EXHIBIT 10.74
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of December 23, 1998, is made and entered
into by and among the undersigned debtors (each a "Debtor" and collectively, the
"Debtors"), and PNC BANK, NATIONAL ASSOCIATION, a national banking association
in its capacity as Collateral Agent (as hereinafter defined) for the benefit of
the Facility Parties (as hereinafter defined) (the "Secured Party").
WITNESSETH THAT:
WHEREAS, Mariner Health Group, Inc., a Delaware corporation (the
"Borrower"), as borrower, PNC Bank, National Association, as administrative
agent, First Union National Bank, as syndication agent, and the lenders party
thereto (the "Banks"), are parties to that certain Credit Agreement dated as of
May 18, 1994, as amended (as it may hereafter from time to time be amended,
restated, modified or supplemented, the "Revolving Credit Agreement"), pursuant
to which the Banks have agreed to make certain revolving credit loans to the
Borrower upon the terms and subject to the conditions set forth therein;
WHEREAS, Mariner Health Group, Inc., a Delaware corporation (the "Term Loan
Borrower"), as borrower, PNC Bank, National Association, as administrative
agent, First Union National Bank, as syndication agent, and the lenders party
thereto (the "Term Loan Banks"), are parties to that certain Term Loan Agreement
dated of even date herewith (as it may hereafter from time to time be amended,
restated, modified or supplemented, the "Term Loan Agreement"; the Revolving
Credit Agreement and the Term Loan Agreement are hereinafter collectively
referred to as the "Credit Agreements"), pursuant to which the Term Loan Banks
have agreed to make certain term loans to the Term Loan Borrower upon the terms
and subject to the conditions set forth therein;
WHEREAS, pursuant to that certain Collateral Agency and Sharing Agreement
dated of even date herewith (as it may hereafter from time to time be amended,
restated, modified or supplemented, the "Collateral Sharing Agreement"), among
the Borrower, the Term Loan Borrower, the other Loan Parties (as defined in the
Collateral Sharing Agreement), the Revolving Credit Agent and the Term Loan
Agent (as such terms are defined in the Collateral Sharing Agreement), and PNC
Bank, National Association, as Collateral Agent (together with its successors
and assigns, the "Collateral Agent"), the Facility Parties (as defined in the
Collateral Sharing Agreement), in order to secure the Obligations (as defined in
the Collateral Sharing Agreement), have agreed to share certain collateral as
provided in the Collateral Sharing Agreement;
WHEREAS, this Security Agreement shall be a Shared Security Document (as
defined in the Collateral Sharing Agreement); and
WHEREAS, each Debtor is (or will be with respect to after-acquired
property) the legal and beneficial owner and holder of its respective Collateral
(as defined in Section 1 hereof), and has agreed to grant a security interest in
such Collateral to the Secured Party on the terms and conditions set forth
herein.
NOW, THEREFORE, intending to be legally bound hereby and for value
received, the parties hereto covenant and agree as follows:
1. Definitions. Except as otherwise expressly provided herein,
-----------
capitalized terms used in this Security Agreement shall have the respective
meanings assigned to them in the Credit Agreements. In addition to the words and
terms defined elsewhere in this Security Agreement, the following words and
terms shall have the following meanings, respectively, unless the context
otherwise clearly requires:
(a) "Code" shall mean the Uniform Commercial Code of each state as
enacted and in effect on the date hereof in each applicable jurisdiction,
and as the same may subsequently be amended from time to time.
(b) "Collateral" shall mean, in the case of each Debtor, all of its
right, title and interest in, to and under the following described
property, whether now owned or hereafter acquired (words and terms defined
in the Code shall have the same meanings when used herein):
(i) all general intangibles of the Debtor, including general
intangibles now in existence and those that shall hereafter arise;
(ii) all accounts of the Debtor, including accounts now in
existence and those that shall hereafter arise;
(iii) all inventory of the Debtor, including inventory which it
now owns and that which it shall hereafter acquire;
(iv) all chattel paper of the Debtor, including chattel paper
which it now owns and that which it shall hereafter acquire;
(v) all investment property of the Debtor, including investment
property which it now owns and that which it shall hereafter acquire;
(vi) all equipment (including fixtures) of the Debtor, including
equipment which it now owns and that which it shall hereafter acquire;
(vii) all documents of the Debtor, including documents which it
now owns and those which it shall hereafter acquire;
(viii) all instruments, letters of credit and advices of credit
of the Debtor, including those which it now owns and those which it
shall hereafter acquire;
2
(ix) all cash, depository accounts (including, without
limitation, any deposits in any lockbox accounts created pursuant to
the provisions of Section 9.02(h) of the Credit Agreements) or other
property of the Debtor at any time delivered to, in the possession of,
or under the control of the Secured Party;
(x) any property the Debtor has given or may give in the future
to the Secured Party to secure the Secured Indebtedness; and
(xi) all additions to and substitutions for, and products and
proceeds (including insurance proceeds whether or not the Secured
Party is the loss payee thereof) of, any of the properties mentioned
in clauses (i) through (x) above, or any indemnity, warranty or
guaranty payable by reason of loss or damage to or otherwise with
respect to any of such properties.
