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Exhibit 10.24
EXHIBIT 4.1-2
[FORM OF SUBSIDIARY SECURITY AGREEMENT]
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SUBSIDIARY SECURITY AGREEMENT
BY AND BETWEEN
------------------------,
AS SUBSIDIARY
AND
TORONTO DOMINION (TEXAS), INC.,
AS AGENT
DATED AS OF ___________
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Exhibit 4.1-2 p. 1
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SUBSIDIARY SECURITY AGREEMENT
THIS SUBSIDIARY SECURITY AGREEMENT (the "Agreement") dated as of _________,
is entered into by and between ____________________, a _____________ corporation
(the "Subsidiary"), and TORONTO DOMINION (TEXAS), INC. (the "Agent"), for itself
and as Agent on behalf of the Banks and the Issuing Bank (all as defined in the
hereinafter defined Credit Agreement).
WITNESSETH:
WHEREAS, New American Healthcare Corporation ("NAHC"), the Agent, the
Issuing Bank and the Banks are parties to that certain Amended and Restated
Credit Agreement dated as of ___________, 199__ (as hereafter amended, modified
or supplemented from time to time, the "Credit Agreement"); and
WHEREAS, it is a condition precedent to the making of Loans and the issuing
of Letters of Credit (as said terms are defined in the Credit Agreement) under
the Credit Agreement that the Subsidiary shall have granted the security
interest contemplated by this Agreement; and
WHEREAS, the Subsidiary is a Subsidiary, as defined in the Credit
Agreement, and the Subsidiary will realize substantial direct and indirect
benefits as a result of the making of the Loans and the issuance of the Letters
of Credit; and
WHEREAS, the Subsidiary is entering into this Agreement in order to secure
the obligations of the Subsidiary arising under (i) this Agreement, (ii) the
Subsidiary Guaranty dated as of _____________ (as hereafter amended, modified or
supplemented from time to time, the "Subsidiary Guaranty") by and between the
Subsidiary and the Agent and (iii) the Subsidiary Notes issued by the Subsidiary
pursuant to the Credit Agreement (collectively, the "Obligations");
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Capitalized terms used but not defined herein shall
have the meanings ascribed thereto in the Credit Agreement.
SECTION 2. GRANT OF SECURITY INTEREST. The Subsidiary hereby conveys,
transfers, grants, assigns and pledges to the Agent a security interest in and
security title to (together with a right of setoff) all assets of the Subsidiary
including, without limitation, the Subsidiary's right, title and interest in and
to the following, whether now owned or hereafter acquired (collectively, the
"Collateral"):
Exhibit 4.1-2 p.2
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(a) all inventory in all of its forms, wherever located, now or
hereafter existing (including, but not limited to (i) all goods,
merchandise and other personal property owned and held for sale, (ii) all
raw materials, work or goods in process, all finished products thereof, and
all materials and supplies which contribute to the finished products of the
Subsidiary in the ordinary course of business and (iii) any goods which are
returned to or repossessed by the Subsidiary), whether the Subsidiary has
an interest in mass or a joint or other interest or right of any other kind
(including, without limitation, goods in which the Subsidiary has an
interest or right as consignee), and all accessions thereto and products
thereof and documents and warehouse receipts therefor (any and all such
inventory, accessions, products and documents being hereinafter referred to
as the "Inventory");
(b) all accounts, contract rights, chattel paper, instruments,
warehouse receipts, drafts, acceptances, deposit and bank accounts, general
intangibles (including all patents, trademarks, tradenames, service marks,
patent applications, trademark applications and copyrights, and all
licenses relating to any of the foregoing) and documents of the Subsidiary,
whether secured or unsecured, and whether now existing or hereafter created
or arising, and all rights now or hereafter existing in and to all
security agreements, leases and other contracts securing or otherwise
relating to any such accounts, contract rights, chattel paper, instruments,
deposit and bank accounts, drafts, acceptances and documents (any and all
such accounts, contract rights, chattel paper, instruments, deposit and
bank accounts, drafts, acceptances and documents being hereinafter referred
to as the "Accounts" and any and all such leases, security agreements and
other contracts being hereinafter referred to as the "Related Contracts"),
and the proceeds of all service contracts sold by or on behalf of the
Subsidiary;
(c) all Certificates of Need, management services agreements, Health
Facility Licenses, Medicaid Provider Agreements and Medicare Provider
Agreements (but only to the extent that the Subsidiary will not be in
