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EXHIBIT 10.85
GENERAL SECURITY AGREEMENT
GENERAL SECURITY AGREEMENT, dated as of November 14, 1996 (this
"Agreement"), among each of the undersigned (each an "Assignor" and,
collectively, the "Assignors") and AP LOM LLC (the "Secured Party"). Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
ascribed to such terms in the Credit Agreement referred to below.
WHEREAS, NextHealth, Inc. (the "Borrower") and the Secured Party have
entered into a Credit Agreement, dated as of November 14, 1996 (as amended,
modified or supplemented from time to time, the "Credit Agreement"), providing
for the making of Loans to the Borrower;
WHEREAS, pursuant to the Guaranty, each Assignor (other than the
Borrower) has jointly and severally guaranteed to the Secured Party the payment
when due of all obligations and liabilities of the Borrower under or in respect
to the Loan Documents;
WHEREAS, it is a condition precedent to the making of Loans to the
Borrower under the Credit Agreement that the Assignors shall have executed and
delivered to the Secured Party this Agreement; and
WHEREAS, each Assignor desires to execute this Agreement to satisfy the
condition precedent described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Assignor, the receipt and sufficiency of which are hereby acknowledged, each
Assignor hereby makes the following representations and warranties to the
Secured Party and hereby covenants and agrees with the Secured Party as follows:
1. As security for the due and punctual payment of any and all of
the present and future Obligations (as defined in Section 2 below), each
Assignor hereby grants to the Secured Party a continuing security interest in,
all of the right, title and interest of such Assignor in, to and under all of
the following, whether now existing or hereafter from time to time acquired: (1)
all of the Collateral (as defined in Section 3 below), and (2) all present and
future products and proceeds of the Collateral, subject to no prior security
interest.
2. For purposes of this Agreement, the term "Obligations" shall
mean the full and prompt payment when due (whether at stated maturity, by
acceleration or otherwise) of all
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obligations and liabilities of each Assignor to the Secured Party, now existing
or hereafter incurred under, arising out of or in connection with any Loan
Document to which it is a party and the due performance and compliance by each
Assignor with the terms of each such Loan Document.
3. As used herein, the term "Collateral" means the property
described below together with the property described in Section 4 below:
A. ALL PERSONAL PROPERTY. All of the personal property and
fixtures of each Assignor wherever located and whether now owned or in existence
or hereafter acquired or created, of every kind and description, tangible or
intangible, including without limitation all instruments, documents, contract
rights and general intangibles, such terms having the meaning ascribed by the
Uniform Commercial Code in effect in the State of New York on the date hereof
(the "Uniform Commercial Code").
B. EQUIPMENT. Equipment (of any nature and description), now
owned or hereafter acquired and wherever located, employed in the operation of
any Assignor's business, and all proceeds thereof and products of such equipment
in any form whatsoever, except and subject to any subsequent purchase money
liens. As used herein, the term "equipment" shall also mean and include all
spare parts therefor, all present and future additions, attachments and
accessions thereto, all substitutions therefor and replacements thereof, and
shall specifically include all "equipment" as such term is defined in the
Uniform Commercial Code.
C. INVENTORY. All of the inventory of each Assignor, of every
type or description, now owned or hereafter acquired and wherever located,
whether raw, in process or finished, all goods usable in processing the same and
all documents of title covering any inventory, and all proceeds thereof and
products of such inventory in any form whatsoever, including but not limited to
accounts and chattel paper, but excluding all inventory which is pledged to
secure accounts payable of such Assignor to the supplier of such inventory and
shall specifically include all "inventory" as such term is defined in the
Uniform Commercial Code.
D. ACCOUNTS AND CHATTEL PAPER. All of each Assignor's present
and future accounts, contract rights, general intangibles and chattel paper and
all other rights to the payment of money arising out of the sale (or lease) of
goods or services (hereinafter referred to in the plural as "Accounts" and in
the singular as "Account"), all proceeds thereof and all liens, securities,
guarantees, remedies and privileges pertaining thereto, together with all rights
and liens of each Assignor in and to such goods, including returned or
repossessed goods, and all rights and property of any kind forming the subject
matter of any of the Accounts, including the right of stoppage in transit.