Without limiting the generality of the foregoing, the term
"Collateral" shall expressly include all royalty, licensing and know-how
agreements, all patents, copyrights, trademarks, tradenames, service marks,
trade secrets, know-how, goodwill, computer software, computer programs,
licensed computer software (to the extent assignable), licensed computer
programs (to the extent assignable), tapes, discs and other documents or
transcribed information of any type, whether expressed in ordinary or
machine readable language.
(c) "Secured Indebtedness" shall mean, collectively, (i) all
indebtedness and obligations, including, without limitation, all
Obligations (as defined in the Collateral Sharing Agreement), whether of
principal, interest, fees, expenses or otherwise, of any of the Loan
Parties (as defined in the Collateral Sharing Agreement) to any of the
Facility Parties (as defined in the Collateral Sharing Agreement), whether
now existing or hereafter incurred under the Credit Agreements or any of
the Loan Documents (as defined in the Collateral Sharing Agreement), as any
of the same may from time to time be amended, modified or supplemented,
together with any and all extensions, renewals, refinancings or refundings
thereof in whole or in part by the Facility Parties, (ii) all out-of-pocket
costs, expenses and disbursements, including reasonable attorneys' fees and
legal expenses, incurred by the Facility Parties or any one of them, or the
Secured Party, in the collection of any of the obligations referred to in
clause (i) above; and (iii) any advances made, subsequent to an Event of
Default, by the Facility Parties or any one of them, or the Secured Party,
for the reasonable maintenance, preservation, protection or enforcement of,
or realization upon, the Collateral, including advances for taxes,
insurance, repairs and the like and reasonable expenses incurred to sell or
otherwise realize on, or prepare for sale or other realization on, any of
the Collateral.
2. Assignment and Grant of Security Interests. As security for the due
------------------------------------------
and punctual payment and performance in full of the Secured Indebtedness, each
Debtor hereby agrees that the Secured Party shall have, and each Debtor hereby
grants to and creates in favor of the Secured Party, for the benefit of the
Secured Party and the Facility Parties, a continuing first priority security
interest in and to each Debtor's respective Collateral subject only to Permitted
Liens.
3
Without limiting the generality of Section 4 below, each Debtor further agrees
that with respect to each item of Collateral as to which (i) the creation of a
valid and enforceable security interest is not governed exclusively by the Code
or (ii) the perfection of a valid and enforceable security interest therein
under the Code cannot be accomplished by the Secured Party or any other Facility
Party taking possession thereof or by the filing in appropriate locations of
appropriate Code financing statements executed by the Debtor, such Debtor will
at its expense execute and deliver to the Secured Party such documents,
agreements, notices, assignments and instruments and take such further actions
as may be requested by the Secured Party from time to time for the purpose of
creating a valid and perfected first priority Lien on such item, subject only to
Permitted Liens, enforceable against the Debtor and all third parties to secure
the Secured Indebtedness; provided, however that Debtor shall not be required to
--------
take any actions required under Sections 9.02(g) and 9.02(h) of the Credit
Agreements until an Event of Default has occurred under the Credit Agreements.
To the extent the granting of any of the foregoing security interest is subject
to any material contracts or agreements which by their terms prohibit the
granting by the applicable Debtor of a security interest therein such Debtor
shall: (i) provide to the Collateral Agent within thirty (30) days of the
Closing Date a list of all such material contracts and agreements; (ii) use its
commercially reasonable best efforts to obtain within ninety (90) days of the
Closing Date any consent or approval of a security interest in any such contract
or agreement granted to the Collateral Agent; and (iii) to the extent any such
consent or approval is obtained and upon receipt thereof, promptly deliver to
the Collateral Agent any original of such consent or approval obtained or such
other evidence in a form satisfactory to the Collateral Agent of any such
consent or approval obtained.