default under any such Medicaid Provider Agreement or Medicare Provider
Agreement or violate any Governmental Requirements as a result of a
granting of the security interest to the Agent therein);
(d) all books and records (including, without limitation, computer
tapes, programs and printouts and all other computer materials, records and
electronic data processing software) recording, evidencing or relating to
any or all of the foregoing Collateral;
Exhibit 4.1-2 p.3
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(e) all deposit accounts (and the investments and earnings thereof and
documents evidencing the same) into which the proceeds of any of the
foregoing may from time to time be deposited;
(f) all equipment, including machinery, supplies, motor vehicles,
tractors, trailers, trucks, dollies, forklifts and computers, and all
accretions, accessions and parts attached thereto, including tires and
tubes in service, and all additions thereto, and replacements thereof;
(g) all proceeds of the Subsidiary Loans (as defined in the Subsidiary
Notes of the Subsidiary); and
(h) all proceeds of any and all of the Collateral (including, without
limitation, cash proceeds and other proceeds which constitute property of
the types described in clauses (a) and (b) of this SECTION 2) and, to the
extent not otherwise included, all payments under insurance (whether or not
the Agent is the loss payee thereof) or under any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect
to any of the Collateral.
The Subsidiary and the Agent agree that the Excluded Leases shall be
excluded from the foregoing grant of security interest.
SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures the payment of
the Obligations, whether now or hereafter existing. Without limiting the
generality of the foregoing, this Agreement secures the payment of all amounts
which constitute part of the Obligations and would be owed by the Subsidiary to
the Agent under the Subsidiary Guaranty and the Subsidiary Notes of the
Subsidiary but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the Subsidiary.
SECTION 4. SUBSIDIARY REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) the Subsidiary shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of the duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by the Agent of any of the
rights hereunder shall not release the Subsidiary from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) neither the Agent, the Issuing Bank nor any Bank shall have any obligation
or liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall the Agent, the Issuing Bank or any Bank be
obligated to perform any of the obligations or duties of the Subsidiary
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
Exhibit 4.1-2 p.4
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SECTION 5. DELIVERY OF CHATTEL PAPER. The Subsidiary will promptly upon
request by the Agent deliver, assign and endorse to the Agent all chattel paper
and all other documents held by the Subsidiary in connection therewith.
SECTION 6. REPRESENTATIONS AND WARRANTIES. The Subsidiary represents and
warrants as follows:
(a) All of the Inventory, other than Inventory in transit, is located
at the places specified in SCHEDULE 1 attached hereto. The chief place of
business and chief executive office of the Subsidiary and the office where
the Subsidiary keeps records concerning the Accounts, and the originals of
all chattel paper that evidence Accounts, are located at its address
specified in SCHEDULE 2 attached hereto. The originals of all chattel paper
that evidence Accounts have been delivered to the Agent. None of the
Accounts is evidenced by a promissory note or other instrument, other than
a note or other instrument which has been delivered to the Agent.
(b) SCHEDULE 3 attached hereto and incorporated herein by reference
sets forth a true, complete and correct list of (i) all leases for Property
in which Inventory is stored (together with the name and mailing address of
each lessor with respect thereto) and (ii) the name and address of each
location at which Inventory is stored with a warehouseman or other bailee
(together with the name and address of each warehouseman or bailee with
respect thereto).
(c) This Agreement creates a valid security interest in the
Collateral, securing the payment of the Obligations, and, to the best of
the Subsidiary's knowledge, all filings and other actions necessary or
desirable to perfect and protect such security interest will have been duly
taken upon the filing of UCC-1 financing statements listing the Subsidiary,
as debtor, and the Agent, as secured party, in the jurisdictions listed on
SCHEDULE 4 attached hereto. Upon the taking of such actions and the making
of such filings, the Agent will have a first priority perfected security
interest in the Collateral, except to the extent such priority is affected
by Permitted Encumbrances.