4. Any and all deposits or other sums at anytime credited by or
due from the Secured Party to any Assignor; and any and all monies, securities
and other property of such Assignor, and the proceeds, thereof now or hereafter
held or received by or in transit to the
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Secured Party from or for such Assignor, whether for safekeeping, custody,
pledge, transmission, collection or otherwise, shall at all times constitute
security for any and all Obligations.
5. Each Assignor represents and warrants that: (a) no Financing
Statement (other than any which may have been filed on behalf of the Secured
Party) relating to any of the Collateral is on file in any public office and so
long as any Note remains unpaid or any of the Obligations remain unpaid, such
Assignor will not execute or authorize to be filed in any public office any
Financing Statement or Statements relating to the Collateral, except Financing
Statements filed or to be filed in respect of and covering the security
interests granted hereby by such Assignor and (b) the Chief Executive Office (or
Major Executive Office) of such Assignor is located at the address set forth
opposite its signature below, and the Collateral is located at the address(es)
set forth in Schedule I hereto and such Assignor will not change such locations
without at least 30 days' prior written notice to the Secured Party; and (c)
such Assignor has not created and is not aware of any security interest, lien or
encumbrance on or affecting the Collateral other than created hereby or
referenced herein.
6. Each Assignor assumes all liability and responsibility in
connection with all Collateral acquired by such Assignor; and the obligation of
such Assignor to pay all Obligations shall in no way be affected or diminished
by reason of the fact that any such Collateral may be lost, destroyed, stolen,
damaged or for any reason whatsoever unavailable to such Assignor.
7. As long as this Agreement shall remain in effect, each
Assignor agrees:
(a) such Assignor will not sell transfer, lease or otherwise
dispose of any of the Collateral or any interest therein without the prior
consent of the Secured Party, except for Inventory sold in the ordinary course
of such Assignor's business.
(b) in order to enable the Secured Party to comply with the
law of any jurisdiction, including state, federal and foreign, applicable to any
security interest granted hereby or to the Collateral, to execute and deliver
upon request, in form acceptable to the Secured Party, any Financing Statement,
notice, statement, instrument, document, agreement or other paper and/or to
perform any act requested by the Secured Party which may be necessary to create,
perfect, preserve, validate or otherwise protect such security interest or to
enable the Secured Party to exercise and enforce the Secured Party's rights
hereunder or with respect to such security interest;
(c) promptly to pay any filing fees or other costs in
connection with (i) the filing or recordation of such Financing Statements or
any other papers described above and (ii) such searches of the public records as
the Secured Party in its sole discretion shall require;
(d) that the Secured Party is authorized to file or record any
such Financing Statements or other papers without the signature of such Assignor
if permitted by applicable law;
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(e) that the Secured Party may file a photographic or other
reproduction of this Agreement in lieu of a Financing Statement in any filing
office where it is permissible to do so;
(f) except for the security interest granted hereby, any liens
referenced in the Search Report, and any subsequent purchase money liens, such
Assignor shall keep the Collateral and proceeds and products thereof free and
clear of any security interest, liens or encumbrances of any kind, such Assignor
shall promptly pay, when due, all taxes and transportation, storage and
warehousing charges and fees affecting or arising out of the Collateral and
shall defend the Collateral against all claims and demands of all persons at any
time claiming the same or any interest therein adverse to the Secured Party;
(g) at all times to keep all insurable Collateral insured at
the expense of such Assignor to the Secured Party's satisfaction against loss by
fire, theft and any other risk to which the Collateral may be subject; all
policies shall name the Secured Party as an additional insured; and in any
event, such policies will provide that each insurer will give the Secured Party
not less than 30 days notice in writing prior to the exercise of any right of