3. Representations and Warranties. Each Debtor jointly and severally
------------------------------
represents, warrants and covenants to the Secured Party (with respect to itself
only) that:
(a) Such Debtor is the legal and beneficial owner and holder of its
respective Collateral and such Debtor has and will continue to have good
and marketable title to the Collateral which such Debtor purports to own or
which is reflected as owned in its books and records.
(b) Each Debtor has received value from each of the Facility Parties
for such Debtor's grant of a security interest hereunder and, except for
the security interest granted to and created in favor of the Secured Party
hereunder and any Permitted Liens, all of such Collateral is and will
continue to be free and clear of all Liens.
(c) Such Debtor has full power to enter into, execute, deliver and
carry out this Security Agreement and to perform its obligations hereunder
and all such actions have been duly authorized by all necessary proceedings
on its part. This Security Agreement has been duly and validly executed and
delivered by such Debtor. This Security Agreement constitutes the legal,
valid and binding obligation of such Debtor, enforceable against it in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforceability of creditors' rights generally or
limiting the right of specific performance.
4
(d) Neither the execution and delivery of this Security Agreement nor
compliance with the terms and provisions hereof (i) will conflict with or
result in any breach of the terms and conditions of the declaration of
trust, articles or certificates of incorporation, by-laws, partnership
agreement, limited liability company agreement, management or operating
agreement or equivalent documents of such Debtor or of any Law or of any
material agreement or instrument to which such Debtor is a party or by
which it is bound or to which it is subject, (ii) will constitute a default
thereunder or (iii) will result in the creation or enforcement of any Lien
whatsoever upon any property (now or hereafter acquired) of such Debtor
(other than Liens granted to the Secured Party on behalf of the Facility
Parties under the Loan Documents).
(e) As of the date hereof, all information contained on Schedule 1 is
----------
accurate and complete and contains no omission or misrepresentation of any
material fact necessary for the creation and/or perfection of a security
interest in the Collateral. The Debtors shall promptly notify the Secured
Party of any changes in the information set forth thereon.
(f) During the past five (5) years no Debtor has operated under any
other legal name, trade name or fictitious name other than such Debtor's
current legal name as specified on the signature pages to this Security
Agreement or as otherwise disclosed on Schedule 1.
----------
4. Further Assurances. Each Debtor will, from time to time, at its
------------------
expense, faithfully preserve and protect the Secured Party's security interest
in such Debtor's Collateral as a continuing first priority perfected security
interest, subject only to Permitted Liens, and will do all such other acts and
things and will, upon request therefor by the Secured Party, execute, deliver,
file and record all such other documents and instruments, including financing
statements, continuation or amendment financing statements, security agreements,
pledges, assignments, documents and powers of attorney with respect to such
Debtor's Collateral, and pay all filing fees and taxes related thereto, as the
Secured Party in its sole discretion may deem necessary or advisable from time
to time in order to attach, preserve, protect, perfect or continue perfected any
security interest granted or purported to be granted hereby or to enable the
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any of the Collateral. Without limiting the generality of the
foregoing, to the extent Article 9 of the Code does not govern the creation
and/or perfection of the security interests intended to be created hereunder,
each Debtor agrees to execute and deliver such further documents and instruments
and do such further acts as the Secured Party may from time to time require.
