courier, specifying next day delivery with signature of delivery requested,
provided, that if such notice is returned to Buyers undelivered, notice may be
given in any other method permitted by this Section 9.5. Notices, demands and
communications to parties will, unless another address is specified in writing,
be sent to the address indicated:
if to Parent or Buyers:
Curative Health Services, Inc.
150 Motor Parkway
Hauppauge, New York 11788
Phone: (631) 232-7016
Fax: (631) 233-8107
Attention: Nancy Lanis, General Counsel
copy to:
Dorsey & Whitney LLP
50 South 6th Street
Minneapolis, Minnesota 55402
Phone: (612) 340-2600
Fax: (612) 340-2868
Attention: Timothy S. Hearn
if to the Sellers:
Bijan Imani, Sellers' Representative
56 Waterford Pointe Circle
Sugar Land, Texas 77479
Phone and Fax: (281) 265-4142
copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Phone: ( 713) 651-8482
Fax: (713) 651-5246
Attention: Jerry A. Bell, Jr.
Section 9.6 Entire Agreement. This Agreement (including any exhibits hereto),
and the Related Documents constitute the entire agreement among the parties, and
supersede all other prior agreements and understandings, both written and oral,
among the parties, with respect to the subject matter hereof.
Section 9.7 No Third Party Beneficiaries. This Agreement is not intended to
confer upon any Person other than the parties hereto any rights or remedies
hereunder other than the Parties hereto and the Sellers' Representative.
Section 9.8 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefore in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
Section 9.9 Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section, Schedule or Exhibit,
such reference shall be to a Section of, or Schedule or Exhibit to, this
Agreement unless otherwise indicated. Whenever the words "include," "includes"
or "including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation." Buyers and the Sellers agree that any rule of
law or any legal decision that would require interpretation of any ambiguities
in this Agreement against the party that drafted it is of no application and is
hereby expressly waived.
Section 9.10 Assignment. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by (a) the Partnership or any
Seller without the prior written consent of the Buyers, or (b) the Buyers
without the prior written consent of the Sellers or the Sellers' Representative;
provided, however, that the Buyers shall have the right, without the consent of
the Sellers or the Sellers' Representative, to assign all or any portion of its
rights, duties and obligations under this Agreement to any Affiliate of Buyers.
Section 9.11 Press Releases and Announcements. Except as otherwise required by
applicable Law or regulation, and except with respect to Buyers and the
Partnership following the Closing, the Sellers, Buyers and the Partnership will
not, and will not permit any of their respective Affiliates, representatives or
advisors to, issue or cause the publication of any press release or make any
other public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other parties, which consent shall not be
unreasonably withheld or delayed. Buyers, the Partnership and the Sellers'
Representative will cooperate with each other in the development and
distribution of all press releases and other public announcements with respect
to this Agreement and the transactions contemplated hereby.
Section 9.12 Definitions.
-----------
(a) Location of Certain Definitions.
-------------------------------
Term Section
Accredited Investor................................................Section 2.7
Acquisition Proposal...............................................Section 5.2
Agreement.............................................................Preamble
Annual Balance Sheet...............................................Section 3.5
Annual Financial Statements........................................Section 3.5
Arbitrator......................................................Section 8.5(c)
Buyer LLC1............................................................Preamble
Buyer LLC2............................................................Preamble
Buyers................................................................Preamble
Buyers Indemnified Parties......................................Section 8.2(a)
Buyers Losses..............................................Section 8.2(a)(vii)
Cash Consideration..............................................Section 1.2(c)
Closing............................................................Section 1.3
Closing Date.......................................................Section 1.3
Closing Receivables.............................................Section 8.2(b)
Closing Receivables Reserve.....................................Section 8.2(b)
Contracts.......................................................Section 3.4(b)
Convertible Notes...............................................Section 1.2(b)
Disclosure Schedule.................................................Article II
DOL/WHD........................................................Section 3.14(c)
EEOC...........................................................Section 3.14(c)
Employee Benefit Plan..........................................Section 3.11(a)
environment....................................................Section 3.16(e)
ERISA..........................................................Section 3.11(a)
Escrow Funds....................................................Section 1.2(e)
Escrow Note.................................................Section 1.2(d)(ii)
Exchange Act....................................................Section 4.4(a)
Financial Statements...............................................Section 3.5
GAAP...............................................................Section 3.5
General Partnership Interest..........................................Recitals
Government Programs.........................................Section 3.12(a)(i)
Governmental Consent............................................Section 3.4(a)
Governmental Entity.............................................Section 3.4(a)
Indemnified Party..................................................Section 8.5
Indemnifying Party.................................................Section 8.5
INS............................................................Section 3.14(c)
Inventory Date..................................................Section 1.5(c)
Inventory Statement.............................................Section 1.5(c)
IRS............................................................Section 3.11(b)
Latest Balance Sheet...............................................Section 3.5
Latest Financial Statements........................................Section 3.5
Laws........................................................Section 3.12(a)(i)
Lessor............................................................Section 5.13
Liability Amount................................................Section 8.4(a)
License Agreements.............................................Section 3.15(f)
Limited Partnership Interest..........................................Recitals
Losses..........................................................Section 8.2(a)
Material Adverse Effect............................................Section 3.7
Material Contracts.............................................Section 3.18(a)
Medical Waste Laws.............................................Section 3.16(h)
Medicare and Medicaid programs..............................Section 3.12(a)(i)
NLRB...........................................................Section 3.14(c)
Non-Escrow Note.............................................Section 1.2(d)(ii)
Note Consideration..............................................Section 1.2(b)
Notifying Party....................................................Section 8.5
Objection Notice................................................Section 1.5(f)
Objection Period................................................Section 1.5(f)
OFCCP..........................................................Section 3.14(c)
Organizational Documents...........................................Section 3.1
OSHA...........................................................Section 3.14(c)
Parent................................................................Preamble
Partnership...........................................................Preamble
Partnership Intellectual Property..............................Section 3.15(b)
Partnership Interests.................................................Recitals
Permits.....................................................Section 3.12(a)(i)
Pre-Closing Tax Period..........................................Section 5.8(a)
Private Consents................................................Section 3.4(b)
Private Programs............................................Section 3.12(a)(i)
Purchase Price..................................................Section 1.2(a)
Regulations....................................................Section 3.12(d)
release........................................................Section 3.16(e)
SEC.............................................................Section 4.4(a)
SEC Reports.....................................................Section 4.4(a)
Securities Act.....................................................Section 2.7
Seller Losses......................................................Section 8.3
Sellers...............................................................Preamble
Sellers' Representative.........................................Section 1.4(a)
Straddle Period.................................................Section 5.8(b)
Threshold Amount................................................Section 8.4(a)
Transferred Receivables.........................................Section 8.2(b)
Underlying Shares...............................................Section 1.2(b)
Working Capital Arbitrator......................................Section 1.5(g)
Working Capital of the Partnership..............................Section 1.5(b)
Working Capital Payment.........................................Section 1.5(a)
Working Capital Statement.......................................Section 1.5(d)
Certain Other Definitions.
"Affiliate" of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first Person. "Control" (including the terms
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
policies of a Person, whether through the ownership of voting securities, by
contract, as trustee or executor, or otherwise.
"Business Day" means any day other than Saturday, Sunday and any
other day on which commercial banks in New York City are authorized or required
by law to remain closed.
"Claim" means any third party action, audit, proceeding, claim,
investigation, subpoena or document request.
"Environmental Law" means any federal, state, local or foreign law,
statute, ordinance, regulation, judgment, order, decree, arbitration award,
agency requirement, license, permit, authorization or opinion, relating to: (a)
the protection, investigation or restoration of the environment, health and
safety, or natural resources, (b) the handling, use, presence, disposal, release
or threatened release of any Hazardous Substance or (c) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property, including but not limited to the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 USC Section 9601 et. sec.
"Hazardous Substance" means any substance or waste that is: (a)
listed, classified or regulated pursuant to any Environmental Law; (b) any
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls, radioactive materials or radon; or
(c) any other substance or waste which may be the subject of regulatory action
by any government authority pursuant to any Environmental Law.
"Indebtedness" means (a) any liability of the Partnership (i) for
borrowed money or arising out of any extension of credit to or for the account
of the Partnership (including reimbursement or payment obligations with respect
to surety bonds, letters of credit, banker's acceptances and similar
instruments), for the deferred purchase price of property or services or arising
under conditional sale or other title retention agreements, other than trade
payables arising in the Ordinary Course of Business, (ii) evidenced by notes,
bonds, debentures or similar instruments, (iii) in respect of capital leases or
(iv) in respect of an interest rate swap, cap or collar agreement or similar
arrangement, (b) any liability secured by any Lien (other than Liens arising by
an operation of law or similar statutory Liens) upon any property or assets of
the Partnership (or upon any revenues, income or profits of the Partnership
therefrom), whether or not the Partnership has assumed that liability or
otherwise become liable for the payment thereof other than trade payables
arising in the Ordinary Course of Business, or (c) any liability of others of
the type described in the preceding clause (a) or (b) in respect of which the
Partnership has incurred, assumed or acquired a liability by means of a
guaranty.
"Intellectual Property" means any or all of the following and all
rights in, arising out of, or associated therewith: (a) all United States,
international and foreign patents and applications thereof and all reissues,
divisions, renewals, extensions, provisions, continuations and
continuations-in-part thereof; (b) all inventions (whether patentable or not),
invention disclosures, improvements, drug candidates, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and all
documentation relating to any of the foregoing; (c) all copyrights, copyright
registrations and applications therefore, and all other rights corresponding
thereto throughout the world; (d) all industrial designs and any registration
and applications therefor throughout the world; (e) all trade names, logos,
common law trademarks, service marks and trade dress, trademark and service mark
registration and applications therefor throughout the world; (f) all databases
and data collections and all rights therein throughout the world; and (g) any
similar or equivalent rights to any of the foregoing anywhere in the world.
"Knowledge" means that an individual will be deemed to have
"Knowledge" of a particular fact or other matter if:
(a) such individual is actually aware of such fact or
other matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation regarding the
accuracy of any representations or warranties contained in this
Agreement.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving as a director, officer, shareholder, partner, executor, or trustee of
such Person (or in any similar capacity) has Knowledge of such fact or other
matter (as set forth in (a) and (b) above), and any such individual (and any
individual party to this Agreement) will be deemed to have conducted a
reasonably comprehensive investigation regarding the accuracy of any
representations and warranties made herein by such Person or individual.
"Licenses" means all permits, licenses, exemptions, variances and
other approvals and authorizations which are necessary to conduct the business
of the Partnership.
"Lien" means a mortgage, pledge, hypothecation, lien (statutory or
otherwise), preference, priority, security interest, security agreement,
easement, covenant, restriction, charge, claim, option, voting trust,
stockholder agreement, proxy or other encumbrance of any kind or nature
whatsoever (including any conditional sale or other title retention agreement
and any lease having substantially the same effect as any of the foregoing and
any assignment or deposit arrangement in the nature of a security device).
"Ordinary Course of Business" means an action taken by the
Partnership that:
(a) is consistent in nature, scope and magnitude with the past
practices of the Partnership and is taken in the ordinary course of
the normal day-to-day operations of the Partnership;
(b) does not require authorization by the board of managers of
the General Partner of the Partnership and does not require any
other separate or special authorization of any nature; and
(c) is similar in nature, scope and magnitude to actions
customarily taken, without any separate or special authorization, in
the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as the Partnership.
"Person" means any individual, corporation (including
not-for-profit), general or limited partnership, limited liability company,
limited liability partnership, joint venture, estate, trust, association,
organization, governmental entity or other entity of any kind or nature.
"PTO" means the United States Patent and Trademark Office.
"Registered Intellectual Property" means those United States,
international and foreign: (a) patents and patent applications (including
provisional applications) and all reissues, divisions, renewals, extensions,
provisions, continuations, foreign counterparts, and continuations-in-part
thereof; (b) registered trademarks, registered service marks, applications to
register trademarks or service marks, intent-to-use applications, or other
registrations or applications related to trademarks or service marks; (c)
registered copyrights and applications for copyright registration, in each case
that are listed on Section 3.15(c) of the Disclosure Schedule; and (d) Internet
domain names and uniform resource locators ("URLS").
"Related Documents" means the Confidentiality Agreement, dated as of
April 10, 2002, between Parent and the Partnership, the Disclosure Schedule, the
Escrow Agreement, the Convertible Notes, the Noncompetition Agreements, the side
letter entered into on the date hereof and the side letter to be entered into on
or prior to the Closing and any certificates delivered by the parties hereto in
connection with this Agreement.
"Tax" (including, with correlative meaning, the terms "Taxes" and
"Taxable") means, with respect to any Person, (a) all taxes, domestic or
foreign, including without limitation any income (net, gross or other, including
recapture of any tax items such as investment tax credits), alternative or
add-on minimum tax, gross income, gross receipts, gains, sales, use, leasing,
lease, user, ad valorem, transfer, recording, franchise, profits, property (real
or personal, tangible or intangible), fuel, license, withholding on amounts paid
to or by such Person, payroll, employment, unemployment, social security,
excise, severance, stamp, occupation, premium, environmental or windfall profit
tax, custom, duty or other tax, or other like assessment or charge of any kind
whatsoever, together with any interest, levies, assessments, charges, penalties,
additions to tax or additional amounts imposed by any Taxing Authority, (b) any
joint or several liability of such Person with any other Person for the payment
of any amounts of the type described in (a) of this definition and (c) any
liability of such Person for the payment of any amounts of the type described in
(a) as a result of any express or implied obligation to indemnify any other
Person.
"Tax Return(s)" mean all returns, consolidated or otherwise
(including without limitation informational returns), required to be filed with
any Taxing Authority.
"Taxing Authority" means any authority responsible for the
imposition or collection of any Tax.
"Transaction Costs" means the aggregate amount of any and all costs
and expenses incurred by or on behalf of the Partnership (but not by or on
behalf of the Sellers unless such expenses are the responsibility of the
Partnership) in connection with this Agreement, the Related Documents, the other
exhibits hereto and the consummation transactions contemplated hereby or thereby
including, without limitation, (i) those costs, expenses and penalties incurred
by the Partnership in connection with the pay-off and termination of any
Indebtedness, and (ii) those fees and expenses relating to any investment
banker, broker, lawyer, accountant, including, without limitation, those fees
and expenses relating to the retention of The Braff Group.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto as of the date first written above.
CURATIVE HEALTH SERVICES, INC.
