LOAN AGREEMENT
Revolving Credit Loan
This is a Loan Agreement (the "Agreement") as of October 29, 1996 among:
GREAT FINANCIAL BANK, FSB
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▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Lender")
and
IN-HOUSE REHAB, INC.
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▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (individually or collectively the "Borrower")
and
PERENNIAL DEVELOPMENT CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (individually or collectively, the Guarantor")
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Recitals:
A. This Agreement provides for a revolving credit loan in the principal
amount up to $2.500.000.00 (the "Loan") pursuant to which the Borrower may
obtain
disbursements of the Loan from the Lender upon the terms and conditions
contained
herein, which Loan shall be evidenced by a promissory note of like amount and
of
even date herewith, made by the Borrower and payable to the order of the
Lender
(including any extension, renewal, modification or novation thereof, the
"Note").
B. The Borrower and the Guarantor, if any, desire to enter into this
Agreement in order to induce the Lender to extend e Loan as more fully set
form
in this Agreement, and on the terms and conditions set forth in this
Agreement.
SECTION 1 DEFINITIONS
As used in this Agreement,
"Affiliate" of the Borrower means: (a) any legal entity which, directly
or
indirectly, is in control of, is controlled by or is under common control
with,
the Borrower, or (b) any director or officer of the Borrower or of any legal
entity described in clause (a) above. For purposes of this definition, control
of a legal entity shall mean the power, direct or indirect, to vote 10% or
more
of the securities having ordinary voting power for the election of directors
of
such legal entity or to direct the management or policies of such legal
entity,
whether through the ownership of voting securities, by contract or otherwise.
"Borrower" shall have the meaning set form in the preamble to this
Agreement.
"Borrowing Base Agreement" shall mean that certain Borrowing Base
Agreement
of even date herewith executed by the Borrower and identified as a "Borrowing
Base Agreement," which Borrowing Base Agreement restricts the aggregate amount
of any advances made under the Note.
"Borrowing Base Certificate" shall mean the certificate(s) submitted by
the
Borrower from time to time which are used to calculate the amount available
for
advances under the Note as determined by the Borrowing Base Agreement, and
which
shall be certified as true and correct by a duly authorized officer of the
Borrower.
"Closing Date" means, the effective date of execution and delivery of
this
Agreement and the other Loan Documents.
"Compliance Certificate" shall have the meaning set forth in Section 6.04
of this Agreement.
"CPA Firm" shall mean such firm of certified public accountants which
regularly performs accounting services for Borrower, provided that such firm
is
satisfactory to the Lender in its sole discretion.
"Direct Financial Statement" shall mean a financial statement, balance
sheet and income statement, which is prepared internally by the Borrower or
the
Guarantor, and which is signed and certified as true and correct by (i) if the
Borrower or Guarantor is an individual, by the Borrower or the Guarantor; (ii)
if the Borrower or Guarantor is a partnership, by a general partner of the
partnership; or (iii) if the Borrower or Guarantor is a corporation, by the
President or the President's designee.
"Event of Default" shall mean any one of the occurrences which are Events
of Default under Section 8 of this Agreement.
"GAAP" shall mean '"generally accepted accounting principles,"
consistently
applied.
"Guarantor" shall have the meaning set forth in the preamble to this
Agreement.
"Guaranty" shall mean the Guaranty of even date executed and delivered by
the Guarantor in favor of the Lender, whereby e Guarantor guarantees the Loan.
"Indebtedness" shall mean all obligations, contingent or otherwise,
which,
in accordance with generally accepted accounting principles, should be
classified
on the obligor's balance sheet as liabilities, and includes (a) liabilities
(whether or not they should be so classified upon such balance sheet) secured
by
any mortgage, pledge, security interest, lien, charge or other encumbrance
existing on property owned or acquired subject thereto, whether or not the
liability secured shall have been assumed or the owner or acquirer of the
property otherwise has corporate liability therefor, (b) all obligations with
respect to any undertaking to pay or be responsible for the obligations of any
other party, or to purchase an obligation owned by any other party, or to
purchase assets to enable any other party to discharge one or more of its
obligations, whether or not reflected on the balance sheet or in a footnote,
and
(c) obligations with respect to leases which, m accordance with generally
accepted accounting principles, should be capitalized on the balance sheet;
provided, however, Hat Indebtedness shall not include trade obligations
incurred
in the ordinary course of business.
"Lender" shall have the meaning set forth in the preamble to this
Agreement.
"Loan Documents" shall mean, collectively, this Agreement and all
agreements, documents or instruments which are either (i) referred to in this
Agreement, or (ii) executed by Borrower and/or the Guarantor in connection
with
the Loan or which relate to this Agreement or the Loan, including, without
limitation, the Note, the Security Instruments, and any other document to be
executed by the Borrower and/or the Guarantor which relates to this Agreement.
"Loan" shall have He meaning given in the Recitals to this Agreement.
"Note" shall have the meaning given in the Recitals to this Agreement.
"Person" shall mean any person, firm, trust, corporation or business
organization.
"Security Instruments" shall mean any and all documents, agreements and
instruments executed in connection with this Agreement which in any way relate
to any collateral security for the indebtedness evidenced by the Note, or any
other indebtedness or obligation of the Borrower to the Lender whether or not
arising out of or in connection with this Agreement or any of the other Loan
Documents.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect in the state of Kentucky.
"Unmatured Default" shall mean the happening of any occurrence which
would,
together with the giving of any required notices or the passage of any
required
period of time, constitute an Event of Default.
SECTION 2 THE LOAN
The Lender hereby establishes the Loan in favor of the Borrower as
follows:
2.01 Amount. The Loan shall be in the principal amount of up to TWO
MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00). The Loan shall be
repaid
as provided in Section 3 of this Agreement.
2.02 Term of the Loan. The Loan shall become effective as of the date
hereof and shall continue until terminated in accordance with the terms of
this
Agreement. The Note shall mature and be due and payable in full on October 2,
1997.
2.03 Termination of Loan Other Than by Maturity. The Lender shall have
the
right, at its sole option and discretion, to terminate the Loan upon the
occurrence of (i) any Event of Default, or (ii) any Unmatured Default. The
termination of the Loan shall not in any way release Borrower from its
obligations incurred under this Agreement prior to termination, nor shall it
terminate this Agreement. The provisions of this Agreement and the security
interest created to secure the Loan shall continue in full force and effect
until
all amounts, including interest, penalties and other charges owed by Borrower
to
Lender have been paid in full.
2.04 Disbursement of Loan. Subject to the terms and conditions of this
Agreement, so long as the Loan remains in effect and is not terminated, the
Lender may grant Borrower such disbursements under the Loan as Borrower may
request from time to time in accordance with the provisions of this Agreement.
At no time shall the aggregate unpaid principal balance of the Loan which is
outstanding at any one time exceed the lesser of (i) $2.500.000.00; or (ii)
the
amount permitted by the terms of the Borrowing Base Agreement.
The Borrower shall submit to the Lender at least monthly, by the
(20th) of each month, a Borrowing Base Certificate, prepared as of the last
business day of the immediately preceding month. In addition, the Borrower
shall
submit an updated Borrowing Base Certificate with each request for an advance
under the Loan.
2.05 Interest. The Loan shall bear interest at an annual rate as set
forth
in the Note, from the date of the Note until the entire principal balance of
the
Loan has been paid.
2.06 Purpose of the Loan. Borrower shall use the proceeds of the Loan for
the following purpose or purposes: working capital requirements of the
Borrower.
2.07 Procedures and Conditions. Each disbursement under the Loan obtained
by the Borrower shall be subject to the following teens and conditions:
(a) Whenever Borrower desires to obtain a disbursement (a
"Disbursement"), it shall deliver to the Lender either a written or telephonic
request for
Disbursement prior to the date on which it wishes to have the funds made
available, specifying the amount of the Disbursement requested, the date on
which
the Borrower desires the funds to be made available, and the purpose for which
the Disbursement is requested.
(b) Borrower shall not be entitled to obtain any Disbursement if
any Event of Default or Unmatured Default exists at the time of the making of
the
request for Disbursement, or would exist upon the making of the Disbursement
requested, even if the Lender does not elect to terminate the Loan as a result
of such event of Default or Unmatured Default.
(c) If Borrower requests any Disbursement which, if made, would
cause the aggregate principal amount of all Disbursements then outstanding to
exceed the maximum amount permitted under Section 2.04 of this Agreement, then
the Lender may disburse only that part of the requested Disbursement which
would
cause the aggregate principal amount of the Loan then outstanding to equal the
maximum amount permitted under Section 2.04 of this Agreement.
(d) All Disbursements shall be made in strict compliance with the
terms and provisions of this Agreement, unless the Lender elects in its sole
discretion to waive any of those terms and conditions. The waiver of any terms
and conditions with respect to any one Disbursement shall not constitute a
waiver
of the same or any other terms or conditions with respect to any other
Disbursement.
