-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rl/7A3w1otqn1gzQoXs1goWHEHB0aOphnkBDtBOc3l/49drvgcc/h7Ua3xw+66ya 2skYqJDtR3A2/2dCWbPdVg== 0000950134-01-503629.txt : 20010629 0000950134-01-503629.hdr.sgml : 20010629 ACCESSION NUMBER: 0000950134-01-503629 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010228 FILED AS OF DATE: 20010628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STAFF BUILDERS INC /DE/ CENTRAL INDEX KEY: 0000720480 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOME HEALTH CARE SERVICES [8082] IRS NUMBER: 112650500 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-11380 FILM NUMBER: 1670011 BUSINESS ADDRESS: STREET 1: 1983 MARCUS AVE STREET 2: STE C115 CITY: LAKE SUCCESS STATE: NY ZIP: 11042 BUSINESS PHONE: 5163581000 MAIL ADDRESS: STREET 1: 425 NORTH AVE EAST STREET 2: STE C115 CITY: WESTFIELD STATE: NJ ZIP: 07090 FORMER COMPANY: FORMER CONFORMED NAME: TENDER LOVING CARE HEALTH CARE SERVICES INC DATE OF NAME CHANGE: 19880404 10-K/A 1 d88156e10-ka.txt AMENDMENT NO. 1 TO FORM 10-K - FISCAL END 2/28/01 1 SECURITIES AND EXCHANGE COMMISSION DRAFT WASHINGTON, D.C. 20549 FORM 10-K/A AMENDMENT 1 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2001. ------------------ OR [ ] TRANSITION REPORT SUBJECT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO ___________. Commission File Number: 0-11380 STAFF BUILDERS, INC. (Exact name of Registrant as specified in its charter) DELAWARE 11-2650500 - --------------------------------- ----------------------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 1983 MARCUS AVENUE, LAKE SUCCESS, NY 11042 - ---------------------------------------- ----------------------------------- (Address of Principal executive offices) (Zip Code) Registrant's telephone number, including area code: (516) 750-1600 -------------- Securities registered pursuant to Section 12 (b) of the Act: NONE Securities registered pursuant to Section 12 (g) of the Act: CLASS A COMMON STOCK, $.01 PAR VALUE CLASS B COMMON STOCK, $.01 PAR VALUE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ___ The aggregate market value of the voting stock (Class A and Class B Common Stock, assuming conversion of each share of Class B Common Stock into a share of Class A Common Stock) held by non-affiliates of the registrant based on the closing price of such stock on May 22, 2001 was $12,997,488. The number of shares of Class A Common Stock and Class B Common Stock outstanding on May 22, 2001 was 23,358,494 and 273,303 shares, respectively. DOCUMENTS INCORPORATED BY REFERENCE NONE 1 2 INTRODUCTORY NOTE This amendment on Form 10-K/A amends the registrant's Annual Report on Form 10-K filed by Staff Builders, Inc. (the "Company") on May 25, 2001 and is being filed to amend Item 7 and Item 14 to reflect the restatement of Management's Discussion and Analysis of Financial Condition and Results of Operations and the inclusion of certain exhibits. In addition, the Company amended its discussion of the new financing facility it had secured in April 2001. Additionally, exhibits that were not available at the time of filing are included herein. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provides information, which the Company's management believes is relevant to an assessment and understanding of the Company's results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere herein. This discussion contains forward-looking statements that are subject to a number of known and unknown risks that, in addition to general economic, competitive and other business conditions, could cause actual results, performance and achievements to differ materially from those described or implied in the forward-looking statements. The Company is subject to significant external factors which could significantly impact its business. These factors could cause future results to differ materially from historical trends. Results of Operations Years Ended February 28, 2001 ("Fiscal 2001"), February 29, 2000 ("Fiscal 2000") and February 28, 1999 ("Fiscal 1999"). REVENUES: Total revenues increased by approximately $5.7 million or 5.0% to $120.7 million in Fiscal 2001 from $115.0 million in Fiscal 2000. This increase is due to growth in revenues for certain locations which had already been in operation during Fiscal 2000 and are experiencing higher sales in Fiscal 2001. These locations offset the loss of revenues from branch offices that have left the network. Total revenues increased by approximately $20.3 million or 21.4% to $115.0 million in Fiscal 2000 from $94.7 million in Fiscal 1999. This increase is due to an increase in revenues for certain locations which had been in operation during the entire Fiscal 1999 period but were experiencing higher sales growth in Fiscal 2000, as well as independent agencies which had joined the Company during Fiscal 1999 which were operating for the entire Fiscal 2000. SERVICE COSTS: Service costs were 77.5%, 77.1% and 78.0% of total revenues in Fiscal 2001, 2000 and 1999, respectively. Service costs represent the direct costs of providing services to patients or clients, including wages, payroll taxes, travel costs, insurance costs, medical supplies and the cost of contracted services. GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses increased by approximately $.8 million or 3.2% to $25.0 million in Fiscal 2001 from $24.3 million in Fiscal 2000. The increase is mainly related to the overall growth of the business. The Company pays royalties to its 2 3 licensees based upon approximately 60% of the gross profit of the licensee office. Despite the growth in revenues, royalty expense decreased by approximately $1.5 million or 15.2% to $8.7 million in Fiscal 2001 from $10.2 million in Fiscal 2000. The decrease is primarily due to the increase in corporately owned offices as well as an increase in the number of franchises enrolled in the Company's administrative program where certain expenses of the franchise are paid by the Company and charged back against the franchisee's royalty. General and administrative expenses increased by approximately $5.0 million or 25.7% to $24.3 million in Fiscal 2000 from $19.3 million in Fiscal 1999. The increase is mainly due to growth of the business and associated royalty expense as well as the hiring of additional personnel because of the relocation of the Company's corporate office from Atlanta, Georgia to Lake Success, New York. DEPRECIATION AND AMORTIZATION: Depreciation and amortization expenses relating to fixed assets and intangible assets increased by approximately $1,078 thousand or 162.3% to $1,742 thousand in Fiscal 2001 from $664 thousand in Fiscal 2000. Charges for depreciation and amortization expenses increased $89 thousand or 15.5% from $575 thousand in Fiscal 1999 to $664 thousand in Fiscal 2000. These increases are mainly due to the purchase and placing into service of approximately $3.6 million of computer equipment in Fiscal 2000 which was necessary to build the computer infrastructure to handle the current and future growth of the business. INTEREST EXPENSE, NET: Interest expense, net was $2.3 million, $1.2 million and $1.2 million in Fiscal 2001, 2000 and 1999, respectively. Interest expense increased due to the level of borrowings of the Company in congruence with the increased growth of the Company's continuing operations. RELOCATION EXPENSES: During Fiscal 2000, the Company incurred one-time relocation charges related to the expenses of moving its corporate offices from Atlanta, Georgia to Lake Success, New York. These costs primarily include travel and lodging, as well as the costs for the physical movement of the Company's equipment and records to the New York location. NON RECURRING SPIN-OFF AND FINANCING COSTS: During Fiscal 2000, the Company incurred one-time spin-off costs of approximately $700 thousand related to the spin-off of TLCS. These costs included legal fees, accounting fees, consultants and printing costs. In addition, the Company incurred financing fees of approximately $400 thousand which were incurred because of the restructuring of the Company's borrowing agreement with its asset based lending institution necessitated by the spin-off of TLCS. PROVISION (BENEFIT) FOR INCOME TAXES: The provision (benefit) for income taxes reflects an effective rate of 10.4%, 3.9%, and (16.0%) in Fiscal 2001, 2000, and 1999, respectively. The provision for income taxes in Fiscal 2001 consists of state capital and minimum taxes. The book benefit for the net operating losses generated in Fiscal 2001 was offset by recording a full valuation allowance. Such valuation allowance was recorded because management does not believe that the utilization of the tax benefits from operating losses, and other temporary differences are "more likely than not" to be realized, as required by generally accepted accounting principles (GAAP) in the United States of America. LIQUIDITY AND CAPITAL RESOURCES Net cash used in operating activities was $3.0 million in Fiscal 2001, which consisted primarily of the decrease in accounts payable, accrued expenses, and accrued payroll and related expenses of $2.4 million and cash used in operations which consisted of the net loss of $1.1 million, which included non-cash 3 4 items consisting primarily of depreciation and amortization of $1.7 million and the decrease to the allowance for doubtful accounts, net of write-off's, of $1.2 million. Net cash used in investing activities was $585 thousand in Fiscal 2001, which consisted of the purchases of fixed assets of $585 thousand. Net cash from financing activities was $5.2 million in Fiscal 2001, which consisted of the increase due under the Company's secured credit facility of $5.5 million and the principal decrease in capital leases of $.3 million. Net cash provided by operating activities was $3.0 million for Fiscal 2000, which consisted primarily of the increase of accounts payable and accrued expenses of $4.6 million offset by cash provided from operations which consisted of the net loss of $(3.2) million, which included non-cash items consisting primarily of depreciation and amortization of $664 thousand, goodwill write-offs of $433 thousand and provision for doubtful accounts of $651 thousand. Net cash provided by investing activities was $4.8 million in Fiscal 2000, which consisted of the disposition of short term assets of discontinued operations of $4.2 million and disposition of long term assets of discontinued operations of $3.5 million offset by $2.9 million of fixed asset purchases. Net cash used in financing activities was $7.6 million in Fiscal 2000, which consisted primarily of the decrease due under secured credit facility of $7.5 million. On September 24, 1999, the Company entered into an amended and restated loan and security agreement with a bank ("Loan Agreement") which expired on February 29, 2000. The Loan Agreement permitted the Company to borrow up to 75% of eligible accounts receivable, up to the maximum amount of $15 million. The borrowings under the credit facility bore interest at 2.0% over the prevailing prime lending rate. In addition, the Company paid a monthly collateral management fee of $3 thousand and .375% per annum of the daily unused portion of the credit facility. The Company paid bank fees of $170 thousand in connection with the execution of the Loan Agreement and facility fees of $131 thousand on November 30, 1999. The Company paid an additional $206 thousand of facility fees in Fiscal 2000. In March 2000, the Company secured a financing facility ("Facility") with a lending institution for a $20 million revolving loan. The Facility was used to repay borrowings under the Loan Agreement. Under the Facility, the Company was able to borrow up to $20 million based upon having sufficient collateral calculated at 85% of the Company's accounts receivable. Interest on the Facility is 3% over the prevailing prime lending rate. There is also a .5% annual fee for the unused portion of the total loan availability. In April 2001, the Company secured a new financing facility ("New Facility") with a lending institution for a $25 million, three year term, revolving loan. The New Facility was used to repay borrowings under the Facility. Under the New Facility, the Company may borrow amounts up to 85% of the Company's eligible accounts receivable subject to a maximum of $25 million. Interest on borrowings under the New Facility is at the annual rate of 3.4% over LIBOR. There is also a .5% annual fee for the unused portion of the total loan availability. The Company will record an extraordinary charge of approximately $850 in the first quarter of the fiscal year ending February 2002 as a result of the write off of previously deferred costs and an early prepayment fee associated with the Facility. The Company expects to recoup these fees in lower interest charged by the New Facility in fiscal year ending February 2002. The Company's working capital was $18.0 million and $13.4 million at February 28, 2001 and February 29, 2000, respectively. 4 5 Management believes that working capital generated from operations, together with other credit facilities, will be sufficient to meet the currently anticipated working capital and capital expenditure requirements of our operations. EFFECT OF INFLATION The rate of inflation was immaterial during Fiscal 2001. In the past, the effects of inflation on salaries and operating expenses have been offset by the Company's ability to increase its charges for services rendered. The Company anticipates that it will be able to continue to do so in the future. The Company continually reviews its costs in relation to the pricing of its services. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The Company does not expect the adoption of recently issued accounting pronouncements to have a material effect, if any, on it's financial condition or its results of operations. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Sensitivity: The Company's primary market risk exposure is interest rate risk. The Company's exposure to market risk for changes in interest rates relates to its debt obligations under its Facility described above. The interest rate on drawings was the prime rate plus 3%. Under the New Facility, the interest rate is 3.4% over LIBOR. At February 28, 2001, drawings on the Facility were $20,636 thousand. Assuming variable rate debt at February 28, 2001, a one point change in interest rates would impact annual net interest payments by $206.4 thousand. The Company does not use derivative financial instruments to manage interest rate risk. CONTINGENT OBLIGATIONS The Company is contingently liable on obligations owed by TLCS which total approximately $3,700,000 as of February 28, 2001. The Company is indemnified by TLCS for any obligations arising out of these matters. As of May 2001, TLCS has represented that it is current on its payments for these obligations. FORWARD-LOOKING STATEMENTS Certain statements in this Annual Report on Form 10-K constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are typically identified by the inclusion of phrases such as "the Company anticipates", "the Company believes" and other phrases of similar meaning. These forward looking statements are based on the Company's current expectations. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The potential risks and uncertainties which would cause actual results to differ materially from the Company's expectations are as follows: BUSINESS CONDITIONS - The Company must continue to establish and maintain close working relationships with physicians and physician groups, managed care organizations, hospitals, clinics, nursing homes, social service agencies and other health care providers. There can be no assurance that the Company will continue to establish or maintain such relationships. The Company expects additional competition will develop in future periods given the increasing market demand for the type of services offered. 5 6 ATTRACTION AND RETENTION OF LICENSEES AND EMPLOYEES - Maintaining quality licensees, managers and branch administrators will play a significant part in the future success of the Company. The Company's professional nurses and other health care personnel are also key to the continued provision of quality care to the Company's patients. The possible inability to attract and retain qualified licensees, skilled management and sufficient numbers of credentialed health care professional and para-professionals and information technology personnel could adversely affect the Company's operations and quality of service. Also, because the travel nurse program is dependent upon the attraction of skilled nurses from overseas, such program could be adversely affected by immigration restrictions limiting the number of such skilled personnel who may enter and remain in the United States. SATISFACTORY FINANCING - The Company entered into the New Facility on April 6, 2001. Management cannot provide assurance that the Company will remain in compliance with the covenants of the new financing agreement. If the Company does not remain in compliance with the covenants, the bank could immediately call the amounts due under the New Facility. If this were to happen, the Company would have to seek alternative financing, which may not be available on acceptable terms to the Company. The line of credit available to the Company is $25 million. Management cannot provide assurance that the available line of credit will be sufficient on a going forward basis to provide sufficient funds to operate the business. 6 7 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The financial statements, including the supporting schedules, filed as part of the report, are listed in the Table of Contents to the Consolidated Financial Statements. (B) REPORTS ON 8-K No reports on Form 8-K were filed by the Registrant for the quarter ended February 28, 2001. (C) EXHIBITS 7 8 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 3.1 Restated Certificate of Incorporation of the Company, filed July 11, 1998 (A) 3.2 Certificate of Amendment to the Restated Certificate of Incorporation of the Company, filed August 22, 1991. (B) 3.3 Certificate of Amendment to the Restated Certificate of Incorporation of the Company, filed September 3, 1992. (A) 3.4 Certificate of Retirement of Stock of the Company, filed February 28, 1994. (T) 3.5 Certificate of Retirement of Stock of the Company, filed June 3, 1994. (A) 3.6 Certificate of Designation, Rights and Preferences of the Class A Preferred Stock of the Company, filed June 6, 1994. (A) 3.7 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed August 23, 1994. (A) 3.8 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed October 26, 1995. (C) 3.9 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed December 19, 1995. (D) 3.10 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed December 19, 1995 (D) 3.11 Amended and Restated By-Laws of the Company. (A) 4.1 Specimen Class A Common Stock Certificate. (E) 4.2 Specimen Class B Common Stock Certificate. (F) 10.8 1986 Non-Qualified Stock Option Plan of the Company. (H) 10.9 First Amendment to the 1986 Non-Qualified Stock Option Plan, effective as of May 11, 1990. (A) 10.10 Amendment to the 1986 Non-Qualified Stock Option Plan, dated as of October 27, 1995. (I) 10.11 Resolutions of the Company's Board of Directors amending the 1983 Incentive Stock Option Plan and the 1986 Non-Qualified Stock Option Plan, dated as of June 3, 1991. (A) - ---------- See Notes to Exhibit 9 EXHIBIT NO. DESCRIPTION 10.12 1993 Stock Option Plan of the Company. (A) 10.13 1998 Stock Option Plan of the Company (incorporated by reference to Exhibit C to the Company's Proxy Statement dated August 27, 1998, filed with the Commission on August 27, 1998). 10.14 Amended and Restated 1993 Employee Stock Purchase Plan of the Company (J) 10.15 1998 Employee Stock Purchase Plan of the Company (incorporated by reference to Exhibit D to the Company's Proxy Statement dated August 27, 1998, filed with the Commission on August 27, 1998). 10.18 1994 Performance-Based Stock Option Plan of the Company (incorporated by reference to Exhibit B to the Company's Proxy Statement, dated July 18, 1994, filed with the Commission on July 27, 1994). 10.19 Stock Option Agreement, dated as of March 28, 1990, under the Company's 1986 Non-Qualified Stock Option Plan between the Company and Stephen Savitsky. (A) 10.20 Stock Option Agreement, dated as of June 17, 1991, under the Company's 1986 Non-Qualified Stock Option Plan between the Company and Stephen Savitsky. (A) 10.21 Stock Option Agreement, dated December 1, 1998, under the Company's 1993 Stock Option Plan between the Company and Stephen Savitsky. (K) 10.22 Stock Option Agreement, dated December 1, 1998, under the Company's 1994 Performance-Based Stock Option Plan between the Company and Stephen Savitsky. (A) 10.23 Stock Option Agreement, dated as of March 28, 1990, under the Company's 1986 Non-Qualified Stock Option Plan between the Company and David Savitsky. (A) 10.24 Stock Option Agreement, dated as of June 17, 1991, under the Company's 1986 Non-Qualified Stock Option Plan between the Company and David Savitsky. (A) 10.25 Stock Option Agreement, dated December 1, 1998, under the Company's 1993 Stock Option Plan between the Company and David Savitsky. (K) 10.26 Stock Option Agreement, dated December 1, 1998, under the Company's 1994 Performance-Based Stock Option Plan between the Company and David Savitsky. (K) 10.27 Stock Option Agreement, dated December 1, 1998, under the Company's 1993 Stock Option Plan, between the Company and Edward Teixeira. (K) - ---------- See Notes to Exhibit 10 EXHIBIT NO. DESCRIPTION 10.29 Stock Option Agreement, dated December 1, 1998, under the Company's 1994 Performance-Based Stock Option Plan, between the Company and Edward Teixeira. (K) 10.30 Stock Option Agreement, dated December 1, 1998, under the Company's 1998 Stock Option Plan, between the Company and Edward Teixeira. (K) 10.31 Stock Option Agreement, dated December 1, 1998, under the Company's 1994 Performance-Based Stock Option Plan, between the Company and Dale Clift. (K) 10.32 Stock Option Agreement, dated December 1, 1998, under the Company's 1994 Performance-Based Stock Option Plan, between the Company and Dale Clift. (K) 10.33 Stock Option Agreement, dated December 1, 1998, under the Company's 1998 Stock Option Plan, between the Company and Dale R. Clift. (S) 10.39 Employment Agreement, dated as of June 1, 1987, between the Company and Stephen Savitsky. (A) 10.40 Amendment, dated as of October 31, 1991, to the Employment Agreement between the Company and Stephen Savitsky. (A) 10.41 Amendment, dated as of December 7, 1992, to the Employment Agreement between the Company and Stephen Savitsky. (A) 10.42 Employment Agreement, dated as of June 1, 1987, between the Company and David Savitsky. (A) 10.43 Amendment, dated as of October 31, 1991, to the Employment Agreement between the Company and David Savitsky. (A) 10.44 Amendment, dated as of January 3, 1992, to the Employment Agreement between the Company and David Savitsky. (A) 10.45 Amendment, dated as of December 7, 1992, to the Employment Agreement between the Company and David Savitsky. (A) 10.47 Employment Agreement, dated as of February 9, 1998, between the Company and Dale R. Clift. (G) 10.48 First Amendment to Employment Agreement, dated as of December 1, 1998, to the Employment Agreement between the Company and Dale R. Clift. (K) 10.54 Amended and Restated Loan and Security Agreement, dated as of January 8, 1997, between the Company, its subsidiaries and Mellon Bank, N.A. (M) - ---------- See Notes to Exhibits 11 EXHIBIT NO. DESCRIPTION 10.55 First Amendment to Amended and Restated Loan and Security Agreement dated as of April 27, 1998, between the Company, its subsidiaries and Mellon Bank, N.A. (G) 10.56 Master Lease Agreement dated as of December 4, 1996, between the Company and Chase Equipment Leasing, Inc. (M) 10.57 Premium Finance Agreement, Disclosure Statement and Security Agreement dated as of December 26, 1996, between the Company and A.I. Credit Corp. (M) 10.58 Agreement of Lease, dated as of October 1, 1993, between Triad III Associates and the Company. (A) 10.59 First Lease Amendment, dated October 25, 1998, between Matterhorn USA, Inc. and the Company. 10.60 Supplemental Agreement dated as of January 21, 1994, between General Electric Capital Corporation, Triad III Associates and the Company (A) 10.61 Agreement of Lease, dated as of June 19, 1995, between Triad III Associates and the Company. (D) 10.62 Agreement of Lease, dated as of February 12, 1996, between Triad III Associates and the Company. (D) 10.63 License Agreement, dated as of April 23, 1996, between Matterhorn One, Ltd. and the Company (M) 10.64 License Agreement, dated as of January 3, 1997, between Matterhorn USA, Inc. and the Company (M) 10.65 License Agreement, dated as of January 16, 1997, between Matterhorn USA, Inc. and the Company . (M) 10.66 License Agreement, dated as of December 16, 1998, between Matterhorn USA, Inc. and the Company. (S) 10.71 Asset Purchase and Sale Agreement, dated as of September 6, 1996, by and among ATC Healthcare Services, Inc. and the Company and William Halperin and All Care Nursing Service, Inc. (N) 10.73 Stock Purchase Agreement by and among the Company and Raymond T. Sheerin, Michael Altman, Stephen Fleischner and Chelsea Computer Consultants, Inc., dated September 24, 1996. (L) - ---------- See Notes to Exhibits 12 EXHIBIT NO. DESCRIPTION 10.74 Amendment No. 1 to Stock Purchase Agreement by and among the Company and Raymond T. Sheerin, Michael Altman, Stephen Fleischner and Chelsea Computer Consultants, Inc., dated September 24, 1996 (L) 10.75 Shareholders Agreement between Raymond T. Sheerin and Michael Altman and Stephen Fleischner and the Company and Chelsea Computer Consultants, Inc., dated September 24, 1996. (L) 10.76 Amendment No. 1 to Shareholders Agreement among Chelsea Computer Consultants, Inc., Raymond T. Sheerin, Michael Altman and the Company, dated October 30, 1997 (L) 10.77 Indemnification Agreement, dated as of September 1, 1987, between the Company and Stephen Savitsky. (A) 10.78 Indemnification Agreement, dated as of September 1, 1987, between the Company and David Savitsky. (A) 10.79 Indemnification Agreement, dated as of September 1, 1987, between the Company and Bernard J. Firestone. (A) 10.80 Indemnification Agreement, dated as of September 1, 1987, between the Company and Jonathan Halpert. (A) 10.81 Indemnification Agreement, dated as of May 2, 1995, between the Company and Donald Meyers. (M) 10.82 Indemnification Agreement, dated as of May 2, 1995, between the Company and Edward Teixeira. (A) 10.84 Form of Medical Staffing Services Franchise Agreement (D) 10.89 Confession of Judgment, dated January 27, 2000, granted by a subsidiary of the Company, to Roger Jack Pleasant.First Lease Amendment, dated October 28, 1998, between Matterhorn USA, Inc. and the Company. (B) 10.91 Forbearance and Acknowledgement Agreement, dated as of February 22, 2000, between TLCS's subsidiaries, the Company and Chase Equipment Leasing, Inc. Agreement and Release, dated February 28, 1997, between Larry Campbell and the Company. (C) 10.92 Distribution agreement, dated as of October 20, 1999, between the Company and TLCS.(O) 10.93 Tax Allocation agreement dated as of October 20, 1999, between the Company and TLCS. (O) - ---------- See Notes to Exhibits 13 EXHIBIT NO. DESCRIPTION 10.94 Transitional Services agreement, dated as of October 20, 1999, between the Company and TLCS. (O) 10.95 Trademark License agreement, dated as of October 20, 1999, between the Company and TLCS. (O) 10.96 Sublease, dated as of October 20, 1999, between the Company and TLCS. (O) 10.97 Employee Benefits agreement, dated as of October 20, 1999, between the Company and TLCS. (O) 10.98 Amendment, dated as of October 20, 1999, to the Employment agreement between the Company and Stephen Savitsky. (P) 10.99 Amendment, dated as of October 20, 1999, to the Employment agreement between the Company and David Savitsky. (P) 10.100 Amendment, dated as of October 20, 1999, to the Employment agreement between the Company and Dale R. Clift. (P) 10.105 Second Amendment to ATC Revolving Credit Loan and Security Agreement, dated October 20, 1999 between the Company and Mellon Bank, N.A. (P) 10.106 Master Lease dated November 18, 1999 between the Company and Technology Integration Financial Services. (Q) 10.107 Loan and Security Agreement between the Company and Copelco/American Healthfund Inc. dated March 29, 2000. (Q) 10.108 Loan and Security Agreement First Amendment between the Company and Healthcare Business Credit Corporation (formerly known as Copelco/American Healthfund Inc.) dated July 31, 2000. (R) 10.109 Employment agreement dated August 1, 2000 between the Company and Alan Levy (R) 10.110 Equipment lease agreements with Technology Integration Financial Services, Inc. (R) 10.111 Loan and Security Agreement dated April 6, 2001 between the Company and HFG Healthco-4 LLC * 10.112 Receivables Purchase and Transfer Agreement dated April 6, 2001 between the Company and HFG Healthco-4 LLC * - ---------- See Notes to Exhibits 14 EXHIBIT NO. DESCRIPTION 21. Subsidiaries of the Company. * 24. Powers of Attorney. * - ---------- See Notes to Exhibits 15 NOTES TO EXHIBITS (A) Incorporated by reference to the Company's exhibit booklet to its Form 10-K for the Fiscal year ended February 28, 1995 (File No. 0-11380), filed with the Commission on May 5, 1995. (B) Incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 33-43728), dated January 29, 1992. (C) Incorporated by reference to the Company's Form 8-K filed with the Commission on October 31, 1995. (D) Incorporated by reference to the Company's exhibit booklet to it Form 10-K for the Fiscal year ended February 28, 1996 (file No. 0-11380), filed with the Commission on May 13, 1996. (E) Incorporated by reference to the Company's Form 8-A filed with the Commission on October 24, 1995. (F) Incorporated by reference to the Company's Form 8-A filed with the Commission on October 24, 1995. (G) Incorporated by reference to the Company's exhibit booklet to its Form 10-K for the Fiscal year ended February 28, 1998 (File No. 0-11380), filed with the Commission on May 28, 1998. (H) Incorporated by reference to the Company's Registration Statement on Form S-4, as amended (File No. 33-9261), dated April 9, 1987. (I) Incorporated by reference to the Company's Registration Statement on Form S-8 (File No. 33-63939), filed with the Commission on November 2, 1995. (J) Incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 3371974), filed with the Commission on November 19, 1993. (K) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended November 30, 1997 (File No. 0-11380), filed with the Commission on January 19, 1999. (L) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended November 30, 1997 (File No. 0-11380), field with the Commission on January 14, 1998. (M) Incorporated by reference to the Company's exhibit booklet to its Form 10-K for the Fiscal year ended February 28, 1997 (File No. 0-11380), filed with the Commission on May 27, 1997. 16 NOTES TO EXHIBIT (N) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended November 30, 1996 (File No. 0-11380), filed with the Commission on January 14, 1997. (O) Incorporated by reference to Tender Loving Care Health Care Services Inc.'s Form 10-Q for the quarterly period ended August 31, 1999 (File No. 0-25777) filed with the Commission on October 20, 1999. (P) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended August 31, 1999 (File No. 0-11380) filed with the Commission on October 20, 1999. (Q) Incorporated by reference to the Company's Form 10-K for the year ended February 29, 2000 (File No. 0-11380) filed with the Commission on July 17, 2000. (R) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended August 31, 2000 (File No. 0-11380) filed with the Commission on October 16, 2000. (S) Incorporated by reference to the Company's Form 10-K for the year ended February 28, 1999 (File No. 0-11380) filed with the Commission on June 11, 1999. (T) Incorporated by reference to the Company's exhibit booklet to its Form 10-K for the fiscal year ended February 28, 1994 (File No. 0-11380), filed with the Commission on May 13, 1994. * Incorporated herein. 17 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STAFF BUILDERS, INC. By: /S/ STEPHEN SAVITSKY --------------------------------- Stephen Savitsky Chairman of the Board and Chief Executive Officer Dated: June 28, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ STEPHEN SAVITSKY Chairman of the Board June 28, 2001 - --------------------------- and Chief Executive Officer Stephen Savitsky (Principal Executive Officer) and Director /s/ ALAN LEVY Senior Vice President, Finance, June 28, 2001 - --------------------------- Chief Financial Officer and Alan Levy Treasurer (Principal Financial and Accounting Officer) * Director June 28, 2001 - --------------------------- Bernard J. Firestone, Ph. D. * Director June 28, 2001 - --------------------------- Jonathan Halpert, Ph. D. * Director June 28, 2001 - --------------------------- Donald Meyers *By: /s/ STEPHEN SAVITSKY ---------------------- Stephen Savitsky Attorney-in-Fact
18 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 3.1 Restated Certificate of Incorporation of the Company, filed July 11, 1998 (A) 3.2 Certificate of Amendment to the Restated Certificate of Incorporation of the Company, filed August 22, 1991. (B) 3.3 Certificate of Amendment to the Restated Certificate of Incorporation of the Company, filed September 3, 1992. (A) 3.4 Certificate of Retirement of Stock of the Company, filed February 28, 1994. (T) 3.5 Certificate of Retirement of Stock of the Company, filed June 3, 1994. (A) 3.6 Certificate of Designation, Rights and Preferences of the Class A Preferred Stock of the Company, filed June 6, 1994. (A) 3.7 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed August 23, 1994. (A) 3.8 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed October 26, 1995. (C) 3.9 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed December 19, 1995. (D) 3.10 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed December 19, 1995 (D) 3.11 Amended and Restated By-Laws of the Company. (A) 4.1 Specimen Class A Common Stock Certificate. (E) 4.2 Specimen Class B Common Stock Certificate. (F) 10.8 1986 Non-Qualified Stock Option Plan of the Company. (H) 10.9 First Amendment to the 1986 Non-Qualified Stock Option Plan, effective as of May 11, 1990. (A) 10.10 Amendment to the 1986 Non-Qualified Stock Option Plan, dated as of October 27, 1995. (I) 10.11 Resolutions of the Company's Board of Directors amending the 1983 Incentive Stock Option Plan and the 1986 Non-Qualified Stock Option Plan, dated as of June 3, 1991. (A) - ---------- See Notes to Exhibit 19 EXHIBIT NO. DESCRIPTION 10.12 1993 Stock Option Plan of the Company. (A) 10.13 1998 Stock Option Plan of the Company (incorporated by reference to Exhibit C to the Company's Proxy Statement dated August 27, 1998, filed with the Commission on August 27, 1998). 10.14 Amended and Restated 1993 Employee Stock Purchase Plan of the Company (J) 10.15 1998 Employee Stock Purchase Plan of the Company (incorporated by reference to Exhibit D to the Company's Proxy Statement dated August 27, 1998, filed with the Commission on August 27, 1998). 10.18 1994 Performance-Based Stock Option Plan of the Company (incorporated by reference to Exhibit B to the Company's Proxy Statement, dated July 18, 1994, filed with the Commission on July 27, 1994). 10.19 Stock Option Agreement, dated as of March 28, 1990, under the Company's 1986 Non-Qualified Stock Option Plan between the Company and Stephen Savitsky. (A) 10.20 Stock Option Agreement, dated as of June 17, 1991, under the Company's 1986 Non-Qualified Stock Option Plan between the Company and Stephen Savitsky. (A) 10.21 Stock Option Agreement, dated December 1, 1998, under the Company's 1993 Stock Option Plan between the Company and Stephen Savitsky. (K) 10.22 Stock Option Agreement, dated December 1, 1998, under the Company's 1994 Performance-Based Stock Option Plan between the Company and Stephen Savitsky. (A) 10.23 Stock Option Agreement, dated as of March 28, 1990, under the Company's 1986 Non-Qualified Stock Option Plan between the Company and David Savitsky. (A) 10.24 Stock Option Agreement, dated as of June 17, 1991, under the Company's 1986 Non-Qualified Stock Option Plan between the Company and David Savitsky. (A) 10.25 Stock Option Agreement, dated December 1, 1998, under the Company's 1993 Stock Option Plan between the Company and David Savitsky. (K) 10.26 Stock Option Agreement, dated December 1, 1998, under the Company's 1994 Performance-Based Stock Option Plan between the Company and David Savitsky. (K) 10.27 Stock Option Agreement, dated December 1, 1998, under the Company's 1993 Stock Option Plan, between the Company and Edward Teixeira. (K) - ---------- See Notes to Exhibit 20 EXHIBIT NO. DESCRIPTION 10.29 Stock Option Agreement, dated December 1, 1998, under the Company's 1994 Performance-Based Stock Option Plan, between the Company and Edward Teixeira. (K) 10.30 Stock Option Agreement, dated December 1, 1998, under the Company's 1998 Stock Option Plan, between the Company and Edward Teixeira. (K) 10.31 Stock Option Agreement, dated December 1, 1998, under the Company's 1994 Performance-Based Stock Option Plan, between the Company and Dale Clift. (K) 10.32 Stock Option Agreement, dated December 1, 1998, under the Company's 1994 Performance-Based Stock Option Plan, between the Company and Dale Clift. (K) 10.33 Stock Option Agreement, dated December 1, 1998, under the Company's 1998 Stock Option Plan, between the Company and Dale R. Clift. (S) 10.39 Employment Agreement, dated as of June 1, 1987, between the Company and Stephen Savitsky. (A) 10.40 Amendment, dated as of October 31, 1991, to the Employment Agreement between the Company and Stephen Savitsky. (A) 10.41 Amendment, dated as of December 7, 1992, to the Employment Agreement between the Company and Stephen Savitsky. (A) 10.42 Employment Agreement, dated as of June 1, 1987, between the Company and David Savitsky. (A) 10.43 Amendment, dated as of October 31, 1991, to the Employment Agreement between the Company and David Savitsky. (A) 10.44 Amendment, dated as of January 3, 1992, to the Employment Agreement between the Company and David Savitsky. (A) 10.45 Amendment, dated as of December 7, 1992, to the Employment Agreement between the Company and David Savitsky. (A) 10.47 Employment Agreement, dated as of February 9, 1998, between the Company and Dale R. Clift. (G) 10.48 First Amendment to Employment Agreement, dated as of December 1, 1998, to the Employment Agreement between the Company and Dale R. Clift. (K) 10.54 Amended and Restated Loan and Security Agreement, dated as of January 8, 1997, between the Company, its subsidiaries and Mellon Bank, N.A. (M) - ---------- See Notes to Exhibits 21 EXHIBIT NO. DESCRIPTION 10.55 First Amendment to Amended and Restated Loan and Security Agreement dated as of April 27, 1998, between the Company, its subsidiaries and Mellon Bank, N.A. (G) 10.56 Master Lease Agreement dated as of December 4, 1996, between the Company and Chase Equipment Leasing, Inc. (M) 10.57 Premium Finance Agreement, Disclosure Statement and Security Agreement dated as of December 26, 1996, between the Company and A.I. Credit Corp. (M) 10.58 Agreement of Lease, dated as of October 1, 1993, between Triad III Associates and the Company. (A) 10.59 First Lease Amendment, dated October 25, 1998, between Matterhorn USA, Inc. and the Company. 