(d) The Subsidiary represents and warrants that it has not operated or
owned the Collateral under any other name or tradename at any time during
the five-year period prior to the date of this Agreement other than the
name of the Subsidiary set forth on the signature pages hereof.
SECTION 7. FURTHER ASSURANCES.
(a) The Subsidiary agrees that from time to time, at the expense of
the Subsidiary, the Subsidiary will promptly execute and deliver all
further instruments and documents and take all further action that may be
necessary or that the Agent may
Exhibit 4.1-2 p.5
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request in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Agent to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, the Subsidiary will: (i)
xxxx conspicuously each chattel paper included in the Accounts and, at the
request of the Agent, each document included in the Inventory, each Related
Contract and each of its records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Agent, indicating that
such document, chattel paper, Related Contract or Collateral is subject to
the security interest granted hereby; (ii) if any Account shall be
evidenced by a promissory note or other instrument or chattel paper,
deliver and pledge to the Agent hereunder such note or instrument or
chattel paper duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to the
Agent; and (iii) execute and file such financing or continuation statements
or amendments thereto and such other instruments or notices as may be
necessary or as the Agent may reasonably request in order to perfect and
preserve the security interest granted or purported to be granted hereby.
(b) The Subsidiary hereby authorizes the Agent and appoints the Agent
its attomey-in-fact to file one or more financing or continuation
statements and amendments thereto relating to all or any part of the
Collateral without the signature of the Subsidiary where permitted by law.
A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient
as a financing statement where permitted by law.
(c) The Subsidiary covenants and agrees that it shall not change its
chief place of business and chief executive office or keep any records
concerning the Accounts at any address other than the addresses set forth
on SCHEDULE 2 unless written notice thereof is given to the Agent at least
thirty (30) calendar days prior to the creation of any new address for the
keeping of such records. The Subsidiary further agrees that it shall
promptly advise the Agent in writing, making reference to this SECTION
7(C), of the opening of any new material place of business, the closing of
any material place of business or the change of the location of the places
where it keeps the Collateral.
SECTION 8. INSURANCE. The Subsidiary shall, at its own expense, maintain
insurance with respect to the Collateral in such amounts, against such risks, in
such form and with such insurers as are in compliance with the requirements of
the Credit Agreement.
SECTION 9. TRANSFERS OF COLLATERAL; LIENS. The Subsidiary shall not (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Collateral, except Inventory in the
ordinary course of business and as otherwise permitted by the Credit Agreement,
or (ii) create or permit to exist any Lien,
Exhibit 4.1-2 p.6
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security interest, option or other charge or encumbrance upon or with respect to
any of the Collateral, except for Permitted Encumbrances.
SECTION 10. AGENT APPOINTED ATTORNEY-IN-FACT. The Subsidiary hereby
irrevocably appoints the Agent its attorney-in-fact, with full authority in the
place and stead of the Subsidiary and in the name of the Subsidiary or
otherwise, at such time as an Event of Default has occurred under the Credit
Agreement and is continuing and the Agent is exercising any of the remedies
available under SECTION 9.2 of the Credit Agreement, to take any action and to
execute any instrument which the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:
(a) to ask, demand, collect, xxx for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
connection with the Collateral;
(b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection therewith;
(c) to file any claims or take any action or institute any proceedings
which the Agent may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of the Agent with
respect to any of the Collateral; and
(d) to use any trademarks, trade names, licenses or other intellectual
property rights to the extent necessary to sell Inventory and to collect
any amounts due under any Accounts or Related Contracts.
SECTION 11. AGENT MAY PERFORM. If the Subsidiary fails to perform any
agreement contained herein, the Agent may itself perform or cause the
performance of such agreement, and the expenses of the Agent incurred in
connection therewith shall be payable by the Subsidiary.