(e) Each request by Borrower for a Disbursement hereunder shall
constitute the remaking of the representations and warranties by Borrower
contained in Section 7 of this Agreement.
(f) Subject to the terms and conditions of As Agreement and the
Note, amounts borrowed and repaid may be repaid and reborrowed from time to
time.
2.08 Notation of Disbursements and Payments. Disbursements of, and
payments of principal with respect to, the Loan shall be evidenced by the
Lender's notations made in the Lender's electronic data processing equipment,
showing the date and amount of each Disbursement or each payment of principal.
The principal amount outstanding under the Note from time to time shall also
be
recorded by the Lender on that electronic data processing equipment. The
aggregate amount of any Disbursements of the Loan made and recorded in the
Lender's electronic data processing equipment, less all of the payments of
principal made by the Borrower on the Loan and recorded in the Lender's
electronic data processing equipment, shall be prima facie evidence of the
outstanding principal balance due under the Note.
SECTION 3 PAYMENT OF THE LOAN
3.01 Note Interest Payments. Commencing December 2, 1996, and continuing
on the same day of each calendar month occurring thereafter until the Note
matures, Borrower shall pay to the Lender installments of all accrued but
unpaid
interest on the principal amount of the Loan.
3.02 Availability Fee. If checked here [], the Borrower shall pay to the
Lender an availability fee (the "Availability Fee") in respect of each
calendar
quarter during the term of the Loan in an amount equal to (i) the product of
(A)
__%, and (B) the positive difference, if any, between (1) $____, and (2) the
average daily unpaid principal balance of the Loan during such calendar
quarter,
multiplied by (ii) a fraction, the numerator of which is the actual number of
days elapsed in such calendar quarter, and the denominator of which is
________.
Each Availability Fee shall be due and payable to the Lender quarterly in
arrears
within fifteen (15) days after the Borrower has received an invoice for the
Availability Fee from the Lender.
3.03 Maturity Date of Note. The Note shall mature on October 2, 1997, at
which time the entire outstanding principal balance of, and all accrued but
unpaid interest on, the Note shall be due and payable in full.
SECTION 4 SECURITY FOR THE LOAN
4.01 Secure Interest Pursuant to Security Instruments. The Loan shall be
secured by the security interest(s) created pursuant to the Security
Instruments.
4.02 Right of Offset. The Loan shall be secured by the right of offset
provided in Section 9.01 of this Agreement.
4.03 Exercise of Rights. The failure or delay of the Lender to exercise
any rights or enforce any security interest shall not release any Person or
property win respect to which the Lender has any rights or any security
interests, or in any way limit or diminish the Lenders rights with respect to
any
such property or Person.
SECTION 5 CONDITIONS PRECEDENT
5.01 Conditions Precedent to the First Disbursement Under the Loan. The
Lender's obligation to make the first Disbursement under the Loan shall be
conditioned upon the fulfillment of all the following conditions prior to the
making of the first Disbursement:
(a) Resolutions. Borrower shall have furnished the Lender with a
certified copy of the resolution of its board of directors or its partners, as
appropriate, (1) authorizing the execution of this Agreement, the Note, the
Security Instruments and any other documents, instruments and agreements
referred
to herein which are required to be executed and delivered by Borrower, and (2)
authorizing consummation of the transactions contemplated by this Agreement
(b) Executed Agreements. Borrower shall have duly executed or
caused to have been duly executed each of the following documents, and shall
have
delivered to the Lender the following: (1) this Agreement; (2) the Note; (3)
the
Security Instruments; (4) the Guaranty (if applicable); and (5) such financing
statements or other documents for filing with public officials with respect to
any of e Security Instruments as the Lender may reasonably request.
(c) Representation and Warranties. Each and every representation
and warranty made by or on behalf of Borrower relating to the Loan Documents
or
the transactions contemplated thereby shall be true, complete and correct.
(d) No Defaults. There shall exist no Event of Default or Unmatured
Default which has not been cured to the Lender's satisfaction.
(e) Recordings and Filing. All financing statements or other
instruments as the Lender may request have been executed and delivered by
Borrower and filed or recorded in such public offices as the Lender may
request
to perfect the security interests which secure the Loan.
(f) Proof of Insurance. The Borrower shall have furnished the
Lender with evidence of insurance demonstrating the Borrower's compliance with
the requirements of Section 6.01 of this Agreement.
5.02 Conditions Precedent to Subsequent Disbursements Under the Loan. The
Lender's obligation to make Disbursements after the initial Disbursement shall
be conditioned upon the fulfillment of the conditions set out ire paragraphs
(c)
and (d) of Section 5.01 of this Agreement.
SECTION 6 GENERAL COVENANTS OF BORROWER
During the term of this Agreement, Borrower shall comply with all of the
following provisions:
6.01 Insurance. Borrower shall maintain insurance as follows:
(a) Liability Insurance. Borrower at its own cost and expense,
shall procure, maintain and carry in full force and effect general liability,
public liability, workers' compensation liability and property damage
insurance
with respect to its actions and operations to such extent, in such amounts and
with such deductibles as are commonly carried by prudent businesses similarly
situated. Without limiting the foregoing, such insurance shall insure against
any
liability for loss, injury, damage or claims caused by or arising out of or in
connection with the operation of the Borrower's business, including injury to
or
death of the Borrower's employees, agents or any other persons, and damage to
or
destruction of public or private property.
(b) Physical Damage Insurance. The Borrower at its own cost and
expense, shall insure all of its insurable properties to such extent, against
such hazards, in the amount of coverage, and with such deductibles as are
commonly carried by prudent businesses similarly situated.
(c) General Insurance Requirements.
(1) All insurance which the Borrower is required to maintain
shall be satisfactory to the Lender in form, amount and insurer. At or before
the
funding of the Loan, the Borrower shall provide the Lender with evidence of
its
due compliance with the requirements of this section.
(2) Thirty days prior to the expiration date of any policy
of insurance maintained pursuant to this Agreement, the Borrower shall provide
the Lender with a certificate of insurance evidencing the acquisition of a new
policy, or an extension or renewal of an existing policy, evidencing the
Borrowers due compliance with this section.
(3) If the Borrower fails to acquire any policy of insurance
required to be maintained pursuant to this section, or fails to renew or
replace
any such policy at least thirty days prior to the expiration thereof, or fails
to keep any such policy in full force and effect, the Lender shall have the
option (but not the obligation) to pay the premiums on any such policy of
insurance or to take out new insurance in amount, type, coverage and terms
satisfactory to the Lender. Any amounts paid therefor by the Lender shall be
immediately due and payable to the Lender by the Borrower upon demand. No
exercise by the Lender of such option shall in any way affect the provisions
of
this Agreement, including the provision that failure by the Borrower to
maintain
the prescribed insurance shall constitute an Event of Default.
6.02 Taxes and Over Payment Obligations.
(a) The Borrower shall pay and discharge, or cause to be paid and
discharged, each before it becomes in arrears, all taxes, assessments,
governmental charges, levies, and claims for labor, materials or supplies
which
if unpaid might become a lien or charge upon any of its property, and all of
its
other debts, obligations and liabilities.
(b) The Borrower may refrain from paying any amount it would be
required to pay pursuant to subparagraph (a) of this section if the validity
or
amount thereof is being contested in good faith by appropriate proceedings
timely
instituted which shall operate to prevent the collection or enforcement of the
obligation contested, provided that the Borrower shall have set aside on its
books appropriate reserves with respect Hereto.
6.03 Financial Statements and Reports.
(a) Direct Financial Statements. As soon as available, and in any
event within twenty (20) days of the end of each fiscal [X] MONTH n QUARTER
(check one), Borrower shall furnish to the Lender a Direct Financial Statement
for the immediately preceding period (monk or quarter, as checked above).
(b) Annual Statements. As soon as available, and in any event
within one hundred twenty (120) days after the end of each fiscal year, the
Borrower shall furnish to the Lender.
If checked here [X], an [X] AUDITED [] COMPILED [] REVIEWED (check one)
balance
sheet, income statement, and statement of cash flows, with consolidating
schedules, for such fiscal year, for the Borrower, prepared by the CPA Firm,
which shall be accompanied by a tax return for the current year, or if the tax
return is not yet prepared for the current year, for the immediately preceding
year; or
If checked here [], a Direct Financial Statement for such fiscal year, which
shall be accompanied by a tax return for the current year, or if the tax
return
is not yet prepared for the current year, for the immediately preceding year.
(c) Guarantor's Annual Statements. The Guarantor, if any, shall
furnish to the Lender, during the term of this Agreement not later than 120
days
after the end of each fiscal year
If checked here [], a Direct Financial Statement for such year, together with
a
tax return for the current year, or if the current year tax return is not yet
prepared, for the immediately preceding year;
or
If checked here [X], an [X] AUDITED [] COMPILED [] REVIEWED (check one)
balance
sheet, income statement, and statement of cash flows, with consolidating
schedules, for such fiscal year, for the Guarantor, prepared by a CPA Firm
acceptable to the Lender which shall be accompanied by a tax return for the
current year, or if the tax return is not yet prepared for the current year,
for
the immediately preceding year.
