EXHIBIT 10.97
EXHIBIT B
to
Revolving Credit
and
Guaranty Agreement
SECURITY AND PLEDGE AGREEMENT
SECURITY AND PLEDGE AGREEMENT (the "Agreement"), dated as of January 18,
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2000 by and between MARINER POST-ACUTE NETWORK, INC., a Delaware corporation
(the "Borrower"), and each of the direct or indirect subsidiaries of the
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Borrower party hereto (together with the Borrower, the "Grantors"), each a
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debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code, and THE
CHASE MANHATTAN BANK, as agent (in such capacity, the "Agent") for the financial
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institutions and other lenders (the "Banks") party to the Credit Agreement (as
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hereinafter defined).
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Agent, the Banks and the Grantors are entering into a Revolving
Credit and Guaranty Agreement dated as of the date hereof (as amended, modified
or supplemented from time to time, the "Credit Agreement"); and
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WHEREAS, unless otherwise defined herein, terms defined in the Credit
Agreement are used herein as therein defined; and
WHEREAS, it is a condition precedent to the making of Loans and the
issuance of Letters of Credit that the Grantors shall have granted a security
interest, pledge and lien on (x) all cash maintained in the Letter of Credit
Account pursuant to Section 364(c)(2) of the Bankruptcy Code and (y) certain of
the Grantors' assets and properties and the proceeds thereof pursuant to
Sections 364(c)(2), 364(c)(3) and 364(d)(1) of the Bankruptcy Code; and
WHEREAS, the grant of such security interest, pledge and lien has been
authorized pursuant to Sections 364(c)(2), 364(c)(3) and 364(d)(1) of the
Bankruptcy Code by the First Day Order, and, after the entry thereof, will have
been so authorized by the Interim Order and the Final Order (collectively, the
"Orders"); and
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WHEREAS, to supplement the Orders without in any way diminishing or
limiting the effect of the Orders or the security interest, pledge and lien
granted thereunder, the parties hereto desire to more fully set forth their
respective rights in connection with such security interest, pledge and lien;
and
WHEREAS, this Agreement has been approved by the Orders;
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NOW, THEREFORE, in consideration of the premises and in order to induce the
Banks to make Loans and issue Letters of Credit, the Grantors hereby agree with
the Agent as follows:
SECTION 1. Grant of Security and Pledge. Each of the Grantors hereby
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transfers, grants, bargains, sells, conveys, hypothecates, assigns, pledges and
sets over to the Agent for its benefit and the ratable benefit of the Banks and
hereby grants to the Agent for its benefit and the ratable benefit of the Banks,
a perfected pledge and security interest in all of the Grantors' right, title
and interest in and to the following (the "Collateral") which pledge and
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security interest shall have the priorities set forth in Orders and shall be
subject to the Carve-Out:
(1) all present and future accounts, accounts receivable and other
rights of each of the Grantors to payment for goods sold or leased or for
services rendered (except those evidenced by instruments or chattel paper),
whether now existing or hereafter arising and wherever arising, and whether or
not they have been earned by performance (collectively, the "Accounts");
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(2) all goods and merchandise now owned or hereafter acquired by each
of the Grantors wherever located, whether in the possession of a Grantor or of a
bailee or other person for sale, storage, transit, processing, use or otherwise
consisting of whole goods, components, supplies, materials, or consigned,
returned or repossessed goods) which are held for sale or lease or to be
furnished (or have been furnished) under any contract of service or which are
raw materials, work-in-process, finished goods or materials used or consumed in
such Grantor's business or processed by or on behalf of any Grantor
(collectively, the "Inventory");
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(3) all machinery, all manufacturing, distribution, selling, data
processing and office equipment, all furniture, furnishings, appliances,
fixtures and trade fixtures, tools, tooling, molds, dies, vehicles, vessels,
aircraft and all other goods of every type and description (other than
Inventory), in each instance whether now owned or hereafter acquired by each of
the Grantors and wherever located (collectively, the "Equipment");
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(4) all works of art now owned or hereafter acquired by each of the
Grantors, including, without limitation, paintings, sketches, drawings, prints,
sculptures, crafts, tapestries, porcelain, carvings, artifacts, renderings and
designs;
(5) all rights, interests, choses in action, causes of action, claims
and all other intangible property of each of the Grantors of every kind and