SECTION 12. AGENT'S DUTIES. The powers conferred on the Agent hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon it, any Bank or the Issuing Bank to exercise any such powers. Except for
the safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral. The Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which the Agent accords its own property. Each
reference herein to any right granted to, benefit conferred upon, or power
exercisable by the "Agent" shall be a reference to the Agent (including any
successors to the Agent pursuant to the Credit Agreement) for itself and for the
benefit of the Banks and the Issuing Bank, and each action taken or right
exercised hereunder
Exhibit 4.1-2 p.7
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shall be deemed to have been so taken or exercised by the Agent for itself and
for the benefit of and on behalf of all of the Banks and the Issuing Bank.
SECTION 13. REMEDIES. If any Event of Default shall have occurred and until
such Event of Default is waived in writing in accordance with the Credit
Agreement:
(a) The Agent may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party under the Uniform
Commercial Code (the "Code") in effect in the State of New York at that
time or any other applicable jurisdiction, and also may (i) require the
Subsidiary to, and the Subsidiary hereby agrees that it will at its expense
and upon request of the Agent forthwith, assemble all or part of the
Collateral as directed by the Agent and make it available to the Agent at
one or more locations where the Subsidiary regularly maintains inventory
and (ii) without notice, except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or private sale, at any
of the Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as are commercially reasonable. The
Subsidiary agrees that, to the extent notice of sale shall be required by
law, at least ten (10) calendar days' notice to the Subsidiary of the time
and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Agent shall not be
obligated to make any sale of Collateral, regardless of notice of sale
having been given. The Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it
was so adjourned. The Agent is hereby granted a license or other right to
use, without charge, the Subsidiary's labels, patents, copyrights, rights
of use of any name, trade secrets, trade names, trademarks, service marks
and advertising matter or any property of a similar nature, whether owned
by the Subsidiary or with respect to which the Subsidiary has rights under
license, sublicense or other agreements, as it pertains to the Collateral,
in preparing for sale, advertising for sale and selling any Collateral, and
the Subsidiary's rights under all licenses shall inure to the benefit of
Agent.
(b) Any cash held by the Agent as Collateral and all cash proceeds
received by the Agent in respect of any sale of, collection from or other
realization upon all or any part of the Collateral may, in the discretion
of the Agent, be held by the Agent as collateral for, and/or then or at any
time thereafter be applied in whole or in part by the Agent against, all or
any part of the Obligations. Any surplus of such cash or cash proceeds held
by the Agent and remaining after payment in full of all the Obligations
shall be paid over to the Subsidiary or to whomsoever may be lawfully
entitled to receive such surplus.
Exhibit 4.1-2 p-8
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(c) The Subsidiary hereby acknowledges that the Obligations arise out
of a commercial transaction and agrees that if an Event of Default shall
occur, the Agent shall have the right to the appointment of a receiver for
the properties and assets of the Subsidiary, and the Subsidiary hereby
consents to such right and appointment and hereby waives any objection
which the Subsidiary may have thereto or the right to have a bond or other
security posted by the Agent, the Issuing Bank or any Bank in connection
therewith.
SECTION 14. REMEDIES CUMULATIVE. Each right, power and remedy of the Agent,
the Issuing Bank and any Bank as provided for in this Agreement and the other
Loan Documents or now or hereafter existing at law or in equity or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to every
other right, power or remedy provided for in this Agreement and the other Loan
Documents or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by any of the Agent,
the Issuing Bank or the Banks of any one or more of such rights, powers, or
remedies shall not preclude the simultaneous or later exercise by any of the
Agent, the Issuing Bank and the Banks of any or all such other rights, powers,
or remedies.
SECTION 15. Expenses. The Subsidiary will upon demand pay to the Agent the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Agent may incur
in connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use, operation or sale of, collection from, or other realization
upon any of the Collateral, (iii) the exercise or enforcement of any of the
rights of the Agent hereunder or (iv) the failure by the Subsidiary to perform
or observe any of the provisions hereof.
SECTION 16. POSSESSION UNTIL DEFAULT. Until an Event of Default shall
occur, except as otherwise provided in this Agreement, the Credit Agreement or
the other Loan Documents, the Subsidiary will have the right to possession and
enjoyment of the Collateral for the purpose of conducting the ordinary course of
its business, subject to and upon the terms hereof and of the Credit Agreement
and the other Loan Documents.