By: /s/ William C. Tella
---------------------------------------
Name: William C. Tella
Title: President - Specialty
Pharmacy Services
INFINITY INFUSION, LLC
By: /s/ William C. Tella
----------------------------------------
Name: William C. Tella
Title: President
INFINITY INFUSION II, LLC
By: /s/ William C. Tella
---------------------------------------
Name: William C. Tella
Title: President
SELLERS:
IIC GP, LLC
By: /s/ Azar I. Delpassand
-----------------------------------------
Name: Azar I. Delpassand
Title: CEO/President
/s/ AZAR I. DELPASSAND
--------------------------------------------
AZAR I. DELPASSAND
/s/ DR. EBRAHIM DELPASSAND
---------------------------------------------
DR. EBRAHIM DELPASSAND
/s/ TARA IMANI
---------------------------------------------
TARA IMANI
/s/ MARYAM PANAHI
---------------------------------------------
MARYAM PANAHI
/s/ YASSAMIN NOROUZIAN
---------------------------------------------
YASSAMIN NOROUZIAN
The following exhibits and schedules to the Stock Purchase Agreement have
been omitted. Curative Healthcare Services, Inc. will furnish any such
exhibits or schedules to the Commission as supplemental information upon
request:
Exhibits
Exhibit A Form of Escrow Note
Exhibit B Form of Non-Escrow Note
Exhibit C Opinion of Counsel
Exhibit D-1 Form of Delpassand Employment Agreement
Exhibit D-2 Form of Norouzian Employment Agreement
Exhibit D-3 Form of Panahi Employment Agreement
Exhibit E Form of Imani Consulting Agreement
Exhibit F Form of Noncompetition Agreement
Exhibit G Form of Escrow Agreement
Exhibit H Material Lease Terms
Exhibit I Form of Employment Agreement
Exhibit 99.3
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
CURATIVE HEALTH SERVICES, INC.,
eBIOCARE.COM, INC.,
HEMOPHILIA ACCESS, INC.,
APEX THERAPEUTIC CARE, INC.
and
Such other Persons joined hereto as a
Borrower from time to time
as Borrowers
with
HEALTHCARE BUSINESS CREDIT CORPORATION
as Lender
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS AND INTERPRETATION..................................1
1.1 Terms Defined...................................................1
1.2 Matters of Construction.............................................12
1.3 Accounting Principles...............................................12
SECTION 2. THE LOANS......................................................12
2.1 Credit Facility - Description:.................................12
2.2 Funding Procedures:.................................................13
2.3 Interest and Fees:..................................................14
2.4 Additional Interest Provisions:.....................................15
2.5 Payments:...........................................................16
2.6 Use of Proceeds.....................................................17
2.7 Lockboxes and Collections:..........................................17
2.8 Fees 19
SECTION 3. COLLATERAL.....................................................19
3.1 Description.........................................................18
3.2 Lien Documents......................................................20
3.3 Other Actions:......................................................20
3.4 Searches............................................................21
3.5 Good Standing Certificates..........................................21
3.6 Filing Security Agreement...........................................21
3.7 Power of Attorney...................................................21
3.8 Revised Article 9:..................................................20
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES...................22
4.1 Resolutions, Opinions, and Other Documents..........................22
4.2 Additional Preconditions to Loans...................................23
4.3 Absence of Certain Events...........................................24
4.4 Compliance with this Agreement......................................24
4.5 Closing Certificate.................................................24
4.6 Closing.............................................................24
4.7 Non-Waiver of Rights................................................24
SECTION 5. REPRESENTATIONS AND WARRANTIES.................................24
5.1 Organization and Validity:..........................................24
5.2 Places of Business..................................................25
5.3 Operation of Facilities.............................................25
5.4 Pending Litigation..................................................26
5.5 Medicaid and Medicare Cost Reporting................................26
5.6 Title to Collateral.................................................26
5.7 Governmental Consent................................................26
5.8 Taxes...............................................................26
5.9 Financial Statements................................................27
5.10 Full Disclosure....................................................27
5.11 Guarantees, Contracts, etc.:.......................................27
5.12 Compliance with Laws:..............................................27
5.13 Other Associations.................................................28
5.14 Environmental Matters..............................................28
5.15 Capital Stock and Equity Interests.................................28
5.16 Lockboxes..........................................................28
5.17 Borrowing Base Reports.............................................28
5.18 Security Interest..................................................28
5.19 Accounts:..........................................................29
5.20 Pension Plans......................................................29
5.21 Representations and Warranties as to Accounts for each Loan........29
5.22 Interrelatedness of Borrowers......................................31
5.23 Commercial Tort Claims.............................................31
5.24 Letter of Credit Rights............................................31
5.25 Intellectual Property..............................................31
SECTION 6. BORROWER'S AFFIRMATIVE COVENANTS...............................31
6.1 Payment of Taxes and Claims.........................................32
6.2 Maintenance of Insurance, Financial Records and Corporate Existence:32
6.3 Business Conducted..................................................33
6.4 Litigation..........................................................33
6.5 Taxes...............................................................33
6.6 Financial Covenants.................................................33
6.7 Financial and Business Information..................................33
6.8 Officers' Certificates..............................................34
6.9 Inspection..........................................................35
6.10 Tax Returns and Reports............................................35
6.11 Material Adverse Developments......................................35
6.12 Places of Business.................................................35
6.13 Notice of Action...................................................35
6.14 Verification of Information........................................36
6.15 Value Track System(TM).............................................36
6.16 Commercial Tort Claim..............................................36
SECTION 7. BORROWER'S NEGATIVE COVENANTS..................................36
7.1 Merger, Consolidation, Dissolution or Liquidation:..................36
7.2 Liens and Encumbrances..............................................37
7.3 Negative Pledge.....................................................37
7.4 Transactions With Affiliates or Subsidiaries:.......................37
7.5 Guarantees..........................................................37
7.6 Indebtedness........................................................38
7.7 Loans to Other Persons..............................................38
7.8 [Reserved]..........................................................39
7.9 Subordinated Debt Payments..........................................39
7.10 Distributions......................................................39
SECTION 8. DEFAULT........................................................39
8.1 Events of Default...................................................39
8.2 Cure 42
8.3 Rights and Remedies on Default:.....................................42
8.4 Nature of Remedies..................................................43
8.5 Lender's Right to Reimbursement for Increased
Costs or Reduced Returns............................................44
8.6 Set-Off.............................................................44
SECTION 9. MISCELLANEOUS..................................................44
9.1 GOVERNING LAW.......................................................44
9.2 Integrated Agreement................................................44
9.3 Waiver and Indemnity:...............................................45
9.4 Time 45
9.5 Expenses of Lender:.................................................45
9.6 Confidentiality.....................................................46
9.7 Notices:............................................................46
9.8 Headings............................................................46
9.9 Survival............................................................46
9.10 Successors and Assigns.............................................47
9.11 Duplicate Originals................................................47
9.12 Modification.......................................................47
9.13 Signatories........................................................47
9.14 Third Parties......................................................47
9.15 Waivers:...........................................................47
9.16 CONSENT TO JURISDICTION............................................48
9.17 WAIVER OF JURY TRIAL...............................................48
9.18 [Reserved]:........................................................48
9.19 Discharge of Taxes, Borrower's Obligations, Etc....................48
9.20 Injunctive Relief..................................................49
SECTION 10. SPECIAL INTER-BORROWER PROVISIONS..............................49
10.1 Certain Borrower Acknowledgments and Agreements....................49
10.2 Maximum Amount Of Joint and Several Liability......................50
10.3 Authorization of Curative by Borrowers.............................50
EXHIBIT LIST
Exhibit 2.1(b) - Form of Revolving Credit Note
Exhibit 2.1(c) - Form of Term Note
Exhibit 2.2(b) - Form of Borrowing Base Certificate
Exhibit 2.2(c) - Loan Request
Exhibit 4.1 - Form of Opinion of Counsel
Exhibit 4.2A - Notice Letter Re: Commercial Obligors
Exhibit 4.2B - Notice Letter Re: Government Obligors
Exhibit 6.8 - Officer's Certificate
Schedule 1 - Ineligible Obligors and Concentration Limits
Schedule 2 - Borrowers' States of Qualifications
- Chief Executive Office
- Places of Business/Other Names
- Provider Identification Numbers
- Pending Litigation
- Permitted Liens
- Fiscal Year End
- Tax ID Numbers
- Existing Guaranties, Investments and Borrowings ......
- Compliance
- Other Associations
- Environmental Matters
- Capital Stock
- Commercial Tort Claims
- Letter of Credit Right
- Corporate Reorganization
- Loan, Advances
- Indebtedness
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amended and Restated Loan and Security Agreement ("Agreement") is
dated this ____ day of May, 2002, by and among Curative Health Services, Inc., a
Minnesota corporation ("Curative"), eBioCare.com, Inc., a Delaware corporation
("eBioCare"), Hemophilia Access, Inc., a Tennessee corporation ("Access"), and
Apex Therapeutic Care, Inc. a California corporation ("Apex"), and such other
Persons joined hereto as a Borrower form 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 Curative, eBioCare and Access, as borrowers, and Lender are parties
to that certain Loan and Security Agreement dated as of January 31, 2002
("Existing Loan Agreement") and the related agreements, instruments and
documents executed in connection therewith, including without limitation, any
and all notes, guarantees and limited support agreements executed in connection
therewith (all of which are collectively referred to as "Existing Financing
Documents").
B Borrowers have requested that Lender amend and restate the Existing
Loan Agreement, join Apex as a joint and several co-Borrower under this
Agreement and make available to Borrowers a Credit Facility in the maximum
amount of $35,000,000 which will be secured by a perfected security interest in
the Collateral (including, without limitation, the Accounts) and which consists
of the $25,000,000 Revolving Loan Commitment and a $10,000,000 Term Loan. Lender
is willing to make the Credit Facility available to Borrowers pursuant to the
terms and provisions hereinafter set forth.
C 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) all accounts, payment intangibles, instruments,
chattel paper and all other rights of Borrowers to receive payments including
without limitation, the third party reimbursable portion of accounts receivable
owing to a Borrower arising out of the delivery by such Borrower of medical,
surgical, diagnostic, treatment or other professional or medical or healthcare
related 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 assets described in clause (a),
and, all rights of enforcement and collection, all books and records evidencing
or related to the foregoing (other than any such information and data subject to
legal restrictions of patient confidentiality), 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.
"Adjusted Debt Service Coverage Ratio" means the ratio of (a) the
sum of (i) net income, plus (ii) interest expense, plus (iii) depreciation and
amortization expenses, plus (iv) income tax expense, minus (v) Distributions
(excluding, to the extent applicable, loans and advances from one Borrower to
another Borrower, Distributions comprised of Permitted Settlement Charges and
loans, advances and extensions of credit permitted under Section 7.7(d)), plus
(vi) actual cash payments associated with Permitted Settlement Charges to (b)
the sum of (i) interest expense, plus (ii) the current portion of long-term
debt, plus (iii) the current portion of lease payments under capitalized leases,
plus (iv) income tax expense, all as determined for Borrowers on a consolidated
basis in accordance with GAAP as in effect on the date of such determination, on
a rolling four quarter basis; provided however, that such calculations as of the
fiscal quarter ending March 31, 2002 shall be based on the annualized operating
results for such fiscal quarter, such calculations for the fiscal quarter ending
June 30, 2002 shall be for the two (2) most recent fiscal quarterly periods
ending on such date on a cumulative, annualized basis and such calculations for
the fiscal quarter ending September 30, 2002 shall be for the three (3) most
recent fiscal quarterly periods ending on such date on a cumulative, annualized
basis.
"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 90% or such other percentage(s) resulting
from an adjustment pursuant to Section 8.3 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).
"Applicable Revolving Loan Commitment" means the Revolving Loan Commitment
in effect from time to time.
............."Authorized Officer" means any officer 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 month in which
goods or the services giving rise to the corresponding Account were rendered or
provided in the case of the Specialty Health Care Services operations and (b)
the earlier of the day after the service date or the regular billing date for
billing the respective Obligor, or if none, the last business day of a calendar
month, in the case of Specialty Pharmacy Services operations.
............."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 (other than the Term
Loan) 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 (other than the Term Loan) 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, Minneapolis,
Minnesota or New York City, New York are 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.
............."Change of Control" means:
.............(a) with respect to Curative (i) a transaction or series of related
transactions pursuant to which any Person or group of related Persons acquires
or would acquire (upon completion of such transaction or series of transactions)
shares (or securities exercisable for or convertible into shares) representing
more than fifty percent (50%) of the outstanding common stock of Curative,
pursuant to a tender offer or exchange offer or otherwise, (ii) a merger,
consolidation, share exchange or other business combination involving Curative,
if, upon consummation of such transaction, the Persons who were stockholders of
Curative immediately prior to such transaction continue to hold, following such
transaction, less than fifty percent (50%) of the outstanding equity securities
of the entity surviving such merger, consolidation or reorganization, or the
parent of such entity, or (iii) any other transaction or series of related
transactions pursuant to which any Person or related group of Persons acquires
or would acquire (upon completion of such transaction or series of transactions)
control of Curative's board of directors or by which nominees of any such Person
or group of Persons are (or would be) elected or appointed to a majority of the
seats on the board of directors of Curative; or
.............(b) a majority of the members of the board of directors of
Curative do not constitute Continuing Directors; or
.............(c) Curative ceases to directly or indirectly own and control
all of the issued and outstanding capital stock of any of the other Borrowers
except as permitted under Section 7.1.
............."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 Agreement" shall have 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.
............."Contingent Indemnification Obligations" means those Obligations as
of the date of determination which are contingent and unliquidated and for which
there has been no indication that any claims associated therewith have been or
may be asserted or alleged.
............."Continuing Directors" means Joe Feshbach, John Prior,
Tim Maudlin, Lawrence English, Dan Berce, Paul Auerbach and Gerard Moufflet.
............."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.
............."Default Rate" means 300 basis points above the interest rate
otherwise applicable on the Loans.
............."Defaulted Account" means an Account as to which (a) the initial ENV
has not been received in full as Collections within 180 days of the Billing
Date, or (b) Lender reasonably deems uncollectible because of the bankruptcy or
insolvency of the Obligor or any similar other reason.
............."Depository Agreement(s)" means those certain Depository Agreements,
as amended, modified, restated or replaced from time to time, dated as of
January 31, 2002 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 other than in capital stock of
such 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,
officers and/or Affiliates other than in capital stock of such Borrower.
............."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 or
Medicaid, or (iv) an HMO, PPO, or institutional Obligor reasonably acceptable to
Lender, a healthcare provider reasonably acceptable to Lender or a hospital
reasonably acceptable to Lender, or any other type of obligor, not included in
the categories of obligors listed in the foregoing clauses (i) - (iii), each of
which is organized under the laws of any jurisdiction in the United States,
having its principal office in the United States, and is not listed on Schedule
1 as an ineligible Obligor,
(b) the Obligor of which is not an Affiliate of Borrower,
(c) the Obligor of which has been sent 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
more than $250,000, 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) 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 (i) one hundred eighty (180) 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 Accounts that have not been billed; provided, that in no
event may the Account be outstanding more than two hundred twenty-five (225)
days past the date the corresponding services and/or goods were provided,
(i) the Obligor on which does not have fifty percent (50%) or more of its
Accounts owing to Borrowers constituting Defaulted Accounts,
(j) to the extent such Account does not include late charges or finance charges,
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.
............."Excess Cash Flow" means, for any period, the greater of (a) zero
(0); or (b) without duplication, (i) net income, plus (ii) non-cash charges,
plus (iii) depreciation and amortization expenses, minus (iv) actual cash
payments on long term debt (including payments related to the Department of
Justice obligation), minus (v) actual cash payments associated with Permitted
Settlement Charges, minus (vi) actual cash payments made on the Seller Notes,
all as determined for Borrowers on a consolidated basis in accordance with GAAP
as in effect on the date of such determination.
............."Existing Financing Documents" has the meaning set forth in the
Background section hereof.
............."Existing Loan Agreement" has the meaning set forth in the
Background section 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 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
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include 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 Revolving Loan Commitment" means Fifteen Million Dollars
($15,000,000).
............."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" 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.
............."LIBOR Advances" means Advances bearing interest based on LIBOR.
............."Loan(s)" means, collectively, the Revolving Credit Loans and the
Term Loan and each may be referred to individually as a "Loan."
............."Loan Documents" means this Agreement, the Revolving Credit Note,
the Term Note, Depository Agreements, Collateral Pledge Agreement and all
agreements relating to the Government Lockbox and the Commercial Lockbox, all
financing statements, Subordination Agreements and any other agreements,
instruments, documents and certificates delivered in connection with this
Agreement and in connection with the Existing Loan Agreement.
............."Loan Request" has the meaning set forth in Section 2.2(c) hereof.
............."Lockbox Bank" means Wells Fargo Bank, National Association or such
other bank that is acceptable to Lender.
............."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 $35,000,000 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.
............."Permitted Acquisition" means any transaction, or series of related
transactions for the direct or indirect (a) acquisition of all or substantially
all of the Property of a Person, or any business division of a Person, (b)
acquisition of in excess of 50% of the capital stock, partnership interest,
membership interests or equity of any Person, or otherwise causing any Person to
become a Subsidiary, or (c) merger or consolidation or any other combination
with another Person, where the aggregate cash and/or debt portion of the
purchase price for all such Permitted Acquisitions during the Initial Term does
not exceed a total of $3,000,000; provided that (A) prior to any such
acquisition, no Event of Default or Unmatured Event of Default shall have
occurred and be continuing and upon giving effect to such acquisition, no Event
of Default of Unmatured Event of Default will result, (B) the potential
acquisition target's shareholders or other equity interest holders have
consented to the sale and such sale is not otherwise a hostile acquisition; (C)
the potential acquisition target is in the same or similar line of business as
Borrowers; (D) the potential acquisition target is located in the United States;
(E) as a result of the transaction, the potential acquisition target and its
shareholders and other equity interest holders shall not have acquired more than
a twenty (20%) percent equity interest in such Borrower; (F) such acquisition
shall be effected through such Borrower and the Person acquired shall be merged
with or into Borrower as soon as practicable after the consummation of the
acquisition but in any event within five (5) Business Days thereafter or become
a Borrower hereunder subject to a joinder acceptable to Lender in its sole
discretion; and (G) Borrowers shall have provided to Lender no later than thirty
(30) days prior to the consummation of any such acquisition with at least the
following: (w) a pro forma historical balance sheet and income statement of the
business being acquired; (x) full disclosure of the material acquisition terms
and conditions including but not limited to the total purchase price for the
business and such Borrower's projected allocation of the purchase price; (y)
Borrowers' projected pro forma pre and post-closing balance sheets, including
adjusting entries, reflecting the completion of the acquisition and any
additional debt incurred to complete the acquisition; and (z) projections of
Borrowers, including pro forma balance sheet, income statement, cash flows and
covenants compliance certificates (all on a consolidated and consolidating basis
if the business is to be merged into or become a subsidiary of a Borrower)
reflecting the effects of the acquisition for at least one fiscal year end (on a
monthly basis) following the closing of such acquisition. In addition to the
foregoing, Borrowers shall permit and assist Lender in completing the due
diligence audit of the business to be acquired (the results of such audit to be
satisfactory to Lender in its sole discretion) prior to the inclusion of any
Accounts generated by the acquired business into the Borrowing Base as Eligible
Accounts.