nature (other than Accounts, Trademarks, Patents and Copyrights), in each
instance whether now owned or hereafter acquired by such Grantor, including,
without limitation, all general intangibles, but excluding causes of action
under the Bankruptcy Code (it being understood and agreed, however, that the
proceeds of any such causes of action shall be available to repay the
Obligations); all corporate and other business records; all loans, royalties,
and other obligations receivable; all inventions, designs, trade secrets,
computer programs, software, printouts and other computer materials, goodwill,
registrations, copyrights, licenses, franchises, customer lists, credit files,
correspondence, and advertising materials (to the extent the same are
assignable); all customer and supplier contracts, firm sale orders, rights under
license and franchise agreements (including all license agreements with any
other Person in
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connection with any of the Patents and Trademarks or such other Person's names
or marks, whether such Grantor is a licensor or licensee under any such license
agreement but only to the extent such license agreements are assignable), and
other contracts and contract rights; all interests in partnerships and joint
ventures; all tax refunds and tax refund claims; all right, title and interest
under leases, subleases, licenses and concessions and other agreements to the
extent assignable relating to real or personal property; all payments due or
made to each of the Grantors in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any property by any person or
governmental authority; all deposit accounts (general or special) with any bank
or other financial institution; all credits with and other claims against
carriers and shippers; all rights to indemnification; all reversionary interests
in pension and profit sharing plans and reversionary, beneficial and residual
interest in trusts; all proceeds of insurance of which each of the Grantors is
beneficiary; and all letters of credit, guaranties, liens, security interest and
other security held by or granted to each of the Grantors; and all other
intangible property, whether or not similar to the foregoing (collectively, the
"General Intangibles");
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(6) all chattel paper, all instruments, all notes and debt
instruments and all payments thereunder and instruments and other property from
time to time delivered in respect thereof or in exchange therefor, and all bills
of lading, warehouse receipts and other documents of title and documents, in
each instance whether now owned or hereafter acquired by each of the Grantors;
(7) all property or interests in property now or hereafter acquired
by each of the Grantors which may be owned or hereafter may come into the
possession, custody or control of the Agent or any agent or affiliate of the
Agent in any way or for any purpose (whether for safekeeping, deposit, custody,
pledge, transmission, collection or otherwise), and all rights and interests of
each of the Grantors, now existing or hereafter arising and however and wherever
arising, in respect of any and all (i) notes, drafts, letters of credits,
stocks, bonds, and debt and equity securities, whether or not certificated, and
warrants, options, puts and calls and other rights to acquire or otherwise
relating to the same; (ii) money (including all cash and cash equivalents held
in the Letter of Credit Account (as defined and referred to in the Credit
Agreement)); (iii) proceeds of loans, including, without limitation, Loans made
under the Credit Agreement; and (iv) insurance proceeds and books and records
relating to any of the property covered by this Agreement; together, in each
instance, with all accessions and additions thereto, substitutions therefor, and
replacements, proceeds and products thereof;
(8) all trademarks, trade names, trade styles, service marks, prints
and labels on which said trademarks, trade names, trade styles and service marks
have appeared or appear, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, and all registrations and recordings
thereof, including, without limitation, applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof, or any other country
or political subdivision thereof (except for "intent to use" applications for
trademark or service xxxx registrations filed pursuant to Section 1(b) of the
Xxxxxx Act, unless and until an Amendment to Allege Use or a Statement of Use
under Sections 1(c) and 1(d) of said Act has been filed), all whether now owned
or hereafter acquired by
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each of the Grantors, including, but not limited to, those described in Schedule
3 annexed hereto and made a part hereof, and all reissues, extensions or
renewals thereof and all licenses thereof (together, in each case, with the
goodwill of the business connected with the use of, and symbolized by each such
trademark, service xxxx, trade name and trade dress, all of the foregoing being
herein referred to as the "Trademarks");
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(9) all letters patent of the United States or any other country, and
all registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by each of the Grantors, including, but
not limited to, those described in Schedule 4 annexed hereto and made a part