10.60 Supplemental Agreement dated as of January 21, 1994, between General Electric Capital Corporation, Triad III Associates and the Company (A) 10.61 Agreement of Lease, dated as of June 19, 1995, between Triad III Associates and the Company. (D) 10.62 Agreement of Lease, dated as of February 12, 1996, between Triad III Associates and the Company. (D) 10.63 License Agreement, dated as of April 23, 1996, between Matterhorn One, Ltd. and the Company (M) 10.64 License Agreement, dated as of January 3, 1997, between Matterhorn USA, Inc. and the Company (M) 10.65 License Agreement, dated as of January 16, 1997, between Matterhorn USA, Inc. and the Company . (M) 10.66 License Agreement, dated as of December 16, 1998, between Matterhorn USA, Inc. and the Company. (S) 10.71 Asset Purchase and Sale Agreement, dated as of September 6, 1996, by and among ATC Healthcare Services, Inc. and the Company and William Halperin and All Care Nursing Service, Inc. (N) 10.73 Stock Purchase Agreement by and among the Company and Raymond T. Sheerin, Michael Altman, Stephen Fleischner and Chelsea Computer Consultants, Inc., dated September 24, 1996. (L) - ---------- See Notes to Exhibits 22 EXHIBIT NO. DESCRIPTION 10.74 Amendment No. 1 to Stock Purchase Agreement by and among the Company and Raymond T. Sheerin, Michael Altman, Stephen Fleischner and Chelsea Computer Consultants, Inc., dated September 24, 1996 (L) 10.75 Shareholders Agreement between Raymond T. Sheerin and Michael Altman and Stephen Fleischner and the Company and Chelsea Computer Consultants, Inc., dated September 24, 1996. (L) 10.76 Amendment No. 1 to Shareholders Agreement among Chelsea Computer Consultants, Inc., Raymond T. Sheerin, Michael Altman and the Company, dated October 30, 1997 (L) 10.77 Indemnification Agreement, dated as of September 1, 1987, between the Company and Stephen Savitsky. (A) 10.78 Indemnification Agreement, dated as of September 1, 1987, between the Company and David Savitsky. (A) 10.79 Indemnification Agreement, dated as of September 1, 1987, between the Company and Bernard J. Firestone. (A) 10.80 Indemnification Agreement, dated as of September 1, 1987, between the Company and Jonathan Halpert. (A) 10.81 Indemnification Agreement, dated as of May 2, 1995, between the Company and Donald Meyers. (M) 10.82 Indemnification Agreement, dated as of May 2, 1995, between the Company and Edward Teixeira. (A) 10.84 Form of Medical Staffing Services Franchise Agreement (D) 10.89 Confession of Judgment, dated January 27, 2000, granted by a subsidiary of the Company, to Roger Jack Pleasant.First Lease Amendment, dated October 28, 1998, between Matterhorn USA, Inc. and the Company. (B) 10.91 Forbearance and Acknowledgement Agreement, dated as of February 22, 2000, between TLCS's subsidiaries, the Company and Chase Equipment Leasing, Inc. Agreement and Release, dated February 28, 1997, between Larry Campbell and the Company. (C) 10.92 Distribution agreement, dated as of October 20, 1999, between the Company and TLCS.(O) 10.93 Tax Allocation agreement dated as of October 20, 1999, between the Company and TLCS. (O) - ---------- See Notes to Exhibits 23 EXHIBIT NO. DESCRIPTION 10.94 Transitional Services agreement, dated as of October 20, 1999, between the Company and TLCS. (O) 10.95 Trademark License agreement, dated as of October 20, 1999, between the Company and TLCS. (O) 10.96 Sublease, dated as of October 20, 1999, between the Company and TLCS. (O) 10.97 Employee Benefits agreement, dated as of October 20, 1999, between the Company and TLCS. (O) 10.98 Amendment, dated as of October 20, 1999, to the Employment agreement between the Company and Stephen Savitsky. (P) 10.99 Amendment, dated as of October 20, 1999, to the Employment agreement between the Company and David Savitsky. (P) 10.100 Amendment, dated as of October 20, 1999, to the Employment agreement between the Company and Dale R. Clift. (P) 10.105 Second Amendment to ATC Revolving Credit Loan and Security Agreement, dated October 20, 1999 between the Company and Mellon Bank, N.A. (P) 10.106 Master Lease dated November 18, 1999 between the Company and Technology Integration Financial Services. (Q) 10.107 Loan and Security Agreement between the Company and Copelco/American Healthfund Inc. dated March 29, 2000. (Q) 10.108 Loan and Security Agreement First Amendment between the Company and Healthcare Business Credit Corporation (formerly known as Copelco/American Healthfund Inc.) dated July 31, 2000. (R) 10.109 Employment agreement dated August 1, 2000 between the Company and Alan Levy (R) 10.110 Equipment lease agreements with Technology Integration Financial Services, Inc. (R) 10.111 Loan and Security Agreement dated April 6, 2001 between the Company and HFG Healthco-4 LLC * 10.112 Receivables Purchase and Transfer Agreement dated April 6, 2001 between the Company and HFG Healthco-4 LLC * - ---------- See Notes to Exhibits 24 EXHIBIT NO. DESCRIPTION 21. Subsidiaries of the Company. * 24. Powers of Attorney. * - ---------- See Notes to Exhibits 25 NOTES TO EXHIBITS (A) Incorporated by reference to the Company's exhibit booklet to its Form 10-K for the Fiscal year ended February 28, 1995 (File No. 0-11380), filed with the Commission on May 5, 1995. (B) Incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 33-43728), dated January 29, 1992. (C) Incorporated by reference to the Company's Form 8-K filed with the Commission on October 31, 1995. (D) Incorporated by reference to the Company's exhibit booklet to it Form 10-K for the Fiscal year ended February 28, 1996 (file No. 0-11380), filed with the Commission on May 13, 1996. (E) Incorporated by reference to the Company's Form 8-A filed with the Commission on October 24, 1995. (F) Incorporated by reference to the Company's Form 8-A filed with the Commission on October 24, 1995. (G) Incorporated by reference to the Company's exhibit booklet to its Form 10-K for the Fiscal year ended February 28, 1998 (File No. 0-11380), filed with the Commission on May 28, 1998. (H) Incorporated by reference to the Company's Registration Statement on Form S-4, as amended (File No. 33-9261), dated April 9, 1987. (I) Incorporated by reference to the Company's Registration Statement on Form S-8 (File No. 33-63939), filed with the Commission on November 2, 1995. (J) Incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 3371974), filed with the Commission on November 19, 1993. (K) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended November 30, 1997 (File No. 0-11380), filed with the Commission on January 19, 1999. (L) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended November 30, 1997 (File No. 0-11380), field with the Commission on January 14, 1998. (M) Incorporated by reference to the Company's exhibit booklet to its Form 10-K for the Fiscal year ended February 28, 1997 (File No. 0-11380), filed with the Commission on May 27, 1997. 26 NOTES TO EXHIBIT (N) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended November 30, 1996 (File No. 0-11380), filed with the Commission on January 14, 1997. (O) Incorporated by reference to Tender Loving Care Health Care Services Inc.'s Form 10-Q for the quarterly period ended August 31, 1999 (File No. 0-25777) filed with the Commission on October 20, 1999. (P) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended August 31, 1999 (File No. 0-11380) filed with the Commission on October 20, 1999. (Q) Incorporated by reference to the Company's Form 10-K for the year ended February 29, 2000 (File No. 0-11380) filed with the Commission on July 17, 2000. (R) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended August 31, 2000 (File No. 0-11380) filed with the Commission on October 16, 2000. (S) Incorporated by reference to the Company's Form 10-K for the year ended February 28, 1999 (File No. 0-11380) filed with the Commission on June 11, 1999. (T) Incorporated by reference to the Company's exhibit booklet to its Form 10-K for the fiscal year ended February 28, 1994 (File No. 0-11380), filed with the Commission on May 13, 1994. * Incorporated herein. EX-10.111 2 d88156ex10-111.txt LOAN & SECURITY AGREEMENT WITH HFG HEALTHCO-4 LLC 1 EXHIBIT 10.111 LOAN AND SECURITY AGREEMENT Dated as of April 6, 2001 Between ATC FUNDING, LLC as Borrower and HFG HEALTHCO-4 LLC as Lender 2 TABLE OF CONTENTS Page ARTICLE I. COMMITMENT; AMOUNTS AND TERMS OF THE REVOLVING LOAN Section 1.01. Revolving Advances 1 Section 1.02. Revolving Commitment and Borrowing Limit 1 Section 1.03. Notice of Borrowing; Borrower's Certificate; Borrowing Base Certificate 2 Section 1.04. Termination of Revolving Commitment 2 Section 1.05. Interest and Fees 2 Section 1.06. Voluntary Reductions 2 Section 1.07. Computation of Interest 2 Section 1.08. Procedures for Payment 2 Section 1.09. Indemnities 3 Section 1.10. Telephonic Notice 4 Section 1.11. Maximum Interest 4 ARTICLE II. COLLECTION AND DISTRIBUTION Section 2.01. Collections on the Receivables 4 Section 2.02. Distributions 5 Section 2.03. Distribution of Funds at the Maturity Date or Upon an Event of Default 5 Section 2.04. Distributions to the Borrower Generally 5 ARTICLE III. REPRESENTATIONS AND WARRANTIES; COVENANTS;EVENTS OF DEFAULT Section 3.01. Representations and Warranties; Covenants 5 Section 3.02. Events of Default; Remedies 5 Section 3.03. Attorney-in-Fact 5 ARTICLE IV. SECURITY Section 4.01. Grant of Security Interest 6 ARTICLE V. MISCELLANEOUS Section 5.01. Amendments, etc. 6 Section 5.02. Notices, etc. 6 Section 5.03. Assignability 6 Section 5.04. Further Assurances 7 Section 5.05. Costs and Expenses; Collection Costs 7 Section 5.06. Confidentiality 7 Section 5.07. Term and Termination; Early Termination Fee 8 Section 5.08. No Liability of Lender 9 Section 5.09. Entire Agreement; Severability 9 Section 5.10. GOVERNING LAW 9 Section 5.11. WAIVER OF JURY TRIAL, JURISDICTION AND VENUE 9 i 3 Section 5.12. Execution in Counterparts 10 Section 5.13. No Proceedings 10 EXHIBITS Exhibit I Definitions Exhibit II Conditions of Revolving Advances Exhibit III Representations and Warranties Exhibit IV Covenants Exhibit V Events of Default Exhibit VI Eligibility Criteria Exhibit VII Form of Borrowing Base Certificate Exhibit VIII Form of Depositary Agreement Exhibit IX-A Form of Opinion of Counsel Exhibit IX-B Form of Opinion of Counsel Exhibit X Form of Pledge Agreement SCHEDULES Schedule I Addresses for Notices Schedule II Credit and Collection Policy Schedule III Disclosures Schedule IV Concentration Account and Lender Lockbox Information Schedule V Net Value Factors ii 4 LOAN AND SECURITY AGREEMENT, dated as of April 6, 2001, between ATC FUNDING, LLC, a limited liability company organized under the laws of the State of Delaware (together with its successors and assigns, the "BORROWER"), and HFG HEALTHCO-4 LLC, a Delaware limited liability company (together with its successors and assigns, the "LENDER"), agree as follows: Certain terms that are capitalized and used throughout this Agreement are defined in Exhibit I to this Agreement. References herein, and in the Exhibits and Schedules hereto, to the "Agreement" refer to this Agreement, as amended, restated, modified or supplemented from time to time in accordance with its terms (this "AGREEMENT"). The Borrower (i) is a limited liability company owned by the Providers, (ii) has acquired and will acquire receivables from the Providers by purchase or contribution to the capital of the Borrower pursuant to the RPTA, as determined from time to time by the Borrower and the Providers, and (iii) wishes to borrow funds from the Lender on a continuing and revolving basis secured by all of its assets, including the receivables acquired from the Providers. The Lender is prepared to make a revolving loan secured by the Borrower's assets, including such receivables on the terms and subject to the conditions set forth herein. Accordingly, the parties agree as follows: ARTICLE I. COMMITMENT; AMOUNTS AND TERMS OF THE REVOLVING LOAN Section I.1. Revolving Advances. (a) The Lender agrees to lend from time to time to the Borrower, subject to and upon the terms and conditions herein set forth, on each Funding Date, such amounts as, in accordance with the terms hereof, may be requested by the Borrower (each such borrowing, a "REVOLVING ADVANCE" and the aggregate outstanding principal balance of all Revolving Advances from time to time, the "REVOLVING Loan"). (b) Each Revolving Advance shall be in a minimum amount of $100,000 or any amount in excess thereof and shall be made on the date specified in the Borrowing Base Certificate requesting such Revolving Advance, or telephonic notice confirmed in writing, as described in Section 1.03 hereof. Section I.2. Revolving Commitment and Borrowing Limit. (a) The Revolving Loan at any time shall not exceed an amount equal to the lesser of (i) $25,000,000 (such amount, or such greater or lesser amount after giving effect to any increase or decrease pursuant to the provisions of Section 1.02(d) and (e) hereof, the "REVOLVING COMMITMENT"), and (ii) the Borrowing Base as of such time (the lesser of (i) and (ii) being the "BORROWING LIMIT"). (b) Subject to the limitations herein and of Exhibit II hereof, the Borrower may borrow, repay (without premium or penalty) and reborrow under the Revolving Commitment. The Revolving Loan shall not exceed, and the Lender shall not have any obligation to make any Revolving Advance which shall result in the Revolving Loan being in excess of, the Borrowing Limit. (c) If at any time the Revolving Loan exceeds the Borrowing Limit at such time, the Borrower shall promptly, in accordance with Article II hereof, eliminate such excess by paying an amount equal to such excess until such excess is eliminated in full. (d) The Borrower may request the Lender to increase the Revolving Commitment by up to $25,000,000 and the Lender, in its sole discretion upon any such request, may decide to increase the Revolving Commitment. Lender shall respond, in writing, within five (5) Business Days after the date Lender has received all 1 5 of the information reasonably requested by the Lender to make such determination. Each such increase shall be in an amount equal to (i) $2,500,000 or an integral multiple thereof if, as of the time of such request, the Revolving Commitment is less than $35,000,000 or (ii) $5,000,000 or an integral multiple thereof if, as of the time of such request, the Revolving Commitment is $35,000,000 or greater, and upon the effective date of such increase the Borrower shall pay to the Lender a fee in an amount equal to 1.00% of any such increase to the Revolving Commitment. Section I.3. Notice of Borrowing; Borrowing Base Certificate. Whenever the Borrower desires a Revolving Advance be made, the Borrower shall give the Lender, (A) not later than 10:30 a.m. (New York City time) on the proposed Funding Date of the Revolving Advance, written notice, or telephonic notice from an Authorized Representative confirmed promptly by a Written Notice (which notice, in each case, shall be irrevocable) of its desire to make a borrowing of a Revolving Advance. Each notice of borrowing under this Section 1.03 shall (i) be indicated on a fully completed Borrowing Base Certificate signed by the Borrower and dated as of such date, and shall specify the proposed Funding Date (which in each instance shall be a Business Day) and the amount of such Borrowing. Section I.4. Termination of Revolving Commitment. On the Maturity Date, the Revolving Commitment shall be canceled automatically and the Revolving Loan shall become due and payable in full. In addition, prior to the Maturity Date, the Borrower may terminate the Revolving Commitment pursuant to Section 5.07(c). Upon such cancellation, the Revolving Loan (together with all other Lender Debt) shall become, without further action by any Person, immediately due and payable together with all accrued interest thereon and any fees (including without limitation, the Early Termination Fee), premiums, charges or costs provided for hereunder with respect thereto. Section I.5. Interest and Fees. (a) Interest. The Borrower shall pay interest on the on the average daily Outstanding Balance of the Revolving Loan during the prior Month on (i) each Interest Payment Date and (ii) the Maturity Date (whether by acceleration or otherwise), in each case, at an interest rate per annum equal to LIBOR plus the Applicable Margin, in each case, as in effect for the applicable Interest Period. (b) Default Interest. Notwithstanding anything to the contrary contained herein, while any Event of Default is continuing, interest on the Revolving Loan shall be payable on demand at a rate per annum equal to 2.50% in excess of the rate then otherwise applicable to the Revolving Loan. (c) Non-Utilization Fee. The Borrower shall pay to the Lender on the first Business Day of each Month a fee (the "NON-UTILIZATION FEE") equal to 0.50% per annum on the average amount, calculated on a daily basis, by which the Revolving Commitment exceeded the Revolving Loan during the prior Month. Section I.6. Voluntary Reductions. The Borrower may on any Funding Date reduce the outstanding principal amount of the Revolving Loan; provided, however, that the Borrower shall provide the Lender with at least 15 days' prior Written Notice to the extent such reduction shall be more than 20% of the then outstanding principal amount of the Revolving Loan Section I.7. Computation of Interest. (a) Interest on the Revolving Loan and fees and other amounts calculated by the Lender on the basis of a rate per annum shall be computed on the basis of actual days elapsed over a 360-day year. (b) Whenever any payment to be made hereunder or under any other Document shall be stated to be due and payable on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall in such case be included in computing interest on such payment. Section I.8. Procedures for Payment. (a) Each payment hereunder shall be made not later than 12:00 noon (New York City time) on the day when due in lawful money of the United States of America to the Lender without counterclaim, offset, claim or recoupment of any kind and free and clear of, and without deduction for, any present or future withholding or other taxes, duties or charges of any nature imposed on such payments or prepayments by or on behalf of any Governmental Entity thereof or therein, except for Excluded Taxes. If any such 2 6 taxes, duties or charges are so levied or imposed on any payment to the Lender, the Borrower will make additional payments in such amounts as may be necessary so that the net amount received by the Lender, after withholding or deduction for or on account of all taxes, duties or charges, including deductions applicable to additional sums payable under this Section 1.08, will be equal to the amount provided for herein. Whenever any taxes, duties or charges are payable by the Borrower with respect to any payments hereunder, the Borrower shall furnish promptly to the Lender information, including certified copies of official receipts (to the extent that the relevant governmental authority delivers such receipts), evidencing payment of any such taxes, duties or charges so withheld or deducted. If the Borrower fails to pay any such taxes, duties or charges when due to the appropriate taxing authority or fails to remit to the Lender the required information evidencing payment of any such taxes, duties or charges so withheld or deducted, the Borrower shall indemnify the Lender for any incremental taxes, duties, charges, interest or penalties that may become payable by the Lender as a result of any such failure. (b) Notwithstanding anything to the contrary contained in this Agreement, the Borrower agrees to pay any present or future stamp or documentary taxes, any intangibles tax or any other sales, excise or property taxes, charges or similar levies now or hereafter assessed that arise from and are attributable to any payment made hereunder or from the execution, delivery of, or otherwise with respect to, this Agreement or any other Documents and any and all recording fees relating to any Documents securing any Lender Debt ("OTHER TAXES"). (c) The Borrower shall indemnify the Lender for the full amount of any taxes, duties or charges other than Excluded Taxes (including, without limitation, any taxes other than Excluded Taxes imposed by any jurisdiction on amounts payable under this Section 1.08) duly paid or payable by the Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Indemnification payments shall be made within 30 days from the date the Lender makes written demand therefor. (d) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 1.08 shall survive the payment in full of principal and interest hereunder. Section I.9. Indemnities. (a) The Borrower hereby agrees to indemnify the Lender on demand against any loss or expense which the Lender or a branch or an Affiliate of the Lender may sustain or incur as a consequence of: (i) any default in payment or prepayment of the principal amount of any Revolving Advance made to it or any portion thereof or interest accrued thereon, as and when due and payable (at the due date thereof, by irrevocable notice of payment or prepayment, or otherwise); (ii) the effect of the occurrence of any Event of Default upon any Revolving Advance made to it; (iii) the payment or prepayment of the principal amount of any Revolving Advance made to it or any portion thereof; or (iv) the failure by the Borrower to accept a Revolving Advance after it has requested such borrowing, conversion or renewal; in each case including, but not limited to, any loss or expense sustained or incurred in liquidating or employing deposits from third parties acquired to effect or maintain such Revolving Advance or any portion thereof. The Lender shall provide to the Borrower a statement, supported when applicable by documentary evidence, explaining the amount of any such loss or expense it incurs, which statement shall be conclusive absent manifest error. (b) The Borrower hereby agrees to indemnify and hold harmless the Lender, the Program Manager, the Master Servicer and their respective Affiliates, directors, officers, agents, representatives, counsel and employees and each other Person, if any, controlling them or any of their respective Affiliates within the meaning of either Section 15 of the Securities Act of 1933, as amended, or Section 20(a) of the Exchange Act of 1934, as amended (each an "INDEMNIFIED PARTY"), from and against any and all losses, claims, damages, costs, expenses (including reasonable counsel fees and disbursements) and liabilities which may be incurred by or asserted against such Indemnified Party with respect to or arising out of the commitments hereunder to make the Revolving Advances, or the financings contemplated hereby, the other Documents, the Collateral (including, without limitation, the use thereof by any of such Persons or any other Person, the exercise by the Lender of rights and remedies or any power of attorney with respect thereto, and any action or inaction of the Lender under and in accordance with any Documents), the use of proceeds of any financial accommodations provided hereunder, any investigation, litigation or other proceeding (brought or threatened) relating thereto, or the role of any such Person or Persons in connection with the foregoing, whether or not they or any other Indemnified Party is named as a party to any legal action or proceeding ("CLAIMS"). The Borrower will not, however, be responsible to any Indemnified 3 7 Party hereunder for any Claims to the extent that a court having jurisdiction shall have determined by a final nonappealable judgment that any such Claim shall have arisen out of or resulted solely from (a)(i) actions taken or omitted to be taken by such Indemnified Party by reason of the bad faith, willful misconduct or gross negligence of any Indemnified Party, or (ii) in violation of any law or regulation applicable to such Indemnified Party (except to the extent that such violation is attributable to any breach of any representation, warranty or agreement by or on behalf of the Borrower, any Provider or any of their respective designees, in each case, as determined by a final nonappealable decision of a court of competent jurisdiction), or (b) a successful claim by the Borrower or any Provider against such Indemnified Party ("EXCLUDED CLAIMS"). Further, should any employee of the Lender, in connection with such employee's employment by the Lender, be involved in any legal action or proceeding in connection with the transactions contemplated hereby (other than relating to an Excluded Claim), the Borrower hereby agrees to pay to the Lender such reasonable per diem compensation as the Lender shall request for each employee for each day or portion thereof that such employee is involved in preparation and testimony pertaining to any such legal action or proceeding. The Indemnified Party shall give the Borrower prompt Written Notice of any Claim setting forth a description of those elements of the Claim of which such Indemnified Party has knowledge. The Lender, as an Indemnified Party shall be permitted hereunder to select counsel to defend such Claim at the expense of the Borrower and, if such Indemnified Party shall decide to do so, then all such Indemnified Parties shall select the same counsel to defend such Indemnified Parties with respect to such Claim; provided, however, that if any such Indemnified Party shall in its reasonable opinion consider that the retention of one joint counsel as aforesaid shall result in a conflict of interest, such Indemnified Party may, at the expense of the Borrower, select its own counsel to defend such Indemnified Party with respect to such Claim. The Indemnified Parties and the Borrower and their respective counsel shall cooperate with each other in all reasonable respects in any investigation, trial and defense of any such Claim and any appeal arising therefrom. Section I.10. Telephonic Notice. Without in any way limiting the Borrower's obligation to confirm in writing any telephonic notice of a borrowing, conversion or renewal, the Lender may act without liability upon the basis of telephonic notice believed by the Lender in good faith to be from an Authorized Representative of the Borrower prior to receipt of written confirmation. Section I.11. Maximum Interest. (a) No provision of this Agreement shall require the payment to the Lender or permit the collection by the Lender of interest in excess of the maximum rate of interest from time to time permitted (after taking into account all consideration which constitutes interest) by laws applicable to the Lender Debt and binding on the Lender (such maximum rate being the Lender's "MAXIMUM PERMISSIBLE RATE"). (b) If the amount of interest (computed without giving effect to this Section 1.11) payable on any Interest Payment Date in respect of the preceding interest computation period would exceed the amount of interest computed in respect of such period at the Maximum Permissible Rate, the amount of interest payable to the Lender on such date in respect of such period shall be computed at the Maximum Permissible Rate. (c) If at any time and from time to time: (i) the amount of interest payable to the Lender on any Interest Payment Date shall be computed at the Maximum Permissible Rate pursuant to the preceding subsection (b); and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to the Lender would be less than the amount of interest payable to the Lender computed at the Maximum Permissible Rate, then the amount of interest payable to the Lender in respect of such subsequent interest computation period shall continue to be computed at the Maximum Permissible Rate until the amount of interest payable to the Lender shall equal the total amount of interest which would have been payable to the Lender if the total amount of interest had been computed without giving effect to the preceding subsection (b). ARTICLE II. COLLECTION AND DISTRIBUTION Section II.1. Collections on the Receivables. The Lender shall be entitled with respect to all Receivables, (i) to receive and to hold as collateral all Receivables and all Collections on Receivables in accordance with the terms hereof, and (ii) to have and to exercise any and all rights to collect, record, track and, during the continuance of an Event of Default, take all actions to obtain Collections with respect to all Receivables. 4 8 Section II.2. Distributions. On each Business Day, and provided, that no Event of Default is continuing the Lender shall distribute any and all Collections actually received in the Concentration Account prior to 12:00 p.m. (New York City time) on the immediately prior Business Day as follows: FIRST, to the Lender, an amount in cash equal to fees and interest that are due and payable as of such Business Day and have not otherwise been paid in full by the Borrower, if any, until such amounts have been paid in full; SECOND, to the Lender, an amount in cash equal to the Borrowing Base Deficiency, if any, until such amount is paid in full; THIRD, to the Lender, an amount in cash equal to the reduction of the principal amount of the Revolving Loan directed by the Borrower to be repaid on such Business Day pursuant to Section 1.02(b), if any, until such amount has been paid in full; FOURTH, to the Lender, an amount in cash equal to the payment of any Lender Debt due and payable on such Business Day, if any, until such amount has been paid in full; and FIFTH, to the Borrower, all remaining amounts of Collections. Section II.3. Distribution of Funds at the Maturity Date or Upon an Event of Default. At the Maturity Date or upon the occurrence and during the continuance of an Event of Default, subject to the rights and remedies of the Lender pursuant to Section 3.02 hereof, the Lender shall distribute any and all Collections as follows: FIRST, to the Lender, an amount in cash equal to any and all accrued fees and collection costs as set forth in Sections 1.05 and 5.05, until such amount has been paid in full; SECOND, to the Lender, an amount in cash equal to all accrued and unpaid interest on the Revolving Loan (at the rates established under Section 1.05) until such amount has been paid in full; THIRD, to the Lender, an amount in cash equal to the principal amount of the Revolving Loan, until such amount is paid in full; FOURTH, to the Lender, an amount in cash equal to the payment of any other Lender Debt due and payable on such date, until such amount has been paid in full; and FIFTH, to the Borrower, all remaining amounts of Collections. Section II.4. Distributions to the Borrower Generally. Distributions to the Borrower on each Business Day shall be deposited in the Borrower Account. ARTICLE III. REPRESENTATIONS AND WARRANTIES; COVENANTS; EVENTS OF DEFAULT Section III.1. Representations and Warranties; Covenants. The Borrower makes on the Initial Funding Date and on each subsequent Funding Date, the representations and warranties set forth in Exhibit III hereto, and hereby agrees to perform and observe the covenants set forth in Exhibit IV hereto. Section III.2. Events of Default; Remedies. (a) If any Event of Default shall occur and be continuing, the Lender may, by Written Notice to the Borrower, take either or both of the following actions: (x) declare the Maturity Date to have occurred, and (y) without limiting any rights hereunder and subject to applicable law, replace the Borrower or the Borrower's agent, as the case may be, in its performance of any or all of the "Primary Servicer Responsibilities" under the RPTA (which replacement may be effectuated through the outplacement to a qualified and experienced third-party of all back office duties, including billing, collection and processing responsibilities, and access to all personnel, hardware and software utilized in connection with such responsibilities); provided, that with respect to the Event of Default in clause (h) of Exhibit V, the Maturity Date shall be deemed to have occurred automatically and without notice. Upon any such declaration or designation, the Lender shall have, in addition to the rights and remedies which it may have under this Agreement, all other rights and remedies provided after default under the UCC and under other applicable law, which rights and remedies shall be cumulative. (b) Right of Set-Off. The Borrower hereby irrevocably authorizes and instructs the Lender to set-off the full amount of any Lender Debt due and payable against (i) any Collections, or (ii) the principal amount of any Revolving Advance requested on or after such due date. No further notification, act or consent of any nature whatsoever is required prior to the right of the Lender to exercise such right of set-off; provided, however, a member of the Lender Group shall notify the Borrower: (1) a set-off pursuant to this Section 3.02 occurred, (2) the amount of such set-off and (3) a description of the Lender Debt that was due and payable. Section III.3. Attorney-in-Fact. The Borrower hereby irrevocably designates and appoints the Lender, the Master Servicer and each other Person in the Lender Group, to the extent permitted by applicable law 5 9 and regulation, as the Borrower's attorneys-in-fact, which irrevocable power of attorney is coupled with an interest, with authority, upon the continuance of an Event of Default (and to the extent not prohibited under applicable law and regulations) to (i) endorse or sign the Borrower's name to financing statements, remittances, invoices, assignments, checks, drafts, or other instruments or documents in respect of the Receivables, (ii) notify Obligors to make payments on the Receivables directly to the Lender, and (iii) bring suit in the Borrower's name and settle or compromise such Receivables as the Lender or the Master Servicer may, in its discretion, deem appropriate. ARTICLE IV. SECURITY Section IV.1. Grant of Security Interest. (a) As collateral security for the Borrower's obligations to pay the Lender Debt when due and payable and its indemnification obligations hereunder, the Borrower hereby grants to the Lender a first priority Lien on and security interest in and right of set-off against all of the rights, title and interest of the Borrower in and to (i) the Provider Documents, (ii) all of the Borrower's Accounts whether now owned or hereafter acquired, (iii) any and all amounts held in any accounts maintained at Fleet Bank. N.A., Wachovia Bank, N.A., Mellon Bank, N.A., The Chase Manhattan Bank or any other bank in respect of any of the foregoing or in compliance with any terms of this Agreement, (iv) all of the Additional Collateral, (v) each Lender Lockbox and Lender Lockbox Account and (vi) all proceeds of the foregoing (all of the foregoing, the "COLLATERAL"). This Agreement shall be deemed to be a security agreement as understood under the UCC. (b) The Borrower agrees to execute, and hereby authorizes the Lender to file, one or more financing statements or continuation statements or amendments thereto or assignments thereof in respect of the Lien created pursuant to this Section 4.01 which may at any time be required or, in the opinion of the Lender, be desirable, and to do so without the signature of the Borrower where permitted by law. ARTICLE V. MISCELLANEOUS Section V.1. Amendments, etc. (a) No amendment or waiver of any provision of this Agreement or consent to any departure therefrom by a party hereto shall be effective unless in a writing signed by the Lender and the Borrower and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of the Lender or the Borrower to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. (b) The parties hereto agree to make any change, modification or amendment to this Agreement as may be requested by Fitch, Inc. or any other rating agency then rating the healthcare financing program of the Lender, so long as any such change, modification or amendment does not materially adversely affect the parties hereto. Section V.2. Notices, etc. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which may include facsimile communication) and shall be faxed or delivered, (i) to each party hereto (and the Lender hereby agrees that notices to or for its benefit may be delivered to the Program Manager and such delivery to the Program Manager shall be deemed received by the Lender), at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a Written Notice to the other parties hereto, and (ii) to the Program Manager and the Master Servicer at the addresses set forth on Schedule I attached hereto and as such schedule may be amended from time to time by the Lender. Notices and communications by facsimile shall be effective when sent (and shall be immediately followed by hard copy sent by regular mail), and notices and communications sent by other means shall be effective when received. Section V.3. Assignability. (a) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective permitted successors and assigns. (b) The Borrower may not assign its rights or obligations hereunder or any interest herein without the prior written consent of the Lender. 