............."Permitted Liens" has the meaning set forth in Section 5.6.
............."Permitted Settlement Charges" means the costs associated with the
settlement of the shareholder lawsuits as more fully described in Curative's
annual report on form 10-K for the fiscal year ended December 31, 2000 and as
described in the litigation disclosure on Schedule 2 attached hereto; so long as
such costs are not reasonably likely to have or result in a material adverse
effect on the Property, business, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrowers, or any of them,
the Collateral, or any Borrower's ability to perform its respective obligations
under the Loan Documents.
............."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.
............."Prime Rate" means the highest per annum rate of interest referenced
as the "Prime Rate" as reported in the Money Rates Section of The Wall Street
Journal, on the date of determination. If The Wall Street Journal is not
published on such Business Day or does not report such rate, such rate shall be
as reported by such other publication or source as Lender may reasonably select
provided that Lender shall endeavor to promptly notify Borrowers of such other
publication or source.
............."Prime Rate Advances" means Advances bearing interest based on the
Prime Rate.
............."Property" means an interest of Borrowers 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 the spread over the Prime
Rate or LIBOR (as applicable) based upon the Adjusted 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 on June 30, 2002 with the financial statements corresponding to
the fiscal quarter ending March 31, 2002:
Adjusted Debt Service Revolving Loan Revolving Loan
Coverage Ratio Applicable Margin Applicable Margin
Prime Rate Advances LIBOR Advances
--------------------------------------------------------------------------------
Less than 2.0 to 1 0.75% 3.50%
Equal to or greater than 0.50% 3.25%
2.0 to 1 but less than or
equal to 2.5 to 1
Greater than 2.5 to 1 0.25% 3.00%
For purposes of the foregoing (i) the Adjusted 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
Adjusted 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 Adjusted
Debt Service Coverage Ratio shall be deemed to be less than 2.0 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 Fifteen Million
Dollars ($15,000,000); provided however, that so long as no Event of Default or
Unmatured Event of Default has occurred and is continuing and subject to the
terms hereof, the Revolving Loan Commitment shall be increased upon the written
request of Borrowers from time to time in Two Million Five Hundred Thousand
Dollar ($2,500,000) increments, provided that the Revolving Loan Commitment
shall at no time exceed Twenty-Five Million Dollars ($25,000,000).
............."Securities" has the meaning set forth in Section 6.14 hereof.
............."Seller Notes" means, collectively, that certain Promissory Note
dated February 28, 2002 from Curative to Jon M. Tamiyasu, in his capacity as
Stockholder Representative in the original principal amount of $5,000,000
subject to offset and adjustment and any other note or instrument given in
connection with an asset or stock acquisition by a Borrower, including an asset
or stock acquisition of Infinity Infusion Care, Ltd.
............."Senior Funded Debt Ratio" means the ratio of (a) the sum of (i) the
Obligations, plus (ii) the outstanding liability under the settlement agreement
with the Department of Justice effectuating the settlement of any and all claims
relating to qui tam False Claims Act actions filed in the United Stated District
Court for the Southern District of New York and the United States District Court
for Washington, D.C. and any damages, fees, penalties or judgments in
conjunction therewith, plus (iii) the outstanding balance of the Seller Notes,
all as determined for Borrowers as of the date of determination on a
consolidated basis in accordance with GAAP as in effect on the date of such
determination, to (b) the sum of (i) net income, plus (ii) interest expense,
plus (iii) depreciation and amortization expenses, plus (iv) income tax expense,
all as determined for Borrowers as of the date of determination on a
consolidated basis in accordance with GAAP as in effect on the date of such
determination, on a rolling four quarter basis; provided however, that such
calculations as of the fiscal quarter ending March 31, 2002 shall be based on
the annualized operating results for such fiscal quarter, such calculations for
the fiscal quarter ending June 30, 2002 shall be for the two (2) most recent
fiscal quarterly periods ending on such date on a cumulative, annualized basis
and such calculations for the fiscal quarter ending September 30, 2002 shall be
for the there (3) most recent fiscal quarterly periods ending on such date on a
cumulative, annualized basis.
............."Shareholder" means, as applicable, a shareholder, member or
partner of a Borrower.
............."Specialty Health Care Services operations" means the operations of
Borrowers engaged in the provision of wound care, diabetes and similar disease
management and related services to hospitals and other healthcare providers,
third party payors and manufacturers.
............."Specialty Pharmacy Services operations" means the operations of
Borrowers engaged in the provision of pharmaceutical products and/or related
services to patients with chronic diseases, hospitals and other healthcare
providers, third party payors and manufacturers.
............."Subordinated Debt" means debt 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.
............."Term Loan" has the meaning set forth in Section 2.1(a).
............."Term Note" has the meaning set forth in Section 2.1(c).
............."Termination Fees" has the meaning set forth in Section 2.3(c).
............."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 and/or, where applicable, a Borrower,
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 Advances may fluctuate from time to time, to be
reduced by repayments made by Borrowers, to be increased by future Revolving
Credit Loans which may be made by Lender. If at any time a Borrowing Base
Deficiency exists or if the aggregate outstanding amount of all Advances 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 upon notice to
Borrowers, 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 an amended and restated
promissory note to Lender in the principal amount of the $25,000,000 (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 Revolving Credit 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, Lender shall make available to Borrowers the Term Loan in
the principal amount of $10,000,000. 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 Maturity Date. At Closing, Borrowers
shall execute and deliver a promissory note to Lender in the principal face
amount of $10,000,000 (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 May 17,
2006. All 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 Loans shall be
available from Lender.
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 and is continuing
hereunder, Lender will make Revolving Credit Loans to Borrowers once a week, on
a specified Business Day of each week (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 1:00 P.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 1:00 P.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) (a "Borrowing Base Report").
(c) On the Funding Date, Borrowers will review the Borrowing Base Report for
accuracy and note any discrepancies thereon and sign and return it to Lender and
indicate whether the outstanding amount of Revolving Credit Loans will bear
interest based on the Prime Rate or LIBOR. 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 (other
than the Term Loan) made by Lender in conjunction with this Agreement shall be
treated for all purposes as, and shall accrue interest at the same rate
applicable to the 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) For the period commencing on the date hereof through June 30, 2002, all
Revolving Credit Loans shall bear interest on the aggregate outstanding
principal amount thereof from the date made until each such Revolving Credit
Loan is paid in full, at a rate per annum equal to, at Borrowers' option, the
Prime Rate plus one percent (1.00%) or LIBOR plus three and three quarters
percent (3.75%). For the period after June 30, 2002, all Revolving Credit Loans
shall bear interest on the aggregate outstanding principal amount thereof from
the date made until each such Revolving Credit Loan is paid in full, at a rate
equal to, at Borrowers' option, the Prime Rate or LIBOR plus the corresponding
Revolving Loan Applicable Margin. Interest shall accrue on the outstanding
balance of the Term Loan at a per annum rate equal to the Prime Rate plus two
and one half of one percent (2.5%). The interest rate on all amounts outstanding
under the Credit Facility shall be adjusted weekly based on the Prime Rate or,
if applicable, LIBOR 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 Borrowers terminate the Credit Facility for any reason prior to the
last day of the Initial Term, in addition to repayment of all such Obligations
(other than Contingent Indemnification 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 ("Revolving Termination Fee") in an amount equal to (a) two
percent (2.0%) of the Initial Revolving Loan Commitment if the early termination
occurs on or before the first anniversary of this Agreement and (b) one percent
(1.0%) of the Initial Revolving Loan Commitment if the early termination occurs
after the first anniversary of this Agreement but on or before the second
anniversary of this Agreement. In addition to the Revolving Termination Fee,
should Borrowers terminate the Credit Facility for any reason prior to the last
day of the Initial Term or should Borrowers prepay the Term Loan in its
entirety, Borrowers shall unconditionally be obligated to pay at the time of
such termination and/or prepayment, a fee ("Term Termination Fee," together with
the Revolving Termination Fee, the "Termination Fees") in an amount equal to (a)
three percent (3.0%) of the outstanding balance of the Term Loan if the early
termination or prepayment occurs on or before the first anniversary date of this
Agreement, (b) two percent (2.0%) of the outstanding balance of the Term Loan if
the early termination or prepayment occurs after the first anniversary date of
this Agreement but on or before the second anniversary date of this Agreement,
and (c) one percent (1.0%) of the outstanding balance of the Term Loan if the
early termination or prepayment occurs after the second anniversary date of this
Agreement but on or before the third anniversary date of this Agreement.
Borrowers acknowledge that the Termination Fees are 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 (other than
Contingent Indemnification 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 (other than Contingent Indemnification 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 (other than
Contingent Indemnification 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 time as
Lender, in its reasonable discretion, may deem necessary to protect Lender from
any such loss or damage.
(d) Borrowers shall unconditionally pay to Lender a fee ("Unused Line Fee")
equal to one-quarter of one percent (.25%) per annum of the unused portion of
the Credit Facility. The unused portion of the Credit Facility shall be the
difference between the Applicable 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.
(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 in the Term Loan shall be due
and payable monthly on the first Business Day of each calendar month commencing
on June 1, 2002. 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 a Borrowing Base Deficiency exists, the aggregate of all
Revolving Credit Loans exceeds the Revolving Loan Commitment, or the aggregate
amount of all Advances exceeds the Maximum Credit Limit, Borrowers shall
immediately make such principal prepayments of the Revolving Credit Loans or the
Term Loan (in the inverse order of maturity), as applicable, as is necessary to
eliminate such Borrowing Base Deficiency or excess.
(c) The entire principal balance of all of the Advances, together with all
unpaid accrued interest thereon and the Termination Fee, if any, and any unpaid
Unused Line Fees, shall be due and payable on the Maturity Date. The Term Loan
shall be paid in forty (40) consecutive monthly installments of principal in an
amount equal to $243,902 plus accrued interest, commencing on January 1, 2003
and continuing on the first Business Day of each calendar month thereafter and
one (1) principal payment of $243,920 plus accrued interest on May 17, 2006 and
a payment of all outstanding principal and accrued but unpaid interest, fees,
costs and Expenses due and payable on or before the Maturity Date. 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.
(d) Except as provided in Section 2.5(h), the Term Loan may not be prepaid
unless such payment is a part of the early prepayment of all Obligations, a
payment under Section 2.5(h) or prepayment of the Term Loan in its entirety,
which shall include the Term Termination Fee, as required by Sections 2.3(c)
above.
(e) Subject to the terms of Sections 2.3(c) and 2.3(d) above, and except as
provided in Sections 2.5(d) and 2.7(f), Borrowers may prepay the principal of
the Loans on any Funding Date by giving Lender written notice of the proposed
prepayment two Business Days' prior to such Funding Date.
(f) If a Borrower sells any of the Collateral (other than inventory sold in the
ordinary course of Borrowers' business) or if any of the Collateral is lost or
destroyed or taken by condemnation, such Borrower shall pay to Lender, unless
otherwise agreed to by Lender, or as otherwise expressly authorized by this
Agreement, as and when received by such 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 such 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.
(h) Commencing with the fiscal year ending December 31, 2002, Borrowers shall
prepay the Term Loan in an amount equal to 25% of Excess Cash Flow for such
fiscal year calculated on the basis of the audited financial statements for such
fiscal year delivered to Lender pursuant to Section 6.7(a)(i). To the extent
owing hereunder, Borrowers shall make such prepayment on or before one hundred
eighty (180) days after the end of each fiscal year of Borrowers. All such
prepayments from Excess Cash Flow shall be applied to the Term Loan in the
inverse order of maturity. No prepayment fee or premium shall be due and payable
in conjunction with such prepayment.
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 and Permitted Acquisitions
(or other acquisitions and purposes specifically consented to by Lender in
writing which consent will not be reasonably withheld or delayed).
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 in the Government Lockbox and the Commercial Lockbox to an
account of Lender in the case of the Commercial Lockbox, and an account in which
Lender has a security interest in the case of the Government Lockbox (as
applicable, the "Collection Account").
(b) Borrowers will direct all Obligors to cause, and will use their best efforts
to ensure that, all Collections with respect to all of the Accounts, other than
Government Accounts, be sent directly to the Commercial Lockbox, and will direct
all Obligors to cause, and will use their best efforts to ensure that, 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 Government Lockbox. If more than ten percent (10%) 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 Revolving Credit 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) So long as no Event of Default has occurred and is continuing, on each
Funding Date, Lender shall cause all Collections which have been forwarded to
Lender from 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 Revolving Credit Loans 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 payment which is 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 and be continuing, Lender shall disburse to
Borrowers the amount, if any, by which the collected balance forwarded to Lender
from the Collection Account exceeds the aggregate outstanding principal amount
of the Advances (other than the Term Loan) and all interest and other amounts
that will be payable on the next Funding Date. Following the occurrence and
during the continuance of an Event of Default, Lender shall 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, and Borrowers shall
have paid to Lender, a non-refundable commitment fee ("Commitment Fee") equal to
$100,000. Borrowers agree and acknowledge that the Commitment Fee is due and
payable at Closing. In addition, Borrowers agree to pay an additional Commitment
Fee equal to one percent (1%) of the amount of each requested increase of the
Revolving Loan Commitment (i.e., for each $2,500,000 increase in the Revolving
Loan Commitment, Borrowers shall pay a Commitment Fee equal $25,000). Such
additional Commitment Fee shall be due and payable at the time of Lender's
approval of the effective date of the requested increase and shall be
non-refundable.
2.9 Existing Indebtedness: Borrowers acknowledge and confirm that as of the date
hereof, Borrowers are indebted to Lender, without defense, set-off or
counter-claim under the Existing Financing Documents in the principal amount of
$0. ("Existing Indebtedness"). This Agreement and the other Loan Documents amend
and restate the Existing Financing Documents and the Existing Indebtedness shall
be deemed to constitute a Revolving Credit Loan hereunder. The execution and
delivery of this Agreement and the other Loan Documents, however, does not
evidence or represent a refinancing, repayment, accord and/or satisfaction or
novation of the Existing Indebtedness. All of Lender's obligations to Borrowers
with respect to Loans to be made concurrently herewith or after the date hereof
are set forth in this Agreement. All liens and security interests previously
granted to Lender, pursuant to the Existing Loan Agreement are acknowledged and
reconfirmed and remain in full force and effect and are not intended to be
released, replaced or impaired.
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 and to all of its right, title and interest,
in and to the following property of such Borrower: (i) all inventory, including,
without limitation, all raw materials, work in process, parts, components,
assemblies, supplies and materials used or consumed in such Borrower's business;
all goods, wares and merchandise, finished or unfinished, held for sale or lease
or leased or furnished or to be furnished under contracts of service; and all
goods returned to or repossessed by such Borrower, (ii) all accounts, payment
intangibles, instruments and other rights to receive payments of such Borrower
(including without limitation the Accounts), whether now existing or hereafter
arising or acquired, (iii) all general intangibles (including without
limitation, contract rights and intellectual property), chattel paper,
documents, supporting obligations, letter of credit rights, commercial tort
claims, investment property (contained in or related to the Collection Accounts
or any deposit account into which the Collections or Advances are deposited),
rights, remedies, guarantees and collateral evidencing, securing or otherwise
relating to or associated with any of the Property described in clauses (i) and
(ii), including without limitation all rights of enforcement and collection,
(iv) all Commercial Lockboxes, all Government Lockboxes, all Collection Accounts
and other deposit accounts into which any of the Collections or Advances are
deposited, all funds received thereby or deposited therein, and any checks or
instruments from time to time representing or evidencing the same and Property
at any time in Lender's possession, (v) all books and records of such Borrower
evidencing or relating to or associated with any of the foregoing, (other than
such books and records subject to legal restrictions of patient
confidentiality), (vi) all information and data compiled or derived by such
Borrower with respect to any of the foregoing (other than any such information
and data subject to legal restrictions of patient confidentiality), (vii) the
issued and outstanding capital stock of Apex and (viii) all collections,
receipts and other proceeds (cash and noncash) derived from any of the foregoing
(collectively, the "Collateral").