cancellation; in the event any Assignor fails to maintain any insurance the
Secured Party may (but shall not be obligated to) place such insurance and pay
the premium therefor, in which event such Assignor will pay the Secured Party
such premium with interest; the Secured Party may apply any proceeds of such
insurance which may be received by it toward payment of the Obligations, whether
or not due, in such order of application as the Secured Party may determine;
(h) that the Secured Party's duty with respect to the
Collateral shall be solely to use reasonable care in the custody and
preservation of Collateral in its possession; the Secured Party shall not be
obligated to take any steps necessary to preserve any rights in any of the
Collateral against prior parties, and each Assignor hereby agrees to take such
steps; each Assignor shall pay to the Secured Party all costs and expenses,
including filing and reasonable attorney's fees, incurred by the Secured Party
in connection with the custody, care, preservation or collection of the
Collateral; the Secured Party may, but is not obligated to, exercise any and all
rights of conversion or exchange or similar rights, privileges and options
relating to the Collateral; the Secured Party shall have no obligation to sell
or otherwise realize upon any of the Collateral as herein authorized and shall
not be responsible for any failure to do so or for any delay in so doing;
(i) to provide the Secured Party with such information as the
Secured Party may from time to time request with respect to the location of the
Collateral and any of its places of business;
(j) such Assignor will permit the Secured Party, by its
officers and agents, to have access to and examine at all reasonable times the
properties, minute books and other corporate records, and books of account and
financial records of such Assignor; and
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(k) such Assignor will promptly notify the Secured Party upon
the occurrence of any default, as provided in this Agreement, of which such
Assignor has knowledge.
8. The following provisions shall also be applicable:
A. As of the time when each of its Accounts arises, each
Assignor shall be deemed to have represented and warranted that each such
Account, and all records, papers and documents relating thereto (if any) are
genuine and in all respects what they purport to be, and that all papers and
documents (if any) relating thereto (i) to the best knowledge of the Assignor
will represent the genuine, legal, valid and binding obligation of the Account
debtor evidencing indebtedness unpaid and owed by the respective Account debtor
arising out of the performance of labor or services or the sale or lease and
delivery of the merchandise listed therein, or both, (ii) will be the only
original writings evidencing and embodying such obligation of the Account debtor
named therein (other than copies created for general accounting purposes), (iii)
to the best knowledge of the Assignor will evidence true and valid obligations,
enforceable in accordance with their respective terms and (iv) will be in
compliance and will conform in all material respects with all applicable
federal, state and local laws and applicable laws of any relevant foreign
jurisdiction.
B. Each Assignor will keep and maintain at its own cost and
expense accurate records of its Accounts, records of all payments received, all
credits granted thereon, all merchandise returned and all other dealings
therewith, and such Assignor will make the same available on such Assignor's
premises to the Second Party for inspection, at such Assignor's own cost and
expense, at any and all reasonable times upon prior notice to an authorized
officer of such Assignor. Upon the occurrence and during the continuance of an
Event of Default and at the request of the Secured Party, such Assignor shall,
at its own cost and expense, deliver all tangible evidence of its Accounts
(including, without limitation, all documents evidencing the Accounts) and such
books and records to the Secured Party or to its representatives (copies of
which evidence and books and records may be retained by such Assignor). Upon the
occurrence and during the continuance of an Event of Default and if the Secured
Party so directs, such Assignor shall legend, in form and manner satisfactory to
the Secured Party, the Accounts, as well as books, records and documents (if
any) of such Assignor evidencing or pertaining to such Accounts with an
appropriate reference to the fact that such Accounts have been assigned to the
Secured Party and that the Secured Party has a security interest therein.