5. Covenants. Each Debtor jointly and severally covenants and agrees that
---------
(a) it will defend the Secured Party's right, title and security interest in and
to the Collateral and the proceeds thereof against the claims and demands of all
Persons whomsoever, (b) it will not suffer or permit to exist on any Collateral
any Lien except for Liens granted herein or in the other Loan Documents and
Permitted Liens, (c) it will maintain in good condition and repair and shall
protect and preserve its Collateral, as and to the extent required in the Credit
Agreements, and such Collateral will be insured in accordance with the
provisions of the Credit Agreements; (d) it
5
will not sell, assign or otherwise dispose of any portion of its Collateral
except sales or dispositions expressly permitted under the terms of the Credit
Agreements; (e) it will obtain and maintain sole and exclusive possession of its
Collateral; (f) it will maintain and keep its chief executive office, the
location of the Collateral and the location of the records pertaining thereto,
at the location(s) specified on Schedule 1 attached hereto, or at such other
----------
location as it may reasonably designate from time to time by not less than
thirty (30) Business Days' prior written notice to the Secured Party; (g) it
will keep materially accurate and complete books and records concerning its
Collateral and such other books and records as may be required under the Credit
Agreements; (h) it will promptly furnish to the Secured Party such information
and documents relating to its Collateral as the Secured Party may reasonably
request in order to confirm the status of the Secured Party's security interest
in such Collateral; (i) it will not take or omit to take any actions, the taking
or the omission of which might result in a material adverse alteration or
impairment of its Collateral or in a violation of this Security Agreement; (j)
it will not, without the prior written consent of the Secured Party, waive or
release any material obligation of any party to any material part of its
Collateral, except in the ordinary course of Debtor's business or in connection
with the disposition of assets permitted under the Credit Agreements; (k) it
will execute and deliver to the Secured Party and record such amendments and
supplements to this Security Agreement and other Loan Documents and additional
assignments as the Secured Party reasonably may request to evidence and confirm
the security interest herein contained; (l) it will, from and after the
occurrence of any Event of Default, comply with all default and remedy
provisions contained in the Credit Agreements (including, without limitation,
the provisions of Sections 9.02(g) and 9.02(h) of the Credit Agreements); and
(m) to the extent required by Section 8.02(i) of the Credit Agreements it will
cause each of its Subsidiaries which may hereafter be created or acquired to
enter into and become a party and signatory to this Security Agreement and do
all such acts and things and execute, deliver and file all such documents and
instruments as the Secured Party may deem necessary and desirable to attach,
create, protect, perfect and continue perfected a first priority security
interest in the Collateral of such Subsidiary.
6. Preservation of Security Interests. Each Debtor assumes full
----------------------------------
responsibility for taking and hereby agrees to take any and all necessary steps
to preserve and defend the Secured Party's right, title and security interest in
and to such Debtor's Collateral against the claims and demands of all Persons
(other than those holding Permitted Liens). The Secured Party shall be deemed
to have exercised reasonable care in the custody and preservation of a Debtor's
Collateral in the Secured Party's possession if, prior to the existence of an
Event of Default or Potential Default, the Secured Party takes such action for
that purpose as such Debtor shall reasonably request in writing, provided that
--------
such requested action will not, in the judgment of the Secured Party, impair the
security interest in such Debtor's Collateral created hereby or the Secured
Party's rights in, or the value of, such Collateral, and provided further that
-------- -------
such written request is received by the Secured Party in sufficient time to
permit the Secured Party to take the requested action.
7. Secured Party's Rights with Respect to the Collateral. At any time and
-----------------------------------------------------
from time to time, whether or not an Event of Default shall have occurred, and
without notice to or consent of the Debtors, the Secured Party may, at its
option, do any or all of the following: (a) take any
6
actions the Secured Party deems appropriate to attach, perfect, continue
perfected, preserve and protect the Secured Party's security interest in the
Collateral; (b) do anything which the Debtors are required but fail to do
hereunder, and in particular the Secured Party may, if any of the Debtors fail
to do so, (i) insure or take any reasonable steps to maintain, repair and
protect the Collateral of any Debtor, (ii) pay any or all taxes, levies,
expenses and costs arising with respect to the Collateral of any Debtor, or
(iii) pay any or all premiums payable on any policy of insurance required to be
obtained or maintained hereunder, and add any amounts paid under this Section 7
to the principal amount of any of the Secured Indebtedness and other
indebtedness and liabilities secured by this Security Agreement; and (c)
inspect, audit and verify the Collateral of any Debtor at any time upon on Event
of Default or otherwise at any reasonable time and upon reasonable prior notice
to Debtor, including reviewing all of Debtors' books and records and copying and
making excerpts therefrom, in accordance with the terms of the Credit
Agreements.