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 such Borrower is organized or 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 such Borrower where there exists at least
$100,000 of inventory or where such Borrower maintains its chief executive
and/or billing and collection functions, 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. Each
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, but reasonable, discretion may determine,
including financing statements containing language indicating 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
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, its jurisdiction of organization, a place of business of
which a Borrower performs principal functions relating to the Collateral, or a
place of business with Collateral in excess of $100,000 in value;
(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
their 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 would have material adverse effect on such Borrower's business,
financial condition, Property or Lender's rights hereunder.
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, until the Obligations (other than Contingent
Indemnification Obligations), are paid in full and Lender's commitments under
this Agreement are terminated, 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 a
collateral pledge agreement by and between Curative and the Lender ("Collateral
Pledge Agreement"), in form and substance satisfactory to Lender, pursuant to
which Curative shall pledge its right, title and interest in and to the issued
and outstanding capital stock of Apex.
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing under this Agreement and the making of each Loan are subject to
the following conditions precedent (all documents to be in form and substance
satisfactory to Lender and Lender's counsel):
4.1 Resolutions, Opinions, and Other Documents: Prior to the Closing,
Borrowers shall have delivered to Lender the following:
(a) this Agreement and the Revolving Credit Note, each properly executed;
(b) the Collateral Pledge Agreement properly executed and the original stock
certificate representing 100% of the issued and outstanding capital stock of
Apex along with a stock power endorsed in blank;
(c) each document and agreement required to be executed under any
provision of this Agreement or any of the other Loan Documents;
(d) certified copies of (i) resolutions of each Borrower's board of directors,
general partners or managers, as applicable, authorizing the execution of this
Agreement, the Revolving Credit Note, the Term Note and each document required
to be delivered by any Section hereof and (ii) each Borrower's Articles of
Incorporation and By-laws, Certificate of Organization and Operating Agreement
or partnership agreement, as applicable;
(e) incumbency certificates identifying all Authorized Officers of each
Borrower, with specimen signatures;
(f) a written opinion of Borrowers' independent counsel addressed to Lender in
the form attached hereto as Exhibit 4.1, which shall include without limitation,
an opinion that Lender has a perfected security interest in the Collateral;
(g) payment by Borrowers of all Expenses associated with the Credit Facility
incurred to the Closing Date and the Commitment Fee;
(h) payoff letter and Lender shall have received releases from all Persons
having a security interest or other interest in the Collateral, together with
all UCC-3 terminations or partial releases necessary to terminate such Persons'
interests in the Collateral;
(i) A Landlord Waiver with respect to the following location of Apex:
31332 Via Colinas, Suite 106, Westlake Village, California 91362;
(j) certification by Borrowers that all past due payroll and unemployment taxes
have been paid in full and that Borrowers remain current on such taxes;
(k) Lender shall have received copies of each of the material accreditations,
licenses, certifications required by Section 5.3 below, and all Contracts
requested by Lender;
(l) Copies of all final executed acquisition documents, instruments and
agreements (including exhibits and schedules) in connection with the acquisition
of Apex; and
(m) all other documents, information and reports required or requested to be
executed and/or delivered by Borrowers under any provision of this Agreement or
any of the Loan Documents.
4.2 Additional Preconditions to Loans: Lender's obligation to make and the Term
Loan and the initial Revolving Credit Loan and each subsequent Revolving Credit
Loan shall be subject to the satisfaction of each of the following conditions:
(a) After giving effect to each such Loan:
(i) the aggregate principal amount of all Revolving Credit Loans outstanding
shall not exceed the Borrowing Base then in effect and the aggregate amount of
all Loans outstanding shall not exceed the Maximum Credit Limit;
(ii) the ENV of all Eligible Accounts shall not exceed any of the Concentration
Limits; and
(iii) the amount of outstanding Advances (other than the Term Loan) supported by
the ENV of all Eligible Accounts included in the Borrowing Base which have not
been billed shall at no time exceed an amount equal to fifty percent (50%) of
outstanding Advances (other than the Term Loan) supported by the ENV of all
Eligible Accounts included in the Borrowing Base which have been billed.
(b) All representations and warranties of Borrowers shall be deemed reaffirmed
as of the making of such Loan and shall be true both before and after giving
effect to such Loan, except for representations and warranties which are (i)
made as of specific date, (ii) supplemented in a writing by a Borrower following
a Permitted Acquisition or an acquisition consented to by Lender hereunder (and
have not resulted, or are reasonably likely to result in, a material adverse
effect on any Borrower, Borrowers' ability to repay the Obligations, the
Collateral, or Lender's rights hereunder), (iii) no longer true solely as a
result of the passage of time, or (iv) subject to exceptions which have been
disclosed in writing to Lender, and have been approved in writing by Lender, and
no Event of Default or Unmatured Event of Default shall have occurred and be
continuing, Borrowers shall be in compliance with this Agreement and the other
Loan Documents, and Borrowers shall have certified such matters to Lender.
(c) Each Borrower shall have signed and delivered to Lender notices, in the form
of Exhibit 4.2A, directing the Obligors (other than Obligors with respect to
Government Accounts) to make payment to the Commercial Lockbox; and, in the form
of Exhibit 4.2B, directing the Obligors with respect to Government Accounts to
make payment to the Government Lockbox.
(d) Borrowers shall have taken all actions necessary to permit Lender to record
all of the Eligible Accounts in Lender's Value Track System(TM).
(e) The lockbox arrangements required by Section 2.7 hereof shall be in effect,
and the amounts received in the lockboxes shall have been identified or
reconciled to Lender's satisfaction, as required by Section 2.7(d) hereof.
(f) Borrowers shall have taken such other actions, including the delivery of
documents and opinions as Lender may reasonably request.
4.3 Absence of Certain Events: As of the Closing Date and prior to each Loan, no
Event of Default or Unmatured Event of Default hereunder shall have occurred and
be continuing.
4.4 Compliance with this Agreement: Borrowers shall have performed and complied
with all agreements, covenants and conditions contained herein including,
without limitation, the provisions of Sections 6 and 7 hereof, which are
required to be performed or complied with by Borrowers before or at the Closing
Date and as of the date of each Advance.
4.5 Closing Certificate: Lender shall have received a certificate dated the
Closing Date and signed by the chief financial officer of Borrowers certifying
that (a) all of the conditions specified in this Section 4 have been fulfilled,
(b) there has not occurred any material adverse change in the operations,
conditions (financial or otherwise) and projections (financial or otherwise) of
Borrowers from the conditions described in the December 31, 2000 10-K Report and
the September 30, 2001 10-Q report of Borrowers or from any additional
information provided to Lender, and (c) the information provided to Lender
concerning Borrowers, their financial conditions, projections and liabilities
contain no material omission or inaccuracy.
4.6 Closing: Subject to the conditions of this Section 4, the Credit Facility
shall be made available on the date ("Closing Date") this Agreement is executed
and all of the conditions contained in Section 4.1 hereof are completed
("Closing").
4.7 Non-Waiver of Rights: By completing the Closing hereunder, or by making
Advances hereunder, Lender does not thereby waive a breach of any warranty,
representation or covenant made by Borrowers hereunder or under any agreement,
document, or instrument delivered to Lender or otherwise referred to herein, and
any claims and rights of Lender resulting from any breach or misrepresentation
by Borrowers are specifically reserved by Lender.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce Lender to complete the Closing and make the Loans under the
Credit Facility to Borrowers, Borrowers warrant and represent (subject to
Section 4.2(b) above) to Lender that:
5.1 Organization and Validity:
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(a) Each Borrower is duly organized as either a corporation or limited liability
company and validly existing under the laws of its state of incorporation or
formation, is duly qualified, is validly existing and in good standing and has
lawful power and authority to engage in the business it conducts in each state
and other jurisdiction where the nature and extent of its business requires
qualification, except where the failure to so qualify would not have a material
adverse effect on such Borrower's business, financial condition, Property or
prospects. A list of all states and other jurisdictions where each Borrower is
qualified to do business is attached hereto as Schedule 2 and made a part
hereof.
(b) The making and performance of this Agreement and related agreements, and
each document required by any Section hereof will not violate any law,
government rule or regulation, or the charter, minutes, partnership agreement,
operating agreement or bylaw provisions of any Borrower or violate or result in
a default (immediately or with the passage of time) under any material contract,
agreement or instrument to which Borrower is a party, or by which a Borrower is
bound. No Borrower is in violation of nor has knowingly caused any Person to
violate any term of any agreement or instrument to which it or such Person is a
party or by which it may be bound or of its charter, minutes, partnership
agreement, operating agreement or bylaws, which violation could reasonably be
likely to have a material adverse effect on any Borrower's business, financial
condition, Property or prospects.
(c) Each Borrower has all requisite power and authority to enter into and
perform this Agreement and the other Loan Documents and to incur the obligations
herein provided for, and has taken all proper and necessary corporate action to
authorize the execution, delivery and performance of this Agreement and the
other Loan Documents.
(d) This Agreement, the Revolving Credit Note, the Term Note and the other Loan
Documents required to be executed and delivered by Borrower hereunder, when
delivered, will be valid and binding upon all Borrowers a party thereto and
enforceable in accordance with their respective terms, subject to limitations as
to enforceability which might result from bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights generally and subject to
limitations on the availability of equitable remedies.
5.2 Places of Business: Each Borrower's chief executive office and the only
other places of business of each such Borrower at which Collateral is located
and principal functions related to the Collateral are located at the
corresponding addresses set forth on Schedule 2. Except as disclosed on Schedule
2: (i) no Borrower has been organized in any other jurisdiction nor changed any
location in the last five years, (ii) no Borrower has changed its name in the
last five years, and (iii) during such period no Borrower used, nor does any
Borrower now use, any fictitious or trade name.
5.3 Operation of Facilities: Except as disclosed on Schedule 2, each Borrower
owns or leases and operates facilities to provide health care services and (a)
maintains Medicare and Medicaid provider status (to the extent required) and is
the holder of the provider identification numbers identified on Schedule 2
hereto, all of which are current and valid and such Borrower has not allowed,
permitted, authorized or caused any other Person to use any such provider
identification number, and (b) has obtained all material licenses,
accreditations, certificates of need and approvals of governmental authorities
and all other Persons necessary for such Borrower to own its assets, to carry on
its business, to execute, deliver and perform the Loan Documents, and to receive
payments from the Obligors and, if organized as a not-for-profit entity, has and
maintains its status, if any, as an organization exempt from federal taxation
under Section 501(c)(3) of the Internal Revenue Code. No Borrower has been
notified by any such governmental authority or other person during the
immediately preceding 24 month period that such party has rescinded or not
renewed, or intends to rescind or not renew, any such license or approval.
5.4 Pending Litigation: There are no judgments or judicial or administrative
orders, proceedings or investigations (civil or criminal) pending, or to the
knowledge of any Borrower, threatened, against any Borrower in any court or
before any governmental authority or arbitration board or tribunal, other than
as set forth on Schedule 2 hereto, none of which, would be reasonably likely to
have a material adverse effect on such Borrower. No Borrower is in default with
respect to any order of any court, governmental authority, regulatory agency or
arbitration board or tribunal. Except as set forth on Schedule 2, no Borrower or
executive officer of any Borrower has been indicted or convicted in connection
with or is engaging in any criminal conduct, or is currently subject to any
lawsuit or proceeding or under investigation in connection with any
anti-racketeering or other illegal conduct or activity.
5.5 Medicaid and Medicare Cost Reporting: The Medicaid and Medicare cost reports
of each facility and of the home office of each Borrower for all cost reporting
periods, if any are required, have been submitted when and as required to (i) as
to Medicaid, the state agency, or other HCFA-designated agent or agent of such
state agency, charged with such responsibility or (ii) as to Medicare, the
Medicare intermediary or other HCFA-designated agent charged with such
responsibility. No such cost report indicates and no audit has resulted in any
determination that any Borrower was overpaid for Medicaid and Medicare by
$100,000 or more in any of the most recent three fiscal years covered by such
audit.
5.6 Title to Collateral: Each Borrower has good and marketable title to all the
Collateral it respectively purports to own, free from liens, claims and
encumbrances, except those of Lender and those listed on Schedule 2 hereto
("Permitted Liens").
5.7 Governmental Consent: Neither the nature of any Borrower or of any
Borrower's business or Property, nor any relationship between any Borrower and
any other Person, nor any circumstance affecting any Borrower in connection with
the issuance or delivery of the Revolving Credit Note such as to require a
consent, approval or authorization of, or filing, registration or qualification
with, any governmental authority on the part of any such Borrower in connection
with the execution and delivery of this Agreement or the issuance or delivery of
the Revolving Credit Note, the Term Note or other Loan Documents.
5.8 Taxes: All tax returns required to be filed by Borrowers, or any of them, in
any jurisdiction have in fact been filed, and all taxes, assessments, fees and
other governmental charges upon Borrowers, or any of them, or upon any of their
respective Property, income or franchises, which are shown to be due and payable
on such returns have been paid, except for those taxes being contested in good
faith with due diligence by appropriate proceedings or with respect to certain
state and/or local taxes (other than income, gross receipts, sales, franchise
and use taxes) in an aggregate amount not to exceed $10,000. No Borrower is
aware of any proposed additional tax assessment or tax to be assessed against or
applicable to any Borrower that might be reasonably likely to have a material
adverse effect on such Borrower's business, financial condition, Property or
prospects.
5.9 Financial Statements: Borrowers' annual audited consolidated and
consolidating balance sheet as of December 31, 2000, accompanied by reports
thereon from Borrowers' independent certified public accountants, and the
quarterly consolidated balance sheet as of September 30, 2001 and the related
income statements and statements of cash flows as of such dates (complete copies
of which have been delivered to Lender), have been prepared in accordance with
GAAP (subject to year end adjustments in the case of quarterly financial
statements) and present fairly, accurately and completely the financial position
of Borrowers as of such dates and the results of their operations for such
periods. The fiscal year for each Borrower currently ends on the date set forth
on Schedule 2 hereto. Each Borrower's federal tax identification number and
organization number are as set forth on Schedule 2 hereto.
5.10 Full Disclosure: Neither the financial statements referred to in Section
5.9, nor this Agreement or related agreements and documents or any written
statement furnished by any Borrower to Lender in connection with the negotiation
of the Credit Facility and contained in any financial statements or documents
relating to any Borrower contain any untrue statement of a material fact or omit
a material fact necessary to make the statements contained therein or herein in
light of the circumstances under which they were made, not misleading.
5.11 Guarantees, Contracts, etc.:
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(a) No Borrower owns nor holds equity or long term debt investments in, has any
outstanding advances to, or serves as guarantor, surety or accommodation maker
for the obligations of, or has any outstanding borrowings from or other
Indebtedness in excess of $100,000 owing to, any Person except as described in
Schedule 2 hereto or as permitted by Sections 7.5 or 7.6.
(b) No Borrower is a party to any contract or agreement, or subject to any
charter or other corporate restriction, which materially and adversely affects
its business, financial condition, Property or prospects.
(c) Except as otherwise specifically provided in this Agreement, no Borrower has
agreed or consented to cause or permit any of the Collateral whether now owned
or hereafter acquired to be subject in the future (upon the happening of a
contingency or otherwise) to a lien or encumbrance not permitted by this
Agreement.
5.12 Compliance with Laws:
--------------------
(a) No Borrower is in violation of, has received written notice that it is in
violation of, or has knowingly caused any Person to violate, any applicable
statute, regulation or ordinance of the United States of America, or of any
state, city, town, municipality, county or of any other jurisdiction, or of any
agency, or department thereof, (including without limitation, environmental laws
and regulations), which would be reasonably likely to materially and adversely
affect its business, financial condition, Property or prospects.