hereof, and (ii) all reissues, continuations, continuations-in-part or
extensions thereof and all licenses thereof (all of the foregoing being herein
referred to as the "Patents");
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(10) all copyrights of the United States, or any other country, and
all registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Copyright Office
or in any similar office or agency of the United States, any State thereof, or
any other country or political subdivision thereof, all whether now owned or
hereafter acquired by each of the Grantors, including, but not limited to, those
described in Schedule 5 hereto and all renewals and extensions thereof and all
licenses thereof (all of the foregoing being herein referred to as the
"Copyrights");
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(11) all books, records, ledger cards and other property at any time
evidencing or relating to the Accounts, Equipment, General Intangibles,
Trademarks, Patents or Copyrights;
(12) (i) all the shares of capital stock owned by each Grantor, as
applicable, listed on Schedule 6 hereto of the issuers listed thereon
(individually, an "Issuer", and collectively, the "Issuers") and all shares of
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capital stock of any Issuer obtained in the future by such Grantor and the
certificates representing or evidencing all such shares (the "Pledged Shares");
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all other property which may be delivered to and held by the Agent in respect of
the Pledged Shares pursuant to the terms hereof; (iii) subject to Section 9
below, all dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed, in respect of, in exchange for or
upon the conversion of the securities referred to in clauses (i) and (ii) above;
and (iv) subject to Section 9 below, all rights and privileges of each Grantor,
as applicable, with respect to the securities and other property referred to in
clauses (i), (ii) and (iii) (the items referred to in clauses (i) through (iv)
being collectively called the "Pledged Collateral");
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(13) all other personal property of each of the Grantors, whether
tangible or intangible, and whether now owned or hereafter acquired; and
(14) all proceeds and products of any of the foregoing, in any form,
including, without limitation, any claims against third parties for loss or
damage to or destruction of any or all of the foregoing and to the extent not
otherwise included, all (i) payments under insurance (whether
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or not the Agent is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral and (ii) cash.
Notwithstanding anything contained herein to the contrary, the total amount of
shares of capital stock or other ownership interests of any Person pledged
pursuant to this Agreement that is not incorporated or organized in the United
States shall in no event exceed sixty-six percent (66%) of the total outstanding
shares of capital stock or such other ownership interests thereof.
SECTION 2. Security for Obligations. This Agreement and the Collateral
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secure the payment of all obligations of each of the Grantors, now or hereafter
existing, under the Credit Agreement and the other Loan Documents (and any other
documents in respect of such obligations), and in respect of Indebtedness
permitted by Section 6.03(vi) of the Credit Agreement, whether for principal,
interest, fees, expenses or otherwise, and all obligations of each of the
Grantors now or hereafter existing under or in respect of this Agreement (all
such obligations of the Grantor being herein called the "Obligations").
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SECTION 3. Delivery of Pledged Collateral; Other Action. Upon written
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request by the Agent (and without further order of the Bankruptcy Court), all
certificates or instruments representing or evidencing the Pledged Collateral
not subject to a pledge in favor of any Real Estate Financier shall be
delivered to and held by the Agent pursuant hereto and shall be accompanied by
duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Agent. All such certificates or instruments
previously delivered by the Grantors to the Pre-Petition Agent shall be deemed
to be held by the Agent. Upon the occurrence and during the continuance of any
Event of Default, the Agent shall have the right (for the ratable benefit of
the Banks), at any time in its discretion and upon giving notice to the
Grantors of its intent to exercise such rights, to transfer to or to register
in the name of the Agent or any of its nominees any or all of the Pledged
Collateral.
SECTION 4. Representations and Warranties. Each Grantor, jointly and
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severally, represents and warrants (but only with regard to itself) as follows:
(1) All of the Inventory and/or Equipment is located at the places
specified in Schedule 1 hereto. The chief places of business and chief executive
offices of each of the Grantors and the offices where each Grantor keeps its
records concerning any Accounts and all originals of all chattel paper which
evidence any Account are located at the places specified in Schedule 2 hereto.