8. Remedies on Default. If there shall have occurred and be continuing an
-------------------
Event of Default under the terms of the Credit Agreements or the other Loan
Documents:
(a) The Secured Party shall have such rights and remedies with respect
to the Collateral or any part thereof and the proceeds thereof as are
provided by the Code and such other rights and remedies with respect
thereto which it may have at Law or in equity or under this Security
Agreement and the Other Loan Documents, including to the extent not
inconsistent with the provisions of the Code, the right to take over and
collect all or any of Debtor's accounts and all or any of the other
Collateral which consists of amounts owing to any Debtor, and to this end,
the Debtor hereby appoints the Secured Party, its officers, employees and
agents, as its irrevocable, true and lawful attorneys-in-fact with all
necessary power and authority to (i) take possession immediately, with or
without notice, demand, or legal process, of any of or all of the
Collateral wherever found, and for such purposes, enter upon any premises
upon which the Collateral may be found and remove the Collateral therefrom,
(ii) require the Debtors to assemble the Collateral and deliver it to the
Secured Party or to any place designated by the Secured Party at the
Debtors' expense, (iii) receive, open and dispose of all mail addressed to
the Debtors (or any of them), (iv) demand payment of the Debtors' accounts
receivable, (v) enforce payment of the Debtors' accounts receivable by
legal proceedings or otherwise, (vi) exercise all of the Debtors' rights
and remedies with respect to the collection of the Debtors' accounts
receivable, (vii) to the extent permitted by applicable Law, settle,
adjust, compromise, extend or renew the Debtors' accounts receivable,
(viii) settle, adjust or compromise any legal proceedings brought to
collect the Debtors' accounts receivable, (ix) to the extent permitted by
applicable Law, sell or assign the Debtors' accounts receivable upon such
terms, for such amounts and at such time or times as the Secured Party
deems advisable, (x) discharge and release the Debtors' accounts
receivable, (xi) take control, in any manner, of any item of payment or
proceeds from any account debtor, (xii) prepare, file and sign the Debtor's
name on any Proof of Claim in Bankruptcy or similar document against any
account debtor, (xiii) prepare, file and sign the Debtor's name on any
notice of lien, assignment or satisfaction of lien or similar document in
connection with the Debtors' accounts receivable, (xiv) do all acts and
things necessary, in the Secured Party's sole discretion, to fulfill the
Debtor's obligations
7
under the Credit Agreements and other Loan Documents, (xv) endorse the name
of the Debtor upon any check, chattel paper, document, instrument, invoice,
freight xxxx, xxxx of lading or similar document or agreement relating to
the Debtors' accounts receivable or inventory; (xvi) use the Debtors'
stationery and sign the Debtors' name to verifications of the Debtors'
accounts receivable and notices thereof to account debtors; (xvii) access
and use the information recorded on or contained in any data processing
equipment or computer hardware or software relating to the Debtors'
accounts receivable, inventory, or other Collateral or proceeds thereof to
which the Debtor has access, (xviii) demand, xxx for, collect, compromise
and give acquittances for any and all Collateral, (xix) prosecute, defend
or compromise any action, claim or proceeding with respect to any of the
Collateral, (xx) direct payments to, and take all necessary actions with
respect to, lockbox agreements and lockbox accounts created pursuant to the
provisions of Section 9.02(h) of the Credit Agreements, and (xxi) take such
other action as the Secured Party may deem appropriate, including extending
or modifying the terms of payment of the Debtors' debtors. This power of
attorney, being coupled with an interest, shall be irrevocable for the life
of this Security Agreement. To the extent permitted by Law, the Debtor
hereby waives all claims of damages due to or arising from or connected
with any of the rights or remedies exercised by the Secured Party pursuant
to this Security Agreement, except claims for damage to the Collateral
arising from gross negligence or willful misconduct by the Secured Party.
(b) The Secured Party shall have the right to lease, sell or otherwise
dispose of all or any of the Collateral at public or private sale or sales
for cash, credit or any combination thereof, with such notice as may be
required by Law (it being agreed by the Debtor that, in the absence of any
contrary requirement of Law, ten (10) days' prior notice of a public or
private sale of Collateral shall be deemed reasonable notice), in lots or
in bulk, for cash or on credit, all as the Secured Party, in its sole and
absolute discretion, may deem advisable. Such sales may be adjourned from
time to time with or without notice. The Secured Party shall have the right
to conduct such sales on the Debtors' premises or elsewhere and shall have
the right to use the Debtors' premises without charge for such sales for
such time or times as the Secured Party may see fit. The Secured Party and
the Facility Parties may purchase all or any part of the Collateral at
public or, if permitted by Law, private sale and, in lieu of actual payment
of such purchase price, may set off the amount of such price against the
Secured Indebtedness.
(c) In the event of a breach by any of the Debtors in the performance
of any of the terms of this Security Agreement, the Secured Party may
demand specific performance of this Security Agreement and seek injunctive
relief and may exercise any other remedy, available at law or in equity, it
being recognized that the remedies of the Secured Party at Law may not
fully compensate the Secured Party for the damages the Secured Party or any
of the Facility Parties may suffer in the event of a breach hereof.