6 10 Section V.4. Further Assurances. The Borrower shall, at its cost and expense, upon the request of the Lender, duly execute and deliver, or cause to be duly executed and delivered, to the Lender such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of the Lender to carry out more effectively the provisions and purposes of this Agreement. Section V.5. Costs and Expenses; Collection Costs. (a) The Borrower agrees to pay on demand (i) all reasonable non-legal costs and expenses in connection with the preparation, execution and delivery of this Agreement; (ii) the reasonable fees and out-of-pocket expenses of counsels for the Lender and its Affiliates in connection with this transaction; and (iii) all reasonable costs and expenses, if any (including reasonable counsel fees and expenses), of the Lender and its Affiliates in connection with any waiver, modification, supplement or amendment hereto, or the enforcement of this Agreement. The Borrower further agrees to pay on the Initial Funding Date (and with respect to costs and expenses incurred following the Initial Funding Date, within seven days of demand therefor) (a) all reasonable costs and expenses incurred by the Lender or its agent in connection with periodic audits of the Receivables, (b) all reasonable costs and expenses (not to exceed $3,000 in any fiscal year of the Borrower) incurred by the Master Servicer or the Program Manager to accommodate any significant coding or data system changes made by the Borrower that would affect the transmission or interpretation of data received through the interface, and (c) all reasonable costs and expenses incurred by the Lender for additional time and material expenses of the Master Servicer resulting from a lack of either commercially reasonably cooperation or responsiveness of the Borrower to agreed-upon protocol and schedules with the Master Servicer; provided, that the Borrower has received Written Notice of the alleged lack of cooperation or responsiveness and has been provided the opportunity to correct such problems. (b) In the event that the Lender shall retain an attorney or attorneys to collect, enforce, protect, maintain, preserve or foreclose its interests with respect to this Agreement, any other Documents, any Lender Debt, any Receivable or the Lien on any Collateral or any other security for the Lender Debt or under any instrument or document delivered pursuant to this Agreement, or in connection with any Lender Debt, the Borrower shall pay all of the reasonable costs and expenses of such collection, enforcement, protection, maintenance, preservation or foreclosure, including reasonable attorneys' fees, which amounts shall be part of the Lender Debt, and the Lender may take judgment for all such amounts. The attorney's fees arising from such services, including those of any appellate proceedings, and all reasonable expenses, costs, charges and other fees incurred by such counsel in any way or with respect to or arising out of or in connection with or relating to any of the events or actions described in this Section 5.05 shall be payable by the Borrower to the Lender on demand (with interest accruing from the earlier of two Business Days following (i) the date of such demand and (ii) the date the Borrower became aware of the incurrence of such cost), and shall be additional obligations under this Agreement. Without limiting the generality of the foregoing, such expenses, costs, charges and fees may include: recording costs, appraisal costs, paralegal fees, costs and expenses; accountants' fees, costs and expenses; court costs and expenses; photocopying and duplicating expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; telegram charges; telecopier charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal services. Section V.6. Confidentiality. (a) The Borrower and the Lender hereby acknowledge that this Agreement and documents delivered hereunder or under the Provider Documents (including, without limitation, any information relating to the Borrower, any member of the Lender Group or any Provider) contain confidential and proprietary information. Unless otherwise required by applicable law, the Borrower and the Lender each hereby agrees to maintain the confidentiality of this Agreement (and all drafts and other documents delivered in connection therewith including, without limitation, any information relating to the Borrower, any member of the Lender Group or any Provider delivered hereunder or under the Provider Documents) in communications with third parties and otherwise and to take all reasonable actions to prevent the unauthorized use or disclosure of and to protect the confidentiality of such confidential information; provided, that, such confidential information may be disclosed to (i) the Borrower's legal counsel, accountants and auditors, the Providers under the Provider Documents, and the Providers' investors, creditors, legal counsel, accountants and auditors, (ii) the Program Manager, the Person then fulfilling the "Primary Servicer Responsibilities" under the Provider Documents, each member of the Lender Group, investors in and creditors of the Lender, appropriate rating agencies with respect to the Lender, and each of their respective legal counsel and auditors, (iii) any Person, if such information otherwise becomes available to such Person or publicly available through no fault of any party governed by this Section 5.06, (iv) any Governmental 7 11 Entity requesting such information, and (v) any other Person with the written consent of the other party, which consent shall not be unreasonably withheld, and provided further that the Borrower shall not disclose such confidential information to any financial adviser, except with the consent of Lender, which will not be unreasonably withheld. Notwithstanding the foregoing, the parties hereto agree that the Parent, as a public company, may make such disclosure as is required by state and federal law, including, but not limited to, such filings as are required by the Securities and Exchange Commission. (b) The Borrower understands and agrees that the Lender or the Lender Group may suffer irreparable harm if the Borrower breaches its obligations under Section 5.06(a) and that monetary damages shall be inadequate to compensate the Lender for such breach. Accordingly, the Borrower agrees that, in the event of a breach by the Borrower of Section 5.06(a), the Lender (or the applicable member of the Lender Group, as the case may be), in addition and not in limitation of its rights and remedies under law, shall be entitled to a temporary restraining order, preliminary injunction and permanent injunction to prevent or restrain any such breach. Section V.7. Term and Termination; Early Termination Fee. (a) This Agreement shall have an initial term commencing on the Initial Funding Date and expiring on April 6, 2004 (the "INITIAL TERM"). Thereafter, the term of this Agreement shall be automatically extended for annual successive terms (each a "RENEWAL TERM") commencing on the last day of the Initial Term or a Renewal Term, as the case may be, and expiring on the date twelve (12) Months thereafter, unless the Lender or the Borrower provides Written Notice not less than forty-five (45) days prior to the expiration of the Initial Term or a Renewal Term, as the case may be, that such Person does not intend to extend the term of this Agreement; provided, however, that if an Event of Default shall have occurred and be continuing at the end of the Initial Term or a Renewal Term, as the case may be, this Agreement will not automatically be extended without the prior written consent of the Lender. The Borrower shall pay to the Lender on the first day of each Renewal Term a fee equal to 0.50% of the Revolving Commitment then in effect. (b) The obligations of the Lender under this Agreement shall continue in full force and effect from the date hereof until the Maturity Date. Upon the payment in full of all Lender Debt, the Lender shall take all actions and deliver all assignments, certificates, releases, notices and other documents, at the Borrower's expense, as the Borrower may reasonably request to effect such termination. (c) The Borrower may terminate this Agreement at any time prior to the Maturity Date upon (i) lapse of not less than thirty days' prior Written Notice (which shall be irrevocable) to the Lender of default of the commitment by the Lender pursuant to Article I hereof to make Revolving Advances and (ii) payment in full of all Lender Debt, including all applicable fees, charges, premiums and costs, all as provided hereunder, and in such occurrence of clauses (i) and (ii) the commitment hereunder shall be deemed to be terminated. (d) If the Revolving Commitment is terminated or the Revolving Loan becomes due and payable prior to the scheduled end of the Initial Term or Renewal Term (including by reason of an Event of Default) the Borrower shall pay to the Lender the Early Termination Fee; provided however that if the Lender refuses a request by the Borrower to increase the Revolving Commitment pursuant to Section 1.02(d) hereof and (i) within 105 days of the date the Borrower receives written notice of the Lender's refusal, the Borrower, the Providers or the Parent consummate a financing arrangement with another lender or lenders (the "ALTERNATIVE FINANCING") and (ii) the commitments of the lending parties under the Alternative Financing is equal to or greater than the Revolving Commitment requested by the Borrower and all such commitments are effective immediately upon the consummation of the Alternative Financing, no Early Termination Fee shall be payable. (e) The termination of this Agreement shall not affect any rights of the Lender or any obligations of the Borrower arising on or prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all Lender Debt incurred on or prior to such termination has been paid and performed in full. (f) Upon the giving of notice of an Event of Default under this Agreement, all Lender Debt shall be due and payable on the date of the Event of Default specified in such notice. Upon the (i) the termination of all commitments and obligations of the Lender, and (ii) the indefeasible payment in full of all Lender Debt, the Lender shall, at the Borrower's request and sole cost and expense, execute and deliver to the Borrower such documents as the Borrower shall reasonably request to evidence such termination. 8 12 (g) The Liens and rights granted to the Lender hereunder shall continue in full force and effect, notwithstanding the termination of this Agreement, until all of the Lender Debt has been indefeasibly paid in full in cash. (h) All indemnities representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof unless otherwise provided. (i) Notwithstanding the foregoing, if after receipt of any payment of all or any part of the Lender Debt, the Lender is for any reason compelled to surrender such payment to any Person or entity because such payment is determined to be void or voidable as a preference, an impermissible setoff, a diversion of trust funds or for any other reason, this Agreement shall continue in full force (except that the Revolving Commitment of the Lender shall have been terminated), and the Borrower shall be liable to, and shall indemnify and hold the Lender harmless for the amount of such payment surrendered until the Lender shall have been finally and irrevocably paid in full. The provisions of the foregoing sentence shall be and remain effective notwithstanding any contrary action which may have been taken by the Lender in reliance upon such payment, and any such contrary action so taken shall be without prejudice to the Lender's rights under this Agreement and shall be deemed to have been conditioned upon such payment having become final and irrevocable. Section V.8. No Liability of Lender. (a) Neither this Agreement nor any document executed in connection herewith shall constitute an assumption by the Lender of any obligation of the Borrower to any Obligor or the Providers. (b) Notwithstanding any other provision herein, no recourse under any obligation, covenant, agreement or instrument of the Lender contained herein or with respect hereto shall be had against any Related Person whether arising by breach of contract, or otherwise at law or in equity (including any claim in tort), whether express or implied, it being understood that the agreements and other obligations of the Lender herein and with respect hereto are solely its corporate obligations; provided, however, nothing herein above shall operate as a release of any liability which may arise as a result of such Related Person's gross negligence or willful misconduct. The provisions of this Section 5.08 shall survive the termination of this Agreement. Section V.9. Entire Agreement; Severability. (a) This Agreement, including all exhibits and schedules hereto and the documents referred to herein, embody the entire agreement and understanding of the parties concerning the subject matter contained herein. This Agreement supersedes any and all prior agreements and understandings between the parties, whether written or oral. (b) If any provision of this Agreement shall be declared invalid or unenforceable, the parties hereto agree that the remaining provisions of this Agreement shall continue in full force and effect. Section V.10. GOVERNING LAW. THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATION LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTERESTS GRANTED HEREUNDER, OR REMEDIES RELATED THERETO, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Section V.11. WAIVER OF JURY TRIAL, JURISDICTION AND VENUE. EACH OF THE PARTIES HERETO HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN THE EVENT OF ANY LITIGATION WITH RESPECT TO ANY MATTER RELATED TO THIS AGREEMENT, AND HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK CITY, NEW YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. IN ANY SUCH LITIGATION, EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND AGREES THAT SERVICE THEREOF MAY BE 9 13 MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE PARTIES HERETO AT THEIR ADDRESSES SET FORTH ON THE SIGNATURE PAGE HEREOF. THE PARTIES HERETO SHALL APPEAR IN ANSWER TO SUCH SUMMONS, COMPLAINT OR OTHER PROCESS WITHIN THE TIME PRESCRIBED BY LAW, FAILING WHICH THE PARTY FAILING TO SO APPEAR SHALL BE DEEMED IN DEFAULT AND JUDGMENT MAY BE ENTERED BY THE OTHER PARTY FOR THE AMOUNT OF THE CLAIM AND OTHER RELIEF REQUESTED THEREIN. Section V.12. Execution in Counterparts. This Agreement may be executed in counterparts, each oF which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Section V.13. No Proceedings. The Borrower hereby agrees that it will not institute against thE Lender any proceeding of the type referred to in clause (h) of Exhibit V so long as any senior indebtedness issued by the Lender shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any such senior indebtedness shall have been outstanding. [Remainder of this page intentionally left blank.] 10 14 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER: ATC FUNDING, LLC By: ------------------------------------ Name: Title: Address: ATC Funding, LLC 1983 Marcus Avenue Suite E-122 Lake Success, NY 11042 Attention: Alan Levy, CFO Facsimile Number: (516) 750-1764 LENDER: HFG HEALTHCO-4 LLC By: HFG Healthco-4, Inc. By: --------------------------------- Name: Title: c/o Lord Securities Corporation Two Wall Street New York, NY 10005 Attention: Dwight Jenkins Facsimile Number: (212) 346-9012 15 EXHIBIT I. DEFINITIONS As used in the Agreement (including its Exhibits and Schedules), the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ACCOUNTS" means all accounts, chattel paper, instruments, general intangibles and goodwill, whether now existing or hereafter arising, including, all Receivables and all proceeds of the foregoing. "ACCRUED AMOUNTS" means, as at any date, the aggregate amount of accrued but unpaid (whether or not due and payable) (a) interest and (b) Non-Utilization Fees. "ADDITIONAL COLLATERAL" means all (i)(a) present and future securities, security entitlements and securities accounts (collectively, "INVESTMENT PROPERTY"); (b) all deposit accounts and all other goods and personal property (including, without limitation, patents, patent applications, trade names and trademarks and Federal, state and local tax refund claims of all kinds), whether tangible or intangible, or whether now owned or hereafter acquired and wherever located; and (c) all proceeds of every kind and nature, including proceeds of proceeds, of any and all of the foregoing, and (ii) money and cash; and all books, records and other property relating to or referring to any of the foregoing including all books, records, ledger cards, data processing records, computer software and other property and general intangibles at any time used or useful in connection with, evidencing, embodying, referring to, or relating to, any of the foregoing. "AFFILIATE" means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. "AGREEMENT" has the meaning set forth in the preamble hereto. "ALTERNATIVE FINANCING" has the meaning set forth in Section 5.07(d) hereto. "APPLICABLE MARGIN" means, as of the first day of any Interest Period, (i) if the average outstanding balance of the Revolving Loan during the most recently ended Interest Period is $30,000,000 or less, 3.40% and (ii) if the average outstanding balance of the Revolving Loan during the most recently ended Interest Period is greater than $30,000,000, 3.00%. "APPLIED MANAGEMENT" means Applied Management Solutions, Inc., a Delaware corporation. "AUTHORIZED REPRESENTATIVE" means each Person designated from time to time, as appropriate, in a Written Notice by the Borrower to the Lender for the purposes of giving notices of borrowing, conversion or renewal of Revolving Advances, which designation shall continue in force and effect until terminated in a Written Notice to the Lender. "BORROWER" has the meaning set forth in the preamble hereto. "BORROWER ACCOUNT" means such bank account designated by the Borrower by Written Notice to the Master Servicer, the Lender and the Program Manager from time to time. "BORROWING BASE" means, as of any time, an amount equal to (i) 85% of the Expected Net Value of Eligible Receivables as of such time (without duplication of Unbilled Receivables) in each case and at all times as determined by reference to and as set forth in the most recent Borrowing Base Certificate delivered to the Lender by the Borrower as of such time minus (ii) the sum of (x) Accrued Amounts and unpaid expenses under Sections 1.05 and 5.05 plus (y) the Reserves, in each case as of such time. I-1 16 "BORROWING BASE CERTIFICATE" means a certificate (which may be sent by Transmission) signed by the Borrower and the Primary Servicer, substantially in the form set forth in Exhibit VII hereto, which shall (i) if the Borrower is requesting a Revolving Advance, specify the proposed Funding Date and amount of such Revolving Advance and (ii) provide the most recently available information (including updated information as of the close of business on the day immediately prior to the day such Borrowing Base Certificate is delivered) with respect to the Eligible Receivables of the Borrower (segregated by the classes set forth in the definition of "Net Value Factor") that is set forth in the general trial balance of the Providers, in form and substance satisfactory to the Lender and the Master Servicer. "BORROWING BASE DEFICIENCY" means, as of any date, the positive difference, if any, between (x) the Revolving Loan minus (y) the Borrowing Base indicated on the most recent Borrowing Base Certificate. "BORROWING LIMIT" has the meaning set forth in Section 1.02(a). "BUSINESS DAY" means any day on which banks are not authorized or required to close in New York City, New York. "CLAIMS" has the meaning set forth in Section 1.09(b). "COLLATERAL" has the meaning set forth in Section 4.01(a). "COLLECTIONS" means all cash collections, wire transfers, electronic funds transfers and other cash proceeds of Receivables deposited in or transferred to the Concentration Account, including, without limitation, all cash proceeds thereof. "CONCENTRATION ACCOUNT" means account number 205779 at the Bank of New York ABA # 021000018. "CONCENTRATION ACCOUNT AGREEMENT" means that certain Concentration Account Agreement, dated the date hereof, among the Borrower, the Lender, and the Concentration Account Bank, in substantially the form attached hereto as Exhibit VIII-B, as such agreement may be amended, modified or supplemented from time to time in accordance with its terms. "CONCENTRATION ACCOUNT BANK" means Bank of New York. "CREDIT AND COLLECTION POLICY" means those receivables credit and collection policies and practices of the Borrower in effect on the date of the Agreement and set forth in Schedule II hereto, as modified in accordance with the terms hereof. "DEBT" of any Person means (without duplication): (i) all obligations of such party for borrowed money, (ii) all obligations of such party evidenced by bonds, notes, debentures, or other similar instruments, (iii) all obligations of such party to pay the deferred purchase price of property or services (other than trade payables in the ordinary course of business), (iv) all "capital leases" (as defined by GAAP) of such party, (v) all Debt of others directly or indirectly guaranteed (which term shall not include endorsements in the ordinary course of business) by such party, (vi) all obligations secured by a Lien existing on property owned by such party, whether or not the obligations secured thereby have been assumed by such party or are non-recourse to the credit of such party (but only to the extent of the value of such property), and (vii) all reimbursement obligations of such party (whether contingent or otherwise) in respect of letters of credit, bankers' acceptances and similar instruments. "DEFAULT" means an event, act or condition which with the giving of notice or the lapse of time, or both, would constitute an Event of Default. "DEFAULTED RECEIVABLE" means a Receivable (i) which is not a Priority DIP Receivable and as to which the Obligor thereof or any other Person obligated thereon has taken any action, or suffered any event to occur, I-2 17 of the type described in paragraph (h) of Exhibit V, or (ii) which, consistent with the Credit and Collection Policy, would be written off the applicable Provider's books as uncollectible. "DELINQUENCY RATIO" has the meaning set forth in the RPTA. "DELINQUENT RECEIVABLE" means a Receivable (a) that has not been paid in full on or following the 180th day following the date of original invoicing thereof, or (b) that is a Denied Receivable. "DENIED RECEIVABLE" means any Receivable as to which any related representations or warranties have been discovered at any time to have been breached. "DEPOSITARY AGREEMENT" means those certain depositary account agreements, among the Lender and a Lockbox Bank, in substantially the form attached hereto as Exhibit VIII-A, as such agreement may be amended, modified or supplemented from time to time in accordance with its terms. "DISTRIBUTION" means any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any capital interest in the Borrower, or return any capital to its members as such, or purchase, retire, defease, redeem or otherwise acquire for value or make any payment in respect of any shares of any class of capital interests in the Borrower or any warrants, rights or options to acquire any such interests, now or hereafter outstanding. "DOCUMENTS" means this Agreement, the Provider Documents, each Borrowing Base Certificate, and each other document or instrument now or hereafter executed and delivered to the Lender by or on behalf of the Borrower pursuant to or in connection herewith or therewith. "EARLY TERMINATION FEE" means, as of the termination of this Agreement, a fee in an amount equal to the product of (A) the Revolving Commitment at such time times (B) the percentage set forth below opposite the applicable period for effective date of such termination:
Effective date of decrease in Revolving Commitment Fee percentage - -------------------------------------------------- -------------- Initial Funding Date through April 5, 2002 3.0% April 6, 2002 through April 5, 2003 1.5% April 6, 2003 through April 5, 2004 1.0% April 6, 2004 and thereafter 0.0%
"ELIGIBILITY CRITERIA" means the criteria and basis for determining whether a Receivable shall be deemed by the Lender Group to qualify as an Eligible Receivable, all as set forth in Exhibit VI hereto, as such Eligibility Criteria may be modified from time to time by the Lender in its good faith discretion upon Written Notice to the Borrower. "ELIGIBLE RECEIVABLES" means Receivables that satisfy the Eligibility Criteria, as determined by the Lender Group. "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning of Section 3(3) of ERISA maintained by the Providers, the Borrower, any of their respective ERISA Affiliates, or with respect to which any of them have any liability. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. I-3 18 "ERISA AFFILIATE" means any entity which is under common control with the Borrower within the meaning of ERISA or which is treated as a single employer with the Borrower under the Internal Revenue Code of 1986, as amended. "EVENT OF DEFAULT" means any of the events specified in Exhibit V hereto. "EVENT OF TERMINATION" has the meaning set forth in the RPTA. "EXCLUDED CLAIMS" has the meaning set forth in Section 1.09(b). "EXCLUDED TAXES" means taxes upon or determined by reference to the Lender's net income. "EXPECTED NET VALUE" means, with respect to any Eligible Receivable, the gross unpaid amount of such Receivable on date of creation thereof, times the applicable Net Value Factor. "FUNDING DATE" means, the Initial Funding Date and any Business Day on which a Revolving Advance is made at the Borrower's request in accordance with the provisions of this Agreement. "GAAP" means generally accepted accounting principles in the United States of America, applied on a consistent basis as set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board and/or the rules and regulations of the Securities and Exchange Commission and/or their respective successors and which are applicable in the circumstances as of the date in question. "GOVERNMENTAL ENTITY" means the United States of America, any state, any political subdivision of a state and any agency or instrumentality of the United States of America or any state or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "INDEMNIFIED PARTY" has the meaning set forth in Section 1.09(b). "INITIAL FUNDING DATE" means the date of the initial Revolving Advance in respect of Receivables hereunder. "INITIAL TERM" has the meaning set forth in Section 5.07(a). "INTEREST PAYMENT DATE" means the first Business Day of each Month, commencing May 1, 2001 . "INTEREST PERIOD" means each one Month period (or shorter period ending on the Maturity Date); provided, that the initial Interest Period shall commence on the Initial Funding Date and shall end on April 30, 2001. "INVESTMENT GRADE RATED OBLIGOR" means an Obligor which as of the date of determination has a rating from Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc. of not less than BBB- and from Moody's Investors Service, Inc. of not less than Baa. "LAST SERVICE DATE" means, with respect to any Eligible Receivable the date set forth on the related invoice or statement as the most recent date on which medical personnel, services or goods were provided by the related Provider to the related Obligor . "LENDER" has the meaning set forth in the preamble hereto. "LENDER DEBT" means and includes any and all amounts due, whether now existing or hereafter arising, under the Agreement, including, without limitation, any and all principal, interest, penalties, fees, charges, premiums, indemnities and costs owed or owing to the Lender, the Program Manager or the Master Servicer by the Borrower, any Provider, or any Affiliate of the Borrower or any Provider, arising under or in connection with this Agreement, the Provider Documents, the Depositary Agreement or any other Document, in each instance, whether absolute or contingent, direct or indirect, secured or unsecured, due or not, arising by operation of law or otherwise, I-4 19 and all interest and other charges thereon, including, without limitation, post-petition interest whether or not such interest is an allowable claim in a bankruptcy. "LENDER GROUP" means (i) the Lender, the Program Manager and the Master Servicer, and (ii) the Lender's agents and delegates identified from time to time to effectuate this Agreement. "LENDER LOCKBOXES" means those lockboxes located at the addresses set forth on Schedule IV to receive checks with respect to Receivables. "LENDER LOCKBOX ACCOUNTS" means those accounts at the Lockbox Banks as set forth on Schedule IV as associated with the corresponding Lender Lockboxes and established by the Providers in the name of and for the benefit for the Lender to deposit collections, including collections received in the Lender Lockboxes and collections received by wire transfer directly from Obligors, all as more fully set forth in the applicable Depositary Agreement. "LIBOR" means the rate established by the Program Manager two Business Days prior to the first day of each Interest Period based on an annualized 30-day interest rate (calculated on the basis of actual days elapsed over a 360-day year) equal to the offered rate that appears on page 3750 of the Telerate Service for U.S. dollar deposits of amounts and in funds comparable to the principal amount of the Revolving Loan. "LIEN" means any lien, mortgage, security interest, tax lien, pledge, hypothecation, assignment, preference, priority, other charge or encumbrance, or any other type of preferential arrangement of any kind or nature whatsoever by or with any Person (including, without limitation, any conditional sale or title retention agreement), whether arising by contract, operation of law, or otherwise. "LOCKBOX BANK" means each lockbox bank under a Depositary Agreement. "LOSS-TO-LIQUIDATION RATIO" means, as of the last Business Day of each Month, a percentage equal to: DFR --- C where: DFR = The Expected Net Value of all Eligible Receivables which became Defaulted Receivables in the Month immediately prior to the date of calculation. C = Collections on such Eligible Receivables in the Month immediately prior to the date of calculation. "MASTER SERVICER" means the Program Manager and any other Person then identified by the Lender to the Borrower as being authorized to administer and service Receivables. "MATERIAL ADVERSE EFFECT" means any event, condition, change or effect that (a) has a materially adverse effect on the business, Properties, capitalization, liabilities, operations, prospects or financial condition of (i) the Providers (in the aggregate) or (ii) the Borrower, (b) materially impairs the ability of the Borrower to perform its obligations under this Agreement or any other Document, (c) materially impairs the ability of the Providers (in the aggregate) or the Borrower to perform their respective obligations under the RPTA or any other Document, or (d) materially impairs the validity or enforceability of, or materially impairs the rights, remedies or benefits available to the Lender under this Agreement or (as assignee of the Borrower) under the RPTA or any other Document. "MATURITY DATE" means the earliest of (a) the date on which this Agreement terminates in accordance with the provisions of Section 5.07(a), (b) the occurrence of an Event of Default pursuant to clause (h) of Exhibit V and (c) the date on which the Lender declares the Maturity Date to have occurred upon an Event of Default in a Written Notice to the Borrower. I-5 20 "MAXIMUM PERMISSIBLE RATE" has the meaning set forth in Section 1.11(a). "MONTH" means a calendar month. "MULTIEMPLOYER PLAN" means a plan, within the meaning of Section 3(37) of ERISA, as to which thE Borrower or any ERISA Affiliate contributed or was required to contribute within the preceding five years. "NET VALUE FACTOR" means, initially, the percentages set forth on Schedule V attached hereto, as such percentages may be adjusted, upwards or downwards with notice (which may be telephonic) to the Borrower, in the good faith discretion of the Lender but in consultation with the Borrower and the Primary Servicer. In adjusting the Net Value Factor, the Lender shall consider, among other factors, the final Collections received within 180 days of the Last Service Date of Receivables which arose during the one-Month, three-Month and six-Month periods, ended at the end of the sixth preceding Month (without regard to the factors set forth in the definition of "Defaulted Receivables"). "NON-UTILIZATION FEE" has the meaning set forth in Section 1.05(c). "OBLIGOR" means any Person, who is responsible for the payment of all or any portion of a Receivable. "OTHER CORPORATIONS" means the Providers and each of their direct and indirect parents or subsidiaries other than the Borrower. "OTHER TAXES" has the meaning set forth in Section 1.08(b). "OUTSTANDING BALANCE" means, as of any date of determination, the aggregate outstanding principal balance of all Revolving Loans (plus interest that is due and payable on the Revolving Loans that remains unpaid beyond the Interest Payment Date), provided, that any Collections utilized to reduce the principal amount of the Revolving Loan shall reduce the "Outstanding Balance" hereunder only following a three Business Day clearance period applied thereto. "PARENT" means Staff Builders, Inc., a Delaware corporation. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to all or any of its functions under ERISA. "PERSON" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "PLEDGE AGREEMENT" means that certain Pledge Agreement, dated the date hereof, made by Parent and ATC Healthcare in favor of the Lender, in substantially the form attached hereto as Exhibit X, as such agreement may be amended, modified or supplemented from time to time in accordance with its terms. "PRIMARY SERVICER" has the meaning set forth in the RPTA. "PRIORITY DIP RECEIVABLE" means a Receivable: (i) the Obligor of which is the subject of a federal bankruptcy case; and (ii) the indebtedness of which constitutes a priority under 11 U.S.C.Section 507(a)(1). "PROGRAM MANAGER" means (i) Healthcare Finance Group, Inc. or (ii) any other Person then identified by the Lender to the Borrower as being authorized to provide administrative services with respect to the Lender and the Lender's finance, funding and collection of receivables. I-6 21 "PROPERTY" means property of all kinds, movable, immovable, corporeal, incorporeal, real, personal or mixed, tangible or intangible (including, without limitation, all rights relating thereto), whether owned or acquired on or after the date of this Agreement. "PROVIDER DOCUMENTS" has the meaning set forth in the RPTA. "PROVIDERS" has the meaning set forth in the RPTA. "RECEIVABLE INFORMATION" has the meaning set forth in the RPTA. "RECEIVABLES" means all accounts or general intangibles and all other obligations for the payment of money, in each case, owing (or in the case of Unbilled Receivables, to be owing) by an Obligor to a Provider and arising out of the rendition of professional services, or the sale of products by a Provider in the ordinary course of its business, including all rights to reimbursement under any agreements with and payments from Obligors or other Persons, together with, to the maximum extent permitted by law, all accounts and general intangibles related thereto, all rights, remedies, guaranties, security interests and Liens in respect of the foregoing, all books, records and other Property evidencing or related to the foregoing, and all proceeds of any of the foregoing. "RELATED PERSON" means any incorporator, stockholder, Affiliate (other than the Program Manager), agent, attorney, officer, director, member, manager, employee or partner of the Lender or its members or its stockholders. "RENEWAL TERM" has the meaning set forth in Section 5.07(a). "RESERVE" means, as of any date, an amount equal to the sum of (i) the aggregate of any accrued, unpaid and past due, federally or state mandated payment obligations owing by the Parent or any Provider and (ii) the aggregate amount of any fees owed by ATC Healthcare to its franchisees who have not executed, within 30 days of the Initial Funding Date, a letter confirming ATC Healthcare's ownership of the Receivables. "RESPONSIBLE OFFICER" of any Person, mean the president, chief executive officer, chief operating officer, chief financial officer or controller of such Person. "REVOLVING ADVANCE" has the meaning set forth in Section 1.01(a). "REVOLVING COMMITMENT" has the meaning set forth in Section 1.02(a). "REVOLVING LOAN" has the meaning set forth in Section 1.01(a). "RPTA" means that certain Receivables Purchase and Transfer Agreement, dated as of the date of this Agreement, among the Primary Servicer, the Providers, the Parent and the Borrower, as such agreement may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "SERVICER TERMINATION EVENT" has the meaning set forth in the RPTA. "TANGIBLE NET WORTH" with respect to the Borrower, means, at any time, the excess of (i) the Expected Net Value of all Receivables owned by the Borrower, plus cash, plus investments, plus amounts which are owing from the Lender to the Borrower minus (ii) the sum of all accrued unpaid monetary obligations and accrued unpaid fees and expenses payable hereunder or otherwise owed by the Borrower. "TRANSMISSION" means, upon establishment of computer interface between the Borrower and the Master Servicer in accordance with the specifications established by the Master Servicer, the transmission of Receivable Information through computer interface to the Master Servicer in a manner satisfactory to the Master Servicer. "UCC" means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction. I-7 22 "UNBILLED RECEIVABLE" means a Receivable in respect of which the goods have been shipped, or the services rendered, to the relevant Obligor, and rights to payment therefor have accrued, but the invoice has not been rendered to the applicable Obligor. "WRITTEN NOTICE" and "IN WRITING" means any form of written communication or a communication by means of telex, telecopier device, telegraph or cable. Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. I-8 23 EXHIBIT II. CONDITIONS OF REVOLVING ADVANCES 1 Conditions Precedent on Initial Funding Date. The making of the Revolving Advance on the Initial Funding Date is subject to the conditions precedent that the Lender shall have received on or before the Initial Funding Date the following, each (unless otherwise indicated) dated such date, in form and substance satisfactory to the Lender: (a) A certificate issued by the Secretary of State of the State of Delaware, dated as of a recent date, as to the legal existence and good standing of the Borrower (which certificate may be dated not more than 20 days prior to the Initial Funding Date). (b) Certified copies of the organizational documents and all amendments thereto, certified copies of resolutions of the managers of the Borrower approving this Agreement, certified copies of all documents filed to register any and all assumed/trade names of the Borrower, and certified copies of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement. (c) A certificate of the Secretary or Assistant Secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the other documents to be delivered by it hereunder. (d) A copy of the opening balance sheet of the Borrower as at the Initial Funding Date, certified by a Responsible Officer of the Borrower. (e) Acknowledgment or time-stamped receipt copies of proper financing statements (showing the Borrower as debtor and the Lender as secured party) duly filed on or before the Initial Funding Date under the UCC of all jurisdictions that the Lender may deem necessary or reasonably desirable in order to perfect the security interests contemplated by the Agreement. (f) Completed requests for information (UCC search results) and a schedule thereof listing all effective financing statements filed in the applicable jurisdictions that name the Borrower as debtor, together with copies of such financing statements. (g) Releases of, and acknowledgment copies of proper termination statements (Form UCC-3), if any, necessary to evidence the release of all security interests, ownership and other rights of any Person previously granted by Borrower in the Collateral. (h) A favorable opinion of Clifford Chance Rogers & Wells LLP, counsel to the Borrower, substantially in the form attached hereto as Exhibit IX-A, and as to such other matters as the Lender Group requests. (i) A favorable opinion of Clifford Chance Rogers & Wells LLP, counsel for the Borrower, substantially in the form attached hereto as Exhibit IX-B, and as to such other matters as the Lender Group requests. (j) The Assignment of Contract as Collateral Security with respect to the RPTA and the Pledge Agreement and assignments of all other documents, lockboxes and lockbox accounts with respect to the RPTA, and the other Provider Documents, duly executed by the Borrower and acknowledged by the other Persons party to such Provider Documents. (k) Originally executed copies of the RPTA and the other Provider Documents, all other documentation required to be delivered with respect to this Agreement, the RPTA and the other Documents, all in form and substance satisfactory to the Lender, which agreements shall be in full force and effect and enforceable in accordance with their respective terms. (l) Evidence that all of the conditions precedent with respect to the initial purchase under the RPTA have been satisfied or waived. II-1 24 (m) Duly executed Depositary Agreements, together with evidence satisfactory to the Lender that the Lender Lockboxes and the Lender Lockbox Accounts have been established. (n) Payment of a facility fee of $250,000 to Healthcare Finance Group, Inc. (o) Payment of all reasonable attorneys' fees incurred by the Lender Group plus reasonable disbursements. (p) A duly executed Pledge Agreement together with stock certificates representing 100% of the issued and outstanding capital stock of each Provider and Applied Management and stock powers for each such certificate, undated and executed in blank. (q) Evidence that the capitalization of the Borrower is satisfactory to the Lender. (r) Master Servicer Certificate. On or before the Initial Funding Date, the Lender shall receive a certificate from the Master Servicer stating that all computer linkups and interfaces necessary or desirable, in the judgment of the Master Servicer, to effectuate the transactions and information transfers contemplated hereunder, are fully operational to the reasonable satisfaction of the Master Servicer. (s) Completion of a due diligence review by the Lender (or its agent) of the Providers, the results of which are satisfactory to the Lender. 