All trade names under which each of the Grantors have sold and will sell
Inventory are listed on Schedule 3 hereto.
(2) Each of the Grantors owns the Collateral free and clear of any
lien, security interest, charge or encumbrance except for the security interest
created by this Agreement and except as permitted under Section 6.01 of the
Credit Agreement. No effective financing statement or other instrument similar
in effect covering all or any part of the Collateral is on file in any recording
office, except (x) such as may have been filed in favor of the Agent relating to
this Agreement and (y) in favor of any holder of a Lien permitted under Section
6.01 of the Credit Agreement.
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(3) As of the Filing Date, no Grantor owns any material Trademarks,
Patents or Copyrights or has any material Trademarks, Patents or Copyrights
registered in, or the subject of pending applications in, the United States
Patent and Trademark Office or any similar office or agency in any other country
or any political subdivision thereof, other than those described in Schedules 3,
4 and 5 hereto. The registrations for the Collateral disclosed on such Schedules
3, 4 and 5 hereto are valid and subsisting and in full force and effect. None of
the material Patents or Copyrights have been abandoned or dedicated.
(4) The Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable.
(5) Each Grantor, as the case may be, is the legal and beneficial
owner of the Pledged Shares as described on Schedule 6 free and clear of any
lien, security interest, option or other charge or encumbrance, except for the
security interest created by this Agreement and the Orders and Liens permitted
under Section 6.01.
(6) Except as disclosed on Schedule 6, the Pledged Shares described
in Section 1(l) hereof constitute all of the issued and outstanding shares of
stock of each of the Issuers and no Issuer is under any contractual obligation
to issue any additional shares of stock or any other securities, rights or
indebtedness.
(7) Except for the Orders, no authorization, approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for the grant and pledge by each of the Grantors of the
security interests granted hereby or for the execution, delivery or performance
of this Agreement by each of the Grantors.
SECTION 5. Further Assurances.
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(1) Each of the Grantors agrees that from time to time, at the
expense of the Grantors, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary,
or that the Agent may reasonably 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 any of its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing, and
without further order of the Bankruptcy Court, each of the Grantors will 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 interests
granted or purported to be granted hereby.
(2) Each Grantor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of such Grantor where permitted
by law.
(3) Each Grantor will furnish to the Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with
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the Collateral as the Agent may reasonably request in connection with any
prospective sale of Collateral pursuant to Section 15 hereof, all in reasonable
detail.
SECTION 6. As to Equipment and Inventory. Each Grantor shall:
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(1) Keep the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the places specified therefor in Schedule 1
hereto or, upon 30 days' written notice to the Agent following any transfer
thereof to a different jurisdiction, at other places in jurisdictions where all
action required by Section 5 shall have been taken to assure the continuation of
the perfection of the security interest of the Agent (for its benefit and the
ratable benefit of the Banks) with respect to the Equipment and Inventory.
(2) Subject to provisions of the Credit Agreement, maintain or cause
to be maintained in good repair, working order and condition, excepting ordinary
wear and tear and damage due to casualty, all of the Equipment, and make or
cause to be made all appropriate repairs, renewals and replacements thereof, to
the extent not obsolete and consistent with past practice of such Grantor, as
quickly as practicable after the occurrence of any loss or damage thereto which
are necessary or reasonably desirable to such end, except where the failure to
do any of the foregoing would not result in a Material Adverse Effect.