6.04 Financial Records: Reporting. Borrower shall maintain a standard,
modern system of accounting in which full, true and correct entries shall be
made
of all dealings or transactions in relation to its business and affairs in
accordance with GAAP.
Together with the delivery of the financial statements referred to in section
6.03 above, the Borrower shall submit to the Lender a certificate in the form
of
Exhibit A attached hereto arid made a part hereof (the "Compliance
Certificate")
(i) stating that the Borrower has reviewed the relevant terns of this Loan
Agreement and have no knowledge of any event or condition which constitutes an
Event of Default hereunder, or if any condition or event existed or exists,
specifying the nature and period of existence thereof and what action the
Borrower has taken or is taking or proposes to take with respect thereto, and
(ii) demonstrating in reasonable detail compliance at the end of such
accounting
period with the financial covenants set form in Section 6.11 hereof.
In addition, the Borrower shall provide the following to the Lender:
If checked here [X], no less frequently than monthly, the Borrower shall
provide
to the Lender a listing and ageing of the Borrowers accounts receivable and
accounts payable.
If checked here [], no less frequently than monthly, the Borrower shall
provide
to the Lender an inventory schedule in form and substance satisfactory to the
Lender, including, without limitation, a detailed listing of inventory, work
in
process, raw materials, and returned goods and supplies.
If checked here [], the Borrower shall provide, on a continuing basis, copies
of
any and all leases to which the Borrower is a party.
If checked here [], the Borrower shall provide, no less frequently than
monthly,
rent rolls for any and all properties of the Borrower which are leased, which
rent rolls shall detail, at a minimum, the tenant, the amount of rent, the
frequency of rent, the term of each lease, and whether each tenant is current.
If checked here [], _________
6.05 Properties. Borrower shall maintain its fixed in good condition,
subject only to normal wear and tear, and make all necessary and proper
repairs,
renewals and replacements. Borrower shall comply with all leases and other
material agreements in order to prevent loss or forfeiture, unless compliance
is
being contested in good faith by appropriate proceedings timely instituted
which
shall operate to prevent enforcement of the loss or forfeiture. The Lender
shall
have the right to inspect Borrower's fixed assets at all reasonable times, and
Dom time to time.
6.06 Corporate Existence and Good Standing. If the Borrower is a
corporation, the Borrower is duly organized, validly existing and in good
standing under the laws of the state of the Borrower's incorporation, and is
qualified to do business in all states ire which it conducts business; and the
Borrower shall preserve its corporate existence in good standing.
6.07 Notice Requirements.
(a) Default. The Borrower, if the Borrower is an individual; a
general partner of the Borrower, if the Borrower is a partnership; or an
authorized officer of the Borrower, if the Borrower is a corporation; or the
Borrower's designee, shall notify the Lender in writing within 30 days after
the
Borrower, or any of its officers or directors, has notice of any Event of
Default
or Unmatured Default or has notice that any representation or warranty made in
this Agreement, or in any related document or instrument, for any reason was
not
true and complete and not misleading in any material respect when made. Such
notice shall specify the nature of such Event of Default or Unmatured Default
and
Me action the Borrower has taken or will take to correct it.
(b) Other Information. From time to time, upon request by the
Lender, the Borrower shall furnish to the Lender, such information regarding
the
Borrower's business, assets and condition, financial or otherwise, as the
Lender
may reasonably request. The Lender shall have the right during reasonable
business hours to examine all of the Borrower's business and financial books
and
records and to make notes and abstracts therefrom, and to make an independent
examination of the Borrower's books and records for the purpose of verifying
the
accuracy of reports delivered by the Borrower and ascertaining compliance with
this Agreement.
6.08 Note and Security Instruments. The Borrower shall pay the Note in
accordance with its terms. The Borrower shall also comply with the provisions
of
the Security Instruments and the other Loan Documents.
6.09 Compliance with Law. The Borrower shall comply in all material
respects with (a) all valid and applicable statutes, rules and regulations of
the
United States of America, of the States thereof and their counties,
municipalities and other subdivisions and of any other jurisdiction applicable
to the
Borrower and/or any collateral for the Loan; (b) the orders, judgments and
decrees of all courts or administrative agencies with jurisdiction over the
Borrower or its business; and (c) the provisions of licenses issued to the
Borrower, pursuant to the terms thereof, except where compliance therewith
shall
be currently contested in good faith by appropriate proceedings, timely
instituted, which shall operate to stay any order with respect to such
noncompliance.
6.10 Liens. If checked here [X], except for (i) liens existing on the
date
of this Agreement, and (ii) security interests granted by the Borrower to the
Lender contemporaneously with the execution of this Agreement, and except for
liens permitted in this Agreement, the Borrower shall not (a) create or incur
or
suffer to be created or incurred or to exist any encumbrance, mortgage,
pledge,
lien, charge, restriction or other security interest of any kind upon any of
their property or assets of any character, whether owned or held on the date
of
this Agreement or acquired thereafter, or upon the income or profits
therefrom,
or (b) transfer any such property or assets or the income or profits therefrom
for the purpose of subjecting the same to payment of indebtedness or
performance
of any other obligation except payments made in accordance with Section 6.02
of
this Agreement or payments made to the Lender in accordance with the terms and
provisions of this Agreement, or (c) acquire, or agree to have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement, or (d) sell,
assign,
pledge or otherwise transfer any accounts, contract rights, general
intangibles
or chattel paper, with or without recourse. The Borrower may incur or create,
or
suffer to be incurred or created or to exist, the following liens without
violating the provisions of this Section 6.10:
(a) Statutory liens to secure claims for labor, material or
supplies to the extent that payment thereof shall not at the time be required
to
be made in accordance with Section 6.02 of this Agreement.
(b) Deposits or pledges made in connection with, or to secure
payment of workers compensation, unemployment insurance, old age pensions or
other social security, or in connection with contests, to the extent that
payment
thereof shall not at that time be required to be made in accordance with
Section
6.02 of this Agreement.
(c) Statutory liens for taxes or assessments or governmental
charges or levies if payment shall not at the tone be required to be made in
accordance with Section 6.02 of this Agreement.
(d) Purchase money liens or security interests with respect to
property acquired by the Borrower; provided, such purchases or acquisitions
(i)
shall not exceed $50.000.00 in the aggregate in any one fiscal year without
the
Lender's prior written consent, and (ii) are not made to replace property
encumbered by any Security Instrument.
(e) Statutory liens to secure payment of rent or lease payments
with respect to leases of real property to the extent that such payments shall
not at the time be required to be made in accordance with Section 6.02 of this
Agreement.
6.11 Financial Covenants. The Borrower shall comply at all times with the
following financial covenants, which financial covenants shall be determined
according to GAAP, unless otherwise defined herein:
(a) Debt to Worth Ratio. The ratio of the Borrower's total
liabilities to the Borrowers tangible net worth shall not exceed 2.50 :1.0.
(b) Net Worth. The Borrower shall at all times maintain a tangible
net worth of at least $1 500,000.00.
(c) Current Ratio. The ratio of the Borrowers' current assets to
the Borrowers current liabilities, shall not, at any time, be less than 1.25
:1.0.
(d) Coverage of Interest Expense. The ratio of the Borrower's
Earnings Before Interest Expense and Taxes ("EBIT") to interest expense shall
not, at any time, be less than 2.5 :1.0.
(e) Other Financial Covenant. The Borrower shall also comply with
the following financial covenant:
6.12 Indebtedness. If checked here [X], the Borrower shall not incur any
indebtedness whatsoever, or guarantee or become a co-maker or an accommodation
maker on any note or other evidence of Indebtedness or contact of any kind
with
another financial institution regulated by a state or federal regulator in
excess
of $50,000.00 in the aggregate.
6.13 Mergers, Sales, Transfers and Other Dispositions of Assets. Without
the Lender's prior written consent, which shall not be unreasonably withheld,
Borrower shall not:
(a) Be a party to any consolidation, reorganization (including
without limitation Rose types referred to in ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Internal Revenue Code of 1986, as amended), stock-swap or merger;
(b) Sell or otherwise transfer any material part of its assets;
(c) Purchase all or a substantial part of the assets of any
corporation or other business enterprise;
(d) Effect any change in capital structure;
(e) Sell, assign, or otherwise dispose of, with or without
recourse, general intangibles, except the endorsement of negotiable
instruments
of collection in the ordinary course of business; or
(f) Liquidate or dissolve or take any action with a view toward
liquidation or dissolution.
6.14 Verification of Financial Information. Lender may at any time, and
from time to time, require that any determinations of financial information
provided by the Borrower to the Lender be verified by the CPA Firm.