9. Application of Proceeds. The proceeds of any collection, sale or other
-----------------------
disposition of the Collateral of any Debtor, or any part thereof, shall, after
the Secured Party has made all deductions of expenses, including but not limited
to reasonable attorneys' fees and other expenses
8
incurred in connection with repossession, collection, sale or disposition of
such Collateral or in connection with the enforcement of the Secured Party's
rights with respect to the Collateral in any insolvency, bankruptcy or
reorganization proceedings, be applied against the Secured Indebtedness, whether
or not all the same be then due and payable, in such manner and order as set
forth in the Collateral Sharing Agreement. The Debtors shall be liable for any
deficiency if the proceeds of any sale, assignment, giving of an option or
options to purchase or other disposition of the Collateral is insufficient to
pay all of the Secured Indebtedness.
10. Attorneys-in-Fact. Each of the Debtors hereby irrevocably appoints the
-----------------
Secured Party, its officers, employees and agents, or any of them, as attorneys-
in-fact, with full power of substitution, for such Debtor for the purpose of
carrying out the provisions of this Security Agreement and the Other Loan
Documents, and taking any action and executing, delivering, filing and recording
any instruments which the Secured Party may deem necessary or advisable to
accomplish the purposes hereof and thereof, which power of attorney being given
for security is coupled with an interest and irrevocable. Each Debtor hereby
ratifies and confirms and agrees to ratify and confirm all action taken by the
Secured Party, its officers, employees or agents pursuant to the foregoing power
of attorney.
11. Indemnity and Expenses.
----------------------
(a) The Debtors unconditionally and jointly and severally agree to
indemnify the Secured Party from and against any and all claims, losses and
liabilities arising out of or resulting from this Security Agreement
(including enforcement of this Security Agreement), except claims, losses
or liabilities resulting from the gross negligence or willful misconduct of
the Secured Party or any of the Facility Parties.
(b) The Debtors unconditionally and jointly and severally agree upon
demand to pay to the Secured Party the amount of any and all reasonable and
necessary out-of-pocket costs, expenses and disbursements for which
reimbursement is customarily obtained, including reasonable fees and
expenses of their counsel actually incurred, which the Secured Party may
incur in connection with (i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii)
the exercise or enforcement of any of the rights of the Secured Party
hereunder or (iv) the failure by the Debtors to perform or observe any of
the provisions hereof.
12. Security Interest Absolute; Waiver of Notices. All rights of the
---------------------------------------------
Secured Party hereunder, all security interests hereunder, and all obligations
of the Debtors hereunder shall be absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of the Credit Agreements, the
promissory notes or guaranties evidencing the Secured Indebtedness, or any of
the other Loan Documents; (b) any change in the time, manner or place or payment
of, or in any other term of, all or any of the Secured Indebtedness or any other
amendment or waiver of or any consent to any departure from the Credit
Agreements or any of the other Loan Documents; (c) any exchange, release or non-
perfection of any other Collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the Secured
9
Indebtedness; or (d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any Debtor or any third party
mortgagors, pledgors or Debtors of security interests. Each Debtor (other than
the Borrower and the Term Loan Borrower with respect to notices otherwise
provided for in the Credit Agreements and the other Loan Documents) waives any
and all notice with respect to acceptance by the Secured Party of this Security
Agreement, the provisions of the Credit Agreements, or any of the other Loan
Documents or any other promissory note, guaranty, instrument or agreement
relating to the Secured Indebtedness, and any default in connection with the
Secured Indebtedness. Each Debtor waives any presentment, demand, notice of
dishonor or nonpayment, protest, notice of protest and any other notice of any
kind in connection with the Secured Indebtedness, except for notices expressly
required under the Loan Documents.
Until the indefeasible payment in full in cash of the Obligations and so
long as any Obligations remain outstanding or any commitment to extend credit to
the Borrower pursuant to the Revolving Credit Agreement remains in effect each
Debtor waives and agrees not to enforce any of the rights of such Debtor against
the Borrower, the Term Loan Borrower or any other Debtor, including: (i) any
right of such Debtor to be subrogated in whole or in part to any right or claim
with respect to any Secured Indebtedness or any portion thereof to the Secured
Party which might otherwise arise from payment by any Debtor to the Secured
Party or any other Facility Party on the account of the Secured Indebtedness or
any portion thereof; and (ii) any right of any Debtor to require the marshalling
of assets of the Borrower, the Term Loan Borrower or any other Debtor which
might otherwise arise from payment by any Debtor to the Secured Party or any
other Facility Party on account of the Secured Indebtedness or any portion
thereof. If any amount shall be paid to any Debtor in violation of the preceding
sentence, such amount shall be deemed to have been paid to such Debtor for the
benefit of, and held in trust for the benefit of, the Secured Party and shall
forthwith be paid to the Secured Party to be credited and applied upon the
Secured Indebtedness, whether matured or unmatured in accordance with the terms
of the Collateral Sharing Agreement. Each Debtor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by the Credit Agreements and that the waivers set forth in this
Section are knowingly made in contemplation of such benefits.