(b) Each Borrower is current with all reports and documents required to be filed
with any state or federal securities commission (if any) or similar agency and
is in full compliance in all material respects with all applicable rules and
regulations of such commissions, except as described in Schedule 2.
5.13 Other Associations: No Borrower is engaged in nor has an interest
in any joint venture or partnership with any other Person or has any Subsidiary
or Affiliates, except as described on Schedule 2 hereto.
5.14 Environmental Matters: Except as disclosed on Schedule 2 hereto,
no Borrower has knowledge:
(a) of the presence of any Hazardous Substances on any of the real property
where any Borrower conducts operations or has its personal property, or
(b) of any on-site spills, releases, discharges, disposal or storage of
Hazardous Substances that have occurred or are presently occurring on any of
such real property or where any Collateral is located, or
(c) of any spills, releases, discharges or disposal of Hazardous Substances that
have occurred, are presently occurring on any other real property as a result of
the conduct, action or activities of any Borrower.
5.15 Capital Stock and Equity Interests: The authorized shares of capital stock
of each Borrower are as set forth on Schedule 2 hereto. All of the capital stock
and equity interests of each Borrower have been duly and validly authorized and
issued and is fully paid and non-assessable and have been sold and delivered to
the holders thereof in compliance with, or under valid exemption from, all
Federal and state laws and the rules and regulations of all regulatory bodies
thereof governing the sale and delivery of securities. Except for the rights and
obligations set forth in Schedule 2, as of the Closing Date there are no
subscriptions, warrants, options, calls, commitments, rights or agreements by
which any Borrower or any of the Shareholders of any Borrower is bound relating
to the issuance, transfer, voting or redemption of shares of its capital stock,
membership units or any pre-emptive rights held by any Person with respect to
the shares of capital stock or membership units of any such Borrower. Except as
set forth in Schedule 2, as of the Closing Date, no Borrower has issued any
securities convertible into or exchangeable for shares of its capital stock or
membership units or any options, warrants or other rights to acquire such shares
or membership units or securities convertible into or exchangeable for such
shares.
5.16 Lockboxes: The Government Lockbox and the Commercial Lockbox are the only
lockbox accounts maintained by Borrowers, and each Obligor of an Eligible
Account has been directed by the notice attached as Exhibit 4.2A to this
Agreement, and is required to, remit all payments with respect to such Account
for deposit in the Commercial Lockbox (other than the Obligors of Government
Accounts which have been directed by the notice attached as Exhibit 4.2B to this
Agreement to remit all payments with respect to such Accounts for deposit in the
Government Lockbox).
5.17 Borrowing Base Reports: Each Borrowing Base Report signed by Borrowers, on
behalf of Borrowers, contains and will contain an accurate summary of all
Eligible Accounts of Borrowers contained in the Borrowing Base as of its date.
5.18 Security Interest: Each Borrower has granted to Lender a valid, perfected
first priority and only security interest in the Accounts and the other
Collateral subject to no other liens, claims or encumbrances, other than
Permitted Liens.
5.19 Accounts:
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(a) No Borrower has done nor shall do anything to interfere with the collection
of the Accounts and no Borrower shall amend or waive the terms or conditions of
any Account or any related Contract in any material adverse manner, except with
respect to write-offs related to financial hardship in the ordinary course of
such Borrower's business and in accordance with historical practice (so long as
such write-offs do not have a material adverse effect on the Collateral, the
value of the Collateral or Lender's rights therein), without Lender's prior
written consent.
(b) Each Borrower has made and will continue to make all payments to Obligors
necessary to prevent any Obligor from offsetting any earlier overpayment to such
Borrower against any amounts such Obligor owes on an Account.
5.20 Pension Plans: Each pension or profit sharing plan, if any, to which any
Borrower is a party has been and will be funded in accordance with the
obligations of such Borrower(s) set forth in such plan.
5.21 Representations and Warranties as to Accounts for each Loan: As of each
date that Borrowers shall request any Loan, each Borrower shall be deemed to
make, with respect to its Eligible Accounts included in the Borrowing Base, each
of the following representations and warranties, subject to the terms of Section
4.2(b):
(a) Such Account satisfies each of the conditions of an Eligible Account.
(b) All information relating to such Account that has been delivered to Lender
is true and correct in all material respects. With respect to each such Account
that has been billed, such Borrower has delivered to the Obligor all requested
supporting claim documents and all information set forth in the bill and
supporting claim documents is true, complete and correct in all material
respects.
(c) There is no adverse claim (other than certain claims included as Permitted
Liens) or any security interest or lien of record, in favor of any third party,
nor any filing against any Borrower, as debtor, covering or purporting to cover
any interest in such Account.
(d) Such Account is (i) payable in an amount not less than its Estimated Net
Value by the Obligor identified by such Borrower as being obligated to do so,
(ii) the legally enforceable obligation of such Obligor, and (iii) an account
receivable or general intangible within the meaning of the UCC of the state in
which such Borrower has its chief executive office, or is a right to payment
under a policy of insurance or proceeds thereof, and is not evidenced by any
instrument or chattel paper. There is no payor other than the Obligor identified
by such Borrower as the payor primarily liable on such Account.
(e) No such Account (i) requires the approval of any third person for such
Account to be assigned as Collateral hereunder to Lender hereunder, (ii) is
subject to any legal action, proceeding or investigation (pending or
threatened), dispute, set-off, counterclaim, defense, suspension, deferment, or
termination by the Obligor, or (iii) is past, or within 180 days of, the
statutory limit for collection applicable to the Obligor.
(f) Such Borrower does not have any guaranty of, letter of credit support for,
or collateral security for, such Account, other than any such guaranty, letter
of credit or collateral security as has been assigned to Lender as Collateral
hereunder.
(g) The services constituting the basis of such Account (i) were medically
necessary for the patient and (ii) at the time such services were rendered, were
covered by an insurance policy or Contract obligating the applicable Obligor to
make payment with respect to such Account (other than any applicable secondary
payor and/or an individual's co-insurance responsibility) (and the corresponding
Borrower has verified such determination), and (iii) the patient received such
services in the ordinary course of such Borrower's business.
(h) The fees and charges charged for the services constituting the basis for
such Account were when rendered and are currently consistent with (i) the usual,
customary and reasonable fees charged by such Borrower or (ii) pursuant to
negotiated fee contracts, or imposed fee schedules, with or by the applicable
Obligors.
(i) The Obligor with respect to such Account is located in the United States,
and is (i) a party which in the ordinary course of its business or activities
agrees to pay for healthcare services received by individuals, including,
commercial insurance companies and non-profit insurance companies issuing
health, or other types of insurance, employers or unions, self-insured
healthcare organizations, preferred provider organizations, and health insured,
prepaid maintenance organizations, (ii) a state, an agency or instrumentality of
a state or a political subdivision of a state, or (iii) the United States or an
agency or instrumentality of the United States.
(j) Any insurance policy or Contract obligating an Obligor to make payment with
respect to such Account (i) does not prohibit the transfer of such payment
obligation from the patient to the corresponding Borrower and (ii) is and was in
full force and effect and applicable to the patient at the time the services
constituting the basis for such Account were performed.
(k) The representations and warranties made by Borrowers in the Loan Documents
and all financial or other information delivered to Lender with respect to
Borrowers and such Account do not contain any untrue statement of material fact
or omit to state a material fact necessary to make the statement made, in light
of the circumstances which they were made, not misleading.
(l) If requested by Lender, a copy of each related Contract to which such
Borrower is a party has been delivered or will be available to Lender unless
such Borrower shall have, prior to the related Funding Date, certified in an
Officer's Certificate that such delivery is prohibited by the terms of the
Contract or by law, and the circumstances of such prohibition.
(m) If such Account has not been billed, the services giving rise to such
Account have been properly recorded in such Borrower's accounting system.
(n) Such Account was (or if unbilled, will be) in any event billed no later than
45 days after the date the services or goods giving rise to such Account were
rendered as provided, as applicable, and each bill dated from and after February
28, 2002 contains an express direction requiring the Obligor to remit payments
to either the Government Lockbox or Commercial Lockbox, as applicable.
(o) Such Account has an Estimated Net Value which, when added to the Estimated
Net Value of all other Accounts owing by the same Obligor and which constitute
Eligible Accounts hereunder, does not exceed any applicable Concentration Limit.
(p) Neither such Account nor the related Contract contravenes any laws, rules or
regulations applicable thereto (including, without limitation, laws, rules and
regulations relating to usury, consumer protection, truth-in-lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and no party to such related Contract is in
violation of any such law, rule or regulation in connection with such Contract.
(q) As of the applicable Funding Date, to the best of Borrowers' knowledge, no
Obligor on such Account is bankrupt, insolvent, or is unable to make payment of
its obligations when due, and no other fact exists which would cause any
Borrower reasonably to expect that the ENV with respect to the amount billed to
the related Obligor for such Account will not be paid in full when due.
5.22 Interrelatedness of Borrowers: The business operations of each Borrower are
interrelated and complement one another, and such companies have a common
business purpose, with intercompany bookkeeping and accounting adjustments used
to separate their respective Properties, liabilities and transactions. To permit
their uninterrupted and continuous operation, such companies now require and
will from time to time hereafter require funds for general business purposes.
The proceeds of Advances under the Credit Facility will directly or indirectly
benefit each Borrower hereunder severally and jointly, regardless of which
Borrower requests or receives part or all of the proceeds of such Loan.
5.23 Commercial Tort Claims: Borrower has no commercial tort claims relating
in any way to the Collateral, except as shown on Schedule 2 hereto.
5.24 Letter of Credit Rights: Borrower has no letter of credit rights except
as shown on Schedule 2 hereto.
5.25 Intellectual Property: Except as shown on Schedule 2 attached hereto and
made part hereof, (i) Borrower does not require any copyrights, patents,
trademarks or other intellectual property, or any license(s) to use any patents,
trademarks or other intellectual property in order to provide services to its
customers or to bill Obligors and collect therefrom, in the ordinary course of
business, and (ii) Lender will not require any copyrights, patents, trademarks
or other intellectual property or any licenses to use the same in order to
provide such services or bill and collect the Accounts, after the occurrence of
an Event of Default.
SECTION 6. BORROWER'S AFFIRMATIVE COVENANTS
Each Borrower covenants that until all of Borrowers' Obligations to Lender
are paid (other than Contingent Indemnification Obligations) and satisfied in
full and the Credit Facility has been terminated, unless otherwise consented to
in writing by Lender:
6.1 Payment of Taxes and Claims: Each Borrower shall pay, before they become
delinquent, all taxes, assessments and governmental charges or levies imposed
upon it or upon such Borrower's Property, except for those being contested in
good faith with due diligence by appropriate proceedings and for which
appropriate reserves have been maintained under GAAP.
6.2 Maintenance of Insurance, Financial Records and Corporate Existence:
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(a) Property Insurance - Borrowers shall maintain or cause to be maintained
insurance on their Property against fire, flood (where appropriate), casualty
and such other hazards as contained in a standard all risk property policy, in
an amount equal to or greater than 100% of the replacement value of such
property. Borrower shall maintain a deductible of no more than $25,000 with
respect to property casualty coverage. The policies of all such casualty
insurance shall contain a standard Lender Loss Payable clause and public
liability policies shall contain an additional insured clause issued in favor of
Lender pursuant to which losses thereunder with respect to the Collateral shall
be paid to Lender as Lender's interests may appear. Such policies shall
expressly provide that the requisite insurance cannot be altered or canceled
without thirty (30) days prior written notice to Lender and shall insure Lender
notwithstanding the act or neglect of the insured. At or prior to Closing,
Borrowers shall furnish Lender with insurance certificates certified as true and
correct and being in full force and effect as of the Closing Date or such other
evidence of insurance as Lender may reasonably require. In the event Borrowers
fail to procure or cause to be procured any such insurance or to timely pay or
cause to be paid the premium(s) on any such insurance, Lender may do so for
Borrowers, but Borrowers shall continue to be liable for the same. Borrowers
hereby appoint Lender as their attorney-in-fact, exercisable at Lender's option,
to endorse any check which may be payable to any Borrower in order to collect
the proceeds of such insurance to which Lender is entitled.
(b) Public Liability and Business Interruption Insurance - Borrowers shall
maintain, and shall deliver to Lender upon Lender's request evidence of public
liability and business interruption insurance in such amounts as is customary
for companies in the same or similar businesses located in the same or similar
area.
(c) Financial Records - Borrowers shall keep current and accurate books of
records and accounts in which full and correct entries will be made of all of
its business transactions, and will reflect in its financial statements adequate
accruals and appropriations to reserves, all in accordance with GAAP. No
Borrower shall change its respective fiscal year end date without the prior
written notice to Lender.
(d) Existence and Rights - Each Borrower shall do (or cause to be done) all
things necessary to preserve and keep in full force and effect its legal
existence, good standing, rights and franchises, except with respect to rights
and franchises where the failure to do so might be reasonably expected have a
material adverse effect on its business, financial condition, Property,
prospects or Lender's rights hereunder or with respect to the Collateral.
(e) Compliance with Laws - Each Borrower shall be in compliance with any and all
laws, ordinances, governmental rules and regulations, and court or
administrative orders or decrees to which it is subject, whether federal, state
or local, (including without limitation environmental or environmental-related
laws, statutes, ordinances, rules, regulations and notices), and shall obtain
and maintain any and all licenses, permits, franchises, certificates of need or
other governmental authorizations necessary to the ownership of its Property or
to the conduct of its businesses, which violation or failure to obtain would be
reasonably likely to materially adversely affect the business, Property,
financial conditions or prospects of such Borrower, the Collateral, or Lender's
rights with respect to the Collateral.
6.3 Business Conducted: Each Borrower shall continue in the business presently
operated by it using its best efforts to maintain its customers. No Borrower
shall engage, directly or indirectly, in any material respect in any line of
business substantially different from the businesses conducted by it immediately
prior to the Closing Date.
6.4 Litigation: Borrowers shall give prompt notice to Lender of any litigation
not listed on Schedule 2 claiming in excess of $250,000 from Borrowers, or any
of them, or which may otherwise be reasonably likely to have a material adverse
effect on the business, financial condition, Property or prospects of Borrowers,
or any of them.
6.5 Taxes: Borrowers shall pay all taxes (other than taxes based upon or
measured by Lender's income or revenues), if any, in connection with the Loans
and/or the recording of any financing statements or other Loan Documents. The
Obligations of Borrowers under this section shall survive the payment of
Borrowers' Obligations under this Agreement and the termination of this
Agreement.
6.6 Financial Covenants:
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(a) Adjusted Debt Service Coverage Ratio. Commencing with the fiscal
quarter ended March 31, 2002, Borrowers shall maintain at all times, an Adjusted
Debt Service Coverage Ratio measured quarterly at the end of each fiscal
quarter, of at least 1.25 to 1, as reflected and computed from their financial
statements.
(b) Senior Funded Debt Ratio. Commencing with the fiscal quarter
ended March 31, 2002, Borrowers shall maintain at all times, a Senior Funded
Debt Ratio measured quarterly at the end of each fiscal quarter, of not more
than 2.75 to 1, as reflected and computed from their financial statements.
6.7 Financial and Business Information: Borrowers shall deliver to Lender the
following (all to be in form and substance satisfactory to Lender):
(a) Financial Statements and Collateral Reports:
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(i) as soon as available but in any event, within one hundred and fifty (150)
days after the end of each fiscal year of Borrowers, deliver financial
statements of Borrowers for such year which present fairly Borrowers' financial
condition including the balance sheet of Borrowers as at the end of such fiscal
year and a statement of cash flows and income statement for such fiscal year,
all on a consolidated and consolidating basis, setting forth in the consolidated
statements in comparative form, the corresponding figures as at the end of and
for the previous fiscal year, all in reasonable detail, including all supporting
schedules, and audited by independent public accountants of recognized standing,
selected by Borrowers and reasonably satisfactory to Lender, and prepared in
accordance with GAAP and the annual report of Borrower on Form 10-K for such
fiscal year;
(ii) as soon as available but in any event within forty-five (45) days after the
end of each fiscal quarter, deliver to Lender Borrowers' internally prepared
quarterly consolidated and consolidating financial statements along with year to
date information, including balance sheet, income statement and statements of
cash flows with respect to the periods measured and the quarterly report of
Borrower on Form 10-Q for such fiscal quarter;
(iii) promptly upon request, deliver such other information concerning Borrowers
as Lender may from time to time reasonably request, including Medicare and
Medicaid cost reports (to the extent applicable) and audits, annual reports,
security law filings and reports to any security holders; and
(iv) within thirty (30) days after the first day of each fiscal year, annual
consolidated and consolidating projections for Borrowers, including balance
sheet income statements and statements of cash flow and Borrowing Base
Availability projections, all prepared on a monthly basis;
(v) contemporaneously with delivery of the annual financial statements referred
to in clause (i) above, a good standing certificate form with each Borrower's
jurisdiction of organization evidencing that such Borrower remain in good
standing in, and continues to be organized under the laws of, such jurisdiction;
and
(vi) such other data, reports, statements and information (financial or
otherwise), as Lender may reasonably request.