6.15 Transactions with Borrowers Affiliates. The Borrower shall not enter
into, or be a party to, any transaction with any of the Borrower's Affiliates
or
other stockholders, except in the ordinary course of business and pursuant to
the
reasonable requirements of the Borrower's business and upon fair and
reasonable
terms which are fully disclosed to the Lender and which are no less favorable
to
the Borrower than the Borrower would obtain in a comparable arm's length
transaction with a legal entity not an Affiliate of the Borrower.
SECTION 7 REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the Loan,
the
Borrower represents and warrants to the Lender all of the representations and
warranties set forth as follows:
7.01 Governmental Franchises and the Like. The Borrower has all required
governmental permits, certificates, consents and franchises necessary to, or
useful in, the business now being conducted by it, and to own, lease and
operate
its businesses and property now owned, leased and operated. All such
governmental
permits, certificates, consents and franchises are valid and in effect, and
the
Borrower is not in violation of any of them. None of those governmental
permits,
certificates, consents or franchises contain any term, provision, condition or
limitation more burdensome than that which is generally applicable to persons
engaged in the same or similar businesses as the Borrower.
7.02 Financial Statements. The most recent financial statements of the
Borrower delivered to the Lender fairly and accurately present the Borrower's
assets, liabilities and financial condition as of the dates thereof, and there
are no omissions from the same or other facts or circumstances not reflected
therein which are or may be material. There has been no material adverse
change
in the Borrower's assets, liabilities or financial condition since the date of
said financial statements. Except for trade payables and accounts payable
arising
in the ordinary course of the Borrower's business since the dates reflected in
said financial statements, the Borrower has no Indebtedness other than as
shown
or reflected on said financial statements, and has no litigation pending which
would materially and adversely affect its business operations or the property
described in the Security Instruments other than as shown or reflected on said
financial statements.
7.03 No Defaults. No Unmatured Default or Event of Default exists on the
date of this Agreement, nor will any such Unmatured Default or Event of
Default
begin to exist immediately after the execution and delivery hereof
7.04 Authority. The Borrower has the full right, power and authority to
enter into and perform this Loan Agreement, the Note, the Security Instruments
and the other Loan Documents, and to grant to the Lender a security interest
in
and to any collateral described in the Security Instruments. This Loan
Agreement,
the Note, the Security Instruments and the other Loan Documents have been duly
entered into and delivered by the Borrower and constitute the legal, valid and
binding obligations of the Borrower, enforceable in accordance with their
respective terms.
7.05 Taxes. The Borrower has filed all federal, state and local tax
returns and other reports which the Borrower is required by law to file, and
the
Borrower has paid all taxes and other similar charges that are due and
payable.
7.06 Registered Office. The registered office of the Borrower is located
in Jefferson County, Kentucky.
SECTION 8 EVENTS OF DEFAULT
A default under any of the Loan Documents, including without limitation,
Borrower's breach of any of the terms of this Agreement or any of the Security
Instruments, shall constitute an Event of Default under this Agreement. In
addition, each of the following shall constitute an Event of Default:
8.01 Failure to Pay. If the Borrower shall fail to pay in full on its
due
date any installment of principal or interest on the Note.
8.02 Other Defaults. If the Borrower shall fail to observe, perform or
comply with any term, obligation, covenant, agreement, condition or other
provision contained or referred to in this Agreement or any of the Security
Instruments, and such failure shall not have been fully corrected with 15 days
after the Lender has given written notice thereof to the Borrower.
8.03 Representations and Warranties. If any representation or warranty or
other statement of fact contained herein or in the Security Instruments or in
any
writing, certificate, report or statement at any time furnished the Lender by
or
on behalf of the Borrower pursuant to or in connection with this Agreement or
the
Loan shall be false or misleading in any material respect or which shall omit
a
material fact, whether or not made with knowledge.
8.04 Judgments. If a final judgment or judgments for the payment of money
in excess of the sum of Fifty Thousand Dollars ($50,000) in the aggregate, or
with respect to property with a value in excess of such amount, shall be
rendered
against the Borrower and such judgment or judgments shall remain unsatisfied
for
a period of 30 consecutive days after the entry thereof and within that 30 day
period shall not have been (a) stayed pending appeal, and not discharged
within
10 days after the expiration of such stay, or (b) discharged.
8.05 Sale of Collateral. If Borrower shall sell any property subject to
any of the Security Instruments, other then inventory sold in the ordinary
course
of business, without the prior written consent of the Lender.
8.06 Other Obligations to the Lender. If the Borrower shall fail to
observe, perform or comply with the terms, obligations, covenants, agreements,
conditions or other provisions of any agreement, document or instrument other
than this Agreement and the related documents which the Borrower has entered
into
with the Lender.
8.07 Termination of Existence. If Borrower takes any action that is
intended to result in termination of Borrower's existence.
8.08 Solvency.
(a) If the Borrower shall (i) admit in writing its inability to pay
its debts generally as they become due, (ii) become insolvent in that the
Borrower's total assets are less than all of its liabilities, or the Borrower
is
unable to pay its debts generally as they become due, (iii) make a general
assignment for the benefit of creditors, or (iv) file a petition, or admit (by
answer, default or otherwise) the material allegations of any petition filed
against it, in bankruptcy under the federal bankruptcy laws (as in effect on
the
date of this Agreement or as they may be amended from time to time), or under
any
other law for the relief of debtors, or for the discharge, arrangement or
compromise of its debts.
(b) If a petition shall have been filed against the Borrower in
proceedings under the federal bankruptcy laws (as in effect on the date of
this
Agreement, or as they may be amended from tone to time), or under any other
laws
for the relief of debtors, or for the discharge, arrangements or compromise of
its debts, or an order shall be entered by any court of competent jurisdiction
appointing a receiver, trustee or liquidator of all or part of the Borrower's
assets, and such petition or order is not dismissed or stayed within 90
consecutive days after entry Hereof.
SECTION 9 REMEDIES UPON DEFAULT
Notwithstanding anything to the contrary, if any Event of Default occurs,
the Lender, in its sole discretion, and without notice to the Borrower, may
(a)
terminate any obligation of the Lender, if any, to make further advances under
the Note, and (b) declare the entire unpaid balance of the Note and the Loan
evidenced thereby, and all other obligations of the Borrower under this
Agreement
to be immediately due and payable in full. En addition, upon the occurrence of
an Event of Default, and at any time thereafter, unless all Events of Default
have been remedied to the full satisfaction of the Lender, the Lender shall
have
all of the following rights and remedies and it may exercise one or more of
them
singly or in conjunction with others:
9.01 Right to Offset. The Lender has the right to apply all of the
Borrower's deposit balances and other sums and indebtedness which the Lender
holds for the Borrower's credit or account, against the Borrower's obligations
to the Lender arising under this Agreement or as evidenced by the Note. In
addition, the Borrower hereby authorizes the Lender to debit any account of
the
Borrower for the purpose of paying any installment of any obligation which is
not
paid by its due date; provided, however, that should the Lender choose not to
debit any account of the Borrower for any overdue payment, whether or not the
Lender has so debited any account in the past, such action or failure to act
shall not be construed to be a waiver of the Lender's right to declare the
Borrower in default. Borrower hereby grants a security interest in such
deposit
balances, other sums and indebtedness of the Lender to secure all of the
Borrower's obligations under this Agreement and the Note. Such offsets by the
Lender may occur without notice to or demand upon the Borrower or any over.
The
Borrower hereby waives all such notices and demands.
9.02 Enforcement of Rights. Lender has the right to protect and enforce
its rights by a suit in equity, an action at law or any other appropriate
proceeding either for specific performance of any covenant or condition
contained
in this Agreement or under any of the Security Instruments or any of the other
Loan Documents or in aid of the exercise of any power granted in this
Agreement,
any of the Securest Instruments or arty Loan Document.
9.03 Rights under Security Instruments. Lender shall also have all rights
and remedies granted under the Security Instruments intending to secure the
Note
or any other indebtedness or obligation of the Borrower under this Agreement.
9.04 Cumulative Remedies. All of the rights and remedies of the Lender
upon the occurrence of an Event of Default shall be cumulative to the greatest
extent permitted by law, may be exercised successively or concurrently, from
time
to time, and shall be in addition to all of those rights and remedies afforded
to the Lender at law, or in equity, or in bankruptcy. Notwithstanding the
foregoing, the Lender shall be entitled to recover from the cumulative
exercise
of all remedies an amount no greater than the sum of (a) the outstanding
principal amount of the Loan; (b) all accrued but unpaid interest with respect
to the principal amount of the Loan; (c) any other amounts that the Borrower
is
required by this Agreement and/or the Loan Documents to pay to the Lender (for
example, and without limitation, the reimbursement of reasonable expenses and
the
Lender's reasonable attorney's fees, court costs, and other legal fees, and
late
charges); and (d) any costs, expenses or damages which the Lender is otherwise
permitted to recover by the terms of this Agreement. Any exercise of any right
or remedy shall not be deemed to be an election of that right or remedy to the
exclusion of any over right or remedy.