SECTION 17. AMENDMENTS; ETC. No waiver of any provision of this Agreement,
and no consent to any departure by the Subsidiary herefrom, shall in any event
be effective unless the same shall be in writing and signed by the Agent, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No amendment of any provision of this
Agreement shall be effective unless the same shall be in writing and signed by
the Agent and the Subsidiary.
SECTION 18. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be given in the form and manner and delivered to
the Agent or the Subsidiary, as the case may be, at the Agent's address
specified in the Credit Agreement and at
Exhibit 4.1-2 p.9
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the following address of the Subsidiary: ___________________; or, as to either
party, at such other address as shall be designated by such party in a written
notice to the other party. A copy of any such notice given to the Subsidiary
shall be given to NAHC at the addressed specified in the Credit Agreement or at
such other address as shall be specified in a written notice to the Agent and
the Subsidiary.
SECTION 19. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER CREDIT
AGREEMENT. This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until (x) the payment
in full of the Obligations and (y) the expiration or termination of the
Commitment and the Letter of Credit Commitment, (ii) be binding upon the
Subsidiary and its successors and assigns, and (iii) inure to the benefit of and
be enforceable by the Agent for the benefit of the Banks and the Issuing Bank
and their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (iii), any Bank may assign or otherwise
transfer all or any portion of its rights and obligations under the Credit
Agreement (including, without limitation, all or any portion of its Commitment,
the Loans owing to it and any Note held by it) to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Bank herein or otherwise, subject, however, to the
provisions of SECTION 11.1 of the Credit Agreement. Upon the payment in full of
the Obligations and all other amounts payable under this Agreement and the
expiration or termination of the Commitment and the Letter of Credit Commitment,
the security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Subsidiary. No transfer or renewal, extension,
assignment or termination of this Agreement, the Credit Agreement, any other
Loan Document or any other instrument or document executed and delivered by the
Subsidiary to the Agent, the Issuing Bank or the Banks, nor any additional Loans
made by the Banks or the Issuing Bank to the Subsidiary, nor the taking of
further security, nor the retaking or re-delivery of the Collateral to the
Subsidiary by the Agent, nor any other act of the Agent, the Issuing Bank or the
Banks shall release the Subsidiary from any obligation hereunder, except upon a
release or discharge executed in writing by the Agent with respect to such
obligation or upon payment of such obligation or upon full satisfaction of all
the Obligations and the expiration or termination of the Commitment and the
Letter of Credit Commitment. The Agent shall not, by any act, delay, omission or
otherwise, be deemed to have waived any of its rights or remedies hereunder
unless such waiver is in writing and signed by the Agent and then only to the
extent therein set forth. A waiver by the Agent of any right or remedy on any
occasion shall not be construed as a bar to the exercise of any such right or
remedy which the Agent has or would otherwise have had on any other occasion.
SECTION 20. GOVERNING LAW; TERMS. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to the conflict or choice of law principles thereof, except to the extent that
the validity or perfection of the security interest hereunder, or the remedies
hereunder, in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the State of New York. Any
Exhibit 4.1-2 p. 10
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terms used herein which are used in the Uniform Commercial Code of the State of
New York shall have the same meanings herein as such terms have in said Uniform
Commercial Code.
SECTION 21. MISCELLANEOUS.
(a) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all such separate
counterparts shall together constitute but one and the same instrument.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall be ineffective to the extent of
such prohibition or unenforceability in such jurisdiction without
invalidating the remaining provisions hereof in such jurisdiction or
affecting the validity or enforceability of such provision in any other
jurisdiction.
IN WITNESS WHEREOF, the Subsidiary and the Agent have caused this Agreement
to be duly executed and delivered as of the date first above written.
[NAME OF SUBSIDIARY]
By:
--------------------------------
Its:
-------------------------------
TORONTO DOMINION (TEXAS), INC.
By:
--------------------------------
Its:
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SCHEDULE 1 - Inventory Locations
SCHEDULE 2 - Locations of Records
SCHEDULE 3 - Leased Property
SCHEDULE 4 - UCC-1 Filing Jurisdictions
Exhibit 4.1-2 p. 11