(b) Notice of Event of Default - promptly upon becoming aware of the
existence of any condition or event which constitutes an Event of Default or
Unmatured Event of Default under this Agreement, a written notice specifying the
nature and period of existence thereof and what action Borrowers are taking (and
propose to take) with respect thereto;
(c) Notice of Claimed Default - promptly upon receipt by any Borrower, notice of
default, oral or written, given to such Borrower by any creditor for borrowed
money in excess of $250,000.
6.8 Officers' Certificates: Along with the set of financial statements delivered
to Lender at the end of each fiscal quarter and fiscal year pursuant to Section
6.7(a) hereof, deliver to Lender a certificate (in the form of Exhibit 6.8
attached hereto and made a part hereof) from the chief financial officer of
Borrowers setting forth:
(a) Covenant Compliance - the information (including detailed calculations)
required in order to establish whether Borrowers are in compliance with the
requirements of Section 6.6 as of the end of the period covered by the financial
statements then being furnished (and any exhibits appended thereto) under
Section 6.7; and
(b) Event of Default - that the signer in his capacity as an officer of
Borrowers has reviewed the relevant terms of this Agreement, and has made (or
caused to be made under his supervision) a review of the transactions and
conditions of Borrowers from the beginning of the accounting period covered by
the financial statements being delivered therewith to the date of the
certificate, and that such review has not disclosed the existence during such
period of any condition or event which constitutes an Event of Default or
Unmatured Event of Default (which has not been waived or cured) or if any such
condition or event existed or exists, specifying the nature and period of
existence thereof and what action Borrowers have taken or propose to take with
respect thereto.
6.9 Inspection: Borrowers will permit any of Lender's officers or other
representatives to visit and inspect any Borrower's location(s) or where any
books and records relating to the Collateral are maintained, or where other
Collateral (and prior to the occurrence of an Event of Default, only such
Collateral locations with Collateral valued in excess of $100,000) is kept,
during regular business hours to examine and audit all of such Borrower's books
of account, records, reports and other papers other than any of the foregoing
subject to legal restrictions of patient confidentiality, to make copies and
extracts therefrom and to discuss its affairs, finances and accounts with its
officers, employees and independent certified public accountants and attorneys.
Borrowers shall pay to Lender all reasonable fees based on standard rates for
such inspections, currently at the rate of $800 per day, per person (plus
out-of-pocket expenses). Notwithstanding the foregoing, prior to the occurrence
of a Event of Default or Unmatured Event of Default, Borrowers shall be
responsible for the costs and expenses incurred in connection with no more than
two (2) collateral audits for per calendar year.
6.10 Tax Returns and Reports: At Lender's request from time to time, Borrowers
shall promptly furnish Lender with copies of the annual federal and state income
tax returns of Borrowers.
6.11 Material Adverse Developments: Each Borrower agrees that immediately upon
it or any of its officers becoming aware of any development or other information
which would reasonably be expected to materially and adversely affect the
businesses, financial condition, Property, prospects of a Borrower or a
Borrower's ability to perform under this Agreement, it shall give to Lender
telephonic or facsimile notice specifying the nature of such development or
information and such anticipated effect. In addition, such verbal communication
shall be confirmed by written notice thereof to Lender on the next Business Day
after such verbal notice is given.
6.12 Places of Business: Each Borrower shall give thirty (30) days prior written
notice to Lender of any changes in (a) its jurisdiction of organization and (b)
the location of any of its chief executive office. On a quarterly basis,
Borrowers will provide a written list to Lender of any other places of business,
or the establishment of any new, and the discontinuance of any existing place of
business during the prior quarter.
6.13 Notice of Action: Each Borrower will promptly notify Lender in the event of
any legal action, dispute, setoff, counterclaim, defense or reduction that is or
may be asserted by an Obligor with respect to any Account that may be reasonably
likely to have a material adverse effect on the collectibility of such Account
or all Accounts collectively.
6.14 Verification of Information: At the request of Lender, and at no
out-of-pocket cost to Borrowers (other than salaries and wages for those persons
assisting on behalf of Borrowers) Borrowers will promptly provide and verify in
writing the accuracy of information concerning Borrowers and their Subsidiaries
of the type provided to Lender in connection with Lender's decision to enter
into this Agreement and such other information concerning Borrowers and their
Subsidiaries as Lender may reasonably request in connection with any offering
documents with respect to the contemplated securitization of, and sale of
securities backed by, the Eligible Accounts (the "Securities"), including,
without limitation, all information necessary to provide full and complete
disclosure of all material facts pertaining to an investment in the Securities
in compliance with federal and state securities and blue sky laws, and such
information may be published in such offering documents and relied upon by
Lender and any party arranging the offering of such Securities by Lender or its
assignee. Such information will be true and complete in all material respects
and will not omit to state a material fact necessary to make the statements
contained in such information, in light of the circumstances under which they
were made, not misleading.
6.15 Value Track System(TM): Borrowers shall permit Lender to interface its
Value Track System(TM) to Borrowers' data files and will assist Lender in
completing and maintaining such interface such that the interface can accurately
interpret, track and reconcile the Accounts Detail File provided by Borrowers.
6.16 Commercial Tort Claim: Borrowers shall provide written notice to Lender of
any commercial tort claim that in any way relates to any of the Collateral, to
which a Borrower is or becomes a party or which otherwise inures to the benefit
of a Borrower. Such notice shall contain a sufficient description of such
commercial tort claim including the parties, the court in which the claim was
commenced (if applicable), the docket number assigned to the case (if
applicable), and a detailed explanation of the events giving rise to such claim.
Borrowers shall grant Lender a security interest in such commercial tort claim
to secure payment of the Obligations. Borrowers shall execute and deliver such
instruments, documents and agreements as Lender may require in order to obtain
and perfect such security interest including, without limitation, a security
agreement or amendment to this Agreement all in form and substance satisfactory
to Lender. Each Borrower authorizes Lender to file (without such Borrower's
signature) financing statements or amendments to existing financing statements
as Lender deems necessary to perfect the security interest in such commercial
tort claim.
SECTION 7. BORROWER'S NEGATIVE COVENANTS
Each Borrower covenants that until all of Borrowers' Obligations (other
than Contingent Indemnification Obligations), to Lender are paid and satisfied
in full and the Credit Facility has been terminated and Lender's Obligations
hereunder are terminated, that without the prior written consent of Lender:
7.1 Merger, Consolidation, Dissolution or Liquidation:
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(a) No Borrower shall sell, lease, license, transfer or otherwise dispose of its
Property other than (i) to another Borrower, (ii) with respect to inventory
and/or data collection and/or management services sold in the ordinary course or
ordinary operation of such Borrower's business, (iii) with respect to the lease
or license of real property or intellectual property, (iv) with respect to
obsolete equipment, including without limitation, hyperbaric oxygen chambers, or
(v) as otherwise permitted by Sections 7.7 or 7.10 below.
(b) No Borrower shall merge or consolidate with, or acquire, any other Person or
commence a dissolution or liquidation, other than through a Permitted
Acquisition or merger with and into another Borrower; provided that with respect
to the proposed corporate restructuring referred to on Schedule 2, Lender's
consent shall not be unreasonably withheld or delayed.
7.2 Liens and Encumbrances: No Borrower shall: (i) execute a negative pledge
agreement with any Person covering any of the Collateral, or (ii) cause or
permit or agree or consent to cause or permit in the future (upon the happening
of a contingency or otherwise) the Collateral, whether now owned or hereafter
acquired, to be subject to any lien, claim or encumbrance other than those of
Lender and Permitted Liens.
7.3 Negative Pledge: No Borrower shall pledge, grant or permit any lien to exist
on the common stock or membership units of its Subsidiaries other than as
permitted under this Agreement.
7.4 Transactions With Affiliates or Subsidiaries:
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(a) No Borrower shall enter into any transaction with any subsidiary or other
Affiliate (other than another Borrower) including, without limitation, the
purchase, sale, lease or exchange of Property, or the loaning, capitalization or
giving of funds to any such Affiliate or any Subsidiary, unless (i) such
Subsidiary or Affiliate is engaged in a business substantially related to the
business conducted by such Borrower and (ii) the transaction is in the ordinary
course of and pursuant to the reasonable requirements of such Borrower's
business and upon terms substantially the same and no less favorable to such
Borrower as it would obtain in a comparable arm's-length transactions with any
Person not an Affiliate or a subsidiary and (iii) such transaction is not
prohibited hereunder provided that, the limitations of this Section 7.4(a) shall
not apply to Distributions permitted under Section 7.7(d), Section 7.10 or any
employment or compensation arrangements with any executive officer or director
of a Borrower that is entered into by such Borrower in the ordinary course of
such Borrower's business and consistent with employment or compensation
arrangements of similarly situated executive officers or directors at comparable
companies engaged in such Borrower's business.
(b) Subject in any event to the limitations of Section 7.4(a) above, except in
connection with a Permitted Acquisition or otherwise with the prior written
consent of Lender, which consent shall not be unreasonably withheld or delayed
(so long as each of the requirements, to the extent applicable, set forth in the
proviso clause of the definition of "Permitted Acquisitions" shall have been
timely satisfied), no Borrower shall create or acquire any subsidiary unless
such subsidiary engages in a business substantially related to the business of
such Borrower as conducted immediately prior to the Closing Date, and if
required by Lender, such subsidiary becomes a Borrower hereunder.
7.5 Guarantees: No Borrower shall become or be liable, directly or indirectly,
primary or secondary, matured or contingent, in any manner, whether as
guarantor, surety, accommodation maker, or otherwise, for the existing or future
indebtedness of any kind of any other Person except as follows:
(a) Guarantee obligations in existence on the date hereof and listed on
Schedule 2 and any subsequent affirmation, extension or renewal thereof;
(b) Endorsements in the ordinary course of business of negotiable instruments
for deposit or collection; and
(c) Contingent obligations in respect of the undrawn portion of the face amount
of letters of credit issued for the account of a Borrower existing as of the
Closing Date listed on Schedule 2; and
(d) Guarantee obligations incurred in connection with Permitted Acquisitions or
acquisitions specifically consented to by Lender which consent shall not be
unreasonably withheld or delayed (so long as each of the requirements set forth
in the proviso clause of the definition of "Permitted Acquisition" shall have
been timely satisfied).
7.6 Indebtedness: Without Lender's prior written consent, no Borrower shall
create, incur, assume or suffer to exist any Indebtedness (exclusive of trade
debt) except with respect to:
(a) Indebtedness to Lender,
(b) Indebtedness specifically identified on Schedule 2 hereto and any
refinancings, refundings, renewals, or extensions thereof;
(c) Indebtedness secured by Permitted Liens, and any refinancings, refundings,
renewals, or extensions thereof;
(d) Guarantee obligations permitted under Section 7.5;
(e) Indebtedness of any Borrower to any other Borrower;
(f) Indebtedness constituting Subordinated Debt;
(g) Indebtedness incurred in connection with Permitted Acquisitions or
acquisitions consented to by Lender, which consent shall not be unreasonably
withheld or delayed (so long as each of the requirements set forth in the
proviso clause of the definition of "Permitted Acquisition" shall have been
timely satisfied); and
(h) Purchase money Indebtedness and capitalized lease obligations of Borrowers,
provided that such purchase money Indebtedness or capital lease obligations are
secured by the asset purchased or leased and is not secured by any Collateral.
In the event that Indebtedness falls within more than one category or categories
of permitted Indebtedness, Borrowers shall determine the applicable category or
categories.
7.7 Loans to Other Persons: No Borrower shall make or be permitted to have
outstanding any loans, advances or extensions of credit to any Person except
as follows:
(a) Subject to Section 7.10 below, loans, advances or extensions of credit
to another Borrower;
(b) Loans, advances or extensions of credit existing on the date of this
Agreement and identified on Schedule 2, and any refinancings, refundings,
renewals, or extensions thereof;
(c) Reasonable travel advances to employees of any Borrower in the ordinary
course of business (including, without limitation, for travel, entertainment and
relocation expenses);
(d) Subject to Section 7.10 below, loans, advances or extensions of credit in
the ordinary course of business to directors, officers or employees in
connection with the purchase or retention of shares of capital stock of a
Borrower by such Person;
(e) Investments in readily marketable direct obligations issued or guaranteed by
the United States or any agency thereof and supported by the full faith and
credit of the United States;
(f) Extensions of credit consisting of extensions of trade credit in the
ordinary course of business;
(g) Extensions of credit relating to settlements of debts (created in the
ordinary course of business) owing to a Borrower; and
(h) Promissory notes received in connection with the settlement of litigation
arising in connection with Accounts created in the ordinary course of business.
In the event that any loan, advance or extension of credit falls within
more than one category or categories of set forth above, Borrowers shall
determine the applicable category or categories.
7.8 [Reserved]
7.9 Subordinated Debt Payments: No Borrower shall (a) make any payment in
contravention of the terms and conditions of the Subordination Agreements, (b)
following the occurrence and during the continuance of an Event of Default or
Unmatured Event of Default, make any payment in connection with the Seller
Notes, or (c) make a payment in connection with a Seller Notes if after giving
effect to such payment, an Event of Default or Unmatured Event of Default will
result.
7.10 Distributions: Borrowers shall not, following the occurrence and during the
continuance of an Event of Default or Unmatured Event of Default, declare or pay
or make any forms of Distributions to its Shareholders, their successors or
assigns, nor may any Borrower declare or pay or make any forms of Distributions
if, after giving effect to such Distributions, an Event of Default or Unmatured
Event of Default will result, except with respect to Distributions comprised of
loans or advances from one Borrower to another to cover payroll and related
expenses.