SECTION 10 FEES AND EXPENSES
The Borrower shall pay to the Lender upon demand all out-of-pocket
expenses
incurred by the Lender in connection with the transactions contemplated under
this Agreement, including, but not limited to, any and all costs and fees
incurred in connection with the recording or filing of any documents or
instruments in any public office. Further, if any Event of Default shall occur
under this Agreement, or any default or Event of Default shall occur under any
of the Loan Documents, Borrower shall pay to the Lender, to the extent
allowable
by applicable law, such amounts as shall be sufficient to reimburse the Lender
fully for all of its costs and expenses incurred in enforcing its rights and
remedies under this Agreement, the other Loan Documents and any related
documents, including without limitation, the Lender's reasonable attorneys'
fees
and court costs. Such amounts shall be deemed to be included m the obligations
secured by the Security Instruments.
SECTION 11 - CROSS DEFAULT WITH OTHER OBLIGATIONS TO THE LENDER
The Borrower and the Guarantor hereby covenant and agree that an Event of
Default under this Agreement shall be deemed to be an Event of Default under
any
other Indebtedness of the Borrower to the Lender. In addition, as provided
herein, should the Borrower fail to comply with any term, provision or
condition
of any other indebtedness of the Borrower to the Lender, such event shall be
an
Event of Default under this Agreement.
SECTION 12 - MISCELLANEOUS PROVISIONS
12.01 Term of Agreement. The term of this Agreement shall commence as
of
the date hereof, and continue until the Borrower shall have paid or performed
all
of its obligations hereunder.
12.02 No Waivers. Failure or delay by the Borrower or the Lender (as
the
case may be) in exercising any right shall not be deemed to be or operate as a
waiver of that right, nor shall any right be exclusive of any other right
referred to in this Agreement, or in any other related document, or available
at
law or in equity, by statute or otherwise. Any single or partial exercise of
any
right shall not preclude the further exercise of that right. Every right of
the
Borrower and the Lender shall continue in full force and effect until such
right
is specifically waived in a writing signed by the party waiving such right.
12.03 Course of Dealing. No course of dealing between the Borrower
and the
Lender shall operate as a waiver of any of e Borrowers or Lenders rights under
this Agreement or under the other Loan Documents.
12.04 Severability. If any park term or provision of this Agreement
is held
by any court to be unenforceable or prohibited by any law applicable to this
Agreement, the rights and obligations of the parties shall be construed and
enforced with that part, term or provision limited so as to make it
enforceable
to the greatest extent allowed by law, or, if it is totally unenforceable, as
if
this Agreement did not contain Hat particular part, terra or provision.
12.05 Time of the Essence. Time shall be of the essence in the
performance
of all of the Borrower's obligations under this Agreement and the other Loan
Documents.
12.06 Benefit and Binding Effect. This Agreement shall inure to the
benefit
of the Lender, its successors and assigns, and all benefits and obligations of
the Borrower shall inure to the benefit of and bind its successors and, if and
to the extent assignment is otherwise permitted by this Agreement, its
assigns.
12.07 Further Assurances. The Borrower shall sign such financing
statements
or other documents or instruments as the Lender may reasonably request from
time
to time to more fully create, perfect, continue, maintain or terminate the
rights
and security interests intended to be granted or created pursuant to this
Agreement or the other Loan Documents.
12.08 Incorporation by Reference. All schedules, annexes or other
attachments to this Agreement are incorporated into this Agreement as if set
out
in full at the first place in this Agreement that reference is made thereto.
12.09 Entire Agreement: No Oral Modifications. This Agreement, the
schedules and annexes hereto, and the documents and instruments referred to
herein constitute the entire agreement of the parties with respect to the
subject
matter hereof. No change, modification, addition or termination of this
Agreement, or any other of the Loan Documents shall be enforceable unless in
writing and signed by the party against whom enforcement is sought. This
Agreement shall be in addition to such other, if any, loan agreement(s) which
the
Borrower may have entered into with the Lender, and nothing contained in any
such
other loan agreement(s) shall be construed to limit the provisions of this
Agreement, nor shall anything contained in this Agreement be construed to
limit
the provisions of any such other agreement(s).
12.10 Headings.
(a) The headings used in this Agreement are included for ease of
reference only and shall not be considered in the interpretation or
construction
of this Agreement.
(b) Unless the particular context requires otherwise, any reference
in this Agreement (i) to a section, paragraph or other grammatical subdivision
shall be deemed to be a reference to a section, paragraph or other grammatical
subdivision of this Agreement, and (ii) to an Annex or a Schedule shall be
deemed
to be a reference to an Annex or a Schedule attached to this Agreement.
12.11 Governing Law. This Agreement and the related documents and
instruments shall be governed by and construed in accordance with the laws
(including, without limitation, the conflicts of laws rules) of the state of
Kentucky.
12.12 No Assignments. The Borrower may not assign its rights under
this
Agreement to any other party. Any attempted assignment without Lender's
written
consent shall be a default under this Agreement and shall be null and void.
12.13 Notices.
(a) Any requirement of the Uniform Commercial Code or other
applicable law of reasonable notice shall be met if such notice is given at
least
five (5) business days before the time of sale, disposition or other event or
thing giving rise to the requirement of notice.
(b) All notices or communications under this Agreement shall be in
writing and shall be hand delivered or mailed to the parties' addresses listed
at the beginning of this Agreement, and any notice so addressed and mailed by
registered or certified mail, return receipt requested, shall be deemed to
have
been given when mailed.
(c) The Borrower, the Lender or the Guarantor may at any time, and
from time to time, change the address to which notice shall be mailed by
written
notice setting forth the changed address.
12.14 Survival of Covenants. All covenants, agreements, warranties
and
representations made by the Borrower herein shall survive the making of the
Loan
and the execution and delivery of this Agreement, the Note and any and all
Loan
Documents.
IN WITNESS WHEREOF, the Borrower and the Lender have signed this
Agreement
as of the date set forth in the preamble hereto, but actually on He dates set
forth below.
THE BORROWER:
Name: IN-HOUSE REHAB, INC.
By: /s/ ▇. ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer, Director
Date: 10/29/96
THE GUARANTOR:
Name: PERENNIAL DEVELOPMENT CORPORATION
By: /s/ ▇. ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer, Director
Date: 10/29/96
THE LENDER:
GREAT FINANCIAL BANK, FSB
By: /s/ K. J. Bund
Title: First Vice President
Date: 10/29/96
SECURITY AGREEMENT
Account Number
This is a Security Agreement dated October 29, 1996 between IN-HOUSE
REHAB, INC. ("Debtor") of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
and GREAT FINANCIAL BANK, FSB ("Secured Party"), ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1. Grant of Security Interest. Debtor hereby grants to Secured
Party a security interest in all of Debtor's right, title and interest in
and to the following described property, in any and all additions and
accessions thereto and replacements thereof and in the proceeds, both cash
and non-cash, of any sale or other disposition of that property, all of
which are collectively referred to as the "Collateral".
(a) All inventory of the Debtor, now owned or hereafter acquired; (b)
all Accounts, accounts receivable and Chattel Paper of the Debtor, now
existing or hereafter arising, including but not limited to all rights to
payment for services rendered, whether or not earned by performance; (c)
all Equipment and Machinery (including but not limited to Mobile Goods) of
the Debtor and all replacements thereof and accessions thereto, whether or
not the same are or may become Fixtures; (d) all negotiable Documents of
Title; (e) all GeneralIntangibles of the Debtor; (f) all Goods,
Instruments, Documents, policies and certificates of insurance, proceeds
of insurance, securities, tax refunds, letters of credit and credit
devises, Deposit Accounts, cash and other property owned by the Debtor or
in which Debtor has an interest whether or not now or hereafter in the
possession of the Secured Party of a Bailee or regardless of whether the
Secured Party may now or hereafter control possession by documents of
title or otherwise; and (g) all other personal property and Goods of the
Debtor, regardless of how classified, including but not limited to all
office supplies, furniture, office, store and trade fixtures and leasehold
improvements, patents, trademarks and copyrights.
As used herein, the terms "Inventory," "Accounts," "Chattel Paper,"
"Mobile Goods," "Fixtures," "Documents," "Equipment," "General
Intangibles," "Instruments," "Goods," "Deposit Accounts," and "Bailee"
shall have the meaning given to them in Kentucky Revised Statutes Chapter
355.
2. Obligations Secured. The security interest created herein
secures payment and performance of all liabilities and obligations of the
Debtor to the Secured Party of every kind and character, now existing or
hereafter incurred, whether direct or indirect, absolute or contingent,
joint or several, however owned, held or acquired by the Secured Party.
