SECURITY AGREEMENT
BETWEEN
THE ENTITIES DESCRIBED ON ATTACHED EXHIBIT A
AND
MONARCH PROPERTIES, LP
DATED JUNE 23, 1998
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is made and entered
into as of June 23, 1998, by and between the entities described on attached
EXHIBIT A (each a "Debtor" and collectively, "Debtors") and MONARCH PROPERTIES,
LP, a Delaware limited partnership ("Secured Party").
RECITALS:
A. Capitalized terms used and not otherwise defined herein shall have the
meanings given them in the Master Lease between Secured Party and Lyric
Holdings, dated as of the date hereof ("Lease").
B. Pursuant to the Master Lease, Secured Party has leased to Lyric Health
Care Holdings III, Inc. ("Lyric Holdings"), for a Term commencing on the
Commencement Date, as defined in the Master Lease, all of the Leased Properties.
Lyric Holdings and the Sublessees have entered into Facility Subleases, each
dated as of the date hereof (each a "Facility Sublease" and collectively,
"Facility Subleases") pursuant to which each Sublessee has subleased from Lyric
Holdings the Leased Property located as set forth opposite such Sublessee's name
on Exhibit A hereto.
C. Each Facility Sublease contains substantially the same provisions as the
Master Lease except for provisions concerning rent and other matters specific to
the individual Facility. In this Agreement, "Lease" means the Master Lease and
the Facility Sublease, as applicable to each Facility.
D. As a condition to Secured Party's agreement to enter into the Lease,
Secured Party has required each Debtor to enter into this Security Agreement and
to grant security interests to Secured Party as herein provided.
NOW, THEREFORE, in order to induce Secured Party to enter into the Lease,
and for other good and valuable consideration the receipt and sufficiency of
which hereby are acknowledged, the parties agree as follows:
ARTICLE I - DEFINITIONS
This Security Agreement is executed and delivered in connection with the
Lease. Terms defined in the Commercial Code (as hereinafter defined) and not
otherwise defined in this Security Agreement or in the Lease shall have the
meanings ascribed to those terms in the Commercial
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Code. In addition to the other definitions contained herein, when used in this
Agreement the following terms shall have the following meanings:
"Collateral" means the collateral described in Article II, Section 2 below.
"Commercial Code" means the Uniform Commercial Code, as enacted and in
force from time to time in the state in which the Facility is located.
"Debtor's Personal Property" means (i) any tangible personal property owned
by a Debtor and not used in connection with the operation of any Facility and
(ii) Debtor's accounts receivable.
ARTICLE II - AGREEMENT
1. GRANT OF SECURITY INTEREST. Each Debtor hereby grants to Secured Party a
continuing security interest in the Collateral to secure the payment of all
amounts now or hereafter due and owing to Secured Party from such Debtor under
the Lease, or any extension or renewal thereof, and any and all other
obligations incurred in connection therewith, together with all other
obligations or indebtedness of each Debtor to Secured Party however created,
evidenced or arising, whether direct or indirect, absolute or contingent, now or
hereafter existing, due or to become due, plus all interest, costs,
out-of-pocket expenses and reasonable attorneys' fees which may be made or
incurred by Secured Party in the administration, and collection thereof (the
"Liabilities"), and in the protection, maintenance, and liquidation of the
Collateral. This Security Agreement shall be and become effective when, and
continue in effect as long as, any Liabilities of any Debtor to Secured Party
are outstanding and unpaid, and except as otherwise permitted pursuant to the
terms of this Agreement or the Lease, no Debtor will sell, assign, transfer,
pledge or otherwise dispose of or encumber any Collateral to any third party
while this Security Agreement is in effect without the prior and express written
consent of Secured Party, except for inventory and supplies sold or disposed of
in the ordinary course of business.