13. Termination. Upon payment in full of the Secured Indebtedness and
-----------
termination of the Credit Agreements and the Commitments, this Security
Agreement shall terminate and be of no further force and effect, and the Secured
Party, at the Debtors' expense, shall thereupon promptly return to each Debtor
such of its Collateral and such other documents delivered by each Debtor
hereunder as may then be in the Secured Party's possession. Upon any such
termination, the Secured Party will, at the Debtor's expense, execute and
deliver to each Debtor such documents as that Debtor shall reasonably request to
evidence such termination. The Secured Party, upon request of any Debtor, shall
release the Secured Party's security interest in any of such Debtor's Collateral
which is sold prior to the occurrence of an Event of Default (but not the
proceeds thereof), provided such sale is permitted by, and made in accordance
--------
with, the provisions of the Credit Agreements.
14. Modifications, Amendments and Waivers. Any and all agreements amending
-------------------------------------
or changing any provision of this Security Agreement or the rights of the
Secured Party or the
10
Debtors hereunder, and any and all waivers or consents to Events of Default or
other departures from the due performance of the Debtors hereunder shall be made
only pursuant to the provisions of the Credit Agreements, except that any
amendment or change that affects less than all of the Debtors shall be effective
with the written consent of the affected Debtors.
15. No Implied Waivers; Cumulative Remedies. No course of dealing and no
---------------------------------------
failure or delay on the part of the Secured Party in exercising any right,
remedy, power or privilege hereunder shall operate as a waiver thereof or of any
other right, remedy, power or privilege of the Secured Party hereunder; and no
single or partial exercise of any such right, remedy, power or privilege shall
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights and remedies of the Secured Party
under this Security Agreement are cumulative and not exclusive of any rights or
remedies which it may otherwise have.
16. Notices. All notices, statements, requests, demands and other
-------
communications under this Security Agreement shall be given in the manner
provided in Section 11.06 of the Credit Agreements, and shall be addressed (a)
to the Debtors at the Borrower's chief executive office as set forth on
Schedule 1, and (b) to the Secured Party at the address set forth in the Credit
----------
Agreements.
17. Severability.
------------
(a) Each Debtor agrees that the provisions of this Security Agreement
are severable, and in an action or proceeding involving any state or
federal bankruptcy, insolvency or other law affecting the rights of
creditors generally:
(i) if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect only such clause or
provision, or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or
any other clause or provision in this Security Agreement in any
jurisdiction; and
(ii) if this Security Agreement would be held or determined to be
void, invalid or unenforceable on account of the amount of the
aggregate liability of a Debtor (other than the Borrower or the Term
Loan Borrower) under this Security Agreement, then, notwithstanding
any other provision of this Security Agreement to the contrary, the
aggregate amount of such liability shall, without any further action
by the Secured Party, such Debtor or any other person, be
automatically limited and reduced to the highest amount which is valid
and enforceable as determined in such action or proceeding.
(b) If the grant of a security interest hereunder by any one or more
Debtors is held or determined to be void, invalid or unenforceable, in
whole or in part, such holding or determination shall not impair or affect:
11
(i) the validity and enforceability of the security interest
granted hereunder by any other Debtor, which shall continue in full
force and effect in accordance with its terms; or
(ii) the validity and enforceability of any clause or provision
not so held to be void, invalid or unenforceable.
18. Governing Law. This Security Agreement shall be deemed to be a
-------------
contract under the laws of the Commonwealth of Pennsylvania and for all purposes
shall be governed by and construed in accordance with the internal laws of said
Commonwealth, without reference to its conflicts of law principles, except as
required by mandatory provisions of law and except to the extent that the
validity or perfection of security interests hereunder, or remedies hereunder
with respect to any particular Collateral, is governed by the laws of a
jurisdiction other than the law of the Commonwealth of Pennsylvania.
19. Successors and Assigns. This Security Agreement shall be freely
----------------------
assignable and transferable by the Secured Party in connection with the
assignment or transfer of the Secured Indebtedness; provided, however, the
-------- -------
duties and obligations of the Debtors may not be delegated or transferred by the
Debtors, except to the extent specifically permitted in the Credit Agreements.