2 Conditions Precedent on All Funding Dates. Each Revolving Advance on a Funding Date (including the Initial Funding Date) shall be subject to the further conditions precedent that the Borrower and the Lender shall have agreed upon the terms of such Revolving Advance and also that: (a) Intentionally omitted; (b) the Borrower shall have delivered to the Lender, no later than 10:30 a.m. on such Funding Date, in form and substance satisfactory to the Lender a completed Borrowing Base Certificate together with such additional information as may reasonably be requested by the Lender or the Master Servicer; and (c) on such Funding Date the following statements shall be true and correct (and acceptance of the proceeds of such Revolving Advance shall be deemed a representation and warranty by the Borrower that such statements are then true and correct): (i) the representations and warranties contained in Exhibits III and VII are true and correct in all material respects on and as of the date of such Revolving Advance as though made on and as of such date, and (ii) no event has occurred and is continuing, or would result from such Revolving Advance or any actions connected therewith, that constitutes a Default or an Event of Default. II-2 25 EXHIBIT III. REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants as follows: (a) The Borrower is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and is duly qualified to do business, and is in good standing, in every jurisdiction where the nature of its business requires it to be so qualified. (b) The execution, delivery and performance by the Borrower of the Agreement and the other documents to be delivered by it thereunder, (i) are within the Borrower's powers, (ii) have been duly authorized by all necessary limited liability company action, (iii) do not contravene (1) the Borrower's operating agreement or certificate of formation, (2) any law, rule or regulation applicable to the Borrower, (3) any contractual restriction binding on or affecting the Borrower or its Property, or (4) any order, writ, judgment, award, injunction or decree binding on or affecting the Borrower or its Property, and (iv) do not result in or require the creation of any Lien upon or with respect to any of its Properties, other than the security interest created by the Agreement. The Agreement has been duly executed and delivered by the Borrower. The Borrower has previously furnished to the Lender a correct and complete copy of the Borrower's certificate of formation and operating agreement including all amendments thereto. (c) No authorization or approval or other action by, and no notice to or filing with, any Governmental Entity is required for the due execution, delivery and performance by the Borrower of the Agreement or any other document to be delivered thereunder. (d) The Agreement constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as limited by bankruptcy, insolvency, moratorium, fraudulent conveyance or other laws relating to the enforcement of creditors' rights generally and general principles of equity (regardless of whether enforcement is sought at equity or law). (e) The Borrower has all power and authority, and has all permits, licenses, accreditations, certifications, authorizations, approvals, consents and agreements of all Obligors, accreditation agencies and any other Person necessary or required for the Borrower (i) to own the assets (including Receivables) that it now owns, (ii) to carry on its business as now conducted, (iii) to execute, deliver and perform the Agreement and the other Documents to which it is a party, and (iv) to receive payments from the Obligors in the manner contemplated in the Agreement and the RPTA. (f) Except as disclosed on Schedule III, no Provider has been notified by any Obligor or instrumentality, accreditation agency or any other person, during the immediately preceding 12 Month period, that such party has rescinded or not renewed, or is reasonably likely to rescind or not renew, any such permit, license, accreditation, certification, authorization, approval, consent or agreement granted by it to such Provider or to which it and such Provider is a party, the recission, cancellation or non-renewal of which could reasonably be expected to cause a Material Adverse Effect. (g) As of the Initial Funding Date, all conditions precedent set forth in Exhibit II have been fulfilled or waived in writing by the Lender, and as of each Funding Date, the conditions precedent set forth in paragraph 2 of such Exhibit II shall have been fulfilled or waived in writing by the Lender. (h) The opening balance sheet of the Borrower, copies of which have been furnished to the Lender, fairly present the financial condition of the Borrower as of the date thereof all in accordance with GAAP. (i) The RPTA is in full force and effect and no Event of Termination or Servicer Termination Event is continuing thereunder. (j) There is no pending or, to the Borrower's knowledge, threatened action or proceeding or injunction, writ or restraining order affecting the Borrower or any Provider before any court, Governmental Entity or III-1 26 arbitrator which could reasonably be expected to result in a Material Adverse Effect, or which purports to affect the legality, validity or enforceability of the Agreement, the RPTA or any other Document, and neither the Borrower nor any Provider is currently the subject of, or has any present intention of commencing, an insolvency proceeding or petition in bankruptcy. (k) The Borrower is the legal and beneficial owner of the Collateral free and clear of any Lien. Upon the effectiveness of this Agreement the Lender shall acquire a valid security interest in the Collateral free and clear of any Lien. No effective financing statement or other instrument similar in effect covering any item of Collateral is on file in any recording office, except those being terminated on or before the Initial Funding Date and those filed in favor of the Borrower relating to the purchase of the Receivables under the RPTA and those in favor of the Lender relating to the Agreement, and no competing notice or notice inconsistent with the transactions contemplated in the Agreement has been sent to any Obligor. (l) All Receivable Information, information provided in the application for the program effectuated by the Agreement, and each other Document, report and Transmission provided by the Borrower to the Lender Group is or shall be accurate in all material respects as of its date and as of the date so furnished, and no such document contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. (m) The principal place of business and chief executive office of the Borrower and the office where the Borrower keeps its records concerning the Collateral are located at the address referred to on the signature page of the Agreement and there have been no other such locations for the four immediately prior Months. (n) The provisions of the Agreement create, legal and valid Liens in all of the Collateral in the Lender's favor and when all proper filings and other actions necessary to perfect such Liens have been completed, will constitute a perfected and continuing Lien on all of the Collateral, having priority over all other Liens on such Collateral, enforceable against the Borrower and all third parties. (o) The Borrower has not changed its principal place of business or chief executive office in the last five years. (p) The exact name of the Borrower is as set forth on the signature page of the Agreement, and except as notified in writing to the Lender, the Borrower has not changed its name in the last 12 Months, and, except as notified in writing to the Lender, the Borrower did not use, nor does the Borrower now use, any fictitious or trade name. (q) Since the Funding Date prior to the making of this representation, there has occurred no event which has or is reasonably likely to have a Material Adverse Effect. (r) Neither the Borrower nor any Provider is in violation under any applicable statute, rule, order, decree or regulation of any court, arbitrator or governmental body or agency having jurisdiction over the Borrower or such Provider which has or is reasonably likely to have a Material Adverse Effect. (s) The Borrower has filed on a timely basis all tax returns (federal, state and local) required to be filed and has paid, or made adequate provision for payment of, all taxes, assessments and other governmental charges due from the Borrower. No tax Lien has been filed and is now effective against the Borrower or any of its Properties except any Lien in respect of taxes and other charges not yet due or contested in good faith by appropriate proceedings. To the Borrower's knowledge, there is no pending investigations of the Borrower by any taxing authority nor any pending but unassessed tax liability of the Borrower. (t) The Borrower is solvent and will not become insolvent after giving effect to the transactions contemplated by this Agreement; the Borrower has not incurred debts or liabilities beyond its ability to pay; the Borrower will, after giving effect to the transaction contemplated by this Agreement, have an adequate amount of capital to conduct its business in the foreseeable future. III-2 27 (u) Other than as set forth on Schedule III hereto, the Lender Lockboxes are the only post office boxes and the Lender Lockbox Accounts are the only lockbox account maintained for Receivables, all checks and other collections received in the Lender Lockboxes are deposited into the corresponding Lender Lockbox Account within one Business Day of receipt thereof, all funds on deposit in each Lender Lockbox Account are transmitted each Business Day to the Concentration Account, and no direction is in effect directing Obligors to remit payments on Receivables other than to the Lender Lockbox or the Lender Lockbox Account, each as described on Schedule IV. The Borrower agrees (i) not to instruct any Obligor to make any payment in respect of the Receivables to the account described on Schedule III and to use reasonable efforts (including, without limitation, the sending of a Notice to Obligors to the applicable Obligors, in multiple copies if necessary) to prevent any payment in respect of the Receivables from being made to such account and (ii) to deposit any funds received in such account into a Lockbox Account within one Business Day of receipt thereof. (v) The Borrower has no pension plans or profit sharing plans. (w) Except as disclosed on Schedule III hereto, there are no pending civil or criminal investigations by any Governmental Entity involving the Borrower, any Provider or any of their respective officers or directors and none of the Borrower, any Provider or any of their respective officers or directors has been involved in, or the subject of, any civil or criminal investigation by any Governmental Entity. (x) The sole business of the Borrower is as provided in its organizational documents. (y) The assets of the Borrower are free and clear of any Liens in favor of the Internal Revenue Service, any Employee Benefit Plan, any Multiemployer Plan or the PBGC other than inchoate tax Liens resulting from an assessment of the Providers or the Borrower. (z) None of the Eligible Receivables constitutes or has constituted an obligation of any Person which is an Affiliate of the Borrower. (aa) No transaction contemplated under this Agreement requires compliance with any bulk sales act or similar law. (bb) The Borrower has no Debt except hereunder and under the RPTA. (cc) All of the employees of the Providers are salaried employees and are not, and do not claim to be independent contractors. No such employee has any rights in, and has not claimed any rights in any Receivable. (dd) Each Receivable represents the direct payment obligation of the applicable Obligor, and is not subject to any condition that such Obligor receive any payment or reimbursement from any third party. III-3 28 EXHIBIT IV. COVENANTS Until the payment in full of all Lender Debt and the termination of the Revolving Commitment hereunder: (a) Compliance with Laws, etc. The Borrower will comply in all material respects with all applicable laws, rules, regulations and orders and preserve and maintain its limited liability company existence, rights, franchises, qualifications, and privileges. (b) Offices, Records and Books of Account. The Borrower will keep its principal place of business and chief executive office and the office where it keeps its records concerning the Collateral at the address of the Borrower set forth under its name on the signature page to the Agreement or, upon 30 days' prior Written Notice to the Lender, at any other locations in jurisdictions where all actions reasonably requested by the Lender or otherwise necessary to protect and perfect the Lender's interest in the Collateral have been taken and completed. The Borrower shall keep its books and accounts in accordance with GAAP and shall make a notation on its books and records, including any computer files, to indicate that the Receivables have been assigned as security to the Lender. The Borrower shall maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables and related contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for collecting all Receivables (including, without limitation, records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each existing Receivable) and for providing the Receivable Information. (c) Performance and Compliance with Contracts and Credit and Collection Policy. The Borrower will, at its expense, timely and fully perform and comply (and will cause the Primary Servicer, the Providers or their designees to fully perform and comply) with all material provisions, covenants and other promises required to be observed by it under the contracts related to the Receivables, and timely and fully comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related contract, and the Borrower shall maintain, at its expense, in full operation each of the bank accounts and lockboxes required to be maintained under the Agreement. The Borrower shall do nothing, nor suffer or permit any other Person, to impede or interfere with the collection by the Lender, or the Master Servicer on behalf of the Lender, of the Receivables. (d) Notice of Breach of Representations and Warranties. The Borrower shall promptly (and in no event later than two Business Days following actual knowledge thereof) inform the Lender and the Master Servicer of any breach of covenants or representations and warranties hereunder and under the Provider Documents, including, without limitation, upon discovery of a breach of the Eligibility Criteria set forth in Exhibit VI hereof. Notwithstanding the foregoing, notice with regard to a breach of the Eligibility Criteria set forth in Exhibit VI hereof shall be deemed given if appropriate information is contained in a Transmission promptly after the occurrence of such breach; provided that the Borrower must promptly, and in any event within two Business Days notify the Lender (i) of any bankruptcy of an Obligor of which the Borrower is aware and (ii) of the to writing-off of more than 10% or the current Outstanding Balance of Eligible Receivables owing from any Obligor. (e) Debt, Sales, Liens, etc. The Borrower will not incur or assume any Debt or issue any securities except under or as contemplated by this Agreement. The Borrower will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Liens upon or with respect to, the Borrower's Properties, or upon or with respect to any account to which any collections of the Receivables are sent, or assign any right to receive income in respect thereof except (i) those Liens in favor of the Lender or any assignee of the Lender relating to the Agreement, and (ii) those assignments of Denied Receivables to the Providers upon receipt by the Borrower of the respective Repurchase Price (as defined in the RPTA). (f) Extension or Amendment of Receivables. Other than as consistent with the past practices of the Providers, the Borrower shall not amend, waive or agree, or otherwise suffer or permit any Provider to amend, waive or agree, to any deviation from the terms or conditions of any Receivable owned by the Borrower in a manner inconsistent with the Credit and Collection Policy. IV-1 29 (g) Change in Credit and Collection Policy. The Borrower will not make any material change in the Credit and Collection Policy without the prior written consent of the Lender; provided, however, that during the continuance of an Event of Default, it will not make any change in the Credit and Collection Policy. (h) Audits and Visits. The Borrower will, from time to time during regular business hours as requested by the Lender, permit the Lender upon reasonable notice, without interfering with the Borrower's or the Providers' businesses or operations and subject to compliance with applicable law in the case of review of patient/customer information, or its agents or representatives (including the Master Servicer), (i) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of the Borrower relating to Receivables including, without limitation, the related contracts, and (ii) to visit the offices and properties of the Borrower for the purpose of examining and auditing such materials described in clause (i) above, and to discuss matters relating to Receivables or the Borrower's performance hereunder or under the contracts with any of the officers or employees of the Borrower having knowledge of such matters. During the continuance of an Event of Default, the Borrower shall permit the Master Servicer to have at least one of its agents or representatives physically present in the Borrower's administrative office during normal business hours to assist the Borrower in the collection of Receivables. (i) Change in Payment Instructions. The Borrower will not terminate any Lender Lockbox or Lender Lockbox Account, or make any change or replacement in the instructions contained in any invoice, Notice to Obligor or otherwise, or regarding payments with respect to the Receivables to be made to the Borrower, the Lender or the Master Servicer, except upon the prior and express direction of the Program Manager or the Lender. (j) Reporting Requirements. The Borrower will provide to the Lender (in multiple copies, if requested by the Lender) the following: (i) on the first Business Day of each week, a copy of the Weekly Report delivered by the Primary Servicer to the Purchaser pursuant to Section 1.03 of the RPTA and a Borrowing Base Certificate based on reconciliations and adjustments reflected in such Weekly Report certified by a Responsible Officer of the Borrower and the Primary Servicer; (ii) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, balance sheets of the Borrower as of the end of such quarter and statements of income, cash flows and retained earnings of the Borrower for the period commencing at the beginning of the current fiscal year and ending with the end of such quarter, certified by the chief financial officer of the Borrower, and accompanied by a certificate of an authorized officer of the Borrower detailing its compliance for such fiscal period with the financial covenants contained in this Agreement; (iii) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, balance sheets as of, and statements of income for, such fiscal year, and accompanied by a certificate of an authorized officer of the Borrower detailing its compliance for such fiscal period with the financial covenants contained in this Agreement; (iv) promptly and in any event within five Business Days after the occurrence of each Default or Event of Default, a statement of a Responsible Officer of the Borrower setting forth details of such Default or Event of Default, and the action that the Borrower has taken and proposes to take with respect thereto; (v) at least ten Business Days prior to any change in the Borrower's name, a notice setting forth the new name and the proposed effective date thereof; (vi) promptly (and in no event later than two Business Days following actual knowledge or receipt thereof), Written Notice in reasonable detail, of (x) any Lien asserted or claim made against a Receivable, (y) the occurrence of an Event of Default, including the occurrence of any other event which could have a material adverse effect on the value of a Receivable, or (z) the results of any cost IV-2 30 report, investigations or similar audits of any Provider being conducted by any federal, state or county Governmental Entity or its agents or designees; (vii) no later than two Business Days after the commencement thereof, Written Notice of all actions, suits, and proceedings before any Governmental Entity or arbitrator affecting the Borrower which, if determined adversely to the Borrower, could reasonably be expected to have a Material Adverse Effect; (viii) as soon as possible and in any event within two Business Days after becoming aware of the occurrence thereof, Written Notice of any matter that could reasonably be expected to have a Material Adverse Effect; (ix) within 90 days after the end of each fiscal year of the Borrower, a certificate from the chief financial officer of the Borrower stating that to his knowledge no Servicer Termination Event has occurred and exists as of the end of such fiscal year, or if in his opinion such a Servicer Termination Event has occurred and is continuing, a statement as to the nature thereof; and (x) such other information respecting the Receivables or the condition or operations, financial or otherwise, of the Borrower as the Lender may from time to time reasonably request. (k) Notice of Proceedings; Overpayments. The Borrower shall promptly notify the Master Servicer (and modify the next Borrowing Base Certificate to be delivered hereunder) in the event of any action, suit, proceeding, dispute, set-off, deduction, defense or counterclaim, in excess of $50,000, in the aggregate at any time, that is or may be asserted by an Obligor with respect to Receivables related to such Obligor. The Borrower shall make, or cause to be made, all payments to the Obligors necessary to prevent the Obligors from offsetting any earlier overpayment to the Borrower or the Providers against any amounts the Obligors owe on any Receivables. (l) Officer's Certificate. On the dates the financial statements referred to in clause (j) above are to be delivered after the Initial Funding Date, the chief financial officer (or in the case of the Weekly Report delivered pursuant to clause (j)(i), a Responsible Officer)of the Borrower shall deliver a certificate to the Lender, stating that, as of such date, (i) all representations and warranties are true and correct, (ii) the conditions precedent set forth in paragraph 2 of Exhibit II have been fulfilled or waived in writing by the Lender, and (iii) no Event of Default exists and is continuing. (m) Further Instruments, Continuation Statements. The Borrower shall, at its expense, promptly execute and deliver all further instruments and documents, and take all further action that the Program Manager or the Lender may reasonably request, from time to time, in order to perfect, protect or more fully evidence the Lender's security interest in the Collateral, or to enable the Lender or the Program Manager to exercise or enforce the rights of the Lender hereunder or in the Collateral. Without limiting the generality of the foregoing, the Borrower will upon the request of the Program Manager execute and file such UCC financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or notices, as may be, in the opinion of the Program Manager, necessary or appropriate. The Borrower hereby authorizes the Program Manager to file one or more financing or continuation statements and amendments thereto and assignments thereof, relative to all or any of the Collateral now existing or hereafter arising without the signature of the Borrower where permitted by law. If the Borrower fails to perform any of its agreements or obligations under the Agreement, the Program Manager may (but shall not be required to) itself perform, or cause performance of, such agreement or obligation, and the expenses of the Program Manager incurred in connection therewith shall be payable by the Borrower. (n) Merger, Consolidation. The Borrower shall not merge with or into, consolidate with or into, or enter into any agreement to merge or consolidate with or into, another Person, or convey, transfer, lease or otherwise dispose of all or substantially all of its assets (whether now owned or hereafter acquired). (o) No "Instruments". The Borrower shall not take any action which would allow, result in or cause any Eligible Receivable to be evidenced by an "instrument" within the meaning of the UCC of the applicable jurisdiction. IV-3 31 (p) Preservation of Company Existence. The Borrower shall preserve and maintain its existence, rights, franchises and privileges in the jurisdiction of its organization, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where the failure to preserve and maintain such existence, rights, franchises, privileges and qualification would have a Material Adverse Effect. (q) Provider Documents. The Borrower will, at its sole expense, timely and fully perform and comply with all provisions, covenants and other promises required to be observed by it under the Provider Documents, maintain the Provider Documents in full force and effect, enforce the Provider Documents in accordance with its terms, take all such action to such end as may be from time to time reasonably requested by the Lender, and make to any party to the Provider Documents such demands and requests for information and reports or for action as the Borrower is entitled to make thereunder and as may be from time to time reasonably requested by the Lender. The Borrower shall not permit any waiver, modification or amendment of the Provider Documents. IV-4 32 SPECIAL COVENANTS ENTITY SEPARATENESS Until the payment in full of all Lender Debt and the termination of the Revolving Commitment hereunder: (i) The Borrower will at all times maintain at least one independent manager who is (x) not a current or former officer, director, manager or employee of an Affiliate of the Borrower or any Other Corporation and who is not a current or former officer or employee of the Borrower and (y) not the holder of any stock or any other equity interest in any Other Corporation or any of their respective Affiliates. (ii) The Borrower will not direct or participate in the management of any of the Other Corporations' operations. (iii) The Borrower will at all times be adequately capitalized in light of its contemplated business. (iv) The Borrower will at all times provide for its own operating expenses and liabilities from its own funds. (v) Subject to consolidation with the Providers for accounting and tax purposes, the Borrower will maintain its assets and transactions separately from those of the Other Corporations and reflect such assets and transactions in financial statements separate and distinct from those of the Other Corporations and evidence such assets and transactions by appropriate entries in books and records separate and distinct from those of the Other Corporations. The Borrower will not hold itself out as being liable, primarily or secondarily, for any obligations of the Other Corporations. (vi) The Borrower will not maintain any joint account with any Provider or any Other Corporation, or be a party, whether as a co-obligor or otherwise, to any agreement to which any Other Corporation is a party (other than any Provider Document) or become liable as a guarantor or otherwise with respect to any indebtedness or contractual obligation of any Other Corporation. (vii) Other than as contemplated under this Agreement or under any other Document and the payment of dividends or distributions to its members, the Borrower will not make any payment or distribution of assets with respect to any obligation of any Other Corporation or grant a Lien on any of its assets to secure any obligation of any Other Corporation. (viii) The Borrower will not make any loans, advances or otherwise extend credit to any of the Other Corporations, provided, that the Borrower may issue dividends or distributions to each of its members to the extent otherwise permitted under this Agreement and under applicable law. (ix) The Borrower will hold regular duly noticed meetings of its members and make and retain minutes of such meetings. (x) The Borrower will comply in full with the procedures set forth in the Documents with respect to the assignment of all assets from any of the Other Corporations. (xi) The Borrower will not engage in any transaction with any of the Other Corporations or any of their respective subsidiaries, except as permitted or contemplated by the Agreement and as contemplated by the Documents. (xii) The Borrower will not enter into any transaction with any Affiliate or third party except (a)(x) as permitted or contemplated by this Agreement or the Documents or (y) investments of cash and cash equivalents with third parties and (b) on terms and conditions which reasonably approximate an arm's length transaction between unaffiliated parties. IV-5 33 (xiii) The Borrower will not amend, modify or supplement its organizational documents. (xiv) The Borrower will not have any subsidiaries nor ownership interest in any other entities. IV-6 34 EXHIBIT V. EVENTS OF DEFAULT Each of the following shall be an "EVENT OF DEFAULT": (a) The Borrower shall default in the due and punctual payment of the principal of the Revolving Loan, when and as the same shall become due and payable (except that the Borrower shall have up five Business Days to cure such a default with respect to a Borrowing Base Deficiency) whether pursuant to Article II of this Agreement, at maturity, by acceleration or otherwise. (b) The Borrower shall default in the due and punctual payment of any installment of interest on the Revolving Loan or any other Lender Debt, including, without limitation, any fee or expense owing to the Lender pursuant to any of the Documents, when and as such amount of interest, fee or expense shall become due and payable and such default shall continue unremedied for three Business Days. (c) Any material provision of any Document is no longer in full force and effect or there shall be continuing a default in the performance or observance of any covenant, agreement or provision (other than as described in clause (a) or (b) above) contained in this Agreement or any other Document or in any instrument or document evidencing or creating any obligation, guaranty or Lien directly or indirectly in favor of the Lender in connection with or pursuant to this Agreement or any Lender Debt, and, except in the case of the agreements and covenants contained in any Document as to each of which no notice or grace period shall apply, such default continues for a period of 30 days (or, in the case where agreements and covenants contained in any Document provide for a grace period that is less than 30 days, continuance of a default for such shorter period) after the earlier of (i) there has been given Written Notice of such default to either of the Borrower or the Primary Servicer on behalf of any Provider by the Lender or (ii) discovery thereof by the Borrower; or if this Agreement or any other Document or any such other instrument or document shall terminate, be terminated or become void or unenforceable for any reason whatsoever without the written consent of the Lender. (d) An Event of Termination shall have occurred under the RPTA. (e) Any representation or warranty made or deemed made by the Borrower (other than with respect to the eligibility of Receivables as Eligible Receivables hereunder) under or in connection with the Agreement or any other Document or any information or report delivered by the Borrower (other than with respect to the Providers) pursuant to the Agreement or any other Document shall prove to have been incorrect or untrue in any material respect when made or deemed made or delivered. (f) The Borrower shall incur any Debt other than under the Agreement or the RPTA. (g) This Agreement shall for any reason (other than pursuant to the terms hereof) fail or cease to create, or the security interest created by this Agreement fails or ceases to be, a valid and perfected first priority security interest in the Collateral free and clear of all Liens (other than Liens referred to in clauses (i) and (ii) of paragraph (e) of Exhibit IV). (h) The Borrower or any Provider shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any Provider seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its Property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its Property) shall occur; or the Borrower or any Provider shall take any action to authorize any of the actions set forth above in this paragraph (i). V-1 35 (i) There shall have occurred any Material Adverse Effect. (j) The Borrower (x) shall have entered into any material transaction or agreement and not provided prompt Written Notice thereof to the Lender, or (y) shall have consummated, any transaction or agreement intended to result in (i) the merger or consolidation of the Borrower, (ii) the acquisition of all or a substantial portion of the assets of any Person, (iii) the transfer, sale, assignment, lease or other disposition of all or a substantial portion of the Borrower's assets or Properties, (iv) a change in the general nature of the Borrower's business, or (v) the sale of a controlling interest, directly or indirectly, in the Borrower. (k) The Loss-to-Liquidation Ratio at end of any Month exceeds 7.5%. (l) The arithmetic average of the Loss-to-Liquidation Ratios for any three Months exceeds 5%. (m) The Delinquency Ratio at the end of any Month exceeds 15%. (n) The arithmetic average of the Delinquency Ratios for any three consecutive Months exceeds 12%. (o) Judgments or orders for payment of money (other than judgments or orders in respect of which adequate insurance is maintained for the payment thereof) in excess of $10,000 in the aggregate against the Borrower remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of 30 days or more. (p) Any governmental authority (including, without limitation, the Internal Revenue Service or the PBGC) files a notice of a Lien against (i) any of the Receivables or (ii) assets other than the Receivables involving an aggregate amount in excess of $25,000 which remains unpaid or discharged for a period of 30 days or more. (q) The Borrower shall fail to discharge within a period of 30 days after the commencement thereof any attachment, sequestration, forfeiture, or similar proceeding or proceedings involving an aggregate amount in excess of $25,000 against any of its Properties. (r) The Borrower does not pay or discharge at or before maturity or before becoming delinquent all taxes, levies, assessments, and governmental charges imposed on it or its income or profits or any of its Property, except any taxes, levies, assessments or charges contested in good faith by appropriate proceedings. (s) The Borrower sells, leases, assigns, transfers, or otherwise disposes of any of its Receivables, except as permitted or contemplated under the Agreement. (t) The Borrower declares or makes any Distribution, unless both prior and subsequent to the effectiveness of such proposed Distribution, (i) no Event of Default is continuing, including an Event of Default under clause (u) of this Exhibit V hereof, (ii) such Distribution is in full compliance with applicable law, including the law of the State of Delaware as in effect at such time, and (iii) the Borrower and the recipient of such Distribution have taken all necessary and appropriate action to effectuate such Distribution. (u) The Borrower engages in any business other than solely the businesses of directly or indirectly purchasing Receivables from the Providers and in financing such Receivables with the Lender hereunder and the other transactions permitted or contemplated hereby. (v) The Borrower shall at any time fail to maintain a Tangible Net Worth of at least 3% of the higher of (i) the Borrowing Limit, and (ii) the then outstanding amount of the Revolving Loan. (w) Any representation or warranty made or deemed made by any Provider under or in connection with the RPTA or any information or report delivered by any Provider pursuant to the RPTA shall prove to have been incorrect or untrue in any material respect when made or deemed made or delivered and such misstatement causes an Event of Default under the RPTA. V-2 36 (x) As of any date after the Initial Funding Date, more than 15% of all outstanding Eligible Receivables are aged more than 120 days but less than 180 days from the respective Last Service Date of such Eligible Receivables. (y) As of any date, Collections on all Eligible Receivables that have been liquidated or written off during the then most recent 13 week period, are less than 85% of the aggregate gross value (billed amount) of such Eligible Receivables. V-3 37 EXHIBIT VI. ELIGIBILITY CRITERIA The following shall constitute the eligibility criteria for acceptance of Receivables for financing and inclusion in the Borrowing Base under the Agreement (the "ELIGIBILITY CRITERIA"): (a) The information provided by the Borrower with respect to each such Receivable is complete and correct and all documents, attestations and agreements relating thereto that have been delivered to the Lender are true and correct. Except with respect to Unbilled Receivables sold or contributed to the Borrower, the related Provider has billed the applicable Obligor and has delivered to such Obligor all requested supporting claim documents with respect to such Receivable and no amounts with respect to such Receivable have been paid as of the date and time of the inclusion of such Receivable in the Borrowing Base. Each Provider has, or has the right to use, valid provider identification numbers and licenses to generate valid Receivables. Except with respect to Unbilled Receivables sold or contributed to the Borrower, all information set forth in the bill and supporting claim documents with respect to such Receivable is true, complete and correct; if additional information is requested by the Obligor, the Borrower (or the related Provider) has or will promptly provide the same, and if any error has been made with respect to such information, the Borrower (or the related Provider) will promptly correct the same and, if necessary, rebill such Receivable. The Obligor of each such Receivable has duly and validly executed the time card related to such Receivable. (b) Each such Receivable (i) is payable, in an amount not less than its Expected Net Value, by the Obligor identified by the related Provider as being obligated to do so, (ii) is based on an actual and bona fide rendition of services or sale of goods to the Obligor by the related Provider in the ordinary course of business, (iii) is denominated and payable only in U.S. dollars in the United States and (iv) is an account or general intangible within the meaning of the UCC of the state in which the related Provider has its principal place of business and is not evidenced by any instrument or chattel paper. (c) Each such Receivable (i) is not the subject of any action, suit, proceeding or dispute (pending or threatened), setoff, counterclaim, defense, abatement, suspension, deferment, deductible, reduction or termination by the Obligor thereof (other than any portion of such Receivable which is being disputed by the Obligor which portion shall not be an "Eligible Receivable"), (ii) is not past, or within 60 days of, the statutory limit for collection applicable to the Obligor thereof or is not aged more than 180 days from its Last Service Date, and (iii) has been billed (or, in the case of Unbilled Receivables sold or contributed to the Borrower, shall be billed) to the Obligor thereof on a date fewer than fourteen (14) days after the Last Service Date provided that with respect to Receivables billed on a monthly cycle at the request of the Obligor, such Receivable has been billed (or, if such Receivable is an Unbilled Receivable and has been sold or contributed to the Borrower, shall be billed) within forty-five (45) days after the Last Service Date. (d) Neither the Borrower nor the related Provider has any guaranty of, letter of credit providing credit support for, or collateral security for, such Receivable, other than any such guaranty, letter of credit or collateral security as has been assigned to the Lender, and any such guaranty, letter of credit or collateral security is not subject to any Lien in favor of any other Person. (e) The relevant Provider has provided (or on the day such Receivable is included in the Borrowing Base, is providing) the goods and services related to such Receivable to the relevant Obligor. (f) Intentionally omitted. (g) The Obligor with respect to each such Receivable is (i) not currently the subject of any bankruptcy, insolvency or receivership proceeding (other than with respect to Priority DIP Receivables), nor is it unable to make payments on its obligations when due, (ii) located in the United States of America, (iii) not a subsidiary, parent or other Person that is an Affiliate of any Provider and (iv) not the Obligor of Defaulted Receivables in the past 12 Months (other than, for the purpose of this clause, as a result of good faith disputes and discounts given in accordance with the Credit and Collection Policy) which, in the aggregate, exceed 10% of the current gross unpaid amount of all Eligible Receivables of such Obligor. VI-1 38 (h) The financing of such Receivables hereunder is made in good faith and without actual intent to hinder, delay or defraud present or future creditors of the Borrower. (i) The contract or other instrument obligating an Obligor to make payment with respect to such Receivable (i) does not contain any provision prohibiting the grant of a security interest in or the assignment of such payment obligation from the relevant Provider to the Borrower, or from the Borrower to the Lender, (ii) has been duly authorized and, together with such Receivable, constitutes the legal, valid and binding obligation of the Obligor in accordance with its terms, (iii) together with such Receivable, does not contravene in any material respect any requirement of law applicable thereto, and (iv) was in full force and effect and applicable to the Obligor at the time the goods or services constituting the basis for such Receivable were sold or performed. (j) No consents by any third party to the sale of such Receivable are required other than consents previously obtained in writing by the Borrower, a copy of each such consent having been provided to the Lender. (k) The inclusion of such Receivable in the Borrowing Base would not increase the fraction expressed as a percentage where (i) the numerator is the sum of the then outstanding principal amount of Eligible Receivables for any Obligor (or group of Obligors) listed below included in the Borrowing Base, and (ii) the denominator is the Borrowing Base for all Eligible Receivables, above the corresponding maximum percentage listed below:
Obligor Maximum ------- Percentage ---------- Each Investment Grade Rated Obligor 15% Each other Obligor 3%