IT BEING THE EXPRESS INTENTION OF THE DEBTOR BY THE EXECUTION AND DELIVERY
OF THIS SECURITY AGREEMENT TO SECURE ALL LIABILITIES AND OBLIGATIONS OF
THE DEBTOR TO, AND ALL FINANCIAL ACCOMMODATIONS BY, THE SECURED PARTY, TO
OR FOR THE BENEFIT OF THE DEBTOR, INCLUDING BUT NOT LIMITED TO LOANS,
LINES OF CREDIT, HONORED OVERDRAFTS, GUARANTIES OF THE OBLIGATIONS OF
THIRD PARTIES AND DISCOUNTS. Without limiting the generality of the
foregoing, the security interest created hereby secures payment and
performance of:
If Checked Here [X] all indebtedness of the debtor evidenced by the
promissory note in the principal amount of $2,500,000.00, dated October
29, 1996, all obligations contained therein, and any amendments,
replacements, and substitutions therefor or extensions thereof;
If Checked Here [ ] arising out of that certain letter of credit agreement
dated -----------, 19---, between the Debtor and the Secured Party;
If Checked Here [ ] arising out of that certain Guaranty Agreement dated
----------, 19---, guarantying certain Guarantied Obligations, as therein
defined, of ------------------------------- to Secured Party;
3. Representations and Warranties. To induce Secured Party to
enter into this Security Agreement, Debtor represents, warrants and
covenants as follows:
(a) If Debtor is a corporation, then it is duly organized and
validly existing under the laws of the state of its incorporation, and it
has full power and authority to enter into this Security Agreement; and
the execution, delivery
and performance of this Security Agreement have been duly authorized.
(b) If Debtor is a partnership, then it has full power and authority
to enter into this Security Agreement; and the execution, delivery and
performance of this Security Agreement have been duly authorized by all of
the partners of this partnership.
(c) If Debtor is an individual, then he has full power and authority
to enter into this Security Agreement.
(d) This Security Agreement has been duly entered into and delivered
and constitutes a legal, valid and binding obligation of Debtor
enforceable in accordance with its terms.
(e) Debtor has good and marketable title to the Collateral, and the
Collateral is not subject to any lien, charge, encumbrance, claim or
security interest, or any pending or threatened legal proceeding, except
the following:
(f) The Collateral will be kept at the following location:
If no address is here given, then the Collateral will be kept at the
address first above given for Debtor. Debtor will not permit the
Collateral to be kept or stored at any location other than that shown
without the prior written consent of Secured Party.
(g) If Debtor is a corporation, its registered office, as set forth
in its most recent filing with the Kentucky Secretary of State which
officially designates its current registered office is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ; if Debtor is an individual, general
partnership, limited partnership, cooperative association, business trust,
credit union or other organization (as defined in KRS 355.1-201) its
principal place of business and residence is
----------------------------------------------. The Debtor's chief
executive office is located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ . Debtor will immediately notify Secured Party in writing of any
change in the location of Debtor's registered office, principal place of
business, residence or chief executive office.
(h) All financial statements, certificates or other information
concerning Debtor's financial condition, or concerning the Collateral, has
been in all respects accurate, true and correct.
(i) The Collateral is intended for use primarily for (check one) [X]
Business Use or [ ] Consumer Use, and (check one) [ ] is or [X] is not
being acquired with the proceeds of one of the obligations secured by this
Security Agreement. If the Collateral is being acquired with the proceeds
of one of the obligations secured in this Security Agreement, Secured
Party may disburse directly to the seller of the Collateral.
(j) During the past five (5) years, Debtor has conducted business
under no trade name or assumed business name other than its real name and
the following:
4. Insurance. Debtor, at its own expense, shall insure the
Collateral against fire, theft and casualty damage in the amount not less
than the outstanding balance of the obligation secured by this Security
Agreement. Such insurance shall be satisfactory to Secured Party as to
form and amount. Debtor has the right to choose the agent and insurer
from which such insurance is obtained, except that Secured Party may, for
reasonable cause, refuse to accept an insurer offered by Debtor. Such
insurance shall name Secured Party as an insured to the extent of its
interest, and shall afford to Secured Party such additional protection to
insure against such additional risks or hazards as Secured Party may
request from time to time. Such insurance shall provide that the
insurance provided thereunder cannot be cancelled without 14 days prior
written notice to Secured Party. Debtor shall provide Secured Party with
evidence satisfactory to it of Debtor's due compliance with this
paragraph. Debtor hereby assigns to Secured Party all sums which become
payable under any insurance covering the Collateral including without
limitation, returned or unearned premiums and dividends, and appoints
Secured Party as attorney for Debtor in obtaining, adjusting, settling,
compromising and cancelling such insurance and endorsing any drafts drawn
to Debtor pursuant to such insurance.
5. Receivables - Special Provisions
(a) If any event of default hereunder occurs, the Secured Party
shall have, in addition to the rights set forth elsewhere in this Security
Agreement, the right to notify debtors obligated on any or all Accounts,
accounts receivable or Chattel Paper of the Debtor ("Receivables") to make
payments directly to the Secured Party, and to apply the whole or any part
of such payments against the obligations secured by this Security
Agreement, the order and method of such application being in the sole
discretion of the Secured Party. Until the Secured Party notifies debtors
to make payments directly to the Secured Party, Debtor shall continue to
collect payments of the Receivables. If any event of default has occurred
and is continuing, Debtor shall not use the proceeds from payments on any
of the Receivable to satisfy any indebtedness to any person other than the
Secured Party. If Debtor collects payments on any of the Receivables
after an event of default has occurred and while it is continuing, or if Debtor
receives any payments after notice has been given to make payments directly to
Secured Party, Debtor shall hold the proceeds received from that collection in
trust for the Secured Party and shall turn over such proceeds to the Secured
Party immediately in the identical form received. In the event of such pay-
ment, the Secured Party shall credit the proceeds as payment of the obligations
secured by this Security Agreement first to interest, then to principal. Any
credit given to Debtor for proceeds in form other than cash shall be con-
ditional upon final payment of the items, and if any item is not paid the
amount of any credit given for it shall be charged to Debtor whether or not
the item is returned, and such amount shall be a part of the obligations
secured by this Security Agreement.
(b) Debtor shall have no power to, and shall not, waive, compromise
or discount any Receivables without the prior written consent of the Secured
Party.
(c) If the Secured Party deems itself insecure and upon notification
to Debtor, the Debtor shall immediately deliver to the Secured Party any
Receivables evidenced by a promissory note, trade acceptance, Chattel Paper
or other instrument, appropriately endorsed to the Secured Party's order.
Debtor authorizes the Secured Party to endorse same on Debtor's behalf. Debtor
hereby waives presentment, demand, notice of dishonor, protest and notice of
protest and all other notices with respect thereto.
(d) The Debtor hereby irrevocably constitutes the Secured Party as
Debtor's agent and attorney-in-fact to (a) proceed against debtors
obligated on Receivables in Debtor's name or in the Secured Party's name, and
(b) sign and endorse all checks, drafts and other instruments in payment of
Receivables, and (c) perform all such other acts with respect to Receivables
as the Secured Party may in its discretion deem necessary to effectuate the
security intended to be granted in this Security Agreement.
THE ADDITIONAL PROVISIONS PRINTED ON ANY ADDITIONAL PAGE SHALL FORM
A PART OF THIS AGREEMENT AND ARE HEREBY INCORPORATED BY REFERENCE.
6. Obligations Regarding Collateral. Debtor shall keep and
maintain the Collateral in good condition and repair and under adequate
condition of storage to prevent its deterioration or depreciation in value.
Debtor shall keep the Collateral free and clear of liens and shall declare
and pay all assessments, charges or taxes. If Debtor fails to pay such
assessments, charges or taxes Secured Party may, but is not obligated to,
pay them, and such payment shall be deemed conclusive evidence of the
legality or validity of such assessments, charges or taxes. If Debtor fails
to provide insurance pursuant to paragraph 4 of this Security Agreement,
Secured Party may, but is not obligated to, pay for insurance. Debtor shall
promptly reimburse Secured Party for any payments made pursuant to this
paragraph, and until reimbursement, such payments shall be a part of the
obligations secured by this Security Agreement.
7. Use and Inspection of Collateral. Debtor shall not use the
Collateral or the proceeds of any loans secured by the Collateral in
violation of any federal or state statute, or local ordinance, and Secured Party
shall have the right to inspect the Collateral at the premises of Debtor or
wherever the Collateral may be located.