C. Upon the occurrence and during the continuance of an Event
of Default, and if the Secured Party so directs any Assignor, such Assignor
agrees (x) to cause all payments on account of the Accounts to be made directly
to the Secured Party, (y) that the Secured Party may, at its option, directly
notify the obligors with respect to any Accounts to make payments with respect
thereto as provided in preceding clause (x) and (z) that the Secured Party may
enforce collection of any such Accounts and may adjust, settle or compromise the
amount of payment thereof, in the same manner and to the same extent as such
Assignor. Without notice to or assent by any Assignor, the Secured Party may
apply any or all amounts so received (after deducting
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costs and expenses of collection) in the manner provided in Section 8.2 of the
Credit Agreement. The costs and expenses (including reasonable attorneys' fees)
of collection, whether incurred by the Assignor or the Secured Party, shall be
borne by the relevant Assignor. The Secured Party shall deliver a copy of each
notice referred to in the preceding clause (y) to the relevant Assignor;
provided, that the failure by the Secured Party to so notify such Assignor shall
not affect the effectiveness of such notice or the other rights of the Secured
Party created by this subsection C.
D. No Assignor shall rescind or cancel any indebtedness
evidenced by any Account, or modify in any material respect any term thereof or
make any material adjustment with respect thereto, or extend or renew the same,
or compromise or settle any material dispute, claim, suit or legal proceeding
relating thereto, or sell any Account, or interest therein, without the prior
written consent of the Secured Party, except as permitted by subsection E
hereof. Each Assignor will duly fulfill all obligations on its part to be
fulfilled under or in connection with the Accounts and will do nothing to impair
the rights of the Secured Party in the Accounts.
E. Each Assignor shall endeavor in accordance with reasonable
business practices to cause to be collected from the Account debtor named in
each of its Accounts, as and when due (including, without limitation, amounts
which are delinquent, such amounts to be collected in accordance with generally
accepted lawful collection procedures) any and all amounts owing under such
Accounts, and apply forthwith upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Account, except that, prior to the
occurrence of an Event of Default, any Assignor may allow in the ordinary course
of business as adjustments to amounts owing under its Accounts (i) an extension
or renewal of the time or times of payment, or settlement for less than the
total unpaid balance, which such Assignor finds appropriate in accordance with
reasonable business judgment and (ii) a refund or credit due as a result of
returned or damaged merchandise or improperly performed services or for other
reasons which such Assignor finds appropriate in accordance with reasonable
business judgment. The reasonable costs and expenses (including, without
limitation), attorneys' fees) of collection, whether incurred by an Assignor or
the Secured Party, shall be borne by the relevant Assignor.
9. If an Event of Default shall have occurred and be continuing,
then: (a) the Secured Party may at its option declare all Obligations to be at
once due and payable, without further notice, presentment, demand for payment or
protest, which are hereby expressly waived; (b) the Secured Party is authorized
to take possession of the Collateral and, for that purpose may enter with the
aid and assistance of any person or persons any premises where the Collateral or
any part thereof is, or may be, placed and remove same; (c) the Secured Party
may proceed to apply to the Obligations, any and all deposits or other sums
described in Section 4 hereof; (d) the Secured Party may require such Assignor
to assemble the Collateral and to make it available to the Secured Party at a
place designated by the Secured Party which is reasonably convenient to the
Secured Party and such Assignor; (e) the Secured Party shall have the right from
time to time to sell, resell, assign, transfer and deliver all or any part of
the Collateral, at any broker's board or exchange, or at public or private sale
or otherwise, at the option of the Secured Party, for cash or on credit for
future delivery, in such parcel or parcels and at such time or times and at such
place or places, and upon such terms, and conditions as the Secured Party, may
deem proper, all
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without (except as shall be required by applicable statute and cannot be waived)
advertisement or demand upon such Assignor or right of redemption to such
Assignor, which are hereby expressly waived; unless the Collateral is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Secured Party will give such Assignor reasonable notice
of the time and place of any such public sale or of the time after which any
private sale or any other intended disposition thereof is to be made and such
Assignor agrees that five (5) days prior notice shall be deemed reasonable
notice; (f) upon each such sale, the Secured Party may, unless prohibited by
applicable statute which cannot be waived, purchase all or any part of the
Collateral being sold, free from and discharged of all trusts, claims, rights of
redemption and equities of such Assignor, which are hereby waived and released;
(g) the Secured Party's obligations, if any, to give additional (or to continue)
financial accommodations of any kind to such Assignor shall immediately
terminate; and (h) in addition to the rights and remedies given to the Secured
Party hereunder or otherwise, the Secured Party shall have all of the rights and
remedies of a secured party under the Uniform Commercial Code.