2. COLLATERAL. The "Collateral" covered by this Agreement is all of the
personal property described below that each Debtor now owns or shall hereafter
acquire or create, immediately upon the acquisition or creation thereof, and
that is located at or used exclusively in connection with the Facility,
consisting of the following:
(a) Inventory. All inventory and goods, now owned or hereafter
acquired, including but not limited to, raw materials, work in process, finished
goods, food, medicines, tangible property, stock in trade, wares and merchandise
used in or sold in the ordinary course of business at the Facility (the
"Inventory"); and
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(b) Equipment. All equipment, furniture, fixtures and other personal
property used in connection with the operation of the Facility, whether now
owned or hereafter acquired by a Debtor, together with all accessions,
additions, parts, attachments, accessories, or appurtenances thereto including
but not limited to linens, motor vehicles, furniture, fixtures and movable
equipment, leasehold improvements, and all books and records now owned or
hereafter acquired pertaining to any of the above described property, including
but not limited to any computer readable memory and any computer hardware or
software necessary to process such memory, wherever located, other than Debtor's
Personal Property (the "Equipment"); and
(c) Licenses and Permits. To the extent permitted by law, all licenses
and permits now owned or hereafter acquired by a Debtor and necessary or
desirable for the contemplated use and operation of a Facility as a health care
facility (the "Licenses"); and
(d) Certificates of Need. To the extent permitted by law, all
Certificates of Need now or hereafter issued in connection with a Facility (the
"Certificates"); and
(e) Proceeds. Proceeds arising out of the operation of Facility,
including, without limitation, proceeds of hazard or other insurance policies
and eminent domain or condemnation awards, of all of the foregoing described
Inventory or Equipment, together with any and all deposits or other sums at any
time credited by or due from Secured Party to a Debtor and any and all
instruments, documents, policies and certificates of insurance, securities,
goods and the proceeds thereof (whether or not the same are Collateral or
Proceeds thereof hereunder) owned by a Debtor or in which a Debtor has an
interest, which are now or at any time hereafter in possession or under the
control of Secured Party or in transit by mail or carrier to or from Secured
Party or in the possession of any third party acting on behalf of Secured Party,
without regard to whether Secured Party received the same in pledge, for
safekeeping, as agent for collection or transmission or otherwise, or whether
Secured Party has conditionally released the same (the "Proceeds"); and
(f) Insurance Rights. All rights under contracts of insurance now
owned or hereafter acquired covering any of the Collateral ("Insurance Rights");
and
(g) Other Property. All other tangible and intangible property of a
Debtor now or hereinafter acquired by a Debtor and located at the Facility or
used exclusively in connection with the operation of the Facility; and
(h) Rights. All rights, remedies, powers and/or privileges of a Debtor
with respect to any of the foregoing. The form of a description of the
Collateral to be attached to financing statements to be executed by each Debtor
is attached hereto as EXHIBIT B. Except to the extent set forth above, the term
"Collateral" does not include Debtor's Personal Property.
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3. PERFECTION OF SECURITY INTEREST. Each Debtor shall execute and deliver
to Secured Party, concurrently with such Debtor's execution of this Security
Agreement and at any time or times hereafter at the request of Secured Party,
all financing statements, continuation financing statements, assignments,
affidavits, reports, notices, letters of authority, vehicle title notations and
all other documents that Secured Party may reasonably request, in a form
reasonably satisfactory to Secured Party, to perfect and maintain perfected
Secured Party's security interests in the Collateral. In order to fully
consummate all of the transactions contemplated hereunder, each Debtor shall
make appropriate entries on its books and records disclosing the security
interests created hereby in the Collateral.
4. WARRANTIES AND COVENANTS. In addition to the warranties and
representations, if any, made in the Lease, each Debtor warrants, represents and
agrees that:
(a) Debtor is and will be the lawful owner or lessee of all of the
Collateral, with the right to subject the owned or leased property to the
security interests of Secured Party hereunder;
(b) Except for the security interests in the Collateral herein granted
to Secured Party, there are no other security interests in the Collateral that
are known to Debtor, and there are no financing statements covering any of the
Collateral filed in any public office created by or known to Debtor prior to the
date hereof, except as previously disclosed by Debtor to Secured Party. Debtor
shall defend Secured Party against any claims and demands of any and all other
persons to the Collateral inconsistent with this Agreement;
(c) All of the Collateral is or will be (upon delivery) located at a
Facility;
(d) Except as permitted under the Lease or hereunder, Debtor shall not
remove the Collateral from a Facility without Secured Party's prior written
consent and shall not use or permit the Collateral to be used for any unlawful
purpose whatsoever. Except as permitted under the Lease or hereunder, Debtor
shall not remove any Collateral from the state in which the Facility is located
without the prior written consent of Secured Party;
(e) Except as permitted under the Lease, Debtor shall not conduct
business under any name at a Facility other than that set forth on SCHEDULE A to
the Facilities Purchase Agreement (as defined in the Master Lease), nor will any
Debtor change or reorganize the type of business entity under which it presently
does business, except upon prior and express written approval of Secured Party,
and, if such approval is granted, Debtor agrees that all documents, instruments
and agreements reasonably requested by Secured Party and relating to such change
shall be prepared, filed and recorded at Debtor's expense before the change
occurs;
(f) Debtor shall not remove any records concerning the Collateral
located at the Facility nor keep any of its records concerning the same at any
other location (other than the
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corporate headquarters of IHS) unless written notice thereof is given to Secured
Party at least ten (10) days prior to the removal of such records to any new
addresses; and
(g) Debtor has the right and power and is duly authorized to enter
into this Security Agreement. The execution of this Security Agreement does not
and will not constitute a breach of any provision contained in any agreement or
instrument to which Debtor is or may become a party or by which Debtor is or may
be bound or affected.