(l) If a Priority DIP Receivable, the inclusion of such Priority DIP Receivable in the Borrowing Base would not increase the fraction expressed as a percentage where (i) the numerator is the sum of the then outstanding principal amount of Priority DIP Receivables included in the Borrowing Base, and (ii) the denominator is the Borrowing Base for all Eligible Receivables, above 2%. (m) No prior sale or assignment of security interest which is still in effect on the applicable Funding Date has been made with respect to or granted in any such Receivable. (n) All personnel provided by any Provider to Obligors giving rise to such Receivables are salaried employees of such Provider, are not independent contractors of such Provider, and no Provider is aware of any claim by any such personnel to be, or have the status of, an independent contractor. VI-2 39 EXHIBIT VII FORM OF BORROWING BASE CERTIFICATE HFG Healthco-4 LLC Two Wall Street New York, New York 10005 Ladies and Gentlemen: The undersigned refers to the Loan and Security Agreement, dated as of April 6, 2001 (as the same may be amended, supplemented, restated, or modified from time to time, the "Loan Agreement") between ATC Funding, LLC ( the "Borrower") and HFG Healthco-4 LLC (the "Lender"). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Loan Agreement. Part 1: Request for Revolving Advance. [To be completed only if a Revolving Advance is being requested.] In accordance with Section 1.03 of the Loan Agreement and in fulfillment of the condition precedent set forth in Section 2(a) of Exhibit II thereto, the Borrower hereby gives you irrevocable notice that the undersigned requests a Revolving Advance under the Loan Agreement, and in connection therewith sets forth below the information relating to such Revolving Advance as required by Section 1.03 of the Loan Agreement: Proposed Revolving Advance: (i) The Funding Date of such Revolving Advance is requested to be _______ __, 200_; and (ii) The amount of the Revolving Advance is requested to be $_______________. VII-1 40 Part 2. Calculation of Borrowing Base HFG HEALTHCO-4 LLC Borrowing Base Report Report Submission Date:_____________ Schedule #:______________ Transmission Date:______________ Gross Receivables (from Transmission) II. LESS: INELIGIBLE A/R, UNAPPLIED CASH AND OTHER MISCELLANEOUS (FROM TRANSMISSION) Eligible Receivables (from Transmission) (I - II ) Additions since Transmission Date Unbilled from Weekly Download Report Unbilled from cut off of Weekly Download Report to end of business of day prior to this Report Submission Date Total Eligible Receivables (III + IV + V ) Net Value Factor 96% Expected Total Value of Eligible Receivables (VI * VII) Deductions from ENV Unposted cash as of cut off for Transmission Date Collections since cut off for Transmission Date Other: discounts, adjustments, repurchased claims, bad debts, etc. Total deductions (IX + X + XI) Expected Net Value of Eligible Receivables (VIII - XII ) Advance Rate Percentage 85% Maximum Loan Available on Collateral (XIII * XIV) Reserves Maximum Loan Available on Collateral net of Reserves (XV - XVII) Maximum Loan Available per Agreement $25,000,000 Total Loan Availability (the lesser of XVII or XVIII)
VII-2 41 Outstanding Loan Balance Prior Report Plus Draws Since Prior Report Interest Due/Fees Additional Advance Requested LOAN BALANCE THIS REPORT NET AVAILABILITY (XIX minus XXIV) Each of the undersigned represents and warrants that: (i) the foregoing information is true, complete and correct on the date hereof and will be true, complete and correct on the date of the proposed Revolving Advance; (ii) the collateral reflected herein complies with and conforms to the Eligibility Criteria set forth in Exhibit VI to the Loan Agreement; (iii) the representations, warranties and covenants contained in Exhibits III and IV of the Loan Agreement are true, correct, and in compliance on and as of the date hereof, and, if a Revolving Advance is requested herein, will be true, correct and in compliance after giving effect to such Revolving Advance and to the application of the proceeds thereof on and as of such date; (iv) the Borrower is in compliance with each of the terms, covenants, and conditions set forth in the Loan Agreement; (v) no Default or Event of Default has occurred and is continuing, or would result from the Revolving Advance requested herein or from the application of the proceeds thereof; (vi) neither the Borrower nor any Provider has diverted or permitted to be diverted any such payments on Accounts from the Lender Lockbox Accounts or the Concentration Account; and (vii) the aggregate outstanding principal amount of the Revolving Advances after giving effect to the Revolving Advance requested herein is not in excess of the Borrowing Limit. The Borrower promises to pay to HFG Healthco-4 LLC the new loan balances reflected above, plus interest, as set forth in the Loan Agreement. Very truly yours, ATC FUNDING, LLC By: ------------------------------ Name: Title: ATC HEALTHCARE SERVICES, INC. By: ------------------------------ Name: Title: ATC STAFFING SERVICES, INC. By: ------------------------------ Name: Title: VII-3 42 EXHIBIT VIII-A FORM OF DEPOSITARY AGREEMENT [See Tab 18] VIII-A-1 43 EXHIBIT VIII-B FORM OF CONCENTRATION ACCOUNT AGREEMENT [N/A] VIII-B-1 44 EXHIBIT IX-A FORM OF OPINION OF COUNSEL [See Tab 9] IX-A-1 45 EXHIBIT IX-B FORM OF OPINION OF COUNSEL [See Tab 10] IX-B-1 46 EXHIBIT X FORM OF PARENT PLEDGE X-1 47 SCHEDULE I ADDRESSES FOR NOTICE If to the Program Manager: Healthcare Finance Group, Inc. 110 Wall Street, 2nd Floor New York, New York 10005 Attention: David Hyams, Chief Credit Officer Tel:(212) 785-9212 Fax:(212) 785-9211 If to the Master Servicer: Healthcare Finance Group, Inc. 110 Wall Street, 2nd Floor New York, New York 10005 Attention: David Hyams, Chief Credit Officer Tel:(212) 785-9212 Fax:(212) 785-9211 If to the Borrower: c/o ATC Healthcare Services, Inc. 1983 Marcus Avenue Lake Success, NY 11042 Attention: Alan Levy, CFO Tel:(516) 750-1666 Fax:(516) 750-1754 48 SCHEDULE II CREDIT AND COLLECTION POLICY See attached. 49 SCHEDULE III DISCLOSURES [TO BE DELIVERED BY BORROWER] 50 SCHEDULE IV LOCKBOX INFORMATION Concentration Account: HFG HEALTHCO-4 LLC Account #2057779 Bank of New York ABA #021000018
Lockboxes: Lockbox Accounts: - --------- ---------------- Post Office Box 40116 HFG HEALTHCO-4 LLC College Park, GA 30349 Account #8-236-697 Mellon Bank, N.A. ABA #031000037 Post Office Box 31718 HFG HEALTHCO-4 LLC Hartford, CT 06150 Account #9428406280 Fleet Bank, N.A. ABA #011900571 Post Office Box 31726 HFG HEALTHCO-4 LLC Hartford, CT 06150 Account #9428406299 Fleet Bank, N.A. ABA #011900571 Post Office Box 531283 HFG HEALTHCO-4 LLC Atlanta, GA 30353 Account #9428406301 Fleet Bank, N.A. ABA #011900571
51 SCHEDULE V NET VALUE FACTORS 96% EX-10.112 3 d88156ex10-112.txt RECEIVABLES PURCHASE & TRANSFER AGREEMENT 1 EXHIBIT 10.112 RECEIVABLES PURCHASE AND TRANSFER AGREEMENT Dated as of April 6, 2001 Among ATC HEALTHCARE SERVICES, INC. as a Provider and as Primary Servicer and ATC STAFFING SERVICES, INC., as a Provider and STAFF BUILDERS, INC., as the Parent and ATC FUNDING, LLC, as Purchaser ALL THE RIGHT, TITLE AND INTEREST OF THE PURCHASER IN AND TO, ALL BENEFITS OF THE PURCHASER UNDER AND ALL MONIES DUE OR TO BECOME DUE TO THE PURCHASER UNDER OR IN CONNECTION WITH, THIS AGREEMENT HAVE BEEN ASSIGNED TO HFG HEALTHCO-4 LLC, AS COLLATERAL SECURITY FOR ANY AND ALL THE OBLIGATIONS OF THE PURCHASER PURSUANT TO A LOAN AND SECURITY AGREEMENT DATED AS OF APRIL 6, 2001 BETWEEN THE PURCHASER AND HFG HEALTHCO-4 LLC. 2 TABLE OF CONTENTS
Page ARTICLE I. TERMS OF THE PURCHASES AND CONTRIBUTIONS SECTION 1.01 Sale, Contribution and Purchase of Receivables..................................1 SECTION 1.02 Receivable Information and Transferred Batch Determination................................1 SECTION 1.03 The Transfers..................................1 SECTION 1.04 Collection and Payment Procedures..............2 SECTION 1.05 Allocation of Servicer Responsibilities........2 ARTICLE II. PAYMENT MECHANICS; MISDIRECTED PAYMENTS SECTION 2.01 Payment Mechanics..............................3 SECTION 2.02 Misdirected Payments...........................3 SECTION 2.03 Unidentified Payments; Purchaser's Right of Presumption..................................4 SECTION 2.04 No Rights of Withdrawal........................4 ARTICLE III. REPRESENTATIONS AND WARRANTIES; COVENANTS; EVENTS OF TERMINATION SECTION 3.01 Representations and Warranties; Covenants......4 SECTION 3.02 Events of Termination..........................4 ARTICLE IV. INDEMNIFICATION; GRANT OF SECURITY INTEREST SECTION 4.01 Denied Receivables.............................4 SECTION 4.02 Indemnities by the Providers...................5 SECTION 4.03 Right of Set-Off...............................6 SECTION 4.04 Grant of Security Interest.....................6 ARTICLE V. MISCELLANEOUS SECTION 5.01 Amendments, etc................................7 SECTION 5.02 Notices, etc...................................7 SECTION 5.03 Assignability..................................7 SECTION 5.04 Further Assurances.............................8 SECTION 5.05 Costs, Expenses and Termination Fee............8 SECTION 5.06 Confidentiality................................9 SECTION 5.07 Term and Termination...........................9 SECTION 5.08 Sale Treatment.................................9 SECTION 5.09 Grant of Security Interest....................10 SECTION 5.10 No Liability of the Purchaser.................10 SECTION 5.11 Attorney-in-Fact..............................10 SECTION 5.12 Entire Agreement; Severability................10 SECTION 5.13 GOVERNING LAW.................................10 SECTION 5.14 WAIVER OF JURY TRIAL, JURISDICTION AND VENUE.......................................10 SECTION 5.15 Execution in Counterparts.....................11 SECTION 5.16 No Proceedings................................11 SECTION 5.17 Survival of Termination.......................11
3 EXHIBITS Exhibit I Definitions Exhibit II Conditions of Purchases Exhibit III Representations and Warranties Exhibit IV Covenants Exhibit V Events of Termination Exhibit VI Receivable Information Exhibit VII Form of Notice to Obligors Exhibit VIII Primary Servicer Responsibilities Exhibit IX Servicer Termination Events Exhibit X Interface Between Master Servicer and the Primary Servicer Exhibit XI-A Form of Opinion of Provider's and Purchaser's Counsel with Respect to Certain Corporate Matters Exhibit XI-B Form of Opinion of Provider's and Purchaser's Counsel with Respect to Certain Bankruptcy Matters Exhibit XII Form of Depositary Agreement SCHEDULES Schedule I Addresses for Notices Schedule II Credit and Collection Policy Schedule III Disclosures Schedule IV Lockbox Information Schedule V Tradenames Schedule VI Net Value Factors Schedule VII Permitted Liens Schedule VIII Debt 4 RECEIVABLES PURCHASE AND TRANSFER AGREEMENT Dated as of April 6, 2001 ATC HEALTHCARE SERVICES, INC., a corporation organized under the laws of the State of Georgia ("ATC HEALTHCARE"), ATC STAFFING SERVICES, INC., a corporation organized under the laws of the State of New York ("ATC STAFFING"; ATC Staffing and ATC Healthcare, each a "PROVIDER" and together, the "PROVIDERS", and ATC Healthcare in its capacity as primary servicer hereunder, the "PRIMARY SERVICER"), and ATC FUNDING, LLC, a limited liability company organized under the laws of the State of Delaware (together with its corporate successors and assigns, the "PURCHASER"), and STAFF BUILDERS, INC., a Delaware corporation ("PARENT") agree as follows: PRELIMINARY STATEMENTS. Certain terms that are capitalized and used throughout this Agreement are defined in Exhibit I to this Agreement. References herein and in the Exhibits and Schedules hereto to the "Agreement" refer to this Agreement, as amended, restated, modified or supplemented from time to time in accordance with its terms (the "AGREEMENT"). The Providers wish to sell or contribute to the Purchaser on a continuing basis all of their healthcare receivables. The Purchaser is prepared to purchase or to accept the contribution of such healthcare receivables on the terms and subject to the conditions set forth herein. Accordingly, the parties agree as follows: ARTICLE 1. TERMS OF THE PURCHASES AND CONTRIBUTIONS SECTION 1.1 Sale, Contribution and Purchase of Receivables. On each Transfer Date until the Facility Termination Date and on the terms and conditions set forth herein, each Provider agrees to sell or contribute, without recourse except to the extent expressly provided herein, all of such Provider's Receivables to the Purchaser, and the Purchaser agrees to purchase or accept such contribution of, all of each Provider's Receivables. SECTION 1.2 Weekly Report. On or prior to the first Business Day of each Week, the Primary Servicer, on behalf of each Provider, shall provide the Master Servicer by Transmission (or, if the Primary Servicer has used reasonable efforts to send a Transmission but cannot do so, another method of transmission acceptable to the Master Servicer) a report (the "WEEKLY REPORT") containing the information listed on Exhibit VI hereto (as such Exhibit may be modified by the Purchaser from time to time, the "RECEIVABLE INFORMATION") with respect to new Receivables sold or contributed to the Purchaser during the Week ended the second Saturday prior to such Business Day and all other outstanding Receivables sold or contributed to the Purchaser prior to such Week. Based on the Weekly Report, the Providers and the Purchaser shall designate those Receivables that were purchased and those that were contributed, and record such determination on their respective books and records. SECTION 1.3 The Transfers. (a) On each Transfer Date (i) subject to satisfaction of the applicable conditions set forth in Exhibit II hereto, the Providers shall sell to the Purchaser all Eligible Receivables that the Providers have submitted to the Purchaser for purchase hereunder and to be included in the Purchased Batch, (ii) the Providers will contribute to the capital of the Purchaser all other Eligible Receivables in the Transferred Batch, and (iii) the Providers will contribute to the capital of the Purchaser all Receivables that do not constitute Eligible Receivables. The Purchase shall (x) pay to the Primary Servicer for the benefit of the Providers, at the Primary Servicer Account, an amount equal to the 1 5 Purchase Price of the Purchased Batch, and (y) record on the books and records of the Purchaser the capital contribution with respect to those Receivables contributed to the capital of the Purchaser in such Transferred Batch, in each case, promptly and in no event later than three Business Days after the applicable Transfer Date for such Batch. The Primary Servicer shall remit the proceeds of the Purchase Price of the Purchased Batch to each Provider in accordance with their respective interests. (1) Effective on each Transfer Date, in consideration of the payment of the Purchase Price, or the increase in the capital accounts of the applicable Provider in the Purchaser, and for other good and valuable consideration, each Provider hereby sells, contributes, assigns and conveys to the Purchaser and the Purchaser hereby purchases and accepts, as absolute owner, all right, title and interest in and to the Batch Receivables purchased or contributed on such Transfer Date. SECTION 1.4 Collection and Payment Procedures. (a) Collections on Batches. The Purchaser shall be entitled with respect to each Batch, (i) to receive all Collections on such Batch and (ii) to have and to exercise any and all rights to collect, record, track and, during the continuance of an Event of Termination or a Servicer Termination Event, take all actions to obtain Collections with respect to each Receivable included in a Batch. (1) Collections Not Part of a Batch. On each Settlement Date, and provided that (i) each Provider shall have paid all amounts then due and owing to the Purchaser under this Agreement and (ii) each Provider, or the Primary Servicer on behalf of such Provider, shall have successfully sent by Transmission to the Master Servicer all information required with respect to the Batch Receivables for the immediately preceding Settlement Period, and (iii) no Event of Termination shall have occurred and be continuing, the Purchaser shall pay or turn over, as the case may be, to the Primary Servicer for the benefit of the applicable Provider any and all cash collections or other cash or non-cash proceeds received by the Purchaser during the immediately preceding Settlement Period with respect to Receivables that are not part of any Batch. The Primary Servicer shall remit such cash and proceeds to each Provider in accordance with their respective interests. (2) Distributions on Each Business Day. On each Business Day and with respect to each Batch, Total Collections shall be distributed to the Purchaser. SECTION 1.5 Allocation of Servicer Responsibilities. (a) Tracking of purchases, Collections and other transactions pertaining to each Batch shall be administered by the Master Servicer in a manner consistent with the terms of this Agreement. The responsibilities of the Providers and Primary Servicer are set forth in Exhibit X attached hereto. Each Provider shall cooperate fully with the Primary Servicer and the Master Servicer in establishing and maintaining the Transmission of the Receivable Information, including, without limitation, the matters described in Exhibit X, and shall provide promptly to the Master Servicer such other information necessary or desirable for the administration of Collections on the Batch Receivables as may be requested from time to time. (1) The Purchaser hereby appoints ATC Healthcare as its agent for the administration and servicing obligations set forth in Exhibit VIII hereto with respect to the Receivables sold or transferred by the Providers to the Purchaser hereunder (the "PRIMARY SERVICER RESPONSIBILITIES"), and ATC Healthcare hereby accepts such appointment and agrees to perform the Primary Servicer Responsibilities on behalf of the Providers and ATC Staffing hereby consents to such appointment; provided, however, that such appointment shall not release any Provider from any of its duties, responsibilities, liabilities and obligations resulting or arising hereunder. Each Provider and the Purchaser hereby acknowledges that ATC Healthcare's appointment as Primary Servicer is expressly limited by and subject to Healthco-4's right under the Loan Agreement to replace the Purchaser or its agent as the 2 6 Primary Servicer (which replacement may be effectuated through the outplacement to a qualified and experienced third-party of all back office duties, including billing, collection and processing responsibilities, and access to all personnel, hardware and software utilized in connection with such responsibilities). The Purchaser may, at any time following the occurrence of a Servicer Termination Event (and shall, without requirement of notice to any party, upon a Servicer Termination Event resulting from the events described in clauses (g) or (i) of Exhibit V hereto) appoint another Person (which may be the Master Servicer) to succeed ATC Healthcare as its agent for performance of the Primary Servicer Responsibilities (which appointment may be effectuated through the outplacement to a qualified and experienced third-party of all back office duties, including billing, collection and processing responsibilities, and access to all personnel, hardware and software utilized in connection with such responsibilities). (2) As compensation for the performance of the Primary Servicer Responsibilities, the Providers shall pay ATC Healthcare (or the successor Primary Servicer who performs such Primary Servicer Responsibilities) the Primary Servicing Fee. ARTICLE 2. PAYMENT MECHANICS; MISDIRECTED PAYMENTS SECTION 2.1 Payment Mechanics. (a) On or prior to the Initial Transfer Date each of the Primary Servicer, the Providers, the Purchaser, Healthco-4 and the Lockbox Bank shall have entered into the Lockbox Agreements and shall have caused the Lockbox Bank to establish the Lockboxes and the Lockbox Account. (1) Each Provider shall prepare, execute and deliver to each of its Obligors, with copies to the Purchaser, on or prior to the Initial Transfer Date, a Notice to Obligors addressed to each such Obligor, which Notice to Obligors shall state that all present and future Receivables owing to such Provider have been and will be transferred to the Purchaser and that all checks from such Obligor on account of Receivables shall be sent to a Lockbox and all wire transfers from such Obligor on account of Receivables shall be wired directly into a Lockbox Account. (2) Each Provider covenants and agrees that, on and after the Initial Transfer Date, all invoices (and, if provided by such Provider, return envelopes) to be sent to Obligors shall set forth only the address of a Lockbox as a return address for payment of Receivables and only the Lockbox Account with respect to wire transfers for payment of Receivables. Each Provider hereby further covenants and agrees to instruct and notify each of the members of its accounting and collections staff to provide identical information in communications with Obligors with respect to payment of Receivables and wire transfers. SECTION 2.2 Misdirected Payments. (a) In the event that the Parent or any Provider receives a Misdirected Payment in the form of a check, the Parent or such Provider shall immediately send such Misdirected Payment, in the form received by the Parent or such Provider, by hand or overnight delivery service to a Lockbox for deposit into the corresponding Lockbox Account. In the event the Parent or any Provider receives a Misdirected Payment in the form of cash or wire transfer, the Parent or such Provider shall immediately wire transfer the amount of such Misdirected Payment directly to the Lockbox Account. All Misdirected Payments shall be sent promptly upon receipt thereof, and in no event later than the close of business, on the first Business Day after receipt thereof. (1) If a Misdirected Payment in the form of a check is received by the Parent or any Provider more than six days after the date of such check with respect thereto, then the relevant Provider shall pay interest on such Misdirected Payment to the Purchaser from such sixth subsequent day to and 3 7 including the date such check is received in the Lockbox Account, at a rate equal to LIBOR then in effect under the Loan Agreement. (2) Each Provider hereby agrees and consents to the Purchaser taking such actions as are reasonably necessary to ensure that future payments from the Obligor of a Misdirected Payment shall be made in accordance with the Notice to Obligors previously delivered to such Obligor, including, without limitation, to the maximum extent permitted by law, (i) the Purchaser, its assigns or designees, or any member of the HFG Group executing on such Provider's behalf and delivering to such Obligor a new Notice to Obligors, and (ii) the Purchaser, its assigns or designees, or any member of the HFG Group contacting such Obligor by telephone to confirm the instructions previously set forth in the Notice to Obligor to such Obligor. Upon the Purchaser's request, each Provider shall promptly (and in any event, within two Business Days from such request) take such similar actions as the Purchaser may reasonably request. SECTION 2.3 Unidentified Payments; Purchaser's Right of Presumption. Each Provider and the Purchaser agree and consent that the HFG Group or its designees or assigns, may apply any payment it receives from an Obligor or any other payor against a Transferred Batch if the HFG Group is unable in good faith to determine whether such payment relates to a Transferred Batch. SECTION 2.4 No Rights of Withdrawal. None of the Parent, the Providers, the Primary Servicer or the Purchaser shall have any rights of direction or withdrawal with respect to amounts held in the Lockbox Accounts or the Concentration Account. ARTICLE 3. REPRESENTATIONS AND WARRANTIES; COVENANTS; EVENTS OF TERMINATION SECTION 3.1 Representations and Warranties; Covenants. The Parent and each Provider makes, on the Initial Transfer Date and on each subsequent Transfer Date, the representations and warranties on and as of such dates, and hereby agrees to perform and observe the covenants, set forth in Exhibits III and IV, respectively, hereto. SECTION 3.2 Events of Termination. If an Event of Termination shall occur and be continuing, the Purchaser may, by notice to the Providers (which notice shall be deemed to have been given to the Providers and the Primary Servicer), take either or both of the following actions: (x) declare the Facility Termination Date to have occurred (except with respect to the Event of Termination in clause (g) of Exhibit V, in which case the Facility Termination Date shall be deemed to have occurred automatically and without notice), and (y) without limiting any rights hereunder, terminate the appointment of ATC Healthcare as Primary Servicer and replace ATC Healthcare as Primary Servicer in the manner set forth in Section 1.05(b). Upon any such declaration or designation, the Purchaser shall have, in addition to the rights and remedies which it may have under this Agreement, all other rights and remedies provided after default under the UCC and under other applicable law, which rights and remedies shall be cumulative. ARTICLE 4. INDEMNIFICATION; GRANT OF SECURITY INTEREST SECTION 4.1 Denied Receivables. (a) If a breach of any of the representations or warranties contained herein relating to a Batch Receivable shall be discovered at any time (each, a "DENIED RECEIVABLE"), the Primary Servicer or the relevant Provider shall on the next Settlement Date, purchase such Denied Receivable from the Purchaser at the Return Price. 4 8 (1) For ease of administration, the Purchaser shall be entitled to presume that the failure of any Batch Receivable (or portion thereof) to be paid in full on or after the 180th day following the Last Service Date thereof is the result of a breach of a representation or warranty contained herein with respect to such Batch Receivable unless (i) the Purchaser shall have actual knowledge to the contrary (such as, by way of example, actual knowledge of the financial inability of an Obligor to pay its obligations represented by a Receivable), or (ii) the Primary Servicer shall have submitted a certificate to the Program Manager (which certificate and underlying documentation shall be reasonably satisfactory to the Program Manager) stating that (1) it has reviewed the representations and warranties and Eligibility Criteria and has made due and appropriate inquiry of the applicable Obligor and such Batch Receivables, (2) the Obligor does not maintain and has not asserted any dispute with the applicable Provider that could impair payment by the Obligor of its payment obligations with respect to such Batch Receivable, and (3) all representations and warranties and Eligibility Criteria with respect to such Batch Receivable were, as of the date of transfer thereof, true and correct in their entirety and such failure to pay is exclusively the result of reasons unrelated to the breach of such representations, warranties or Eligibility Criteria (such as the financial inability of an Obligor to pay its obligations). In the event the Purchaser receives the Return Price for any such Batch Receivable and it is thereafter determined that the failure of such Batch Receivable to be paid in full was not the result of a breach of representation or warranty contained herein, the parties hereto shall make an appropriate adjustment by increasing the Purchase Price of any Purchased Batch to be purchased on or after such date. (2) Upon receipt by (or on behalf of) the Purchaser of the Return Price with respect to any Denied Receivable, the Purchaser shall be deemed to have reassigned and resold to the relevant Provider such Denied Receivable without any representation, warranty or recourse whatsoever, and, thereafter, neither the Purchaser nor any member of the HFG Group shall have any further servicing or other obligation to such Provider with respect to such Denied Receivable. (3) From time to time at the request of any Provider, the Purchaser shall promptly deliver to such Provider (at such Provider's sole cost and expense) such documents, assignments, releases, notices and instruments of termination as such Provider may reasonably request to evidence the reconveyance by the Purchaser of a Denied Receivable pursuant to the terms of Section 4.01(c). SECTION 4.2 Indemnities by the Providers. Without limiting any other rights that the Purchaser, the Program Manager, the Master Servicer or any of their respective Affiliates (together with their respective officers, directors, agents, representatives, shareholders, counsel, employees and lenders, each, an "INDEMNIFIED PARTY") may have hereunder or under applicable law, each Provider hereby, jointly and severally, agrees to indemnify each Indemnified Party from and against any and all claims, losses and liabilities (including, without limitation, reasonable attorneys' fees) (all of the foregoing being collectively referred to as "INDEMNIFIED AMOUNTS") arising out of or resulting from any of the following: (1) the sale or contribution of any Receivable which purports to be part of a Transferred Batch but which is not, at the date of such sale or contribution, an Eligible Receivable; (2) any representation or warranty made or deemed made by any Provider (or any of its officers) under or in connection with this Agreement (and not relating to the Eligibility Criteria) which shall have been incorrect in any material respect when made; (1) (3) the failure by any Provider or any Batch Receivable to comply with any applicable law, rule or regulation; 5 9 (4) the failure to vest in the Purchaser a perfected ownership interest in each Receivable included in a Transferred Batch and the proceeds and Collections in respect thereof, free and clear of any Liens; (5) any dispute, claim, set-off or defense to the payment, in whole or in part, of any Receivable (including, without limitation, a defense based on such Receivable not being a legal, valid and binding obligation) or any other claim resulting from the services or merchandise related to such Receivable or the furnishing or failure to furnish such services or merchandise or relating to collection activities with respect to such Receivable (if such collection activities were performed by any Provider or any of their Affiliates acting as Primary Servicer), provided, however, this clause (e) shall not be deemed to include any dispute, claim, set-off or defense to the payment of any Receivable (i) arising out of the financial inability of an Obligor to pay its obligations represented by such Receivable including, without limitation, a discharge in bankruptcy, or (ii) arising solely as a result of actions taken by any member of the HFG Group; (6) a failure of any Provider, including, without limitation, the Primary Servicer's actions on behalf of the Providers under Section 1.05(b) of this Agreement with respect to Primary Servicer Responsibilities, to perform its duties or obligations in accordance with the provisions hereof or to perform its duties or obligations hereunder; or (7) the commingling by any Provider of Collections at any time with other funds of any Provider; provided, however, that in all events there shall be excluded from the foregoing indemnification any claims, losses or liabilities resulting from the gross negligence or willful misconduct of an Indemnified Party or which constitutes credit recourse for an uncollectible Batch Receivable. Such Indemnified Party shall notify the Primary Servicer, on behalf of the Providers, of such claim, provided that the failure to so notify shall not affect or invalidate the indemnity granted pursuant to this Section 4.02. SECTION 4.3 Right of Set-Off. Each Provider hereby irrevocably instructs the Purchaser to set-off the full amount of the Return Price or the Indemnified Amounts, as the case may be, against the Purchase Price of any Purchased Batch to be purchased on or after such date and unless any Provider notifies the Purchaser in writing that it desires to pay on the date when due the Return Price under Section 4.01 or any Indemnified Amounts under Section 4.02 and such Provider makes such payment to the Purchaser in immediately available funds on such date any such amount shall be so set-off. No further notification, act or consent of any nature whatsoever is required prior to the right of the Purchaser to exercise such right of set-off; provided, however, the Purchaser or a member of the HFG Group shall notify the Primary Servicer on behalf of the Providers that a set-off pursuant to this Section 4.03 occurred, the amount of such set-off and a description of the Denied Receivable or Indemnified Amounts, as the case may be; provided, further that the failure to so notify shall not affect or invalidate the indemnity granted pursuant to Section 4.02. The Purchaser shall exercise its right to set-off hereunder to the extent funds are available prior to making a demand for indemnification under Section 4.02. SECTION 4.4 Grant of Security Interest. (a) As collateral security for each Provider's existing and future (i) obligations to purchase Denied Receivables under Section 4.01 hereof, (ii) indemnification obligations to the Purchaser under Section 4.02 hereof, and (iii) obligations to pay 6 10 costs, expenses and fees under Section 5.05 hereof, each Provider hereby grants to the Purchaser a first priority lien on and security interest in, and right of set-off against, (v) all of the Accounts now or hereafter owned or held by such Provider, (w) all of the Additional Collateral, (x) any and all cash collateral reserve accounts established pursuant to this Agreement from time to time, (y) any and all amounts held in any accounts maintained at any bank and (z) all proceeds of the foregoing (all of the foregoing, the "COLLATERAL"). (1) In connection with the grant under (a) above, this Agreement shall be deemed to be a security agreement as understood under the UCC. Each Provider agrees to execute, and hereby authorizes the Purchaser to file, one or more financing statements or continuation statements or amendments thereto or assignments thereof in respect of the lien created pursuant to this Section 4.04 which may at any time be required or, in the opinion of the Purchaser, be desirable, and to do so without the signature of such Provider where permitted by law. ARTICLE 5. MISCELLANEOUS SECTION 5.1 Amendments, etc. (a) No amendment or waiver of any provision of this Agreement or consent to any departure therefrom by a party hereto shall be effective unless in writing signed by the Primary Servicer, the Providers, the Purchaser, the Parent and consented to in writing by Healthco-4 as assignee of all of the Purchaser's rights and remedies hereunder, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of the Purchaser, the Parent, the Primary Servicer or any Provider to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. (1) The parties hereto agree to make any change, modification or amendment to this Agreement as may be requested by Fitch, Inc. or any other rating agency then rating the healthcare finance program of Healthco-4, so long as any such change, modification or amendment does not materially adversely affect the parties hereto. SECTION 5.2 Notices, etc. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which may include facsimile communication) and shall be faxed or delivered, (i) to each Provider, the Parent, the Primary Servicer and the Purchaser, at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a Written Notice to the other parties hereto (the Parent and each Provider hereby acknowledges and agrees that notices and communications to or for the benefit of the Parent and such Provider may be delivered to the Primary Servicer and such delivery to the Primary Servicer shall be deemed to be received by the Parent and such Provider), and (ii) to the Program Manager and the Master Servicer at the addresses set forth on Schedule I attached hereto (as such Schedule may be amended from time to time). Notices and communications by facsimile shall be effective when sent (and shall be followed by hard copy sent by regular mail) and notices and communications sent by other means shall be effective when received. SECTION 5.3 Assignability. (a) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective permitted successors and assigns. (1) Subject to Section 5.03(b) of the Loan Agreement, this Agreement and the Purchaser's rights and obligations herein (including, without limitation, ownership of the Batch Receivables in each Transferred Batch, the Lockboxes and the Lockbox Accounts and rights in relation to 7 11 the Lockboxes and the Lockbox Accounts) shall be assignable by the Purchaser and its successors and assigns. Each Provider hereby acknowledges that the Purchaser is granting to Healthco-4, which is further granting to its lenders, a security interest in, and collateral assignment of, this Agreement and all of the Purchaser's rights, title and interests hereunder (including, without limitation, the Batch Receivables, such Provider's obligations hereunder, the Lockboxes and the Lockbox Accounts, and rights in relation to the Lockboxes and the Lockbox Accounts). (2) Neither the Parent nor any Provider may assign its rights or obligations hereunder or any interest herein without the prior written consent of the Purchaser and Healthco-4. SECTION 5.4 Further Assurances. The Parent and each Provider shall, at its cost and expense, upon the request of the Purchaser, duly execute and deliver, or cause to be duly executed and delivered, to the Purchaser such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of the Purchaser to carry out more effectively the provisions and purposes of this Agreement. SECTION 5.5 Costs, Expenses and Termination Fee. (a) In addition to the rights of indemnification granted under Section 4.02 hereof, each Provider, jointly and severally, agrees to pay on demand all reasonable costs and expenses in connection with the preparation, execution and delivery of this Agreement and any waiver, modification, supplement or amendment hereto, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Purchaser and the members of the HFG Group, and all costs and expenses, if any (including reasonable counsel fees and expenses), of the Purchaser, its Affiliates and the members of the HFG Group in connection with the enforcement of this Agreement. Each Provider further agrees to pay on the Initial Transfer Date (and with respect to costs and expenses incurred following the Initial Transfer Date, within seven days of demand therefor) (i) all reasonable costs and expenses incurred by the Purchaser or its agent in connection with periodic audits of the Receivables, (ii) all reasonable costs and expenses (not to exceed $3,000 in any fiscal year of the Providers) incurred by the Master Servicer or the Program Manager to accommodate any significant coding or data system changes made by any Provider that would affect the transmission or interpretation of data received through the interface, and (iii) all reasonable costs and expenses incurred by the Purchaser for additional time and material expenses of the Master Servicer resulting from a lack of cooperation or responsiveness of any Provider or the Primary Servicer to agreed-upon protocol and schedules with the Master Servicer; provided, that the Providers or the Primary Servicer, as applicable, has received Written Notice of the alleged lack of cooperation or responsiveness and has been provided an opportunity to correct such problems. (1) In the event that any Facility Termination Date is declared (or is deemed to have occurred) pursuant to an Event of Termination, the Providers shall pay to the Purchaser an early termination fee in an amount equal to the termination fee payable by the Purchaser pursuant to Section 5.07(d) of the Loan Agreement. (2) In the event that, following the occurrence and continuance of an Event of Termination or a Servicer Termination Event, the Purchaser or any member of the HFG Group shall retain an attorney or attorneys to collect, enforce, protect, maintain, preserve or foreclose its interests with respect to this Agreement, any related documents, any Collateral, any Lien, or under any instrument or document delivered pursuant to this Agreement, the Providers shall pay all of the reasonable costs and expenses of such collection, enforcement, protection, maintenance, preservation or foreclosure, including reasonable attorneys' fees, and the Purchaser may take judgment for all such amounts. The attorneys' fees arising from such services, including those of any appellate proceedings, and all reasonable out-of-pocket expenses, charges, costs and other fees incurred by such counsel in any way or in any respect to or 8 12 arising out of or in connection with or relating to any of the events or actions described in this Section 5.05 shall be payable by the Providers to the Purchaser on demand (with interest accruing from the tenth Business Day following the date of such demand). SECTION 5.6 Confidentiality. (a) The Parent, each Provider, the Primary Servicer and the Purchaser hereby acknowledge that this Agreement, the Loan Agreement and the documents delivered hereunder, thereunder or in connection with, including, without limitation, any information relating to any member of the HFG Group, contains confidential and proprietary information. Unless otherwise required by applicable law, the Parent, each Provider, the Primary Servicer and the Purchaser hereby agree to maintain the confidentiality of this Agreement (and all drafts, memos and other documents delivered in connection therewith including, without limitation, any information relating to any member of the HFG Group delivered hereunder or under the Loan Agreement) in communications with third parties and otherwise and to take all reasonable action to prevent the unauthorized use or disclosure of and to protect the confidentiality of such confidential information; provided, that such confidential information may be disclosed to (i) the Parent's, the Providers' and the Purchaser's legal counsel, accountants and auditors, (ii) the Program Manager, Healthco-4, the Primary Servicer, each member of the HFG Group, investors in and creditors of Healthco-4, appropriate rating agencies with respect to Healthco-4, and each of their respective legal counsel, accountants and auditors, (iii) any Person, if such information otherwise becomes available to such Person or publicly available through no fault of any party governed by this Section 5.06, (iv) any Governmental Entity requesting such information, and (v) to any other Person with the written consent of the applicable party, which consent shall not be unreasonably withheld, and provided further that none of the Parent, the Primary Servicer or any Provider shall disclose such confidential information to any financial adviser except with the consent of the Program Manager. Notwithstanding the foregoing, the parties hereto agree that the Parent, as a public company, may make such disclosure as is required by state and federal law, including, but not limited to, such filings as are required by the Securities and Exchange Commission. (1) The Parent, each of the Providers, the Primary Servicer and the Purchaser understands and agrees that the other or the HFG Group may suffer irreparable harm if the obligations under this Section 5.06 are breached and that monetary damages shall be inadequate to compensate the injured party for such breach. Accordingly, the Parent, each of the Providers, the Primary Servicer and the Purchaser agrees that, in the event of their respective breach of Section 5.06(a), the injured party, in addition and not in limitation of its rights and remedies under law, shall be entitled to a temporary restraining order, preliminary injunction and permanent injunction to prevent or restrain any such breach. SECTION 5.7 Term and Termination. This Agreement shall continue in full force and effect from the date hereof until the Final Payment Date; provided, however, that, with respect to any Transferred Batches transferred prior to the Final Payment Date and not purchased pursuant to Section 4.01, the occurrence of the Final Payment Date shall not terminate any security interest of the Purchaser hereunder, nor shall it relieve or discharge the Parent, any Provider, the Primary Servicer or the Purchaser of or from their respective duties, obligations or covenants hereunder and all the terms, provisions and conditions of this Agreement shall remain in effect for such purpose until such obligations have been satisfied and performed in full. Upon the satisfaction in full of all the obligations, the Purchaser shall deliver all assignments, certificates, releases, notices and other documents at the Providers' expense, as the Providers may reasonably request to effect such termination. SECTION 5.8 Sale and Contribution Treatment. The Providers and the Purchaser have structured the transactions contemplated by this Agreement with respect to each Transferred Batch as a sale or contribution and intend that such transactions constitute a sale or contribution, and each Provider and the Purchaser agree to treat each such transaction as a sale or contribution for all purposes, including, 9 13 without limitation, in their respective books, records, computer files, tax returns (federal, state and local), regulatory and governmental filings (and shall reflect such sale in their respective financial statements). The Providers will advise all persons inquiring about the ownership of the Receivables that all Receivables have been sold or contributed to the Purchaser. The Providers will pay all taxes (excluding income or franchise taxes of the Purchaser), if any, relating to the transactions contemplated under this Agreement, including, without limitation, the sale, transfer and contribution of each Batch to the Purchaser. SECTION 5.9 Grant of Security Interest. In the event that, contrary to the mutual intent of the Providers and the Purchaser, any purchase or contribution of a Batch is not characterized as a sale or contribution, each Provider shall, effective as of the date hereof, be deemed to have granted (and such Provider hereby does grant) (in addition to and not in substitution of the grant under Section 4.04 hereof) to the Purchaser a first priority security interest in and to any and all present and future Receivables and the proceeds thereof to secure the repayment of all amounts paid to any Provider hereunder with accrued interest thereon, and this Agreement shall be deemed to be a security agreement. With respect to such grant of a security interest, the Purchaser may at its option exercise from time to time any and all rights and remedies available to it under the UCC or otherwise. Each Provider agrees that five Business Days shall be reasonable prior notice to such Provider or to the Primary Servicer on behalf of the Providers of the date of any public or private sale or other disposition of all or any of the Batch Receivables. SECTION 5.10 No Liability of the Purchaser. Neither this Agreement nor any document executed in connection herewith shall constitute an assumption by the Purchaser of any obligation to an Obligor. SECTION 5.11 Attorney-in-Fact. Each Provider hereby irrevocably designates and appoints the Purchaser, the Primary Servicer, the Master Servicer and each Person in the HFG Group, to the extent permitted by applicable law and regulation, as such Provider's attorneys-in-fact, which irrevocable power of attorney is coupled with an interest, with authority to (i) endorse or sign such Provider's name to financing statements, remittances, invoices, assignments, checks, drafts or other instruments or documents in respect of the Batch Receivables, (ii) notify Obligors to make payments on the Batch Receivables directly to the Purchaser, and (iii) bring suit in such Provider's name and settle or compromise such Batch Receivables as the Purchaser, the Primary Servicer, the Master Servicer or any Person in the HFG Group may, in its discretion, deem appropriate. SECTION 5.12 Entire Agreement; Severability. (a) This Agreement, including all exhibits and schedules hereto, and the documents referred to herein, embody the entire agreement and understanding of the parties concerning the subject matter contained herein. This Agreement supersedes any and all prior agreements and understandings between the parties, whether written or oral. (1) If any provision of this Agreement shall be declared invalid or unenforceable, the parties hereto agree that the remaining provisions of this Agreement shall continue in full force and effect. SECTION 5.13 GOVERNING LAW. THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION. SECTION 5.14 WAIVER OF JURY TRIAL, JURISDICTION AND VENUE. EACH OF THE PARTIES HERETO HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY 10 14 IN THE EVENT OF ANY LITIGATION WITH RESPECT TO ANY MATTER RELATED TO THIS AGREEMENT, AND HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK CITY, NEW YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. IN ANY SUCH LITIGATION, EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND AGREES THAT SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH PARTY AT ITS ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF. EACH OF THE PARTIES HERETO SHALL APPEAR IN ANSWER TO SUCH SUMMONS, COMPLAINT OR OTHER PROCESS WITHIN THE TIME PRESCRIBED BY LAW, FAILING WHICH SUCH PARTY FAILING TO SO APPEAR SHALL BE DEEMED IN DEFAULT AND JUDGMENT MAY BE ENTERED BY THE OTHER PARTY FOR THE AMOUNT OF THE CLAIM AND OTHER RELIEF REQUESTED THEREIN. SECTION 5.15 Execution in Counterparts. This Agreement may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. SECTION 5.16 No Proceedings. The Parent and each Provider hereby agrees that it will not institute against the Purchaser or Healthco-4 any proceeding of the type referred to in paragraph (g) of Exhibit V so long as any senior indebtedness issued by the Purchaser or Healthco-4 shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any such senior indebtedness shall have been outstanding. SECTION 5.17 Survival of Termination. The provisions of Article IV (and the representations and warranties with respect thereto) (other than Section 4.04) and Sections 5.05, 5.06, 5.10 and 5.16 shall survive any termination of this Agreement. SECTION 5.18 Joint and Several Liability; Providers . Each Provider agrees that each reference to "the Providers" in this Agreement shall be deemed to refer to each such Provider jointly and severally with the other Providers. Each Provider (i) shall be jointly and severally liable for the obligations, duties and covenants of each other such Provider under this Agreement and the acts and omissions of each other such Provider including, without limitation, under Article IV hereof, and (ii) jointly and severally makes each representation and warranty for itself and each other Provider under this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 11 15 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. PROVIDERS: ATC HEALTHCARE SERVICES, INC. By: ---------------------------------------- Name: Title: Address: ATC Healthcare Services, Inc. 1983 Marcus Avenue Lake Success, NY 11042 Attention: Alan Levy, CFO Facsimile Number:(516) 750-1754 ATC STAFFING SERVICES, INC. By: ---------------------------------------- Name: Title: Address: ATC Staffing Services, Inc. 1983 Marcus Avenue Lake Success, NY 11042 Attention: Alan Levy, CFO Facsimile Number: (516) 750-1754 PURCHASER: ATC FUNDING, LLC By: ------------------------------------ Name: Title: Address: ATC Funding, LLC 1983 Marcus Avenue Suite E-122 Lake Success, NY 11042 Attention: Alan Levy, CFO Facsimile Number: (516) 750-1764 12 16 PRIMARY SERVICER: ATC HEALTHCARE SERVICES, INC. By: ---------------------------------------- Name: Title: Address: ATC Healthcare Services, Inc. 1983 Marcus Avenue Lake Success, NY 11042 Attention: Alan Levy, CFO Facsimile Number: (516) 750-1754 PARENT: STAFF BUILDERS, INC. By: ---------------------------------------- Name: Title: Address: Staff Builders, Inc. 1983 Marcus Avenue Lake Success, NY 11042 Attention: Alan Levy, CFO Facsimile Number: (516) 750-1754 13 17 EXHIBIT I DEFINITIONS As used in the Agreement (including its Exhibits and Schedules), the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ACCOUNTS" means all accounts, chattel paper, instruments, general intangibles and goodwill, whether now existing or hereafter arising, including, all Receivables and all proceeds of any of the foregoing. "ACCOUNTS RECEIVABLE TURNOVER PARENT" means, at any date, for the 12-Month period then ending, the quotient obtained by dividing (i) aggregate gross revenue of the Parent and its Subsidiaries on a consolidated basis for such period by (ii) aggregate Receivables of the Parent and its Subsidiaries on a consolidated basis of such date. "ACCOUNTS RECEIVABLE TURNOVER PROVIDERS" means, at any date, for the 12-Month period then ending, the quotient obtained by dividing (i) aggregate gross revenue of ATC Healthcare and its Subsidiaries on a consolidated basis for such period by (ii) aggregate Receivables of ATC Healthcare and its Subsidiaries on a consolidated basis as of such date. "ADDITIONAL COLLATERAL" means (including, without limitation, the items listed on any separate schedule(s) at any time or from time to time furnished by any Provider to the Purchaser and made part of this Agreement and all accessions to the Additional Collateral, substitutions and replacements thereof (unless the description of Additional Collateral expressly excludes after-acquired Additional Collateral), now owned or existing and hereafter acquired, created or arising, and all products and proceeds thereof (including, without limitation, claims of any Provider against third parties for loss or damage to or destruction of any Additional Collateral)) (a) all of each Provider's right, title and interest in and to all equipment in all of its forms, wherever located, now or hereafter existing, including, but not limited to, all fixtures and all parts thereof and all accessions thereto (any and all such equipment, fixtures, parts and accessions being the "EQUIPMENT"); (b) all inventory in all of its forms, wherever located, now or hereafter existing, including, but not limited to, (i) all raw materials, work in process, semi-finished products and finished products, intended for sale or lease or to be furnished under contracts of service in the ordinary course of business, of every kind and description; (ii) goods in which such Provider has an interest en masse or a joint or other interest or right of any kind (including, without limitation, goods in which such Provider has an interest or right as consignee), and (iii) goods which are returned to or repossessed by such Provider, and all accessions thereto and products thereof and documents (including, without limitation, all warehouse receipts, negotiable documents, bills of lading and other title documents) therefor (any and all such inventory, accessions, products and documents being the "INVENTORY"); (c) all present and future securities, security entitlements and securities accounts (collectively, "INVESTMENT PROPERTY"); (d) all deposits and all other goods and personal property (including, without limitation, patents, patent applications, trade names and trademarks and Federal, state and local tax refund claims of all kinds), whether tangible or intangible, or whether now owned or hereafter acquired and wherever located; (e) all proceeds of every kind and nature, including proceeds of proceeds, of any and all of the foregoing Additional Collateral (including, without limitation, proceeds which constitute property of the types described in clauses (a) through (e) of this paragraph) and, to the extent not otherwise included, all (i) payments under insurance (whether or not the Purchaser is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Additional Collateral and (ii) money and cash; and all books, records and other property relating to or referring to any of the foregoing Additional Collateral, including all books, records, ledger cards, data processing records, computer software and other property and general intangibles at any time used or useful I-1 18 in connection with, evidencing, embodying, referring to, or relating to, any of the foregoing Additional Collateral. "ADDITIONAL REPORTING EVENT" means the formation by the Parent of any Subsidiary other than ATC Healthcare and its Subsidiaries. "AFFILIATE" means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. "AGREEMENT" has the meaning set forth in the preliminary statements hereto. "APPLIED MANAGEMENT" means Applied Management Solutions, Inc., a Delaware corporation. "BATCH" means, with respect to any Transfer Date, all Receivables, including the Transferred Batch with respect to such Transfer Date, which are purchased by the Purchaser or contributed to capital of the Purchaser. "BATCH RECEIVABLE" means a Receivable that is included in a Transferred Batch, but excludes a Denied Receivable for which the Return Price has been received by the Purchaser. "BUSINESS DAY" means any day on which banks are not authorized or required to close in New York City, New York. "CAPITAL EXPENDITURES" means, with respect to any Person for any period, the aggregate of all expenditures (including, without limitation, obligations created under Capital Leases in the year in which created but excluding payments made thereon) of any Person in respect of the purchase or other acquisition of fixed or capital assets. "CAPITAL LEASE" means, as applied to any Person, any lease of any Property (whether real, personal or mixed) by that Person as lessee, the obligations of which are required, in accordance with GAAP, to be capitalized on the balance sheet of that Person. "CAPITALIZED LEASE OBLIGATION" means an obligation to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real and/or personal property which obligation is required to be classified and accounted for as a capital lease on a balance sheet prepared in accordance with GAAP, and for purposes hereof the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP. "CHANGE OF CONTROL" means (a) the sale, lease or transfer of all or substantially all of the assets of the Parent or any Provider to any Person or group (as such term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended); (b) the liquidation or dissolution of (or the adoption of a plan of liquidation by) the Parent or any Provider; (c) the acquisition by any Person or group (as such term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of a direct or indirect majority interest (more than 25%) of the voting stock of the Parent or any Provider by way of merger or consolidation or otherwise; or (d) the failure of the Parent to own, directly or indirectly, 100% of the equity interests of each Provider. I-2 19 "CLOSING DATE" means April 6, 2001. "COLLATERAL" has the meaning set forth in Section 4.04(a) hereto. "COLLECTIONS" means, with respect to any Receivable included in a Batch, all cash collections, wire transfers, electronic funds transfers and other cash proceeds of such Receivable, deposited in or transferred to a Lockbox Account, including, without limitation, all cash proceeds thereof. "CONCENTRATION ACCOUNT" means account number 205779 at the Bank of New York, ABA#021000018. "CONSOLIDATED CURRENT ASSETS PARENT" means, at any date of determination, the aggregate amount of all assets of the Parent and its Subsidiaries on a consolidated basis that would be classified as current assets at such date, computed and calculated in accordance with GAAP. "CONSOLIDATED CURRENT ASSETS PROVIDERS" means, at any date of determination, the aggregate amount of all assets of ATC Healthcare and its Subsidiaries on a consolidated basis that would be classified as current assets at such date, computed and calculated in accordance with GAAP. "CONSOLIDATED CURRENT LIABILITIES PARENT" means, at any date of determination, the aggregate amount of all liabilities of the Parent and its Subsidiaries on a consolidated basis that would be classified as current liabilities at such date, computed and calculated in accordance with GAAP. "CONSOLIDATED CURRENT LIABILITIES PROVIDERS" means, at any date of determination, the aggregate amount of all liabilities of ATC Healthcare and its Subsidiaries on a consolidated basis that would be classified as current liabilities at such date, computed and calculated in accordance with GAAP. "CONSOLIDATED DEBT SERVICE COVERAGE RATIO PARENT" means, for the Parent and its Subsidiaries on a consolidated basis, at the end of each fiscal quarter of the Parent, for the four fiscal quarter period then ended, the quotient obtained by dividing (i) Consolidated EBITDA Parent for such period by (ii) the sum of (x) Consolidated Interest Expense Parent for such period and (y) the current portion of long term debt and Capital Leases as of such date of determination. "CONSOLIDATED DEBT SERVICE COVERAGE RATIO PROVIDERS" means, for ATC Healthcare and its Subsidiaries on a consolidated basis, at the end of each fiscal quarter of the Providers, for the four fiscal quarter period then ended, the quotient obtained by dividing (i) Consolidated EBITDA Providers for such period by (ii) the sum of (x) Consolidated Interest Expense Providers for such period and (y) the current portion of long term debt and Capital Leases of ATC Healthcare and its Subsidiaries on a consolidated basis, as of such date of determination. "CONSOLIDATED EBITDA PARENT" means, for any period, the EBITDA of the Parent and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED EBITDA PROVIDERS" means, for any period, the EBITDA of ATC Healthcare and its Subsidiaries on a consolidated basis in accordance with GAAP. "CONSOLIDATED INTEREST COVERAGE RATIO PARENT" means, at the end of each fiscal quarter of the Parent, for the four fiscal quarter period ending on such date, the quotient obtained by dividing I-3 20 (i) Consolidated EBITDA Parent for such period by (ii) Consolidated Interest Expense Parent for such period. "CONSOLIDATED INTEREST COVERAGE RATIO PROVIDERS" means, at the end of each fiscal quarter of the Providers, for the four fiscal quarter period ending on such date, the quotient obtained by dividing (i) Consolidated EBITDA Providers for such period by (ii) Consolidated Interest Expense Providers for such period. "CONSOLIDATED INTEREST EXPENSE PARENT" means, for any period, the Interest Expense of the Parent and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INTEREST EXPENSE PROVIDERS" means, for any period, the Interest Expense of ATC Healthcare and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED NET WORTH PARENT" means, at any date of determination, an amount equal to (a) the total unrestricted assets of the Parent and its Subsidiaries on a consolidated basis in accordance with GAAP minus (b) the total liabilities of the Parent and its Subsidiaries on a consolidated basis in accordance with GAAP . "CONSOLIDATED NET WORTH PROVIDERS" means, at any date of determination, an amount equal to (a) the total unrestricted assets of ATC Healthcare and its Subsidiaries on a consolidated basis in accordance with GAAP minus (b) the total liabilities of ATC Healthcare and its Subsidiaries on a consolidated basis in accordance with GAAP "CONSOLIDATED TANGIBLE NET WORTH PARENT" means with respect to the Parent and its Subsidiaries determined on a consolidated basis in accordance with GAAP, at any date of determination, (i) the sum of capital stock, capital in excess of par or stated value of shares of its capital stock, retained earnings and any other account which, in accordance with GAAP constitutes stockholder's equity, less (ii) treasury stock and any minority interest in subsidiaries, less (iii) the amount of any write-up subsequent to the Closing Date in the value of any asset above the cost or depreciated cost thereof and less (iv) all intangible assets, including, without limitation, goodwill, which would be classified as such in accordance with GAAP. "CONSOLIDATED TANGIBLE NET WORTH PROVIDERS" means with respect to ATC Healthcare and its Subsidiaries on a consolidated basis in accordance with GAAP, at any date of determination, (i) the sum of capital stock, capital in excess of par or stated value of shares of its capital stock, retained earnings and any other account which, in accordance with GAAP constitutes stockholder's equity, less (ii) treasury stock and any minority interest in subsidiaries, less (iii) the amount of any write-up subsequent to the Closing Date in the value of any asset above the cost or depreciated cost thereof and less (iv) all intangible assets, including, without limitation, goodwill, which would be classified as such in accordance with GAAP. "CONSOLIDATED TOTAL NET INCOME PARENT" means, for any period, the total net income of the Parent and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED TOTAL NET INCOME PROVIDERS" means, for any period, the total net income of ATC Healthcare and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. I-4 21 "CONSOLIDATED WORKING CAPITAL PARENT" means at any date of determination, an amount equal to Consolidated Current Assets Parent minus Consolidated Current Liabilities Parent. "CONSOLIDATED WORKING CAPITAL PROVIDERS" means at any date of determination, an amount equal to Consolidated Current Assets Providers minus Consolidated Current Liabilities Providers. "CREDIT AND COLLECTION POLICY" means those receivables credit and collection policies and practices of the Providers in effect on the date of the Agreement and set forth in Schedule II hereto, as modified from time to time with the consent of the Purchaser and Healthco-4. "DEBT" means as to any Person (without duplication): (i) all obligations of such party for borrowed money, (ii) all obligations of such party evidenced by bonds, notes, debentures, or other similar instruments, (iii) all obligations of such party to pay the deferred purchase price of property or services (other than trade payables in the ordinary course of business), (iv) all Capital Leases of such party, (v) all Debt of others directly or indirectly Guaranteed (which term shall not include endorsements in the ordinary course of business) by such party, (vi) all obligations secured by a Lien existing on property owned by such party, whether or not the obligations secured thereby have been assumed by such party or are non-recourse to the credit of such party (but only to the extent of the value of such property), (vii) all reimbursement obligations of such party (whether contingent or otherwise) in respect of letters of credit, bankers' acceptance and similar instruments and (viii) all obligations of such Party under this Agreement and the Loan Agreement. "DEFAULTED RECEIVABLE" means a Batch Receivable (i) as to which the Obligor thereof or any other Person obligated thereon has taken any action, or suffered any event to occur, of the type described in paragraph (g) of Exhibit V or (ii) which, consistent with the Credit and Collection Policy, would be written off the applicable Provider's books as uncollectible. "DELINQUENCY RATIO" means, as of the last Business Day of each Month, a percentage equal to: DLR --- ENV where: DLR= The Expected Net Value of all Receivables which became Delinquent Receivables in the Month prior to the date of calculation. ENV= The Expected Net Value of all Receivables which were purchased in the Month immediately prior to the date of calculation. "DELINQUENT RECEIVABLE" means a Batch Receivable (a) that has not been paid in full on or following the 180th day following the date of original invoicing thereof, or (b) that is a Denied Receivable. "DENIED RECEIVABLE" has the meaning set forth in Section 4.01(a) hereto. "DEPOSITARY AGREEMENT" means those certain depositary account agreements, among Healthco-4 and the applicable Lockbox Bank, in substantially the form attached hereto as Exhibit XII, as such agreements may be amended, modified or supplemented from time to time in accordance with their terms. I-5 22 "EBITDA" means, for any Person during any period, the sum (determined without duplication on a consolidated basis) of (a) net income (or net loss) of such Person (calculated before extraordinary items) during such period plus (b) the Interest Expense of such Person during such period deducted in the determination of such net income (or net loss) plus (c) depreciation, amortization and other non-cash items of such Person during such period to the extent included in the determination of net income (or net loss) plus or minus (d) all taxes accrued by such Person during such period on or measured by income to the extent deducted or credited in determining such net income (or net loss) minus or plus (e) gains (or losses) from asset dispositions by such Person during outside of the normal course of business to the extent included in determining such net income (or net loss) plus (f) losses due to asset impairment minus (g) non-cash, non-recurring items to the extent included in determining such net income (or net loss). "ELIGIBILITY CRITERIA" has the meaning specified in the Loan Agreement, as such Eligibility Criteria may be modified from time to time by Healthco-4 upon Written Notice to the Primary Servicer. "ELIGIBLE RECEIVABLES" has the meaning specified in the Loan Agreement. "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning of Section 3(3) of ERISA maintained by the Parent, any Provider or any ERISA Affiliate thereof, or with respect to which any of them have any liability. "EQUITY" means the amount set forth on the balance sheet of the any Provider as equity. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA AFFILIATE" means any entity which is under common control with the Parent or any Provider within the meaning of ERISA or which is treated as a single employer with any Provider under the Internal Revenue Code of 1986, as amended. "EVENT OF TERMINATION" means any of the events specified in Exhibit V hereto. "EXPECTED NET VALUE" means, with respect to any Batch Receivable, the gross unpaid amount of such Receivable on the Transfer Date therefor, times the applicable Net Value Factor. "FACILITY TERMINATION DATE" means the earlier of (a) April 5, 2004 (subject to automatic extensions of such date to coincide with extensions under Section 5.07 of the Loan Agreement) and (b) the date of delivery of notice of the occurrence of an Event of Termination, if required pursuant to Section 3.02 hereof, or the date of occurrence of an Event of Termination if no notice is required, unless such Event of Termination is waived by the Purchaser in writing. "FINAL PAYMENT DATE" means the first Settlement Date following the Settlement Period in which final collection has been received for all Batch Receivables have become Denied Receivables or Defaulted Receivables. "GAAP" means generally accepted accounting principles in the United States of America, applied on a consistent basis, as set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants or in statements of the Financial Accounting Standards Board or the rules and regulations of the Securities and Exchange Commission or their respective successors and which are applicable in the circumstances as of the date in question. I-6 23 "GOVERNMENTAL ENTITY" means the United States of America, any state, any political subdivision of a state and any agency or instrumentality of the United States of America or any state or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "GUARANTY" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay), or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect the obligee of such Debt or other obligation of the payment thereof or to protect the obligee against loss in respect thereof (in whole or in part), provided that the term Guaranty shall not include endorsements for collection or deposit in the ordinary course of business. The term "GUARANTEE" used as a verb has a corresponding meaning. "HEALTHCO-4" means HFG Healthco-4 LLC, a Delaware limited liability company. "HFG GROUP" means (i) Healthco-4, the Program Manager and the Master Servicer and (ii) Healthco-4's agents, delegates, designees and assigns identified from time to time to effectuate the Agreement. "INDEMNIFIED AMOUNTS" has the meaning set forth in Section 4.02 hereto. "INDEMNIFIED PARTY" has the meaning set forth in Section 4.02 hereto. "INITIAL TRANSFER DATE" means the date of the initial purchase and contribution of Receivables hereunder. "INTEREST EXPENSE" means, with respect to any Person for any period, the interest expense of such Person during such period as determined in accordance with GAAP. "LAST SERVICE DATE" means, with respect to any Receivable the date set forth on the related invoice or statement as the most recent date on which services or merchandise were provided by the related Provider to the related Obligor. "LIBOR" has the meaning specified in the Loan Agreement. "LIEN" means any lien, mortgage, security interest, tax lien, pledge, hypothecation, assignment, preference, priority, other charge or encumbrance, or any other type of preferential arrangement of any kind or nature whatsoever by or with any Person (including, without limitation, any conditional sale or title retention agreement), whether arising by contract, operation of law, or otherwise. "LOAN AGREEMENT" means the Loan and Security Agreement dated as of the date hereof between the Purchaser as borrower and Healthco-4 as lender, as such agreement may be modified, supplemented or amended from time to time in accordance with its terms. "LOCKBOX" means a lockbox set forth on Schedule IV hereto to receive checks with respect to Receivables payable by Obligors. "LOCKBOX ACCOUNT" means a lockbox account set forth on Schedule IV hereto associated with a Lockbox established by the Providers, in the name of and for the benefit of Healthco-4, to deposit I-7 24 Collections from Obligors, including Collections received in related Lockbox and Collections received by wire transfer directly from Obligors, all as more fully set forth in the relevant Depositary Agreement. "LOCKBOX BANK" means a financial institution in its capacity as lockbox bank under a Depositary Agreement. "LOSS-TO-LIQUIDATION RATIO" means, as of the last Business Day of each Month, a percentage equal to: DFR --- C where: DFR= The Expected Net Value of all Batch Receivables which became Defaulted Receivables in the Month prior to the date of calculation. C= Collections in the Month prior to the date of calculation. "MASTER SERVICER" means the Program Manager and any other Person then identified by the Program Manager to the Providers, or the Primary Servicer on behalf of the Providers, as being authorized to administer and service Receivables. "MATERIAL ADVERSE EFFECT" means any event, condition, change or effect that (a) has a materially adverse effect on the business, Properties, capitalization, liabilities, operations, prospects or financial condition of (i) Providers (in the aggregate) or (ii) the Parent on a consolidated basis, (b) materially impairs the ability of the Providers (in the aggregate) or the Parent to perform its obligations under the Agreement, (c) materially impairs the validity or enforceability of, or materially impairs the rights, remedies or benefits available to the Purchaser under the Agreement, or (d) changes, or could reasonably be expected to change, the characterization and treatment of the sales and contributions of Receivables under the Agreement as something other than a true sale or complete transfer of ownership. "MISDIRECTED PAYMENT" means any form of payment in respect of a Batch Receivable made by an Obligor in a manner other than as provided in the Notice to Obligor sent to such Obligor. "MONTH" means a calendar month. "MULTIEMPLOYER PLAN" means a plan, within the meaning of Section 3(37) of ERISA, as to which the Parent, Primary Servicer, any Provider or any ERISA Affiliate contributed or was required to contribute within the preceding five years. "NET VALUE FACTOR" means, initially, the percentages set forth on Schedule VI attached hereto, as such percentages may be adjusted, upwards or downwards in accordance with the Loan Agreement based on the historical actual final collections received on the Providers' Receivables within 180 days of the Last Service Date of such Receivables (without regard to the factors set forth in the definition of "Defaulted Receivable"). "NOTICE TO OBLIGOR" means a notice letter on the relevant Provider's corporate letterhead in substantially the form attached hereto as Exhibit VII. I-8 25 "OBLIGOR" means the Person who is responsible for the payment of all or any portion of a Receivable. "PARENT" has the meaning set forth in the preamble hereto. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to all or any of its functions under ERISA. "PERMITTED LIENS" means (i) those Liens on Additional Collateral existing as of the date hereof and set forth on Schedule VII hereto and (ii) Liens arising after the date hereof securing the purchase money Debt and Capitalized Lease Obligations of the Parent or any Provider, in an aggregate amount not to exceed $2,000,000 for the Parent and the Providers taken as a whole at any time, provided that no such Lien described in this clause (ii), shall apply to any other property of the Parent or any Provider. "PERSON" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "PLEDGE AGREEMENT" means that certain Pledge Agreement, dated the date hereof, by the Parent and ATC Healthcare in favor of Healthco-4 as lender under the Loan Agreement, as the same may be amended, modified or supplemented from time to time. "PRIMARY SERVICER" as defined in the preamble, means ATC Healthcare, if then authorized to perform the Primary Servicer Responsibilities pursuant to Section 1.05(b), or the Master Servicer, or any other Person then authorized to perform the Primary Servicer Responsibilities that is acceptable to the Program Manager. "PRIMARY SERVICER ACCOUNT" means account number 777-522683 of the Primary Servicer at The Chase Manhattan Bank, ABA number 021000021, or such other bank account designated by the Primary Servicer by Written Notice to the Master Servicer, the Purchaser and the Program Manager from time to time, as the account for receipt of proceeds on behalf of the Providers. "PRIMARY SERVICER RESPONSIBILITIES" has the meaning set forth in Section 1.05(b) hereto. "PRIMARY SERVICING FEE" means, with respect to any Transferred Batch, an amount equal to $8.00 multiplied by the number of Receivables in such Transferred Batch. "PROGRAM MANAGER" means (i) Healthcare Finance Group, Inc. or (ii) any other Person then identified by Healthco-4 to the Primary Servicer as being authorized to provide administrative services with respect to the Purchaser and the Purchaser's purchase, funding and collection of healthcare receivables. "PROPERTY" means property of all kinds, movable, immovable, corporeal, incorporeal, real, personal or mixed, tangible or intangible (including, without limitation, all rights relating thereto), whether owned or acquired on or after the date of this Agreement. "PROVIDER", "PROVIDERS" have the meanings set forth in the preamble hereto. "PROVIDER DOCUMENTS" means this Agreement, the Depositary Agreement, the Pledge Agreement, each agreement now existing or hereafter created providing collateral security for the payment I-9 26 or performance of any Provider's obligations described in Section 4.04(a) or any Person's obligations under a Guaranty of such obligations of the Providers, and each other document or instrument now or hereafter executed and delivered to the Purchaser by or on behalf of the Providers pursuant to or in connection herewith or therewith. "PURCHASE PRICE" means, with respect to Eligible Receivables in each Purchased Batch, an amount equal to 95% of the aggregate Expected Net Value of such Receivables. "PURCHASED BATCH" means all Eligible Receivables purchased on any Transfer Date. "PURCHASED RECEIVABLE" means a Receivable that has been purchased by the Purchaser. "PURCHASER" has the meaning set forth in the preamble hereto. "RECEIVABLE INFORMATION" has the meaning set forth in Section 1.02(a) hereto. "RECEIVABLES" means all accounts or general intangibles and all other obligations for the payment of money, in each case, owing (or in the case of Unbilled Receivables, to be owing) by an Obligor to a Provider and arising out of the rendition of professional services, or the sale of products by a Provider in the ordinary course of its business, including all rights to reimbursement under any agreements with and payments from Obligors or other Persons, together with, to the maximum extent permitted by law, all accounts and general intangibles related thereto, all rights, remedies, guaranties, security interests and Liens in respect of the foregoing, all books, records and other Property evidencing or related to the foregoing, and all proceeds of any of the foregoing. "RETURN PRICE" means, with respect to a Denied Receivable, an amount equal to (x) either the Purchase Price or the increase in the capital account of the applicable Provider with respect to the prior contribution thereof, in each case, of such Denied Receivable, minus (y) any cash received from the Obligor in a Lockbox Account with respect to such Denied Receivable, plus (z) accrued and unpaid interest on such amount calculated at the interest rate then in effect under the Loan Agreement on the average outstanding difference between clauses (x) and (y) from and including the Business Day following the Transfer Date of such Denied Receivable to the date the Return Price is received by the Purchaser. "SERVICER TERMINATION EVENT" means any of the events specified in Exhibit IX hereto. "SETTLEMENT DATE" means the third Business Day of each Week; provided, that, if, following the occurrence of an Event of Termination, the Purchaser shall have selected a period shorter than one Week as the Settlement Period, the Settlement Date shall mean the fifth Business Day following the end of each such Settlement Period. "SETTLEMENT PERIOD" means each Week; provided, that notwithstanding the foregoing, the first Settlement Period shall be the period from and including the Initial Transfer Date through April 7, 2001; and provided, further, that following the occurrence of an Event of Termination, the Purchaser may from time to time, by notice to the Primary Servicer on behalf of the Providers, select a shorter period as the Settlement Period. "SUBSIDIARY" means, with respect to the Parent and each Provider, any corporation or entity of which at least a majority of the outstanding shares of stock or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors (or Persons performing similar functions) of such corporation or entity (irrespective of whether or not at the time, in the case of a I-10 27 corporation, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by the Parent or such Provider. "TANGIBLE NET WORTH" means, with respect to any Person at any time, the sum of (i) such Person's capital stock, capital in excess of par or stated value of shares of its capital stock, retained earnings and any other account which, in accordance with GAAP, constitutes stockholders' equity, minus (ii) treasury stock, minus (iii) the book value of all assets classified as intangible under GAAP, including, without limitation, goodwill, deferred taxes, deferred financing costs, trademarks, trade names, patents, copyrights and licenses. "TOTAL COLLECTIONS" means, as to each Batch, the sum of all Collections, Return Prices and Indemnified Amounts (but only to the extent that such Indemnified Amounts are received in lieu of Collections) distributed to and received by the Purchaser with respect thereto. "TRANSFER DATE" means the Initial Transfer Date and each Business Day thereafter. "TRANSFERRED BATCH" means, with respect to any Transfer Date, all Receivables purported by the Primary Servicer and applicable Provider to constitute Eligible Receivables and which are purchased by the Purchaser or contributed to capital of the Purchaser as of such Transfer Date. "TRANSMISSION" means, upon establishment of computer interface between the Providers and the Master Servicer in accordance with the specifications established by the Master Servicer, the transmission of Receivable Information through computer interface to the Master Servicer in a manner satisfactory to the Master Servicer. "UCC" means the Uniform Commercial Code as in effect from time to time in the specified jurisdiction. "UNBILLED RECEIVABLE" means a Receivable in respect of which the goods have been shipped, or the services rendered, to the relevant Obligor, and rights to payment therefor have accrued, but the invoice has not been rendered to the such Obligor. "WEEK" means a calendar week which in each instance shall begin on Sunday and end on Saturday. "WEEKLY REPORT" has the meaning set forth in Section 1.02 hereof. "WRITTEN NOTICE" and "IN WRITING" mean any form of written communication or a communication by means of telex, facsimile device, telegraph or cable. Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. I-11 28 EXHIBIT II CONDITIONS OF PURCHASES AND CONTRIBUTIONS 1. Conditions Precedent on the Initial Transfer Date. The purchase or contribution of the Transferred Batch under the Agreement on the Initial Transfer Date is subject to the conditions precedent that the Purchaser shall have received on or before the Initial Transfer Date the following, each (unless otherwise indicated) dated such date, in form and substance satisfactory to the Purchaser: (1) For the Parent, each Provider and the Primary Servicer, a certificate issued by the Secretary of State of the state of such entity's (i) organization as to the legal existence and good standing of such entity and (ii) locale of operation, if different from its state of organization, as to the foreign qualification, authorization and good standing of such entity in such locale (all of which certificates shall be dated not more than 20 days prior to the Initial Transfer Date). (2) For the Parent, each Provider and the Primary Servicer, certified copies of the charter and by-laws of such entity, certified copies of resolutions of the board of directors of such entity approving the Agreement, certified copies of all documents filed to register any and all assumed/trade names of such entity, and certified copies of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the Agreement. (3) For the Parent, each Provider and the Primary Servicer, a certificate of the Secretary or Assistant Secretary of such entity certifying the names and true signatures of the incumbent officers of such entity authorized to sign the Agreement and the other documents to be delivered by it hereunder. (4) (i) Certified copies of the balance sheets of the Parent and its Subsidiaries as at February 29, 2000, and February 28,1999 and the related statements of income and expense and retained earnings of the Parent and its Subsidiaries for the fiscal year then ended, certified in a manner acceptable to the Purchaser by independent public accountants acceptable to the Purchaser and demonstrating that there has been no Material Adverse Effect and (ii) unaudited balance sheets of the Parent and its Subsidiaries for the fiscal quarters ended May 31, 2000, August 31, 2000 and November 30, 2000 and the related statements of income and expense and retained earnings of the Parent and its Subsidiaries for such fiscal quarter then ended. (5) Acknowledgment or time stamped receipt copies of proper financing statements (showing each Provider as debtor/seller, the Purchaser as secured party/purchaser and Healthco-4 as assignee, and stating that the financing statements are being filed because UCC Section 9-102 does not distinguish between a sale and a secured loan for filing purposes) duly filed on or before the Initial Transfer Date under the UCC of all jurisdictions that the Purchaser may deem necessary or desirable in order to perfect the ownership interests contemplated by the Agreement. (6) Acknowledgment or time-stamped receipt copies of proper financing statements (showing each Provider as debtor and the Purchaser as secured party and Healthco-4 as assignee with respect to the grant by the Providers of a first priority security interest to the Purchaser in the Collateral, as contemplated by Section 4.04 of the Agreement) duly filed on or before the Initial Transfer Date under the UCC of all jurisdictions that the Purchaser may deem necessary or desirable in order to perfect such security interest. (7) Completed requests for information (UCC search results) dated within 20 days of the Initial Transfer Date, and a schedule thereof listing all effective financing statements filed in the jurisdictions referred to in subsections (e) and (f) above that name the Parent or any Provider as debtor, II-1 29 together with copies of all other financing statements filed against the Parent or any Provider (none of which shall cover any Collateral or the Receivables). (8) Releases of, and acknowledgment copies of proper termination statements (Form UCC-3), if any, necessary to evidence the release of all security interests, ownership and other rights of any Person previously granted by the Parent or any Provider in any of the Collateral or the Receivables. (9) A favorable opinion of Clifford Chance Roger & Wells LLP, counsel for the Primary Servicer, the Parent and the Providers, substantially in the form attached hereto as Exhibit XI-A, and as to such other matters as the HFG Group requests. (10) A favorable opinion of Clifford Chance Roger & Wells LLP, counsel for the Primary Servicer, the Parent and the Providers, substantially in the form attached hereto as Exhibit XI-B, and as to such other matters as the HFG Group requests. (11) Proof of payment of the $250,000 facility fee payable by the Purchaser to Healthcare Finance Group, Inc. (12) Proof of payment of all reasonable attorneys' fees and disbursements incurred by the Purchaser and the HFG Group. (13) A duly executed Depositary Agreement for each Lockbox and Lockbox Agreement, together with evidence satisfactory to the Purchaser that all Lockboxes and the Lockbox Accounts have been established such that all funds on deposit in the Lockbox Accounts are transmitted to the Concentration Account each Business Day. (14) Copies of all Notices to Obligors required pursuant to Article II of the Agreement, together with evidence satisfactory to the Purchaser that such Notices to Obligors have been or will be delivered to the addressees thereof. (15) A copy of each new form of invoice from each Provider showing the proper Lockbox as the remittance address. (16) A certificate from the Master Servicer stating that all computer linkings and interfaces necessary or desirable, in the judgment of the Master Servicer, to effectuate the transactions and information transfers contemplated hereunder, are fully operational to the reasonable satisfaction of the Master Servicer. (17) Executed acknowledgment letters regarding the ownership of the Receivables from franchisees who are owed fees in connection with Receivables consisting of at least 90% of such Receivables. 2. Conditions Precedent on All Transfer Dates. Each purchase and contribution of a Transferred Batch on a Transfer Date (including the Initial Transfer Date) shall be subject to the further conditions precedent that the Primary Servicer and the Providers and the Purchaser shall have agreed upon the terms of such purchase and also that: (1) The Providers shall have delivered to the Purchaser or the Master Servicer, as the case may be, no later than 10:30 a.m. on such Transfer Date, in form and substance satisfactory to the Purchaser or the Master Servicer (as the case may be), to the extent not previously provided, an executed II-2 30 Notice to Obligors to each Obligor responsible for the payment of any of the Batch Receivables to be transferred on such Transfer Date, directing such Obligors to make payment to the addresses and accounts designated in such Notice to Obligors, as set forth in Article II hereof, together with evidence that such Notice to Obligors has been delivered to such Obligors. (2) On each such Transfer Date the following statements shall be true and correct: (1) the representations and warranties contained in Exhibit III are true and correct in all material respects on and as of the date of such purchase as though made on and as of such date, and (2) no event has occurred and is continuing, or would result from such purchase, that constitutes an Event of Termination or that would constitute an Event of Termination but for the requirement that notice be given or time elapse or both. II-3 31 EXHIBIT III REPRESENTATIONS AND WARRANTIES The Parent, the Primary Servicer and each Provider represents and warrants as follows: (3) It is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation as set forth in the preamble hereto, and is duly qualified to do business, and is in good standing, in every jurisdiction where the nature of its business requires it to be so qualified, except in any jurisdiction other than that of its chief executive offices where the failure to be so qualified would not have a Material Adverse Effect. (4) The execution, delivery and performance by it of the Agreement and the other documents to be delivered by it thereunder, (i) are within its corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene (1) its charter or by-laws, (2) any law, rule or regulation applicable to it, (3) any contractual restriction binding on or affecting it or its Property, or (4) any order, writ, judgment, award, injunction or decree binding on or affecting it or its Property, and (iv) do not result in or require the creation of any Lien upon or with respect to any of its Properties, other than the interests created by the Agreement. The Agreement has been duly executed and delivered by it. It has furnished to the Purchaser a true, correct and complete copy of its certificate of incorporation and by-laws, including all amendments thereto. (5) No authorization or approval or other action by, and no notice to or filing with, any Governmental Entity is required for the due execution, delivery and performance by it of the Agreement or any other document to be delivered thereunder. (6) The Agreement constitutes the legal, valid and binding obligation of it, enforceable against it in accordance with its terms, except as limited by bankruptcy, insolvency, moratorium, fraudulent conveyance or other laws relating to the enforcement of creditors' rights generally and general principles of equity (regardless of whether enforcement is sought at equity or law). (7) It has all power and authority, and has all permits, licenses, accreditations, certifications, authorizations, approvals, consents and agreements of all Obligors, accreditation agencies and any other Person, other than those permits, licenses, accreditations, certifications, authorizations, approvals, consents and agreements, the failure of which to have is not reasonably likely to result in a Material Adverse Effect, for it (i) to own the assets (including Receivables) that it now owns, and (ii) to carry on its business as now conducted. (8) It has not been notified by any Obligor, or any other Person, during the immediately preceding 12 Month period, that such party has rescinded or not renewed, or is reasonably likely to rescind or not renew, any such permit, license, accreditation, certification, authorization, approval, consent or agreement granted to it or to which it is a party except as disclosed in Schedule III hereto or which is not reasonably likely to result in a Material Adverse Effect. (1) (9) As of the Initial Transfer Date, all conditions precedent set forth in Exhibit II have been fulfilled or waived in writing by the Purchaser, and as of each Transfer Date, the conditions precedent set forth in paragraph 2 of such Exhibit II have been fulfilled or waived in writing by the Purchaser. (10) The balance sheets of the Parent and its Subsidiaries as at February 29, 2000, and the related statements of income and expense, cash flows and retained earnings of the Parent and its Subsidiaries for the fiscal periods then ended, copies of which have been furnished to the Purchaser, fairly present the financial condition of the Parent and its Subsidiaries as at such date and the results of the III-1 32 operations of the Parent and its Subsidiaries for the period ended on such date, all in accordance with GAAP, and since February 29, 2000 there has been no change resulting in a Material Adverse Effect. (11) There is no pending or, to its knowledge, threatened action or proceeding or injunction, writ or restraining order affecting it or any of its Subsidiaries before any court, Governmental Entity or arbitrator which could reasonably be expected to result in a Material Adverse Effect, and it or any Subsidiary thereof is not currently the subject of, and has no present intention of commencing, an insolvency proceeding or petition in bankruptcy. (12) Such Provider is the legal and beneficial owner of the each Batch Receivable free and clear of any Lien; upon each purchase or contribution of a Transferred Batch, the Purchaser shall acquire valid ownership of each Batch Receivable therein and in the collections with respect thereto prior to all other Liens thereon. No effective financing statement or other instrument similar in effect covering any Collateral or any Batch Receivable is on file in any recording office, except those filed in favor of the Purchaser, Healthco-4 or any permitted assignee of Healthco-4 relating to the Agreement (or with respect to the Additional Collateral those filed in connection with Permitted Liens securing Debt which remains outstanding), and no competing notice or notice inconsistent with the transactions contemplated in the Agreement remains in effect with respect to any Obligor. (13) All Receivable Information, information provided in the application for the program effectuated by the Agreement, and each other document, report and Transmission provided by the Primary Servicer or any Provider to the HFG Group is or shall be accurate in all material respects as of its date and as of the date so furnished, and no such document contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. (14) The principal place of business and chief executive office of the Parent and each Provider and the office where the Parent and such Provider keeps its records concerning the Collateral and the Batch Receivables are located at the respective address referred to on the signature pages of the Agreement and there have been no other such locations for the four immediately prior Months. (15) Each transfer of a Transferred Batch will constitute a purchase or other acquisition of notes, drafts, acceptances, open accounts receivable or other obligations representing part or all of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended. (16) Each Receivable included in a Purchased Batch is, as of the Transfer Date of such Purchased Batch, an Eligible Receivable. (17) The provisions of the Agreement create legal and valid security interests in all of the Collateral owned or held by each Provider in the Purchaser's favor, and when all proper filings and other actions necessary to perfect such Liens have been completed, will constitute a perfected and continuing Lien on all of the Collateral owned or held by such Provider (excluding the Batch Receivables sold or contributed to the Purchaser pursuant to the provisions of the Agreement), having priority over all other Liens on such Collateral (other than Permitted Liens on Additional Collateral existing on the date hereof) of such Provider, enforceable against such Provider and all third parties. (18) All required Notices to Obligors have been prepared and delivered to each applicable Obligor, and all invoices now bear only the appropriate remittance instructions for payment direction to the proper Lockbox and the proper Lockbox Account, as the case may be. III-2 33 (19) Except as disclosed on Schedule III hereto, neither the Parent nor any Provider has changed its principal place of business or chief executive office in the last five years. (20) The exact name of the Parent and each Provider is as set forth on the signature pages of the Agreement and, except as set forth on such signature page, neither the Parent nor any Provider has changed its name in the last five years and, except as set forth on Schedule III, during such period and neither the Parent nor any Provider has used or now uses, any other fictitious, assumed or trade name. (21) With respect to itself or any Subsidiary there exists no event which has or is reasonably likely to have a Material Adverse Effect. (22) It is not in violation under any applicable statute, rule, order, decree or regulation of any court, arbitrator or governmental body or agency having jurisdiction over it which could reasonably be expected to have a Material Adverse Effect. (23) Except as disclosed in writing by the Parent to the Master Servicer prior to the Closing Date, it has filed on a timely basis all tax returns (federal, state and local) required to be filed and has paid, or made adequate provision for payment of, all taxes, assessments and other governmental charges due from it, unless contested in good faith by appropriate proceedings. No tax Lien has been filed and is now effective against it or any of its Properties, except any Lien in respect of taxes and other charges not yet due or contested in good faith by appropriate proceedings. To its knowledge, there are no pending investigations of it by any taxing authority or any pending but unassessed tax liability of it. It does not have any obligation under any tax sharing agreement. (1) (24) It is solvent and will not become insolvent after giving effect to the transactions contemplated by the Agreement; it has not incurred debts or liabilities beyond its ability to pay; it will, after giving effect to the transaction contemplated by the Agreement, have an adequate amount of capital to conduct its business in the foreseeable future; the sales and contributions of Receivables hereunder are made in good faith and without intent to hinder, delay or defraud its present or future creditors. (25) Other than as set forth on Schedule III attached hereto, the Lockboxes are the only post office boxes and the Lockbox Accounts are the only lockbox accounts maintained for Receivables, all funds on deposit in each Lockbox Account are transmitted each Business Day to the Concentration Account, and no direction is in effect directing Obligors to remit payments on Receivables other than to the Provider Lockbox or the Lockbox Account, each as described on Schedule IV. The Providers agree (i) not to instruct any Obligor to make any payment in respect of the Receivables to the account described on Schedule III and to use reasonable efforts (including, without limitation, the sending of a Notice to Obligors to the applicable Obligors, in multiple copies if necessary) to prevent any payment in respect of the Receivables from being made to such account and (ii) to deposit any funds received in such account into a Lockbox Account within one Business Day of receipt thereof. (26) Each pension plan or profit sharing plan to which it is a party has been fully funded in accordance with its obligations as set forth in such plan. (27) Except as disclosed on Schedule III, there are no pending civil or criminal investigations by any Governmental Entity involving it or its officers or directors, in their capacity as such, and neither it nor any of its officers or directors, in their capacity as such, has been involved in, or the subject of, any civil or criminal investigation by any Governmental Entity. III-3 34 (28) The primary business of the Providers is the provision of healthcare and healthcare related services, products, merchandise or equipment. (29) The assets of the Parent each Provider are free and clear of any Liens in favor of the Internal Revenue Service, any Employee Benefit Plan or the PBGC other than inchoate tax liens resulting from an assessment of the Parent or such Provider. (30) With respect to each Employee Benefit Plan of it, including to its knowledge as to any Multiemployer Plan, such Employee Benefit Plan has complied and been administered in accordance with its terms and in substantial compliance with all applicable provisions of ERISA and the Internal Revenue Code of 1986, as amended; neither it nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA; and it has no material unpaid liability for any Employee Benefit Plan. (31) No Batch Receivable constitutes or has constituted an obligation of the Parent, the Primary Servicer, any Subsidiary or other Person which is its Affiliate. (32) No transaction contemplated under this Agreement requires compliance with any bulk sales act or similar law. (33) It has, or has the right to use, valid provider identification numbers and licenses to generate the Receivables. (34) It shall treat each sale of Receivables hereunder as a sale for federal and state income tax, reporting and accounting purposes and shall treat each contribution of Receivables hereunder as a contribution for federal and state income tax, reporting and accounting purposes. (35) It is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation T, U, or X of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any extension of credit under this Agreement will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying margin stock. (36) With respect to each Receivable contributed to the capital of the Purchaser in each Batch, the Purchaser shall record in each applicable Provider's own capital account the aggregate Expected Net Value of such Receivables as a capital contribution. (37) All of the employees of each Provider are salaried employees and are not, and do not claim to be independent contractors. No such employee has any rights in, and has not claimed any rights in any Receivable. (38) Each Receivable represents the direct payment obligation of the applicable Obligor, and is not subject to any condition that such Obligor receive any payment or reimbursement from any third party. (39) ATC Staffing has no Subsidiary other than the Purchaser; ATC Healthcare has no Subsidiaries other than the Purchaser, ATC Staffing and Applied Management; Applied Management has no Subsidiaries; and the Purchaser has no Subsidiaries. III-4 35 (40) Except as listed on Schedule VIII hereto, no Provider or any of their respective Subsidiaries has any Debt (other than the Debt of the Purchaser under the Loan Agreement). (1) III-5 36 EXHIBIT IV COVENANTS Until the later of the Facility Termination Date and the Final Payment Date, the Parent, the Primary Servicer and each Provider agrees as follows: (41) Compliance With Laws, etc. It will comply in all material respects with all applicable laws, rules, regulations and orders and preserve and maintain its corporate existence, rights, franchises, qualifications, and privileges. (42) Offices, Records and Books of Account. It will keep its principal place of business and chief executive office and the office where it keeps its records concerning the Collateral and the Batch Receivables at the address set forth under its name on the signature pages to the Agreement or, upon 30 days' prior Written Notice to the Purchaser, at any other locations in jurisdictions where all actions reasonably requested by the Purchaser or otherwise necessary to protect, perfect and maintain the Purchaser's security interest in the Collateral have been taken and completed. It shall keep its books and accounts in accordance with GAAP and shall make a notation on its books and records, including any computer files, to indicate which Receivables have been sold or contributed to the Purchaser and the security interest of the Purchaser in the Collateral and its Receivables not sold or contributed to the Purchaser. It shall maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables and related contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for collecting all Batch Receivables (including, without limitation, records adequate to permit the daily identification of each Batch Receivable and all Collections of and adjustments to each existing Batch Receivable) and for providing the Receivable Information. (43) Performance and Compliance With Contracts and Credit and Collection Policy. It will, at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the contracts and other documents related to the Batch Receivables and its responsibilities under the Agreement, and timely and fully comply in all material respects with the Credit and Collection Policy in regard to each Batch Receivable and the related contract, and it shall maintain, at its expense, in full operation each of the bank accounts and lockboxes required to be maintained under the Agreement. It shall not do anything to impede or interfere, or suffer or permit any other Person to impede or interfere in any material respect, with the collection by the Purchaser, or the Master Servicer, or any other Person designated by the Purchaser on behalf of the Purchaser, of the Batch Receivables. (44) Notice of Breach of Representations and Warranties. It shall promptly (and in no event later than one Business Day following actual knowledge thereof) inform the Purchaser and the Master Servicer of any breach of covenants or representations and warranties hereunder, including, without limitation, upon discovery of a breach of the Eligibility Criteria set forth in the Loan Agreement. (1) (45) Sales, Liens, etc. It will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Liens (other than Permitted Liens on Additional Collateral) upon or with respect to, the Collateral, the Batch Receivables, or upon or with respect to any account to which any Collections of any Batch Receivable are sent, or assign any right to receive income in respect thereof except those Liens in favor of the Purchaser, Healthco-4 or any assignee of Healthco-4 relating to the Agreement. (46) Extension or Amendment of Batch Receivables. It shall not amend, waive or otherwise permit or agree to any deviation from the terms or conditions of any Batch Receivable except in IV-1 37 accordance with the Credit and Collection Policy or in the ordinary course of its business consistent with its past practice. (47) Change in Credit and Collection Policy. It will not make any material change in the Credit and Collection Policy without the prior written consent of the Purchaser; provided, however, that during the continuance of an Event of Termination, it will not make any change in the Credit and Collection Policy. (48) Audits and Visits. It will, at any time and from time to time during regular business hours as requested by the Purchaser, permit the Purchaser, or its agents or representatives (including the Master Servicer), upon reasonable notice, (i) on a confidential basis, to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in its possession or under its control relating to Batch Receivables including, without limitation, the related contracts, and (ii) to visit its offices and properties for the purpose of examining and auditing such materials described in clause (i) above, and to discuss matters relating to Batch Receivables or its performance hereunder or under the contracts with any of its officers or employees having knowledge of such matters. During the continuance of an Event of Termination, it shall permit the Master Servicer to have at least one agent or representative physically present in its administrative office during normal business hours to assist it in performing its obligations under the Agreement, including its obligations with respect to the collection of Batch Receivables pursuant to Article I of the Agreement. (49) Change in Payment Instructions. It will not terminate any Lockbox or Lockbox Account, or make any change or replacement in the instructions contained in any invoice, Notice to Obligors or otherwise, or regarding payments with respect to Receivables to be made to any Lockbox or Lockbox Account, except upon the prior and express written consent of the Program Manager. (50) Reporting Requirements. It will provide to the Purchaser and the Master Servicer (in multiple copies, if requested by the Purchaser or the Master Servicer) the following: (1) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Parent, consolidated balance sheets of the Parent and its Subsidiaries and, if an Additional Reporting Event has occurred, consolidated balance sheets of ATC Healthcare and its Subsidiaries, in each case, as of the end of such quarter and consolidated statements of income, cash flows and retained earnings of the Parent and its Subsidiaries, and if an Additional Reporting Event has occurred consolidated statements of income, cash flows and retained earnings of ATC Healthcare and its Subsidiaries, in each case, for the period commencing at the beginning of the current fiscal year and ending with the end of such quarter, all in reasonable detail, fairly presenting the financial position and results of operations of the Parent and its Subsidiaries, or ATC Healthcare and its Subsidiaries, as the case may be, as set forth above, as at the date thereof and for such periods, and prepared in accordance with GAAP, certified by the chief financial officer of Parent and each Provider, and accompanied by a certificate of a Responsible Officer of the Parent, Primary Servicer and each Provider detailing the Parent's, Primary Servicer's and the Providers' compliance for such fiscal period with all terms, including the financial covenants, contained in the Agreement, and to the extent any non-compliance exists, a description of the steps being taken by the Parent, Primary Servicer or the Providers to address such non-compliance; (2) as soon as available and in any event within 90 days after the end of each fiscal year of the Parent, a copy of the audited consolidated financial statements (together with explanatory notes thereon) and the auditor's report letter for such year for the Parent and its IV-2 38 Subsidiaries, containing financial statements for such year audited by Deloitte & Touche or other independent public accountants of recognized standing acceptable to the Purchaser, and accompanied by a certificate of an authorized officer of the Parent, Primary Servicer and each Provider detailing the Parent's, Primary Servicer's and the Providers' compliance for such fiscal period with all terms, including the financial covenants, contained in the Agreement, and to the extent any non-compliance exists, a description of the steps being taken by the Parent, Primary Servicer or the Providers to address such non-compliance; (3) if an Additional Reporting Event has occurred, as soon as available and in any event within 90 days after the end of each fiscal year of the Parent, a copy of consolidated financial statements for such year for ATC Healthcare and its Subsidiaries, containing financial statements for such year, all in reasonable detail, fairly presenting the financial position and results of operations of ATC Healthcare and its Subsidiaries as set forth above, as at the date thereof and for such period, and prepared in accordance with GAAP, certified by the chief financial officer of each Provider, and accompanied by a certificate of a Responsible Officer of each Provider detailing such Provider's compliance for such fiscal period with all terms, including the financial covenants, contained in the Agreement, and to the extent any non-compliance exists, a description of the steps being taken by such Provider to address such non-compliance; (4) promptly and in any event within five Business Days after the occurrence of each Event of Termination or event which, with the giving of notice or lapse of time, or both, would constitute an Event of Termination, a statement of the chief financial officer of the Parent and each Provider setting forth details of such Event of Termination or event, and the action that it has taken and proposes to take with respect thereto; (5) promptly after the sending or filing thereof, if any, copies of all reports and registration statements that the Parent, such Provider or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange and official statements that the Parent, such Provider or any Subsidiary files with respect to the issuance of tax-exempt indebtedness and after an Event of Termination or Servicer Termination Event, copies of all reports (if any) that the Parent, such Provider or any Subsidiary sends to any of its security holders; (6) promptly after the filing or receiving thereof, copies of all reports and notices that the Parent, such Provider or any of its Affiliates files under ERISA with the Internal Revenue Service or the PBGC or the U.S. Department of Labor or that the Parent, such Provider or any of its Affiliates receives from any of the foregoing or from any Multiemployer Plan to which the Parent, such Provider or any of its Affiliates is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition which could, in the aggregate, result in the imposition of liability on the Parent, such Provider or any such Affiliate in excess of $250,000; (7) at least ten Business Days prior to any change in the Parent's or such Provider's name or any implementation of a new trade/assumed name, a Written Notice setting forth the new name or trade name and the proposed effective date thereof and copies of all documents required to be filed in connection therewith; (8) promptly (and in no event later than three Business Days following actual knowledge or receipt thereof), Written Notice in reasonable detail, of (w) any Lien in excess of $50,000 asserted or claim made against the Batch Receivables, (x) the occurrence of a Servicer Termination Event, (y) the occurrence of any other event which could have a material adverse IV-3 39 effect on the value of a Batch Receivable or on the interest of the Purchaser in a Batch Receivable or (z) the results of any cost report, investigation or similar audit being conducted by any federal, state or county Governmental Entity or its agents or designees; (9) at least 30 days prior to the commencement of each fiscal year, a consolidated and consolidating operating plan (together with a complete statement of the assumptions on which such plan is based) of each Provider certified by a Responsible Officer, which shall include quarterly budgets for the prospective year in reasonable detail acceptable to the Purchaser and will integrate operating profit and cash flow projections and personnel, capital expenditures, and facilities plans; (10) promptly upon receipt thereof, a copy of any management letter or written report submitted to the Parent or such Provider by independent certified public accountants with respect to the Subsidiaries, business, condition (financial or otherwise), operations, prospects, or Properties of the Parent or such Provider; (11) no later than five Business Days after the commencement thereof, Written Notice of all actions, suits, and proceedings before any Governmental Entity or arbitrator affecting the Parent or such Provider which, if determined adversely to the Parent or such Provider, could have a Material Adverse Effect; (12) promptly after the furnishing thereof, copies of any statement or report furnished by the Parent or such Provider to any other party pursuant to the terms of any indenture, loan, or credit or similar agreement and not otherwise required to be furnished to the Purchaser pursuant to this Agreement; (13) as soon as possible and in any event within three Business Days after becoming aware of the occurrence thereof, Written Notice of any matter that could reasonably be expected to result in a Material Adverse Effect; (14) as soon as available, (A) one copy of each financial statement, report, notice or proxy statement sent by the Parent to its stockholders generally, (B) and one copy of each regular, periodic or special report, registration statement, or prospectus filed by the Parent or such Provider with any securities exchange or the Securities and Exchange Commission or any successor agency or the Bankruptcy Court, and (C) all press releases and other statements made available by the Parent or such Provider to the public concerning developments in the business of the Parent or such Provider; (15) within the sixty (60) day period prior to the end of each fiscal year of the Parent, a report satisfactory in form to the Purchaser, listing all material insurance coverage maintained as of the date of such report by the Parent and its Subsidiaries and all material insurance planned to be maintained by the Parent and its Subsidiaries in the subsequent fiscal year; and (16) such other information respecting the Receivables or the condition or operations, financial or otherwise, of the Parent, such Provider or any Subsidiary or Affiliate as the Purchaser may from time to time reasonably request. (51) Notice of Proceedings; Overpayments. The Primary Servicer shall promptly notify the Master Servicer in the event of any action, suit, proceeding, dispute, set-off, deduction, defense or counterclaim in excess of $35,000 that is or may be asserted by an Obligor with respect to Receivables IV-4 40 related to such Obligor. The relevant Provider shall make any and all payments to the Obligors necessary to prevent the Obligors from offsetting any earlier overpayment to such Provider against any amounts the Obligors owe on any Batch Receivables. (52) Officer's Certificate. On the date the financial statements referred to in clause (j) above are to be delivered in each fiscal year after the Initial Transfer Date, the chief financial officer of the Parent and each Provider shall deliver a certificate to the Purchaser, stating that, as of such date, (i) all representations and warranties set forth in the Agreement are true and correct, (ii) the conditions precedent set forth in paragraph 2 of Exhibit II have been fulfilled or waived in writing by the Purchaser, (iii) the Parent and each of its Subsidiaries has paid all payroll taxes and charges then due and (iv) no Event of Termination exists and is continuing. (1) (53) Further Instruments, Continuation Statements. It shall, at its expense, promptly execute and deliver all further instruments and documents, and take all further action that the Program Manager or the Purchaser may reasonably request, from time