The rights and privileges of the Secured Party shall inure to the benefit of its
successors and assigns, and the duties and obligations of the Debtors shall bind
the Debtors and their respective successors and permitted assigns. Except to the
extent otherwise required by the context of this Security Agreement, the word
"Facility Parties" where used in this Security Agreement shall include, without
limitation, any holder of a promissory note, or assignee of an interest therein,
originally issued to a Facility Party under the Credit Agreements, and each such
holder of a promissory note, or assignee of an interest therein, shall be bound
by and have the benefits of this Security Agreement to the same extent as if
such holder had been a signatory hereto.
20. Election. Each Debtor acknowledges that the Secured Party may, in its
--------
sole discretion, elect to exercise its rights under this Security Agreement
against any one or more of the Debtors, or the Collateral of any one or more of
the Debtors, without any duty or responsibility to pursue any other Debtor, and
that such an election by the Secured Party shall not be a defense to any action
the Secured Party may elect to take against any one or more of the Debtors.
21. Counterparts. This Security Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be deemed an original, but all
such counterparts shall constitute but one and the same instrument.
22. Consent to Jurisdiction; Waiver of Jury Trial. Each of the Debtors
---------------------------------------------
hereby irrevocably consents to the non-exclusive jurisdiction of the Court of
Common Pleas of Allegheny County and the United States District Court for the
Western District of Pennsylvania, and waives personal service of any and all
process upon it and consents that all such service of process be made by
certified or registered mail directed to the Debtors at the addresses set forth
12
or referred to in Section 16 hereof and service so made shall be deemed to be
completed upon actual receipt thereof. Each of the Debtors waives any objection
to jurisdiction and venue of any action instituted against it as provided herein
and agrees not to assert any defense based on lack of jurisdiction or venue, AND
THE SECURED PARTY AND EACH OF THE DEBTORS WAIVE TRIAL BY JURY IN ANY ACTION,
SUIT, PROCEEDING OR COUNTERCLAIM WITH RESPECT TO THIS SECURITY AGREEMENT TO THE
FULL EXTENT PERMITTED BY LAW.
[SIGNATURES BEGIN ON NEXT PAGE]
13
[SIGNATURE PAGE 1 OF 1 TO SECURITY AGREEMENT]
WITNESS the due execution hereof as of the day and year first above
written.
SECURED PARTY:
PNC BANK, NATIONAL ASSOCIATION, as Collateral
Agent
By:
-------------------------------------
Title:
----------------------------------
DEBTORS:
MARINER HEALTH GROUP, INC.
EACH SUBSIDIARY OF MARINER HEALTH GROUP, INC.
WHICH IS A CORPORATION AND WHICH IS LISTED AS A
"COMPANY" ON SCHEDULE 6.01(c) OF THE CREDIT
AGREEMENT BOTH FOR ITSELF AND, IF APPLICABLE: (i)
AS GENERAL PARTNER OF EACH OTHER SUBSIDIARY OF
MARINER HEALTH GROUP, INC. WHICH IS A PARTNERSHIP
AND WHICH IS LISTED AS A "COMPANY" ON SCHEDULE
6.01(c) OF THE CREDIT AGREEMENT, AND (ii) AS A
MEMBER OF EACH OTHER SUBSIDIARY OF MARINER HEALTH
GROUP, INC. WHICH IS A LIMITED LIABILITY COMPANY
AND WHICH IS LISTED AS A "COMPANY" ON SCHEDULE
6.01(c) OF THE CREDIT AGREEMENT
By:
-------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President/Treasurer of each
of the foregoing corporations
SCHEDULE 1
TO
SECURITY AGREEMENT
SECURITY INTEREST DATA SUMMARY
------------------------------
1. The chief executive office of each Debtor is located as follows:
Borrower:
Term Loan Borrower:
Other Debtors:
2. Each Debtor's true, full and current corporate name is as set forth on
the signature pages to this Security Agreement. No Debtor has used or currently
uses any legal name, trade names or fictitious names, other than its current
legal name or as follows:
Debtor Name Other Legal, Trade or Fictitious Names
----------- --------------------------------------
3. All of each Debtor's personal property which has not been delivered to
the Secured Party pursuant to the terms of this Agreement or the Credit
Agreement is now, and will be at all future times, located at the Debtor's chief
executive office as described in Paragraph 1 above, or at the following
locations:
Debtor Name Collateral Locations
----------- --------------------