5. DEFAULT/REMEDIES
(a) The occurrence and continuation of any Event of Default under the
Lease shall constitute a Security Agreement Event of Default.
(b) Whenever a Security Agreement Event of Default shall have occurred
and so long as it continues, Secured Party may exercise from time to time any
rights and remedies, including the right to immediate possession of the
Collateral, available to it under the Lease, this Security Agreement or
applicable law. Secured Party shall have the right to hold any property then in
or upon the Facility (but excluding any property belonging to patients at the
Facility) at the time of repossession not covered by this Security Agreement
until return is demanded in writing by a Debtor. Each Debtor agrees, in case of
the occurrence of a Security Agreement Event of Default that is continuing and
upon the request of Secured Party, to assemble, at its expense, all of the
Collateral under its control at a convenient place acceptable to Secured Party
and to pay all costs of Secured Party of collection of all the Liabilities, and
enforcement of rights hereunder, including reasonable attorneys' fees and legal
expenses, including participation in bankruptcy proceedings, and the expenses of
locating the Collateral and the expenses of any repairs to any realty or other
property to which any of the Collateral may be affixed or be a part. If the
Collateral is disposed of at a public sale, the parties agree that a public sale
with at least ten (10) business days prior notice to Lyric Holdings and notice
to the public by one publication in a local newspaper is commercially
reasonable. If any notification of intended disposition of any of the Collateral
is required by law, such notification, if mailed, shall be deemed reasonably and
properly given if sent at least ten (10) business days before such disposition,
by first class mail, postage prepaid, addressed to Lyric Holdings either at the
address set forth in the notice section hereof, or at any other address of Lyric
Holdings appearing on the records of Secured Party.
(c) TO THE EXTENT PERMITTED BY LAW, EACH DEBTOR AGREES THAT SECURED
PARTY SHALL, UPON THE OCCURRENCE OF ANY SECURITY AGREEMENT EVENT OF DEFAULT,
HAVE THE RIGHT TO PEACEFULLY RETAKE ANY OF THE COLLATERAL. DEBTOR WAIVES ANY
RIGHT IT MAY HAVE, IN SUCH INSTANCE, TO A JUDICIAL HEARING PRIOR TO SUCH
RETAKING.
(d) Notwithstanding anything elsewhere herein to the contrary, if the
existence of an Event of Default upon which Secured Party is relying in its
pursuit of the remedies provided
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for herein is being arbitrated pursuant to Article [Insert] of the Lease,
Secured Party's right to pursue such remedies on the basis of such Event of
Default shall be suspended until in such arbitration there is a final
determination that such Event of Default exists.
6. GENERAL
(a) Time shall be deemed of the essence with respect to this Security
Agreement.
(b) Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of any Collateral in its possession if it takes
such action for that purpose as Lyric Holdings requests in writing, but failure
of Secured Party to comply with any such request shall not of itself be deemed a
failure to exercise reasonable care. Failure of Secured Party to preserve or
protect any rights with respect to such Collateral against any prior parties
shall not be deemed a failure to exercise reasonable care in the custody and
preservation of such Collateral.
(c) Any delay on the part of Secured Party in exercising any power,
privilege or right under the Lease, this Security Agreement or under any other
instrument or document executed by a Debtor in connection herewith shall not
operate as a waiver thereof. No single or partial exercise thereof, or the
exercise of any other power, privilege or right shall preclude other or further
exercise thereof, or the exercise of any other power, privilege or right. The
waiver by Secured Party of any default by a Debtor shall not constitute a waiver
of any subsequent defaults or defaults by any other Debtor but shall be
restricted to the default so waived.