SECTION 8. DEFAULT
8.1 Events of Default: Each of the following events shall constitute an event of
default ("Event of Default") and Lender shall upon the continuance thereof have
the option to declare the Obligations immediately due and payable, all without
demand, notice, presentment or protest or further action of any kind (it also
being understood that the occurrence of any of the events or conditions set
forth in subparagraphs (j), (k), (l) or (r) shall automatically cause an
acceleration of the Obligations):
(a) Payments - if Borrowers fail to make any payment of principal or interest on
the date when such payment is due and payable and such failure continues for a
period of two (2) Business Days; provided however, that the two (2) Business
Days grace period shall not be applicable if such payments are due and payable
due to maturity, acceleration or demand, whether following an Event of Default
or otherwise; or
(b) Other Charges - if Borrowers fail to pay any other charges, fees, Expenses
or other monetary obligations owing to Lender, arising out of or incurred in
connection with this Agreement on the date when such payment is due and payable,
whether upon maturity, acceleration, demand or otherwise and such failure
continues for a period of five (5) Business Days after the earlier of a Borrower
becoming aware of such failure or a Borrower receiving written notice of such
failure; provided however, that the five (5) Business Day grace period shall not
be applicable if such payments are due and payable due to maturity, acceleration
or demand, whether following an Event of Default, or otherwise; or
(c) Particular Covenant Defaults - if any Borrower fails to perform, comply with
or observe any covenant or undertaking contained in this Agreement not otherwise
described in this Section 8.1, and such failure continues for a period of ten
(10) Business Days after the earlier of a Borrower becoming aware of such
failure or a Borrower receiving written notice of such failure from Lender; or
(d) Financial Information - if any statement, report, financial statement, or
certificate made or delivered by a Borrower or any of their officers, employees
or agents, to Lender is not true and correct, in all material respects, when
made; or
(e) Uninsured Loss - if there shall occur any uninsured damage to or loss,
theft, or destruction in excess of $250,000 with respect to any portion of any
Borrower's Property; or
(f) Warranties or Representations - if any warranty, representation or other
statement by or on behalf of Borrowers, or any of them, contained in or pursuant
to this Agreement, or in any document, agreement or instrument furnished by or
on behalf of Borrowers, or any of them, in compliance with, relating to, or in
reference to this Agreement, is false, erroneous, or misleading in any material
respect when made; or
(g) Agreements with Others - if Borrowers, or any of them, shall default beyond
any grace period under any agreement with any creditor for borrowed money in
principal amount in excess of $250,000, and (i) such default consists of the
failure to pay any principal, premium or interest with respect to such
indebtedness or (ii) such default consists of the failure to perform any
covenant or agreement with respect to such indebtedness, if the effect of such
default is to cause or permit Borrowers', or any of their obligations which are
the subject thereof to become due prior to its maturity date or prior to its
regularly scheduled date of payment;
(h) Other Agreements with Lender - if Borrowers, or any of them, breach or
violate the terms of, or if a default or an event of default, occurs under, any
other existing or future agreement (related or unrelated) between or among
Borrowers, or any of them and Lender, including without limitation, any material
lease agreements or finance agreements with any affiliate of Lender; or
(i) Judgments - if any final judgment for the payment of money in excess of
$250,000 which is not fully and unconditionally covered by insurance or an
appeal bond, or for which Borrowers have not established a cash or cash
equivalent reserve in the amount of such judgment, shall be rendered or entered;
(j) Assignment for Benefit of Creditors, etc. - if Borrowers, or any of them,
make or propose an assignment for the benefit of creditors generally, offers a
composition or extension to creditors, or makes or sends notice of an intended
bulk sale of any business or assets now or hereafter owned or conducted by any
Borrower which might be reasonably likely to materially and adversely affect
such Borrower; or
(k) Bankruptcy, Dissolution, etc. - upon the commencement of any action for the
dissolution or liquidation of Borrowers, or any of them, or the commencement of
any proceeding to avoid any transaction entered into by Borrowers, or any of
them, or the commencement of any case or proceeding for reorganization or
liquidation of Borrowers', or any of their debts under the Bankruptcy Code or
any other state or federal law, now or hereafter enacted for the relief of
debtors, whether instituted by or against any Borrower; provided, however, that
Borrowers shall have sixty (60) days to obtain the dismissal or discharge of
involuntary proceedings filed against a Borrower, it being understood that
during such sixty (60) day period, Lender shall be not obligated to make
Advances hereunder and Lender may seek adequate protection in any bankruptcy
proceeding; or
(l) Receiver - upon the appointment of a receiver, liquidator, custodian,
trustee or similar official or fiduciary for Borrowers, or any of them, or for
any of any Borrower's Property; or
(m) Execution Process, Seizure, etc. - the issuance of any execution or
distraint process against any Borrower or any Collateral, or if any
accounts (as defined in the UCC) or inventory or if a material portion of
other Property of any Borrower is seized by any governmental entity,
federal, state or local; or
(n) Termination of Business - if Borrowers, or any of them, cease any
material portion of their business operations as presently conducted; or
(o) Pension Benefits, etc. - if Borrowers fail to comply with ERISA, so that
grounds exist to permit the appointment of a trustee under ERISA to administer
Borrowers' employee plans or to allow the Pension Benefit Guaranty Corporation
to institute proceedings to appoint a trustee to administer such plan(s), or to
permit the entry of a Lien to secure any deficiency or claim; or
(p) Investigations - any indication or evidence received by Lender that
reasonably leads it to believe Borrowers, or any of them, may have directly or
indirectly been engaged in any type of activity which would be reasonably likely
to result in the forfeiture of any accounts (as defined in the UCC), cash,
inventory or a material portion of other Property of Borrowers, or any of them,
to any governmental entity, federal, state or local; or
(q) Material Adverse Events -
-----------------------
(i) Lender reasonably determines that an event which adversely affects the
collectibility of a material portion of the Accounts has occurred; or
(ii) a material adverse change occurs in the business or condition of Borrowers,
or any of them, as determined by Lender in its sole but reasonable discretion;
or
(r) Lockbox Instructions - any instruction or agreement regarding the Commercial
Lockbox or the Government Lockbox or the bank accounts related thereto is
amended or terminated without the written consent of Lender, or if any Borrower
fails, within one (1) Business Day of receipt, to forward Collections it
receives with respect to any Accounts to the Commercial Lockbox or the
Government Lockbox, as the case may be; or
(s) Change of Control - The occurrence of a Change of Control which
has not been consented to by Lender; or
(t) Stipulation and Order - Any material breach, default or failure to
perform on the part of any Borrower, under that certain Stipulation and Order of
Settlement and Dismissal as to Curative Health Services, Inc. No. 98 Civ. 2501
(RCC) in the United States District Court for the Southern District of New York
or that certain Corporate Integrity Agreement between the Office of Inspector
General of the Department of Health and Human Services and Curative Health
Services, Inc., dated on or about December 28, 2001.
8.2 Cure: Nothing contained in this Agreement or the Loan Documents shall be
deemed to compel Lender to accept a cure of any Event of Default hereunder.
8.3 Rights and Remedies on Default:
------------------------------
(a) In addition to all other rights, options and remedies granted or available
to Lender under this Agreement or the Loan Documents, or otherwise available at
law or in equity, upon or at any time after the occurrence and during the
continuance of an Event of Default or Unmatured Event of Default, Lender may, in
its discretion, withhold or cease making Advances under the Credit Facility.
(b) In addition to all other rights, options and remedies granted or available
to Lender under this Agreement or the Loan Documents (each of which is also then
exercisable by Lender), Lender may, in its discretion, upon or at any time after
the occurrence and during the continuance of an Event of Default, terminate the
Credit Facility.
(c) In addition to all other rights, options and remedies granted or available
to Lender under this Agreement or the Loan Documents (each of which is also then
exercisable by Lender), Lender may, upon or at any time after the occurrence and
during the continuance of an Event of Default, exercise all rights under the UCC
and any other applicable law or in equity, and under all Loan Documents
permitted to be exercised after the occurrence of an Event of Default, including
the following rights and remedies (which list is given by way of example and is
not intended to be an exhaustive list of all such rights and remedies):
(i) Subject to all applicable laws and regulations governing payment of Medicare
and Medicaid receivables, the right to "take possession" of the Collateral, and
notify all Obligors of Lender's security interest in the Collateral and require
payment under the Accounts to be made directly to Lender and Lender may, in its
own name or in the name of the applicable Borrower, exercise all rights of a
secured party with respect to the Collateral and collect, sue for and receive
payment on all Accounts, and settle, compromise and adjust the same on any terms
as may be satisfactory to Lender, in its sole and absolute discretion for any
reason or without reason and Lender may do all of the foregoing with or without
judicial process (including without limitation notifying the United States
postal authorities to redirect mail addressed to Borrowers, or any of them, to
an address designated by Lender); or
(ii) Require Borrowers at Borrowers' expense, to assemble all or any part of the
Collateral and make it available to Lender at any place reasonably designated by
Lender, which may include providing Lender or any entity designated by Lender
with access (either remote or direct) to Borrowers' information system for
purposes of monitoring, posting payments and rebilling Accounts to the extent
deemed desirable by Lender in its sole discretion; or
(iii) The right to reduce or modify the Revolving Loan Commitment, Borrowing
Base or any portion thereof or the Advance Rates or to modify the terms and
conditions upon which Lender may be willing to consider making Advances under
the Credit Facility or to take additional reserves in the Borrowing Base for any
reason.
(d) Borrowers hereby agree that a written notice received by them at least ten
(10) days before the time of any intended public sale or of the time after which
any private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted
by applicable law, any Collateral which threatens to speedily decline in value
or which is sold on a recognized market may be sold immediately by Lender
without prior notice to Borrowers. Each Borrower covenants and agrees not to
interfere with or impose any obstacle to Lender's exercise of its rights and
remedies with respect to the Collateral.
(e) Lender is hereby granted, until the Obligations are paid in full and all
obligations of Lender hereunder are terminated, a worldwide, non-exclusive
license to use, after the occurrence and during the continuance of an Event of
Default and without charge, all of Borrowers' labels, trademarks (and associated
goodwill), copyrights, patents and advertising matter, as they pertain to the
Collateral, in completing production of, advertising for sale and selling of any
Collateral.
8.4 Nature of Remedies: All rights and remedies granted Lender hereunder and
under the Loan Documents, or otherwise available at law or in equity, shall be
deemed concurrent and cumulative, and not alternative remedies, and Lender may
proceed with any number of remedies at the same time until all Obligations are
satisfied in full. The exercise of any one right or remedy shall not be deemed a
waiver or release of any other right or remedy, and Lender, upon or at any time
after the occurrence of an Event of Default, may proceed against Borrowers, or
any of them, at any time, under any agreement, with any available remedy and in
any order.
8.5 Lender's Right to Reimbursement for Increased Costs or Reduced Returns: If
any material change occurs in the marketplace for the delivery or financing of
healthcare services which causes a material adverse change in the business of
Lender or any of its Affiliates, or any event occurs which results in the early
amortization or termination of commitments made to Lender for the financing of
Accounts, and the effect of such change is to increase the costs to Lender of
obtaining funds or maintaining the Loans or to reduce the return to Lender on
the Loans, then Borrowers shall reimburse Lender in an amount equal to such
increased costs or reduced return. Such amount shall be due and payable within
fifteen (15) Business Days of Borrowers' receipt of written notice thereof from
Lender (such notice to include Lender's basis for such adjustment and
calculation of such amount, which basis for such adjustment and calculation will
be conclusive and binding absent manifest error), provided that Borrowers shall
not be obligated to pay any such amount or amounts which are attributable to any
period of time occurring more than thirty (30) days prior to the date of receipt
by Borrowers of such notice. If not paid when due, such amount shall be added to
the Obligations and subject to all of the terms and conditions set forth herein
(including without limitation charging of the Default Rate). Notwithstanding the
terms of this Agreement to the contrary, in the event Lender provides the
written notice described in this Section 8.5 and no Event of Default has
occurred and is continuing which has resulted in the Obligations (including,
without limitation, the Termination Fee) becoming immediately due and payable,
Obligations (other Contingent Indemnification Obligations), without payment of
the Termination Fee.
8.6 Set-Off: If any bank account or other Property held by or with Lender, or
any Affiliate of Lender, or any participant is attached or otherwise liened or
levied upon by any third party, Lender (and such participant) shall have and be
deemed to have, without notice to Borrowers, the immediate right of set-off and
may apply the funds or other amounts or property thus set off against any of
Borrowers' Obligations hereunder; provided that Lender shall endeavor to give
prompt notice following the exercise of any such right, it being acknowledged
that the failure to give any such notice shall not result in any liability to
Lender.
SECTION 9. MISCELLANEOUS
9.1 GOVERNING LAW: THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND DOCUMENTS,
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF
THE STATE OF NEW JERSEY. THE PROVISIONS OF THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE
DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL
NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE
AND EFFECT.
9.2 Integrated Agreement: The Revolving Credit Note, the Term Note, the other
Loan Documents, all related agreements, and this Agreement shall be construed as
integrated and complementary of each other, and as augmenting and not
restricting Lender's rights and remedies. If, after applying the foregoing, an
inconsistency still exists, the provisions of this Agreement shall constitute an
amendment thereto and shall control.
9.3 Waiver and Indemnity:
--------------------
(a) No omission or delay by Lender in exercising any right or power under this
Agreement or any related agreements and documents will impair such right or
power or be construed to be a waiver of any default, or Event of Default or an
acquiescence therein, and any single or partial exercise of any such right or
power will not preclude other or further exercise thereof or the exercise of any
other right, and as to any Borrower no waiver will be valid unless in writing
and signed by Lender and then only to the extent specified.
(b) Each Borrower releases and shall indemnify, defend and hold harmless Lender,
and its respective officers, employees and agents, of and from any claims,
demands, liabilities, obligations, judgments, injuries, losses, damages and
costs and expenses (including, without limitation, reasonable legal fees)
resulting from (i) acts or conduct of a Borrower under, pursuant or related to
this Agreement and the other Loan Documents, (ii) any Borrower's breach, or
alleged breach, or violation of any representation, warranty, covenant or
undertaking contained in this Agreement or the other Loan Documents, and (iii)
any Borrower's failure, or alleged failure, to comply with any or all laws,
statutes, ordinances, governmental rules, regulations or standards, whether
federal, state or local, or court or administrative orders or decrees (including
without limitation environmental laws, etc.), and all costs, expenses, fines,
penalties or other damages resulting therefrom, unless resulting from acts or
conduct of Lender constituting a violation of the law, willful misconduct or
gross negligence. A Person seeking to be indemnified under this Section 9.4(b)
shall notify the subject Borrower of any event requiring indemnification
following such Person's receipt of notice of commencement of any action or
proceeding, or such Person's obtaining knowledge of the occurrence of any event,
giving rise to a claim for indemnification hereunder.
(c) Lender shall not be liable for, and Borrowers hereby agree that Lender's
liability in the event of a breach by Lender of this Agreement shall be limited
to Borrowers' direct damages suffered and shall not extend to, any consequential
or incidental damages. In the event Borrowers bring suit against Lender in
connection with the transactions contemplated hereunder, and Lender is found not
to be liable, Borrowers shall indemnify and hold Lender harmless from all costs
and expenses, including attorneys' fees, incurred by Lender in connection with
such suit.
9.4 Time: Whenever Borrowers, or any of them, shall be required to make any
payment, or perform any act, on a day which is not a Business Day, such payment
may be made, or such act may be performed, on the next succeeding Business Day.
Time is of the essence in Borrowers' performance under all provisions of this
Agreement and all related agreements and documents.
9.5 Expenses of Lender:
------------------
(a) At Closing and from time to time thereafter, Borrowers will pay all
reasonable expenses of Lender on demand (including, without limitation, search
costs, audit fees, appraisal fees, and the fees and expenses of legal counsel
for Lender) relating to this Agreement, and all related agreements and
documents, including, without limitation, expenses incurred in the analysis,
negotiation, preparation, closing, administration and enforcement of this
Agreement and the other Loan Documents, the enforcement, protection and defense
of the rights of Lender in and to the Loans and Collateral or otherwise
hereunder, and any reasonable expenses relating to extensions, amendments,
waivers or consents pursuant to the provisions hereof, or any related agreements
and documents or relating to agreements with other creditors, or termination of
this Agreement (collectively, the "Expenses"). Any Expenses not paid upon demand
by Lender shall bear interest at the highest per annum rate of interest
applicable to the Loans.
(b) In addition, at any time following the date of this Agreement, Borrowers
effect any changes which results in a change in the format or sequence of
Borrowers' data, Borrowers shall pay to Lender its reasonable charge for
implementing such changes as are necessary to accommodate the changes in the
format or sequence of the data such that the Value Track System(TM) is capable
of importing such data, including an hourly fee of $100.
9.6 Confidentiality: Except as provided in Section 9.18 hereof or to the extent
required by law or applicable regulations, Borrowers and Lender agree to
maintain the confidentiality of this Agreement and not to disclose the contents
hereof or provide a copy hereof to any third party, except (i) accountants,
lawyers and financial advisers of the parties who are informed of and agree to
be bound by this Section 9.6, (ii) Persons with whom a Borrower proposes to
engage in a Permitted Acquisition or other acquisition specifically consented to
by Lender, (iii) Persons from whom a Borrower proposed to obtain Subordinated
Debt or equity financing not to be secured by the Collateral, (iv) as may
otherwise be required or requested by any regulatory authority having
jurisdiction over Lender or any Borrower, and (v) that copies hereof may be
provided to any assignee or participant (or potential assignee or participant)
of Lender's interests herein, any investors or prospective investors who acquire
or may acquire Securities backed by Accounts and any parties which facilitate
the issuance of such Securities, including rating agencies, guarantors and
insurers so long as each such entity(ies) agrees in writing to be bound by the
terms of this Section 9.6. Lender agrees to maintain the confidentiality of
patient information obtained as a result of its interests in, or duties with
respect to, the Accounts.
9.7 Notices:
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(a) Any notices or consents required or permitted by this Agreement shall be in
writing and shall be deemed given if delivered in person or if sent by telecopy
or by nationally recognized overnight courier, or via first class, Certified or
Registered mail, postage prepaid, to the address of such party set forth on the
signature pages hereof, unless such address is changed by written notice
hereunder.