to time, in order to perfect, protect or more fully evidence the full and complete transfer of ownership of the Batch Receivables and the security interest in the Collateral, or to enable the Purchaser or the Program Manager to exercise or enforce the rights of the Purchaser hereunder or under the Batch Receivables. Without limiting the generality of the foregoing, the Parent, the Primary Servicer and each Provider will upon the request of the Program Manager execute and file such UCC financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or notices, as may be, in the opinion of the Program Manager, necessary or appropriate. The Parent, the Primary Servicer and each Provider hereby authorizes the Program Manager or its designees, to file one or more financing or continuation statements and amendments thereto and assignments thereof, relative to all or any of the Batch Receivables or the Collateral now existing or hereafter arising without the signature of the Parent or such Provider where permitted by law. If the Parent, the Primary Servicer or any Provider fails to perform any of its agreements or obligations under the Agreement, the Program Manager may (but shall not be required to) itself perform, or cause performance of, such agreement or obligation, and the expenses of the Program Manager incurred in connection therewith shall be payable by the Parent, the Primary Servicer or such Provider. (54) Taxes. It shall pay any and all taxes (excluding the Purchaser's income, gross receipts, franchise, doing business or similar taxes) relating to the transactions contemplated under the Agreement, including but not limited to the sale, transfer and assignment of each Batch Receivable. (55) Deviation from Terms of Batch Receivable, etc. None of the Parent, the Primary Servicer or any Provider shall, without the prior written consent of the Purchaser: (1) other than in connection with the purchase of a Denied Receivable or as consistent with past practice in the operation of its business, compromise, adjust, extend, satisfy, subordinate, rescind, set off, waive, amend, or otherwise modify, or permit or agree to any deviation from, the terms and conditions of any Batch Receivable, or materially or adversely amend, modify or waive any term or condition of any contract related thereto; (2) (x) amend, modify, supplement or delete in any way or to any extent any provision for uncollectible accounts and free care applicable to any Batch Receivable or (y) amend, modify or supplement in any way or to any extent any financial category or change in any way or to any extent the manner in which any financial category is treated or reflected in the Parent or such Provider's records; (3) materially or adversely alter or modify its claims processing system; or IV-5 41 (4) change, modify or rescind any direction contained in any invoice or previously delivered Notice to Obligors. (1) (56) Purchaser's Ownership of Batch Receivables. It shall not prepare or permit to be prepared any financial statements which shall account for the transactions contemplated hereby in a manner which is, or in any other respect account for the transactions contemplated hereby in a manner which is, inconsistent with the Purchaser's ownership of the Batch Receivables. (57) Merger, Consolidation. It shall not, and shall not enter into an agreement to, merge with or into or consolidate with or into, another Person, or sell, convey, transfer, lease, assign or otherwise dispose of all or substantially all of its assets (whether now owned or hereafter acquired). (58) No "Instruments". It shall not take any action which would allow, result in or cause any Transferred Batch or Batch Receivable to be evidenced by an "instrument" within the meaning of the UCC of the applicable jurisdiction. (59) Intentionally omitted. (60) Implementation of New Invoices. The Parent and such Provider shall take all reasonable steps to ensure that all invoices rendered or dispatched on or after the Initial Transfer Date contain only the remittance instructions required under Article II of this Agreement. (61) Notice of Termination or Suspension of Contracts. It shall promptly (and in no event later than one Business Day following actual knowledge thereof) inform the Purchaser and the Master Servicer of any termination or suspension of any of its contracts, the termination or suspension of which could reasonably be expected to have a Material Adverse Effect. (62) Fiscal Year. To cause the fiscal year for the Parent and each of its Subsidiaries to end on the last day of February of each year. (63) Franchise Agreements. After the Initial Transfer Date no Provider shall execute any franchise agreement unless (i) such franchise agreement is in form and substance acceptable to the Program Manager or (ii) is accompanied by an additional agreement in form and substance acceptable to the Program Manager. IV-6 42 EXHIBIT V EVENTS OF TERMINATION Each of the following shall be an "EVENT OF TERMINATION": (64) The Primary Servicer, in its capacity as agent for the Providers and the Purchaser pursuant to Section 1.05(b), shall fail to perform or observe any term, covenant or agreement included in the Primary Servicer Responsibilities (other than a Servicer Termination Event resulting from the events described in paragraph (g) of this Exhibit) and such failure shall remain unremedied for 15 days or the Primary Servicer, the Parent or any Provider shall fail to make when due any payment or deposit to be made by it under the Agreement. (65) The Parent or any Provider or the Primary Servicer (i) fails to transfer in a timely manner any servicing rights and obligations with respect to the Batch Receivables to any successor designated pursuant to Section 1.05(b) of the Agreement or (ii) fails to make any payment required under the Agreement within three Business Days of the date when due (unless such payment obligation has been fulfilled in full pursuant to the Purchaser's set-off rights under Section 4.03 of the Agreement). (66) Any representation or warranty (other than those representations and warranties (i) with respect to the purchase of Receivables that are covered by paragraph (f) of this Exhibit V and (ii) with respect to Batch Receivables, the Return Price with respect thereto is paid to the Purchaser in the manner set forth in Article IV of this Agreement within five Business Days following demand therefor) made or deemed made by the Parent, the Primary Servicer or any Provider under or in connection with the Agreement, any Provider Document or any information or report delivered by the Parent, the Primary Servicer or any Provider pursuant to the Agreement or any Provider Document shall prove to have been incorrect or untrue in any material respect when made or deemed made or delivered. (67) The Parent, the Primary Servicer or any Provider fails to perform or observe any other term, covenant or agreement contained in the Agreement or in any Provider Document on its part to be performed or observed and any such failure shall remain unremedied for fifteen (15) Business Days after the earlier of (i) the discovery thereof by the Parent, the Primary Servicer or such Provider and (ii) written notice thereof shall have been given to the Parent, such Provider or the Primary Servicer by the Purchaser. (68) The Parent or any Provider shall fail to pay any principal of or premium or interest on any of its Debt which has an outstanding balance in excess of $150,000 when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to repay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof. (69) Any purchase or contribution of a Transferred Batch pursuant to the Agreement shall for any reason (other than pursuant to the terms hereof) fail or cease to create or fail or cease to be a valid and perfected ownership interest in each Batch Receivable in such Transferred Batch and the Collections with respect thereto free and clear of all Liens (other than Liens in favor of the Purchaser, Healthco-4, or any assignee of Healthco-4 relating to the Agreement) unless, as to any such Batch V-1 43 Receivable, the Return Price with respect thereto is paid to the Purchaser in the manner set forth in Article IV of the Agreement within five Business Days following demand therefor. (70) The Parent, the Primary Servicer or any Provider shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Parent, the Primary Servicer or such Provider seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its Property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its Property) shall occur; or the Parent, the Primary Servicer or any Provider shall take any action to authorize any of the actions set forth above in this paragraph (g). (71) There shall have occurred any Material Adverse Effect. (72) The Parent, the Primary Servicer or any Provider shall have consummated, or have entered into any transaction or agreement which shall result in the consummation of (i) the merger or consolidation of the Parent, the Primary Servicer or any Provider into or with another Person, (ii) the acquisition of all or a substantial portion of the assets of any Person, (iii) the transfer, sale, assignment, lease or other disposition of all or a substantial portion of the Parent, the Primary Servicer's or any Provider's assets or Properties, (iv) a change in the general nature of the Primary Servicer or any Provider's business, or the Parent engages in any activity other than owning stock and activities incidental thereto, or (v) the sale of a controlling interest, directly or indirectly, in the Parent, the Primary Servicer or any Provider; provided, however, that the Parent or any Provider may acquire all or substantially all of the assets or equity interests of any Person so long as (i) in the case of an acquisition by a Provider, such Person engages in a substantially similar line of business to such Provider and (ii) prior to the consummation of such acquisition the Parent has delivered a certificate, executed by its chief financial officer, to the Master Servicer demonstrating, in a manner acceptable to the Master Servicer, pro forma compliance with each of the financial covenants contained herein both immediately prior to and after giving effect to such acquisition. (73) Judgments or orders for payment of money (other than judgments or orders in respect of which adequate insurance is maintained for the payment thereof) against the Parent and its Subsidiaries in excess of $250,000 in the aggregate remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of 30 days or more. (74) Any governmental authority (including, without limitation, the Internal Revenue Service or the PBGC) files a notice of a Lien against the assets of the Parent, the Primary Servicer or any Provider other than a Lien (i) that is limited by its terms to assets other than Receivables, and (ii) that does not result in a Material Adverse Effect. (75) The Parent, the Primary Servicer or any Provider does not maintain, keep, and preserve all of its material Properties necessary or useful in the proper conduct of its business in good repair, working order, and condition (ordinary wear and tear excepted) and make all necessary repairs, renewals, replacements, betterments, and improvements thereof. V-2 44 (76) The Parent, the Primary Servicer or any Provider does not pay or discharge at or before maturity or before becoming delinquent (i) all taxes, levies, assessments, and governmental charges imposed on it or its income or profits or any of its Property, and (ii) all lawful claims for labor, material, and supplies, which, if unpaid, might become a Lien upon any of its Property, other than in connection with good faith disputes for which adequate reserves in accordance with GAAP have been taken. (77) The Parent or any Provider does not keep insured by financially sound and reputable insurers all Property of a character usually insured by corporations engaged in the same or similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such corporations and carry such other insurance as is usually carried by such corporations. Each policy referred to in this clause (n) shall provide that it will not be canceled, amended, or reduced except after not less than thirty (30) days' prior written notice to the Purchaser and Healthco-4 and shall also provide that the interests of the Purchaser shall not be invalidated by any act or negligence of the Parent or any Provider. The Parent or any Provider does not advise the Purchaser promptly of any policy cancellation, reduction, or amendment. Any insurance policy for property, casualty, liability and business interruption coverage for the Parent or any Provider does not name Healthco-4 as assignee of the Purchaser as loss payee (as the Purchaser's interests may appear) or an additional insured, as appropriate. (78) The Parent, the Primary Servicer or any Provider does not maintain proper books of record and account in which full, true and correct entries in conformity with GAAP are made of all dealings and transactions in relation to its business and activities. (79) The Parent, the Primary Servicer or any Provider does not comply in all material respects with (i) any document directly relating to the responsibilities of the Parent, the Primary Servicer or such Provider, respectively, under the Agreement or (ii) any agreement, contract, or instrument that results in a Material Adverse Effect. (80) The Parent, the Primary Servicer or any Provider does not comply with all minimum funding requirements and all other material requirements of ERISA, if applicable, so as not to give rise to any liability thereunder. (81) The Parent, the Primary Servicer or any Provider engages in any line or lines of business activity other than businesses reasonably related to the businesses in which it is engaged on the date hereof, provided, however, after the Closing Date the Parent may form a new direct Subsidiary of the Parent, which Subsidiary may engage in a business not related to the businesses of the Parent on the Closing Date. (82) An "Event of Default" (as defined in the Loan Agreement) shall occur under the Loan Agreement. (83) Any operative provision or any other material provision of this Agreement shall for any reason cease to be valid and binding on the Parent, the Primary Servicer or any Provider, or the Primary Servicer or any Provider shall so state in writing. (84) The Loss-to-Liquidation Ratio in any Month exceeds 7.50%. (85) The Delinquency Ratio in any Month exceeds 15%. (86) Consolidated Net Worth. Consolidated Net Worth Parent at the end of any fiscal quarter is less than $8,000,000. V-3 45 (87) Consolidated EBITDA. Consolidated EBITDA Parent as of the end of any fiscal quarter for the four fiscal quarter period then most recently ended, is less than $1,500,000. (88) Accounts Receivable Turnover. The Accounts Receivable Turnover Parent as of the end of any fiscal quarter, is less than 3.50. (89) Debt to Consolidated Tangible Net Worth Ratio. The ratio of Debt of the Parent and its Subsidiaries on a consolidated basis to its Consolidated Tangible Net Worth Parent exceeds 20 at the end of any fiscal quarter. (90) Current Ratio. The ratio of Consolidated Current Assets Parent to Consolidated Current Liabilities Parent at the end of any fiscal quarter, is less than 1.75. (91) Consolidated Interest Coverage Ratio. Consolidated Interest Coverage Ratio Parent as of the end of any fiscal quarter, is less than 1.1. (92) Consolidated Tangible Net Worth. Consolidated Tangible Net Worth Parent at the end of any fiscal quarter (i) from the Closing Date through the fiscal quarter ending February 28, 2002, is less than $400,000 and (ii) thereafter, is less than $800,000. (93) Restrictions on Parent. The Parent shall incur Debt (including any Guaranty) in excess of $50,000, in the aggregate, or incur any Liens other than Debt or Liens incurred in connection with this Agreement or any of the Provider Documents and involuntary Liens which are discharged within 15 days of their creation or are being contested in good faith by the Parent and for which the Parent is fully indemnified by a Person who is not a Affiliate of the Parent to the satisfaction of the Master Servicer, in its good faith discretion. (94) Change of Control. A Change of Control shall occur. (95) Debt Service Coverage Ratio. Consolidated Debt Service Coverage Ratio Parent at the end of any fiscal quarter is less than 1.1. If an Additional Reporting Event shall have occurred, in addition to the foregoing, each of the following shall be an Event of Termination: (96) Consolidated Net Worth. Consolidated Net Worth Providers at the end of any fiscal quarter is less than $8,000,000. (97) Consolidated EBITDA. Consolidated EBITDA Providers as of the end of any fiscal quarter for the four fiscal quarter period then most recently ended, is less than $1,500,000. (98) Accounts Receivable Turnover. The Accounts Receivable Turnover Providers, as of the end of any fiscal quarter, is less than 3.50. (99) Debt to Consolidated Tangible Net Worth Ratio. The ratio of Debt of ATC Healthcare and its Subsidiaries on a consolidated basis to Consolidated Tangible Net Worth Providers, exceeds 20 at the end of any fiscal quarter. V-4 46 (100) Current Ratio. The ratio of Consolidated Current Assets Providers to Consolidated Current Liabilities Providers, at the end of any fiscal quarter, is less than 1.75. (101) Consolidated Interest Coverage Ratio. Consolidated Interest Coverage Ratio Providers as of the end of any fiscal quarter, is less than 1.1. (102) Consolidated Tangible Net Worth. Consolidated Tangible Net Worth Providers at the end of any fiscal quarter (i) from the Closing Date through the fiscal quarter ending February 28, 2002, is less than $400,000 and (ii) thereafter, is less than $800,000. (103) Debt Service Coverage Ratio. Consolidated Debt Service Ratio Providers at the end of any fiscal quarter is less than 1.1. (1) V-5 47 EXHIBIT VI RECEIVABLE INFORMATION The following information shall, as appropriate, be provided by each Provider to the Master Servicer with respect to each Batch Receivable, together with such other information and in such form as may reasonably be requested from time to time by the Master Servicer and as, in accordance with applicable law, may be disclosed or released to the Master Servicer (the "RECEIVABLE INFORMATION"): (1) Obligor required information (i.e., information provided in the ordinary course of business to any specified Obligor or any other information required to be provided to an Obligor pursuant to any agreement, contract or other arrangement with such Obligor); and (2) billing information (i.e., all information provided by the Providers on invoices to Obligors and any other information required to be provided pursuant to the Credit and Collection Policy and a detailed copy of the bill). VI-1 48 EXHIBIT VII FORM OF NOTICE TO OBLIGORS [Letterhead of the relevant Provider] [Date] [Name and Address of Obligor] Re: Change of Account and Address To Whom it May Concern: Please be advised that in connection with a financing, we (the "Provider") are selling and contributing to ATC Funding, LLC (the "Purchaser"), an affiliated company, all of our existing and future receivables payable by you to us; and the Purchaser is assigning the aforementioned existing and future arising receivables as collateral to HFG Healthco-4 LLC (the "Lender"). Accordingly, you are hereby directed to make: (1) All wire transfers directly to the following account: ------------------------------- ------------------------------- ------------------------------- Account # ---------------------- ABA # -------------------------- Confirm Phone Number: --------- Attention: -------------------- (2) All remittance advices and other forms of payment, including checks, to the following address: ------------------------------- ------------------------------- Reference: HFG HEALTHCO-4 LLC The foregoing directions shall apply to all existing receivables payable to us and (until further written notice) to all receivables arising in the future and may not be revoked except by a writing executed by the Purchaser. Please be advised that it is only the receivables being sold; we shall continue to provide you the services we have provided you with to date. VII-1 49 Please acknowledge your receipt of this notice by signing the enclosed copy of this letter and returning it in the enclosed envelope. Thank you for your cooperation in this matter. [RELEVANT PROVIDER] By: --------------------------------- [Authorized Officer] ATC FUNDING, LLC By: ------------------------------ [Authorized Officer] Receipt Acknowledged: [Name of Obligor] By: --------------------------- Title: VII-2 50 EXHIBIT VIII PRIMARY SERVICER RESPONSIBILITIES ATC Healthcare shall be responsible for the following administration and servicing obligations (the "PRIMARY SERVICER RESPONSIBILITIES") which shall be performed by the Primary Servicer on behalf of the Providers until such time as a successor servicer shall be designated and shall accept appointment pursuant to Section 1.05(b) of the Agreement: (104) Servicing Standards and Activities. The Primary Servicer agrees to administer and service the Batch Receivables sold or contributed by the Providers in each Transferred Batch (i) to the extent consistent with the standards set forth in clauses (b)(i) through (iv) below, with the same care that it exercises in administering and servicing similar receivables for its own account, (ii) within the parameters of services set forth in paragraph (b) of this Exhibit VIII, as such parameters may be modified by mutual written agreement of the Purchaser and the Primary Servicer, (iii) in compliance at all times with applicable law and with the agreements, covenants, objectives, policies and procedures set forth in the Agreement, and (iv) in accordance with industry standards for servicing healthcare receivables unless such standards conflict with the procedures set forth in paragraph (b) of this Exhibit VIII in which case the provisions of paragraph (b) shall control. The Primary Servicer shall establish and maintain electronic data processing services for monitoring, administering and collecting the Batch Receivables in accordance with the foregoing standards and shall, within three Business Days of the deposit of any checks, other forms of cash deposits or other written matter into a Lockbox or Lockbox Account, post such information to its electronic data processing services. (105) Parameters of Primary Servicing. The Primary Servicer Responsibilities shall be performed within the following parameters: (1) Subject to the review and authority of the Purchaser and except as otherwise provided herein, the Primary Servicer shall have full power and authority to take all actions that it may deem necessary or desirable, consistent in all material respects with its existing policies and procedures with respect to the administration and servicing of accounts receivable, in connection with the administration and servicing of Batch Receivables. Without limiting the generality of the foregoing, the Primary Servicer shall, in the performance of its servicing obligations hereunder, act in accordance with all legal requirements and subject to the terms and conditions of the Agreement. The Primary Servicer agrees that the Primary Servicing Fee has been calculated to cover all costs and expenses incurred in the performance of its servicing obligations hereunder and no other reimbursement of costs and expenses shall be payable to the Primary Servicer. (2) The Primary Servicer shall not be entitled to sue to enforce or collect any Batch Receivable without the prior written consent of the Purchaser unless the Primary Servicer shall have purchased such Batch Receivable in accordance with the Agreement. (3) The Primary Servicer shall not change in any material respect its existing policies and procedures with respect to the administration and servicing of accounts receivable (including, without limitation, the amount and timing of write-offs) without the prior written consent of the Purchaser. (4) The Primary Servicer will be responsible for monitoring and collecting the Batch Receivables, including, without limitation, contacting Obligors that have not made payment VIII-1 51 on their respective Batch Receivables within the customary time period for such Obligor, and resubmitting any claim rejected by an Obligor due to incomplete information. (5) If the Primary Servicer determines that a payment with respect to a Batch Receivable has been received by any other Person, the Primary Servicer shall promptly advise the Purchaser, and the Purchaser shall be entitled to presume that the reason such payment was made to such other Person was because of a breach of representation or warranty in the Agreement with respect to such Batch Receivable (such as, by way of example, the forms related to such Batch Receivable not being properly completed so as to provide for direct payment by the Obligor to the Primary Servicer), unless the Primary Servicer shall demonstrate that such is not the case. In the case of any such Batch Receivable which is determined not to be a Denied Receivable, the Primary Servicer shall promptly demand that such other Person remit and return such funds. If such funds are not promptly received by the applicable Provider, the Primary Servicer shall take all reasonable steps to obtain such funds. (6) Notwithstanding anything to the contrary contained herein, no Provider may amend, waive or otherwise permit or agree to any deviation from the terms or conditions of any Batch Receivable in any material respect without the prior consent of the Purchaser. (7) The Primary Servicer shall take no action inconsistent with the Purchaser's ownership of the Receivables. (106) The Loan Agreement. The Primary Servicer shall be responsible, with the Purchaser, for the determination and application of the Eligibility Criteria and the delivery and certification of information relating to the Receivables required to be delivered under the Loan Agreement. (107) Aged Term Servicing. The parties hereby agree that at such time as any Batch Receivable is unpaid for more than 365 days after the Last Service Date, the Primary Servicer shall, upon the request of the Purchaser, turn over all of its Primary Servicer Responsibilities under this Agreement with respect to such Batch Receivable to a successor servicer selected by the Purchaser, and such servicer shall thereafter service such Batch Receivable. (108) Termination of Primary Servicer Responsibilities; Cooperation. Upon the termination of the performance of the Primary Servicer Responsibilities by the Primary Servicer in accordance with Section 1.05(b) of the Agreement, the Primary Servicer shall immediately transfer to a successor servicer designated by the Purchaser all records, computer access and other information as shall be necessary or desirable, in the reasonable judgment of such successor servicer, to perform such responsibilities. The Primary Servicer shall otherwise cooperate fully with such successor servicer. (109) Primary Servicing Fee. Upon the transfer of servicing with respect to any Receivable pursuant to this Agreement, the Primary Servicer shall no longer be paid the Primary Servicing Fee relating to such Receivables, and such Primary Servicing Fee will be paid to the successor Person performing the Primary Servicer Responsibilities with respect thereto. (1) VIII-2 52 EXHIBIT IX SERVICER TERMINATION EVENTS Each of the following shall be a "SERVICER TERMINATION EVENT": (110) An event has occurred and is continuing that constitutes an Event of Termination or that would constitute an Event of Termination but for the requirement that notice be given or time elapse or both. (111) The Primary Servicer is not performing, or becomes unable (in the commercially reasonable determination of the Purchaser) to perform, fully the Primary Servicer Responsibilities set forth in Exhibit VIII hereof or the Purchaser, in its sole judgment, which judgment shall be commercially reasonable, is not satisfied with the performance by ATC Healthcare, or the Primary Servicer on behalf of the Providers, of the Primary Servicer Responsibilities. (112) The Primary Servicer is unable to maintain the Transmission interface described in Exhibit X to the satisfaction of the Master Servicer, or the electronic information servicing capabilities of the Primary Servicer are not functioning for a period of more than five consecutive Business Days and the Primary Servicer has not replaced such system with another method of transmission acceptable to the Master Servicer. During such five Business Day period the most recent Transmission successfully sent shall be used until the earlier of (i) five Business Days and (ii) the completion of the next successful Transmission. The Primary Servicer and the Master Servicer agree to cooperate in trying to correct any problem with the Transmission interface. (113) The Primary Servicer has sent more than (i) one Transmission in any one Month period or (ii) four Transmissions in any fiscal year, to the Master Servicer in a manner that is not in compliance with the specifications set forth in Exhibit X hereof. (114) If, at any date, the aggregate Expected Net Value of all Delinquent Receivables that became Delinquent during the prior 3 Months is in excess of 15 % of the aggregate Expected Net Value of all Receivables sold by the Providers to the Purchaser during the prior 3 Months (regardless of whether the Denied Receivables are purchased by the relevant Provider or the Primary Servicer pursuant to Article IV of the Agreement). (115) As of any date after the Initial Transfer Date, more than 15% of all outstanding Batch Receivables (excluding Denied Receivables) are aged more than 120 days but less than 180 days from the respective Last Service Dates of such Batch Receivables. IX-1 53 EXHIBIT X INTERFACE BETWEEN MASTER SERVICER AND THE PRIMARY SERVICER 1. The Master Servicer will convey appropriate data requirements and instructions to the Primary Servicer to establish a computer interface between the Primary Servicer's systems and the Master Servicer's receivables monitoring system. The interface will permit the Master Servicer to receive electronically the Primary Servicer's accounts receivable data, including the Receivable Information, billing data and collection and other transaction data relating to the Receivables. 2. The Primary Servicer shall give the Master Servicer and the Purchaser at least ten Business Days' notice of any coding changes or electronic data processing system modifications made by the Primary Servicer which could affect the Master Servicer's processing or interpretation of data received through the interface. 3. The Master Servicer shall have no responsibility to return to the Primary Servicer any information which the Master Servicer receives pursuant to the computer interface. 4. The Primary Servicer will prepare weekly accounts receivable data files of all transaction types for all of the Primary Servicer's sites that are included in the program. The weekly cutoff will occur at a predetermined time each week, and the weekly cutoff date for all of the sites must occur at exactly the same time. The cutoff date that will be selected will be at the end of business for a specific day of the week, or in other words, at the end of the Primary Servicer's transaction posting process for that day. The Primary Servicer will temporarily maintain a copy of the accounts data files in the event that the data is degraded or corrupted during transmission, and needs to be re-transmitted. 5. The Master Servicer will be responsible for the management of the hardware, communications and software used in the program. 6. The Master Servicer's data center will receive the Receivable files, and immediately confirm that the files have been passed without degradation or corruption of data by balancing the detailed items to the control totals that accompany the files. Any problems in this process will be immediately reported to the Primary Servicer so that the Receivable file can be re-transmitted, if necessary. 7. Once the receipt of the Receivable data has been confirmed, the Master Servicer will perform certain tests and edits to ensure that each Receivable meets the specified eligibility criteria for purchase by the Purchaser. Compliance with concentration limits will be verified and the Master Servicer will notify the Program Manager to initiate a Receivable purchase using the Receivable file received. Upon the successful completion of a purchase, the Master Servicer will generate a one-line trial balance (listing all purchased accounts) confirming the Receivables that have been purchased. A copy of the trial balance will be forwarded to the Providers, to the Primary Servicer, to the Purchaser, and to the Program Manager to confirm the purchase. X-1 54 8. The Primary Servicer's sites will continue to post daily transactions to their respective Receivable files. The Primary Servicer's Receivable files for each of the eligible sites will include all transactions posted through that day. The Primary Servicer will create a transaction report and a Receivable file for each of the eligible sites. The transaction report will contain all transactions posted to the respective site Receivable file for the specified period (and will indicate the respective site and the number of items and total dollars on each transaction report for control purposes). The Receivable file will contain balances that reflect the transactions posted on the Primary Servicer's systems through the end of business of the specified period. 9. The Primary Servicer will transmit the billing, transaction, and the most current Receivable data files to the Master Servicer's data center according to the established schedule. Each Provider and the Primary Servicer should, again, maintain the backup of each of these files in the event that a re-transmission is necessary. 10. The Master Servicer's data center will confirm that the files have been received intact, and will immediately communicate any problems to the Primary Servicer in order to initiate a re-transmission. The Master Servicer will then post the transaction files to the accounts receivable for the previously purchased accounts that the Master Servicer is maintaining, and consequently update the affected balances. Upon completion of the posting process, the Master Servicer will generate summary reports of the posting process that the Program Manager will use to complete various funding activities. The Master Servicer summary reports will reference the Primary Servicer's transaction codes and activity to codes that are common to the funding program. 11. The Master Servicer will then compare the updated accounts balances on the Master Servicer's system to the corresponding account balances reflected on the Receivable file. The Master Servicer expects that the balances for the funded Receivables will be congruent, and any discrepancies will be immediately examined and resolved through the cooperative effort of the Master Servicer and the Primary Servicer. The Master Servicer shall produce discrepancy reports (e.g., "Funding Only" or "Out of Balance" reports) and the Primary Servicer shall respond promptly to such reports. 12. Once the reconciliation process has been completed and any discrepancies between the Master Servicer and the Primary Servicer's Receivable files resolved through the discrepancy report process described in paragraph 9 above, the Master Servicer will then process the Receivable file and advise the Purchaser that it may purchase any new Receivable that is eligible. The Master Servicer will then proceed through exactly the same process described in paragraph 6 above. X-2 55 EXHIBIT XI-A FORM OF OPINION OF PROVIDERS' AND PURCHASER'S COUNSEL WITH RESPECT TO CERTAIN CORPORATE MATTERS [See Tab 9] 56 EXHIBIT XI-B FORM OF OPINION OF PROVIDERS' AND PURCHASER'S COUNSEL WITH RESPECT TO CERTAIN BANKRUPTCY MATTERS [See Tab 10] 57 EXHIBIT XII FORM OF DEPOSITARY AGREEMENT [See Tab 18] 58 SCHEDULE I ADDRESSES FOR NOTICE If to the Program Manager: Healthcare Finance Group, Inc. 110 Wall Street, 2nd Floor New York, New York 10005 Attention: David Hyams, Chief Credit Officer Tel: (212) 785-9212 Fax: (212) 785-9211 If to the Master Servicer: Healthcare Finance Group, Inc. 110 Wall Street, 2nd Floor New York, New York 10005 Attention: David Hyams, Chief Credit Officer Tel: (212) 785-9212 Fax: (212) 785-9211 If to the Providers: ATC Healthcare Services, Inc. 1983 Marcus Avenue Lake Success, NY 11042 Attention: Allan Levy, CFO Tel: (516) 750-1666 Fax: (516) 750-1754 If to the Purchaser: c/o ATC Healthcare Services, Inc. 1983 Marcus Avenue Lake Success, NY 11042 Attention: Allan Levy, CFO Tel: (516) 750-1666 Fax: (516) 750-1754 If to the Primary Servicer: c/o ATC Healthcare Services, Inc. 1983 Marcus Avenue Lake Success, NY 11042 Attention: Allan Levy, CFO Tel: (516) 750-1666 Fax: (516) 750-1754 59 SCHEDULE II CREDIT AND COLLECTION POLICY [TO BE DELIVERED BY PROVIDERS] 60 SCHEDULE III DISCLOSURES [TO BE DELIVERED BY PROVIDERS] 61 SCHEDULE IV LOCKBOX INFORMATION Concentration Account: HFG HEALTHCO-4 LLC Account #2057779 Bank of New York ABA #021000018
Lockboxes: Lockbox Accounts: - --------- ---------------- Post Office Box 40116 HFG HEALTHCO-4 LLC College Park, GA 30349 Account #8-236-697 Mellon Bank, N.A. ABA #031000037 Post Office Box 31718 HFG HEALTHCO-4 LLC Hartford, CT 06150 Account #9428406280 Fleet Bank, N.A. ABA #011900571 Post Office Box 31726 HFG HEALTHCO-4 LLC Hartford, CT 06150 Account #9428406299 Fleet Bank, N.A. ABA #011900571 Post Office Box 531283 HFG HEALTHCO-4 LLC Atlanta, GA 30353 Account #9428406301 Fleet Bank, N.A. ABA #011900571
62 SCHEDULE V TRADENAMES EX-21 4 d88156ex21.txt SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY Staff Builders, Inc. (DE) ATC Healthcare Services, Incorporated (GA) ATC Staffing Services, Inc. (DE) EX-24 5 d88156ex24.txt POWER OF ATTORNEY 1 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of STAFF BUILDERS, INC., a Delaware corporation (the "Corporation"), hereby constitutes and appoints David Savitsky or Stephen Savitsky, his true and lawful attorney-in-fact and agent, with full power to act for him and in his name, place and stead, in any and all capacities, to sign the Corporation's Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K for the Fiscal Year Ended February 28, 2001, or any amendments or supplements thereto, including without limitation on Form 8, with power where appropriate to affix the corporate seal of the Corporation thereto and to attest said seal, and to file such Form 10-K and each such amendment and supplement, with all exhibits thereto, and any and all other documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the 15th day of May, 2001. /s/ JONATHAN J. HALPERT ----------------------------- Jonathan J. Halpert, Director of the Corporation 2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of STAFF BUILDERS, INC., a Delaware corporation (the "Corporation"), hereby constitutes and appoints David Savitsky or Stephen Savitsky, his true and lawful attorney-in-fact and agent, with full power to act for him and in his name, place and stead, in any and all capacities, to sign the Corporation's Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K for the Fiscal Year Ended February 28, 2001, or any amendments or supplements thereto, including without limitation on Form 8, with power where appropriate to affix the corporate seal of the Corporation thereto and to attest said seal, and to file such Form 10-K and each such amendment and supplement, with all exhibits thereto, and any and all other documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the 15th day of May, 2001. /s/ BERNARD J. FIRESTONE ---------------------------- Bernard J. Firestone, Director of the Corporation 3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of STAFF BUILDERS, INC., a Delaware corporation (the "Corporation"), hereby constitutes and appoints David Savitsky or Stephen Savitsky, his true and lawful attorney-in-fact and agent, with full power to act for him and in his name, place and stead, in any and all capacities, to sign the Corporation's Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K for the Fiscal Year Ended February 28, 2001, or any amendments or supplements thereto, including without limitation on Form 8, with power where appropriate to affix the corporate seal of the Corporation thereto and to attest said seal, and to file such Form 10-K and each such amendment and supplement, with all exhibits thereto, and any and all other documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the 15th day of May, 2001. /s/ DONALD MEYERS ---------------------------- Donald Meyers, Director of the Corporation -----END PRIVACY-ENHANCED MESSAGE-----