(d) All rights, remedies and powers of Secured Party hereunder are
irrevocable and cumulative, and not alternative or exclusive, and shall be in
addition to all rights, remedies and power is given by the Lease or the
Commercial Code, or any other applicable laws now existing or hereafter enacted.
(e) Whenever the singular is used hereunder, it shall be deemed to
include the plural (and vice-versa), and reference to one gender shall be
construed to include all other genders, including neuter, whenever the context
of this Security Agreement so requires. Section captions or headings used in
this Security Agreement are for convenience and reference only and shall not
affect the construction thereof.
(f) Whenever possible each provision of this Security Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Security Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Security Agreement.
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(g) This Security Agreement may be executed in multiple counterparts,
each of which shall be considered an original but all of which, when taken
together, shall constitute one agreement.
(h) The rights and privileges of Secured Party hereunder shall inure
to the benefit of its successors and assigns, and this Security Agreement shall
be binding on all assigns and successors of each Debtor as may be permitted
under the Lease.
(i) In the event of any action to enforce this Security Agreement or
to protect the security interest of Secured Party in the Collateral, or to
protect, preserve, maintain, process, assemble, develop, insure, market or sell
any Collateral, Debtor agrees to pay the costs owed and expenses thereof,
together with reasonable and documented attorneys' fees (including fees incurred
in appeals and post judgment enforcement proceedings).
(j) THIS SECURITY AGREEMENT SHALL BE CONSTRUED, AND THE RIGHTS AND
OBLIGATIONS OF EACH DEBTOR AND SECURED PARTY SHALL BE DETERMINED, IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT THAT THE LAWS OF THE STATE WHERE
THE COLLATERAL IS LOCATED SHALL GOVERN THIS SECURITY AGREEMENT (A) TO THE EXTENT
NECESSARY TO PERFECT AND/OR ENFORCE THE LIENS CREATED BY THIS SECURITY AGREEMENT
AND TO THE EXTENT NECESSARY TO OBTAIN THE BENEFIT OF THE RIGHTS AND REMEDIES SET
FORTH HEREIN WITH RESPECT TO THE COLLATERAL, AND (B) FOR PROCEDURAL REQUIREMENTS
THAT MUST BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS
LOCATED.
(k) EACH DEBTOR CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE
AND FEDERAL COURTS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED AND NEW YORK
AND AGREES THAT ALL DISPUTES CONCERNING THIS SECURITY AGREEMENT BE HEARD IN THE
STATE AND FEDERAL COURTS LOCATED IN THE STATE IN WHICH THE COLLATERAL IS LOCATED
OR IN NEW YORK. EACH DEBTOR AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON
IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE IN WHICH THE
COLLATERAL IS LOCATED OR NEW YORK, AND EACH DEBTOR IRREVOCABLY WAIVES ANY
OBJECTION TO VENUE IN THE STATE AND FEDERAL COURTS OF THE STATE IN WHICH THE
COLLATERAL IS LOCATED AND NEW YORK.
(l) No amendment to this Security Agreement shall be effective unless
the same shall be in writing and signed by the parties.
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(m) Nothing contained herein shall be construed as in any way
modifying or limiting the effect of terms or conditions set forth in the Lease,
but each and every term and condition hereof shall be in addition thereto.
(n) All notices required or permitted to be given hereunder shall be
given and deemed effective as provided in the Lease. The parties hereby agree
that a notice sent as specified in this paragraph at least ten (10) business
days before the date of any intended public sale or the date after which any
private sale or other intended disposition of the Collateral is to be made shall
be deemed to be reasonable notice of such sale or other disposition.
SIGNATURE PAGES FOLLOW
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IN WITNESS WHEREOF, the parties have executed this Security Agreement as of
the date first written above.
SECURED PARTY:
MONARCH PROPERTIES, LP
By: MP Operating, Inc.,
its General Partner
By:
-----------------------------------------
Name: Xxxx X. Xxxxx
Title: President and Chief Executive Officer
DEBTOR:
[INSERT SUBSIDIARIES]
By:
-----------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
LYRIC HOLDINGS:
LYRIC HEALTH CARE HOLDINGS III, INC.
By:
-----------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
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