(b) Any notice sent by Lender or Borrowers, or any of them, by any of the above
methods shall be deemed to be given when so received.
(c) Lender shall be fully entitled to rely upon any facsimile transmission or
other writing purported to be sent by any Authorized Officer (whether requesting
an Advance or otherwise) as being genuine and authorized.
9.8 Headings: The headings of any paragraph or Section of this Agreement are for
convenience only and shall not be used to interpret any provision of this
Agreement.
9.9 Survival: All warranties, representations, and covenants made by any or all
Borrowers and/herein, or in any agreement referred to herein or on any
certificate, document or other instrument delivered by it or on its behalf under
this Agreement, shall be considered to have been relied upon by Lender, and
shall survive the delivery to Lender of the Revolving Credit Note, regardless of
any investigation made by Lender or on its behalf. All statements in any such
certificate or other instrument prepared and/or delivered for the benefit of
Lender shall constitute warranties and representations by Borrowers hereunder.
Except as otherwise expressly provided herein, all covenants made by any or all
Borrowers hereunder or under any other agreement or instrument shall be deemed
continuing until all Obligations (other than contingent indemnification
Obligations to the extent no claims giving rise thereto have been asserted), are
satisfied in full and Lender's obligations under this Agreement have been
terminated.
9.10 Successors and Assigns: This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties. No Borrower may
transfer, assign or delegate any of its duties or obligations hereunder.
9.11 Duplicate Originals: Two or more duplicate originals of this Agreement may
be signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument. This Agreement may be
executed in counterparts, all of which counterparts taken together shall
constitute one completed fully executed document.
9.12 Modification: No modification hereof or any agreement referred to herein
shall be binding or enforceable unless in writing and signed by Borrowers and
Lender.
9.13 Signatories: Each individual signatory hereto represents and warrants that
he is duly authorized to execute this Agreement on behalf of his principal and
that he executes the Agreement in such capacity and not as a party.
9.14 Third Parties: No rights are intended to be created hereunder, or under any
related agreements or documents for the benefit of any third party donee,
creditor or incidental beneficiary of any Borrower. Nothing contained in this
Agreement shall be construed as a delegation to Lender of any Borrower's duty of
performance, including, without limitation, such Borrower's duties under any
account or contract with any other Person.
9.15 Waivers:
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(a) Until the Obligations are indefeasibly paid in full (other than Contingent
Indemnification Obligations) and the Credit Facility is terminated, Borrowers
each hereby irrevocably, unconditionally and fully subordinate in favor of
Lender, any and all rights they or any of them, may have at any time (whether
arising directly or indirectly, by operation of law or contract) to assert or
receive payment on any claim against each other or any of them, on account of
payments made under this Agreement, including without limitation, any and all
rights of subrogation, reimbursement, exoneration, contribution or indemnity.
Each Borrower waives any event or circumstances which might constitute a legal
or equitable defense of, or discharge of, such Borrower (other than the
indefeasible payment in full of all of the Obligations). Furthermore, each
Borrower agrees that if any payment on the Obligations is recovered from or
repaid by Lender in whole or in part in any bankruptcy, insolvency or similar
proceeding instituted by or against any Borrower, the remaining Borrowers
and/shall be obligated to the same extent as if the recovered or repaid payment
had never been originally made on such Obligation. Each Borrower consents and
agrees that Lender shall be under no obligation to marshal any assets or
Collateral in favor of such Borrower or against or in payment of any or all of
the Obligations.
(b) Each Borrower hereby consents and agrees that Lender, at any time or from
time to time in its discretion: (i) may settle, compromise or grant releases for
liabilities of other Borrowers, and/or any other Person or Persons liable for
any Obligations, (ii) may exchange, release, surrender, sell, subordinate or
compromise any Collateral of any party now or hereafter securing any of the
Obligations, and (iii) following the occurrence and during the continuance of an
Event of Default, shall apply any and all payments received at any time against
the Obligations in any order as Lender may determine; all of the foregoing in
such manner and upon such terms as Lender may see fit, without notice to or
further consent from such Borrower who hereby agrees and shall remain bound upon
this Agreement notwithstanding any such action on Lender's part.
(c) The liability of each Borrower hereunder is absolute and unconditional and
shall not be reduced, impaired or affected in any way by reason of (i) any
failure to obtain, retain or preserve, or the lack of prior enforcement of, any
rights against any Person or Persons (including other Borrowers), or in any
Property, (ii) the invalidity or unenforceability of any Obligations or rights
in any Collateral, (iii) any delay in making demand upon other Borrowers or any
delay in enforcing, or any failure to enforce, any rights against other
Borrowers or in any Collateral even if such rights are thereby lost, (iv) any
failure, neglect or omission to obtain, perfect or retain any lien upon,
protect, exercise rights against, or realize on, any Property of any Borrower,
or any other party securing the Obligations, (v) the existence or non-existence
of any defenses which may be available to the other Borrowers with respect to
the Obligations, or (vi) the commencement of any bankruptcy, reorganization,
liquidation, dissolution or receivership proceeding or case filed by or against
any of Borrowers.
9.16 CONSENT TO JURISDICTION: EACH BORROWER AND LENDER HEREBY IRREVOCABLY
CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN THE STATE
OF NEW JERSEY IN ANY AND ALL ACTIONS AND PROCEEDINGS WHETHER ARISING HEREUNDER
OR UNDER ANY OTHER LOAN DOCUMENT. BORROWERS WAIVE ANY OBJECTION TO IMPROPER
VENUE AND FORUM NON-CONVENIENS TO PROCEEDINGS IN ANY SUCH COURT AND ALL RIGHTS
TO TRANSFER FOR ANY REASON. EACH BORROWER IRREVOCABLY AGREES TO SERVICE OF
PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED TO THE ADDRESS OF THE
APPROPRIATE PARTY SET FORTH HEREIN.
9.17 WAIVER OF JURY TRIAL: EACH BORROWER AND LENDER HEREBY WAIVE ANY AND ALL
RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION COMMENCED
BY OR AGAINST LENDER WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO OR UNDER THE LOAN DOCUMENTS, WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE.
9.18 [Reserved]:
--------
9.19 Discharge of Taxes, Borrower's Obligations, Etc.: Lender, in its sole
discretion, shall have the right at any time, and from time to time, with prior
written notice to Borrowers, if Borrowers fail to do so five (5) Business Days
after requested in writing to do so by Lender, to: (a) pay for the performance
of any of Borrowers' obligations hereunder, and (b) discharge taxes or liens, at
any time levied or placed on any of the Collateral or Borrower's Property
related to the Collateral in violation of this Agreement unless Borrowers are in
good faith with due diligence by appropriate proceedings contesting such taxes
or liens. Expenses and advances shall be deemed Advances hereunder and shall be
deemed Advances hereunder and shall bear interest at the highest rate applied to
the Loans until reimbursed to Lender. Such payments and advances made by Lender
shall not be construed as a waiver by Lender of an Event of Default under this
Agreement.
9.20 Injunctive Relief: The parties acknowledge and agree that, in the event of
a breach or threatened breach of any party's obligations hereunder, may have no
adequate remedy in money damages and, accordingly, shall be entitled to an
injunction (including without limitation, a temporary restraining order,
preliminary injunction, writ of attachment, or order compelling an audit)
against such breach or threatened breach, including without limitation,
maintaining the cash management and collection procedure described herein.
However, no specification in this Agreement of a specific legal or equitable
remedy shall be construed as a waiver or prohibition against any other legal or
equitable remedies in the event of a breach or threatened breach of any
provision of this Agreement.
SECTION 10. SPECIAL INTER-BORROWER PROVISIONS
10.1 Certain Borrower Acknowledgments and Agreements.
-----------------------------------------------
(a) Each Borrower acknowledges that it will enjoy significant benefits from the
business conducted by the other Borrowers because of, inter alia, their
consolidated ability to bargain with other Persons including without limitation
their ability to receive the Credit Facility on favorable terms granted by this
Agreement and other Loan Documents which would not have been available to an
individual Borrower acting alone. Each Borrower has determined that it is in its
best interest to procure the Credit Facility which each Borrower may utilize
directly and which receive the credit support of the other Borrowers as
contemplated by this Agreement and the other Loan Documents.
(b) Lender has advised Borrowers that it is unwilling to enter into this
Agreement and the other Loan Documents and make available the Credit Facility
extended hereby to any Borrower unless each Borrower agrees, among other things,
to be jointly and severally liable for the due and proper payment of the
Obligations of each other Borrower under this Agreement and other Loan
Documents. Each Borrower has determined that it is in its best interest and in
pursuit of its purposes that it so induce Lender to extend credit pursuant to
this Agreement and the other documents executed in connection herewith (i)
because of the desirability to each Borrower of the Credit Facility, the
interest rates and the modes of borrowing available hereunder, (ii) because each
Borrower may engage in transactions jointly with other Borrowers and (iii)
because each Borrower may require, from time to time, access to funds under this
Agreement for the purposes herein set forth.
(c) Each Borrower has determined that it has and, after giving effect to the
transactions contemplated by this Agreement and the other Loan Documents
(including, without limitation, the inter-Borrower arrangement set forth in this
Section 10.1) will have, assets having a fair saleable value in excess of the
amount required to pay its probable liability on its existing debts as they fall
due for payment and that the sum of its debts is not and will not then be
greater than all of its Property at a fair valuation, that such Borrower has,
and will have, access to adequate capital for the conduct of its business and
the ability to pay its debts from time to time incurred in connection therewith
as such debts mature and that the value of the benefits to be derived by such
Borrower from the access to funds under this Agreement (including, without
limitation, the inter-Borrower arrangement set forth in this Section 10.1) is
reasonably equivalent to the obligations undertaken pursuant hereto.
(d) Curative (on behalf of each Borrower) shall maintain records specifying (a)
all Obligations incurred by each Borrower, (b) the date of such incurrence, (c)
the date and amount of any payments made in respect of such Obligations and (d)
all inter-Borrower obligations pursuant to this Section 10. Curative shall make
copies of such records available to Lender, upon request.
10.2 Maximum Amount Of Joint and Several Liability: To the extent that
applicable law otherwise would render the full amount of the joint and several
obligations of any Borrower hereunder and under the other Loan Documents invalid
or unenforceable, such Borrower's obligations hereunder and under the other Loan
Documents shall be limited to the maximum amount which does not result in such
invalidity or unenforceability, provided, however, that each Borrower's
obligations hereunder and under the other Loan Documents shall be presumptively
valid and enforceable to their fullest extent in accordance with the terms
hereof or thereof, as if this Section 10.2 were not a part of this Agreement.
10.3 Authorization of Curative by Borrowers.
--------------------------------------
(a) Each of Borrowers hereby irrevocably authorizes Curative to give notices,
make requests, make payments, receive payments and notices, give receipts and
execute agreements, make agreements or take any other action whatever on behalf
of such Borrower under and with respect to any Loan Document and each Borrower
shall be bound thereby. This authorization is coupled with an interest and shall
be irrevocable, and Lender may rely on any notice, request, information supplied
by Curative, every document executed by Curative every agreement made by
Curative or other action taken Curative in respect of Borrowers or any thereof
as if the same were supplied, made or taken by any or all Borrowers. Without
limiting the generality of the foregoing, the failure of one or more Borrowers
to join in the execution of any writing in connection herewith shall not, unless
the context clearly requires, relieve any such Borrower from obligations in
respect of such writing.
(b) Each Borrower, shall be jointly and severally liable for all Obligations,
regardless of, inter alia, which Borrower requested (or received the proceeds
of) a particular Advance.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
Address for notices to Borrowers: Borrowers:
CURATIVE HEALTH SERVICES, INC.
150 Motor Parkway By: /s/ Thomas Axmacher
Hauppauge, NY 11788 Name: Thomas Axmacher
Attn: Mr. Thomas Axmacher Title: Chief Financial Officer
Fax: 631-232-9323
With a Copy to: eBIOCARE.COM, INC.
Curative Health Services, Inc.
150 Motor Parkway By: /s/ Anthony Leiker
Hauppauge, NY 11788 Name: Anthony Leiker
Attn: Nancy F. Lanis, Esquire Title: President
General Counsel
Fax: 631-233-8151
HEMOPHILIA ACCESS, INC.
By: /s/ William C. Tella
Name: William C. Tella
Title: President, Speciality Pharmacy
Services
APEX THERAPEUTIC CARE, INC.
By: /s/ William C. Tella
Name: William C. Tella
Title: President, Speciality Pharmacy
Services
Address for notices Lender:
to Lender:
Healthcare Business Credit Corporation HEALTHCARE BUSINESS CREDIT CORPORATION
305 Fellowship Road, Suite 300
Mount Laurel, NJ 08054 By: /s/ Michael Gervais
Attn: Bernard J. Lajeunesse, President Name: Michael Gervais
Fax: 856-222-0568 Title:Senior Vice President
CORPORATE ACKNOWLEDGMENT
STATE OF New York :
:
COUNTY OF Suffolk :
On this 17th day of May, 2002, before me personally appeared
Thomas Axmacher, who being duly sworn, deposes and says that he is
the Chief Financial Officer of Curative Health Services, Inc., the corporation
described in the foregoing document, that he in such capacity as officer of said
corporation is authorized to execute on behalf of the said corporation the
foregoing document for the purposes contained therein, and that he is the person
whose name and signature is subscribed to the foregoing document.
/s/ Maria Sattler
Notary Public
CORPORATE ACKNOWLEDGMENT
STATE OF Texas :
:
COUNTY OF Harris :
On this 16th day of May, 2002, before me personally appeared
Anthony Leiker, who being duly sworn, deposes and says that he is the
President of eBioCare.com, Inc., the corporation described in the
foregoing document, that he in such capacity as officer of said corporation is
authorized to execute on behalf of the said corporation the foregoing document
for the purposes contained therein, and that he is the person whose name and
signature is subscribed to the foregoing document.
/s/ Erika Bonilla
Notary Public
CORPORATE ACKNOWLEDGMENT
STATE OF New York :
:
COUNTY OF Suffolk :
On this 17th day of May, 2002, before me personally appeared
William C. Tella, who being duly sworn, deposes and says that he is the
President Specialty Pharmacy Services of Hemophilia Access, Inc., the
corporation described in the foregoing document, that he in such capacity as
officer of said corporation is authorized to execute on behalf of the said
corporation the foregoing document for the purposes contained therein, and that
he is the person whose name and signature is subscribed to the foregoing
document.
/s/ Maria Sattler
Notary Public
CORPORATE ACKNOWLEDGMENT
STATE OF New York :
:
COUNTY OF Suffolk :
On this 17th day of May, 2002, before me personally appeared
William C. Tella, who being duly sworn, deposes and says that he is the
President Specialty Pharmacy Services of Apex Therapeutic Care, Inc.,
the corporation described in the foregoing document, that he in such capacity as
officer of said corporation is authorized to execute on behalf of the said
corporation the foregoing document for the purposes contained therein, and that
he is the person whose name and signature is subscribed to the foregoing
document.
/s/ Maria Sattler
Notary Public
The following exhibits and schedules to the Amended and Restated Loan and
Security Agreement have been omitted. Curative Healthcare Services, Inc. will
furnish any suchexhibits or schedules to the Commission as supplemental
information upon request:
EXHIBIT LIST
Exhibit 2.1(b) - Form of Revolving Credit Note
Exhibit 2.1(c) - Form of Term Note
Exhibit 2.2(b) - Form of Borrowing Base Certificate
Exhibit 2.2(c) - Loan Request
Exhibit 4.1 - Form of Opinion of Counsel
Exhibit 4.2A - Notice Letter Re: Commercial Obligors
Exhibit 4.2B - Notice Letter Re: Government Obligors
Exhibit 6.8 - Officer's Certificate
Schedule 1 - Ineligible Obligors and Concentration Limits
Schedule 2 - Borrowers' States of Qualifications
- Chief Executive Office
- Places of Business/Other Names
- Provider Identification Numbers
- Pending Litigation
- Permitted Liens
- Fiscal Year End
- Tax ID Numbers
- Existing Guaranties, Investments and Borrowings
- Compliance
- Other Associations
- Environmental Matters
- Capital Stock
- Commercial Tort Claims
- Letter of Credit Right
- Corporate Reorganization
- Loan, Advances
- Indebtedness