10. In the case of each such sale or of any proceedings to collect
any of the Obligations, each Assignor shall pay all costs and expenses of every
kind for collection, sale or delivery, including reasonable attorneys' fees, and
after deducting such costs and expenses from the proceeds of sale or collection,
the Secured Party may apply any residue to pay any of the Obligations and each
Assignor will continue to be liable to the Secured Party for any deficiency with
interest.
11. The Secured Party may, but is not obligated to, (a) demand,
xxx for, collect or receive any money or property at any time due, payable or
receivable on account of or in exchange for any obligations securing any of the
Obligations, (b) compromise and settle with any person liable on such
obligations, and/or (c) extend the time of payment of or otherwise change the
terms thereof, as to any party liable thereon; all without incurring
responsibility to the undersigned or affecting any of the Obligations.
12. In order to effectuate the terms and provisions hereof, each
Assignor hereby designates and appoints Secured Party and its designees or
agents as attorney-in-fact of such Assignor, irrevocably and with power of
substitution, with authority, effective upon an Event of Default: to receive,
open and dispose of all mail addressed to such Assignor, to notify the Post
Office authorities to change the address for delivery of mail addressed to such
Assignor to such address as Secured Party may designate; to endorse the name of
such Assignor on any notes, acceptances, checks, drafts, money orders,
instruments or other evidence of payment or proceeds of the Collateral that may
come into Secured Party's possession; to sign the name of such Assignor on any
invoices, documents, drafts against and notices (which also may direct, among
other things, that payment be made directly to the Secured Party) to Account
debtors or obligors of such Assignor, assignments and requests for verification
of Accounts; to execute proofs of claim and loss; to execute any endorsements,
assignments, or other instruments of conveyance or transfer, to adjust and
compromise any claims under insurance policies; to execute releases; and to do
all other acts and things necessary and advisable in the sole discretion of
Secured Party to carry out and enforce this Agreement. All acts of said attorney
or designee are
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hereby ratified and approved and said attorney or designee shall not be liable
for any acts of commission or omission, nor for any error of judgement or
mistake of fact or law. This power of attorney being coupled with an interest is
irrevocable while any of the Obligations shall remain unpaid.
13. All options, powers and rights granted to the Secured Party
hereunder or under any promissory note, instrument, document or other writing
delivered to the Secured Party shall be cumulative and shall be in addition to
any other options, powers or rights which the Secured Party may now or hereafter
have as a secured party under the Uniform Commercial Code or under any other
applicable law or otherwise. Each Assignor waives all rights of homestead
exemption under applicable law.
14. No delay on the part of the Secured Party in exercising any of
its options, powers, or rights, or partial or single exercise thereof, shall
constitute a waiver thereof. Neither this Agreement nor any provision hereof may
be modified, changed, waived, discharged or terminated orally, but only by an
instrument in writing, signed by the party against whom enforcement of the
modification, change, waiver, discharge or termination is sought.
15. Notice of acceptance of this Agreement by the Secured Party is
hereby waived. Upon execution hereof, this Agreement shall be immediately
binding upon each Assignor and its successors and assigns, whether or not the
Secured Party signs this Agreement.
16. It is the intention of the parties (a) that, this Agreement
shall constitute a continuing agreement applying to any and all future, as well
as existing transactions among each Assignor and the Secured Party, and (b) that
the security interest provided for herein shall attach to after acquired as well
as existing Collateral, and the Obligations covered by this Agreement shall
include future advances and other value, as well as existing advances and other
value, whether or not similar to prior or existing advances or other value, and
whether or not the advances or value are or shall be given pursuant to
commitment, all to the maximum extent permitted by the Uniform Commercial Code.