8. Default. At the option of Secured Party and without necessity
for demand or notice, the happening of any of the following events shall
constitute an event of default hereunder:
(a) Failure of Debtor to pay when due any obligation secured by this
Security Agreement, or any installment on any such obligation;
(b) Failure of Debtor to keep or perform any of the terms or
provisions of this Security Agreement, or of any note or other evidence of any
obligations secured by this Security Agreement;
(c) Any warranty, representation or statement made herein or
otherwise furnished to Secured Party by or on behalf of Debtor proves to be
false in any material respect;
(d) Loss, theft, damage, destruction or encumbrance of the
Collateral,
or any part thereof, or the making of a levy, seizure or attachment
thereof or
thereon;
(e) The sale or other disposition of the Collateral or any interest
therein without the prior written consent of Secured Party;
(f) The Collateral should become the subject matter of litigation
which
might, in the opinion of Secured Party, result in substantial impairment
or loss
of the security intended to be provided by this Security Agreement;
(g) Any of the following by or to Debtor or to any guarantor or
endorser
of any obligation secured by this Security Agreement: Death (if an
individual);
unless steps are taken within 60 days thereafter to reasonably satisfy the
Secured Party that the Note will be paid and when due, any failure in
business;
any general assignment for the benefit of creditors; the filing of any
petition
for relief under the provisions of the Bankruptcy Act, or for relief under
any
insolvency law, either voluntarily or involuntarily; dissolution,
termination of
existence, or appointment of a receiver of any part of the property of
Debtor;
(h) Secured Party should deem itself insecure, or Secured Party in
good
faith believes that the prospect for payment of any obligation secured by
this
Security Agreement, or any installment on any such obligation has been
impaired;
(i) If Debtor is a corporation, any event should occur (including
without
limitation, transfer, sale or other disposition of shares of Debtor by the
shareholders on the date of this Security Agreement, or the issuance by
Debtor
of shares of Debtor to persons not shareholders of Debtor on the date of
this
Security Agreement) which would cause fifty percent or more of the then
outstanding shares of Debtor to be owned by persons other than one of the
shareholders of Debtor on the date of this Security Agreement, without
Debtor
having first received the prior written consent of Secured Party;
(j) Debtor or any guarantor or endorser of any obligation secured by
this
Security Agreement should default in any obligation to or agreement with
any
person or entity by which Debtor or such guarantor or endorser or any of
their
properties are bound;
(k) Debtor or any officer, director, agent, tenant or employee of
the
Debtor is charged, indicted, or convicted of any criminal offense by the
federal
or any state government which, in the sole and reasonable exercise of the
Secured
Party's discretion, shall place any of the Collateral at risk of
forfeiture to
the federal or any state government.
9. Remedies. Upon any event of default under this Security
Agreement,
Secured Party may at its option declare any and all obligations secured by
this
Security Agreement immediately due and payable; and, in addition to
exercising
all other rights or remedies proceed to exercise with respect to the
Collateral
all rights, options and remedies of a secured party upon default as
provided for
under the Uniform Commercial Code. The rights of Secured Party upon
default
shall include, without limitation, the following:
(a) The right to the immediate possession of the Collateral without
requirement of notice or demand, or of legal process. In exercising this
right,
Secured Party may enter into the premises of Debtor, without requirement
of any
legal process and Secured Party may pursue the Collateral wherever it may
be
found. After retaking possession, Secured Party shall be entitled to sell
the
Collateral at public or private sale, in accordance with the requirements
of the
Uniform Commercial Code, or other law regulating such sale.
(b) The right to recover the reasonable expenses of preparing the
Collateral for sale, and for selling the Collateral, and other like
expenses,
together with court costs and reasonable attorney fees incurred in
realizing upon
the Collateral or enforcing any provision of this Security Agreement.
(c) The right to require Debtor to assemble the Collateral and make
it
available to Secured Party at a place to be designated by Secured Party
which is
reasonable and convenient to both parties.
(d) The right to require Debtor to store the Collateral, at its own
costs
and risk, on behalf of Secured Party after Secured Party has retaken
possession
of Collateral. Such storage shall be in such manner as to prevent any
deterioration of the Collateral, and shall be for a reasonable time
pending the
sale or other disposition of the Collateral.
(e) The right to proceed by appropriate legal process to enforce any
provisions of this Security Agreement or in aid of the execution of any
power of
sale, or for foreclosure of the security interest of Secured Party, or for
the
sale of the Collateral under the judgment or decree of any court.
10. Remedies Cumulative. The rights and remedies of Secured Party
in
this Security Agreement shall be deemed to be cumulative, and any exercise
of any
rights or remedies by Secured Party shall not be deemed to be an election
of that
right or remedy, to the exclusion of any other right or remedy.
11. No Waivers. Any forbearance, failure or delay by Secured Party
in
the exercise of any right, power or remedy hereunder shall not be deemed
to be
a waiver of any such right, power or remedy and any single or partial
exercise
of any right, power or remedy, shall not preclude the further exercise
thereof.
Every right, power and remedy of Secured Party shall continue in full
force and
effect until such right, power or remedy is specifically waived by an
instrument
in writing executed by Secured Party.
12. Notice. Any requirement of the Uniform Commercial Code of
reasonable
notice, whether to Debtor or to any other party, shall be met if such
notice is
mailed, postage prepaid, to Debtor, or as the case may be, to such other
party
to whom notice is required, at the address shown for each of them
respectively
on the records of Secured Party at least five days before the time of
sale,
disposition or other event or thing giving rise to the requirement of
notice.
13. Severability. Any provision of this Security Agreement
prohibited
by any law applicable to this Security Agreement shall be ineffective to
the
extent of such prohibition without invalidating or affecting in any manner
the
remaining provisions of this Security Agreement. If any part, term or
provision
of this Security Agreement is held by any court to be illegal, or in
conflict
with any law applicable to this Security Agreement, the rights and
obligations
of the parties shall be construed and enforced as if this Security
Agreement did
not contain that particular part, term or provision.
14. Headings. The headings in this Security Agreement have been
included
for ease of reference only, and shall not be considered in the
construction or
interpretation of this Security Agreement.
15. Benefit. This Security Agreement shall inure to the benefit of
Secured Party and its successors and assigns, and all obligations of
Debtor shall
bind its heirs, executors or administrators, and its successors and
assigns. If
these is more than one Debtor, their obligations hereunder shall be joint
and
several.
16. Filing of Copies. A carbon copy, photocopy or other
reproduction of
(a) this Security Agreement, or (b) any financing statement covering all
or part
of the Collateral, is sufficient as a financing statement.
17. This agreement shall be governed by the laws of the Commonwealth
of
Kentucky to the extent allowed by the Uniform Commercial Code.
IN WITNESS WHEREOF, Debtor and Secured Party have signed this
Security
Agreement on 10-29, 1996.
Debtor: IN-HOUSE REHAB, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Treasurer and Chief Financial Officer
GREAT FINANCIAL BANK, FSB
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, First Vice President
----------------------------------
Account key (for internal use only)
PROMISSORY NOTE
Revolving Credit Loan
$2,500,000.00 October 29, 1996
Louisville, Kentucky
For value received the undersigned Maker(s), (individually or
collectively, the "Maker"), promises to pay to the order of Great
Financial Bank,
FSB (the "Lender"), at its home office in Louisville, Kentucky, the
principal sum
of TWO MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS, together with
interest
on the principal of this note from time to time outstanding at an annual
rate set
forth below.
1. INTEREST RATE. The principal balance of this note outstanding at any
time
shall bear interest as is checked below from the date of this note first
set
forth above until paid in full at a rate equal to the following:
1.1 [ ] Fixed Rate: % per annum.
1.1 [ X ] Variable Rate: A variable rate per annum which is equal
to
the sum of the "Prime Rate" charged by the Lender, from time to time in
effect,
plus 1/4 of 1 percentage points, provided, however, if checked here [
], the
annual interest rate shall not be less than % nor shall it exceed
%.
As used in this note, "Prime Rate" means the annual rate set by the Lender
from
time to time to establish the annual interest rate applicable to
extensions of
credit by the Lender which bear interest related to the Lender's Prime
Rate. The
Prime Rate is not necessarily the Lender's best or lowest rate of
interest. The
Lender's Prime Rate shall be posted at all times in the offices of the
Commercial
Lending Division at the Lender's home office in Louisville, Kentucky. The
interest rate of this note shall be adjusted from time to time on the same
day
on which the Prime Rate is changed by the Lender. As of the date of this
note
the Prime Rate is 8.25% and the annual interest rate of this note is
8.50%.
1.2 Interest Accrual. All interest on this note shall be computed
on the
basis of the actual number of days elapsed over an assumed year of 360
days, or
if checked here [ ], over a year of 365 days, or
if checked here [ ], over an assumed year of 360 days with 30
day
months.
2. REPAYMENT TERMS. This note is a revolving credit note under which
advances
may be made by the Bank from time to time under the terms and conditions
set
forth in this note. Amounts once borrowed and repaid may be reborrowed in
accordance with the terms and conditions set forth in this note.
All accrued interest shall be paid, until this note has been paid in
full,
beginning on December 2, 1996 and continuing on the same successive day
every:
[ X ] month; [ ] three (3) months; [ ] other (insert frequency):
. The
outstanding balance of principal, accrued interest, charges and fees shall
be due
and payable in full on October 2, 1997 (the "Maturity Date").