17. Unless the context otherwise requires, all terms used herein
which are defined in the Uniform Commercial Code shall have meanings therein
stated.
18. Mailing Address of each Assignor. For the purpose of Section
9.402(1) of the Uniform Commercial Code, the address of the each Assignor
specified below opposite its signature shall be such Assignor's mailing address.
19. This Agreement shall be construed in accordance with and be
governed by the law of the State of New York.
20. This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be executed and delivered by its proper corporate officer or
officers as of the date first written above.
Address: NEXTHEALTH, INC.
00000 Xxxxx Xxxx xxx Xxx Xxxxxxx By:/s/ Xxxxxxx X X'Xxxxxxx,Xx
Xxxxxx, Xxxxxxx 00000 ---------------------------
Attention: President Name: Xxxxxxx X. X'Xxxxxxx, Xx.
Title: President
Address: SIERRA TUCSON, INC.
00000 X. Xxxx xxx Xxx Xxxxxxx By:/s/ Xxxxxxx X. X'Xxxxxxx, Xx.
Xxxxxx, XX 00000 ----------------------------
Attention: President Name: Xxxxxxx X. X'Xxxxxxx, Xx.
Title: President
Address: SIERRA TUCSON AC, INC.
00000 X. Xxxx xxx Xxx Xxxxxxx By:/s/ Xxxxxxx X. X'Xxxxxxx, Xx.
Xxxxxx, XX 00000 -----------------------------
Attention: President Name: Xxxxxxx X. X'Xxxxxxx, Xx.
Title: President
Address: SIERRA TUCSON
00000 X. Xxxx xxx Xxx Xxxxxxx EDUCATIONAL MATERIALS
Xxxxxx, XX 00000 (S.T.E.M.), INC.
Attention: President
By:/s/ Xxxxxxx X. X'Xxxxxxx, Xx.
-----------------------------
Name: Xxxxxxx X. X'Xxxxxxx, Xx.
Title: President
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Address: SIERRA HEALTHSTYLES, INC.
00000 X. Xxxx xxx Xxx Xxxxxxx D/B/A MIRAVAL
Xxxxxx, XX 00000
Attention: President By:/s/ Xxxxxxx X. X'Xxxxxxx, Xx.
------------------------------
Name: Xxxxxxx X. X'Xxxxxxx, Xx.
Title: President
Address: ONSITE WORKSHOPS, INC.
00000 X. Xxxx xxx Xxx Xxxxxxx
Xxxxxx, XX 00000 By:/s/ Xxxxxxx X. X'Xxxxxxx, Xx.
Attention: President -----------------------------
Name: Xxxxxxx X. X'Xxxxxxx, Xx.
Title: President
Address: NEXTHEALTH WATER
00000 X. Xxxx xxx Xxx Xxxxxxx RESOURCES, INC.
Xxxxxx, XX 00000
Attention: President By:/s/ Xxxxxxx X. X'Xxxxxxx, Xx.
-----------------------------
Name: Xxxxxxx X. X'Xxxxxxx, Xx.
Title: President
Address: SOFTEN REALTY, L.L.C.
00000 X. Xxxx xxx Xxx Xxxxxxx
Xxxxxx, XX 00000 By: NEXTHEALTH, INC., a Member
Attention: President
By:/s/ Xxxxxxx X. X'Xxxxxxx, Xx.
------------------------------
Name: Xxxxxxx X. X'Xxxxxxx, Xx.
Title: President
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Address: AP LOM LLC
0000 Xxxxxx xx xxx Xxxxxxxx
00xx Xxxxx By: AP XX XXX LLC, its
Xxx Xxxx, XX 00000 Managing Member
Attention: Xxxxxx Xxxxxxxxx
By Kronus Property, Inc.
By:/s/ Xxxxxx Xxxxxxxxx
--------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Vice President
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