If checked here [ X ], advances made under this note are subject to
the
terms of a Borrowing Base Agreement dated October 29, 1996, which governs
conditions and circumstances under which advances may be made under this
note.
If checked here [ ], the Borrower shall be required to maintain a
zero
balance outstanding under this note for a period of days during
the term
of this note.
Time shall be of the essence in making all payments of principal
and/or
interest due under this note.
3. LATE CHARGE. If the Maker fails to pay any installment of principal
and/or
interest due hereunder within fifteen (15) days after the payment first
became
due and payable, the Maker shall pay the Lender a "late charge" equal to
the
greater of (i) five percent (5%) of each such overdue payment, or (ii)
$25.00
each. If not sooner paid, all late charges shall be payable on the
Maturity
Date.
4. UNPAID INTEREST; DEFAULT RATE. At the discretion of the Lender,
interest
not paid within 14 days of its due date will be added to the outstanding
principal balance of this note and will bear interest at the rate
indicated on
the front of this note. Notwithstanding any other provision in this note
to the
contrary, upon maturity, whether by acceleration or otherwise, at the
discretion
of the Lender, the principal balance of this note shall bear interest
thereafter
until paid in full at 3 percentage points in excess of the interest rate
of this
note. Acceleration of maturity occurs if the Lender exercises its option
to deem
this note immediately due and payable.
5. APPLICATION OF PAYMENTS. Payments shall be applied first to accrued
but
unpaid interest, then to the principal balance outstanding, and then to
any late
fee or charge outstanding under this note.
6. COLLATERAL SECURITY. To secure payment of this note, any renewals or
extensions thereof, and all other existing and future indebtedness (direct
or
contingent) of the Maker to the Lender, the Lender has been given the
property
described below, or the property described in any instruments described
below,
or a lien on such property, and any additions to or substitutions for the
same,
as well as all property which now or hereafter is listed under any
separate
security agreement, instrument or document as directly or indirectly
securing
this note, and also all money and other property held by the Lender on
deposit,
in safekeeping or otherwise for the account of or to the credit of the
Maker:
All Business Assets of IN-HOUSE REHAB, INC., as evidenced in the Security
Agreement dated as of October 29, 1996
7. DEFAULT; REMEDIES. In the event (i) the Maker fails to make any
payment
when due under this note or under any other notes or obligations of the
Maker to
the Lender, or (ii) the Maker or any endorser or guarantor of this note
shall be
adjudged a bankrupt, or file a petition in bankruptcy, or have a petition
filed
against them, or (iii) the Maker or any endorser or guarantor of this note
shall,
in the sole opinion of the Lender, experience a material adverse change in
its,
his or her financial condition, or (iv) a writ or order of attachment or
garnishment shall be issued or made against any property of the Maker or
any
endorser or guarantor of this note, or (v) of dissolution, termination of
existence, or material change in the ownership of the Maker of any
endorser or
guarantor of this note, or (vi) the Maker or any endorser or guarantor of
this
note fails to provide financial statements or other financial information
on a
timely basis when reasonably requested by the Lender, or (vii) the Bank in
good
▇▇▇▇▇ ▇▇▇▇▇ itself insecure with respect to repayment of this note, or in
good
faith believes that the prospect of payment is impaired, or (viii) of the
death
of any Maker or any endorser or guarantor of this note, or (ix) the Maker
or any
endorser or Guarantor of this Note shall default under or breach this
Note, any
other note, loan agreement, warranty or other agreement with Lender, then
in any
such case, (a) the Lender may terminate any obligation of the Lender to
make
further advances under this note, and (b) the entire unpaid principal
balance of
and all accrued interest on this note and/or all liabilities of the Maker
to the
Lender shall be considered to be in default and, at the Lender's option,
forthwith become due and payable without demand or notice, and the Lender
may
sell at public or private sale any or all of the property securing this
note, or
substitutes therefor or additions thereto, and if such sale be public, the
Lender
may purchase such property or any part thereof. The proceeds of any sale
made
hereunder, after deducting any expense incident to said sale, together
with the
cost of handling said property, may be applied by the Lender, as it shall
deem
proper, to any one or more or all of the liabilities of the Maker to the
Lender,
whether such liabilities are due or not, and the balance of said proceeds,
if
any, shall be returned to the Maker.
If any Maker is a corporation, partnership, limited partnership,
limited
liability company or any other type of business entity, the happening of
any of
the following events without the Lender's prior written consent shall
render this
note in default and, at the option of the Lender, immediately due and
payable
without demand or notice: (1) a merger or consolidation of the Maker or
any
subsidiary of the Maker with or into any corporation or other legal
entity, or
a merger or consolidation of one or more other such entities with or into
the
Maker; (2) the sale, lease, transfer or other disposition of all or any
substantial part of the assets of the Maker, whether now owned or
hereafter
acquired; (3) an acquisition by the Maker of all or substantially all of
the
assets or outstanding capital stock of any other business entity; or (4)
any one
or more transfers, sales or other dispositions of shares of any class of
stock
of the Maker by shareholders on the date of this note, or the issuance by
Maker
on one or more occasions of shares of any class of stock of the Maker to
persons
not shareholders of the Maker on the date of this note, which in the
aggregate
would cause 50% or more of the then outstanding shares of such class of
stock to
be owned by persons other than one of the shareholders of the Maker on the
date
of this note.
Failure of the holder of this note to exercise any of its rights and
remedies shall not constitute a waiver of any provision of this note, or
of any
security agreement, instrument or document (including without limitation
any
guaranty) securing Maker's obligations under this note, or of any such
holder's
rights and remedies, nor shall it prevent the holder from exercising any
rights
or remedies with respect to the subsequent happening of the same or
similar
occurrences. All remedies of the holder hereof shall be cumulative to the
greatest extent permitted by law.
8. SEVERABILITY. If at any time any provision of this note shall be
determined to be illegal, invalid or unenforceable, the rights and
obligations
of the parties shall be construed and enforced with that provision limited
so as
to make it enforceable to the greatest extent allowed by law or, if it is
totally
unenforceable, as if this note did not contain that particular provision.
9. GOVERNING LAW. This note has been delivered in, and shall be
governed by
and construed in accordance with the laws of the Commonwealth of Kentucky.
10. ATTORNEYS FEES; COSTS OF COLLECTIONS. If there is any default under
this
note, and this note is placed in the hands of an attorney who is not a
salaried
employee of the Lender for collection, or is collected through any court,
including any bankruptcy court, the Maker promises to pay to the holder
hereof
such court costs and reasonable attorney's fees as are incurred by the
holder.
11. MISCELLANEOUS. The Borrower agrees that payments received on this
note by
check, draft or other non-cash item shall not be deemed to be made until
the
Lender has received final payment of the check, draft or non-cash item
from the
financial institution that it is drawn upon.
All parties to this instrument, whether makers, sureties, guarantors,
endorsers, accommodation parties or otherwise, shall be jointly and
severally
bound, and jointly and severally waive presentment, demand, notice of
dishonor,
protest, notice of protest, notice of nonpayment or nonacceptance and any
other
notice and all due diligence or promptness that may otherwise be required
by law.
The holder of this instrument may, from time to time and in one or more
instances, with or without notice to any party, and without affecting the
obligations of any maker, surety, guarantor, endorser, accommodation party
or any
other party to this note (1) renew this note or extend the time for
payment of
principal or interest from time to time, (2) release or discharge any one
or more
parties liable on this note, (3) suspend the right to enforce this note
with
respect to any persons, (4) change, exchange, or release any property in
which
the Lender has any interest securing this note, (5) justifiably or
otherwise,
impair any collateral securing this note or suspend or release the right
to
enforce against any such collateral, and (6) at any time it deems it
necessary
or proper, call for and accept, as additional security, the signature or
signatures of additional parties, or a security interest in property of
any kind,
or both.
If checked here [ ], this note is a renewal of that certain
promissory note
dated in the principal amount of $
.
If checked here [ X ], this note is issued pursuant to the terms of
a
certain letter or loan agreement dated as of October 29, 1996 to which
both the
Maker and the Lender (with the possible addition of other parties) are
parties
(the "Agreement"), and this note is subject to the terms and conditions of
said
Agreement.
This note was executed as of and is effective as of the date set
forth above, but was actually executed on the date(s) set forth below.
IF MORE THAN ONE PERSON SHALL SIGN THIS NOTE, THE OBLIGATION OF ALL
SUCH PERSONS SHALL BE JOINT AND SEVERAL AND ANY REFERENCE IN THIS NOTE TO THE
"MAKER" SHALL REFER TO EACH ONE SEPARATELY AS WELL AS TO ALL.
IN-HOUSE REHAB, INC.
by: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Treasurer and Chief Financial Officer
Date: 10-29-96
Reviewed:
(officer initials)