(3) Until satisfaction in full of the Obligations, at any time when
an Event of Default has occurred and is continuing: (i) each Grantor will
perform any and all reasonable actions requested by the Agent to enforce the
Agent's security interest in the Inventory and all of the Agent's rights
hereunder, such as subleasing warehouses to the Agent or its designee (to the
extent such subleases are not prohibited), placing and maintaining signs,
appointing custodians, transferring Inventory to warehouses, and delivering to
the Agent warehouse receipts and documents of title in the Agent's name; (ii) if
any Inventory is in the possession or control of any of the Grantors' agents,
contractors or processors or any other third party, each such Grantor will
notify the Agent thereof and will notify such agents, contractors or processors
or third party of the Agent's security interest therein and, upon request,
instruct them to hold all such Inventory for the Agent and such Grantor's
account, as their interests may appear, and subject to the Agent's instructions;
(iii) the Agent shall have the right to hold all Inventory subject to the
security interest granted hereunder; and (iv) the Agent shall have the right to
take possession of the Inventory or any part thereof and to maintain such
possession on such Grantor's premises or to remove any or all of the Inventory
to such other place or places as the Agent desires in its sole discretion. If
the Agent exercises its right to take possession of the Inventory, such Grantor,
upon the Agent's demand, will assemble the Inventory and make it available to
the Agent at such Grantor's premises at which it is located.
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SECTION 7. As to Accounts.
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(1) Each Grantor shall keep its chief place of business and chief
executive office and the offices where it keeps its records concerning the
Accounts, and the offices where it keeps all originals of all chattel paper
which evidence Accounts, at the location or locations therefor specified in
Section 4(a) or, upon 15 days' prior written notice to the Agent, at such other
locations in a jurisdiction where all actions required by Section 5 shall have
been taken with respect to the Accounts. Each Grantor will hold and preserve
such records and chattel paper and will permit representatives of the Agent, at
any time during normal business hours and upon reasonable prior written notice,
to inspect and make abstracts from such records and chattel paper in accordance
with Section 5.08 of the Credit Agreement.
(2) Except as otherwise provided in this subsection (b), each
Grantor shall continue to collect in accordance with its customary practice, at
its own expense, all amounts due or to become due to such Grantor under the
Accounts and, prior to the occurrence and continuance of an Event of Default,
such Grantor shall have the right to adjust, settle or compromise the amount or
payment of any Account, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon, all in accordance with
its customary practices. In connection with such collections, the Grantors may,
upon the occurrence and during the continuation of an Event of Default, take
(and at the direction of the Agent shall take) such action as the Grantors or
the Agent may reasonably deem necessary or advisable to enforce collection of
the Accounts; provided, that upon written notice by the Agent to any Grantor,
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following the occurrence and during the continuation of an Event of Default, of
its intention so to do but subject to subsection (c) below, the Agent shall have
the right to notify the account debtors or obligors under any Accounts of the
assignment of such Accounts to the Agent and to direct such account debtors or
obligors to make payment of all amounts due or to become due to such Grantor
thereunder directly to the Agent and, upon such notification and at the expense
of such Grantor, to enforce collection of any such Accounts, and to adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as such Grantor might have done. After receipt by such Grantor
of the notice referred to in the proviso to the preceding sentence, and unless
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and until such notice is rescinded by the Agent by written notice to such
Grantor (i) all amounts and proceeds (including instruments) received by such
Grantor in respect of the Accounts shall be received in trust for the benefit of
the Agent (for the ratable benefit of the Banks) hereunder, shall be segregated
from other funds of the Grantors and shall be forthwith paid over to the Agent
in the same form as so received (with any necessary endorsement) to be held as
cash collateral and either (A) released to the Grantors if such Event of Default
shall have been cured or waived or (B) if such Event of Default shall be
continuing, applied as provided by Section 15, and (ii) the Grantors shall not
adjust, settle or compromise the amount or payment of any Account, or release
wholly or partly any account debtor or obligor thereof, or allow any credit or
discount thereon.
(3) Notwithstanding the provisions of Section 7, the Agent shall
not collect or enforce payment of any Account, the Account Debtor of which is a
Governmental Authority (a "Governmental Account") if and to the extent that such
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collection or enforcement is prohibited under 42 U.S.C. (S)(S)1395(g) or 1396(a)
or under any comparable provision of federal or state law. To the
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extent the Agent's rights as to any Governmental Account are limited pursuant to
this Section 7, upon the occurrence and during the continuation of an Event of
Default, each Grantor will (i) use its reasonable and diligent best efforts to
collect and enforce payment of such Governmental Account, (ii) immediately
deposit in the exact form received, duly indorsed by such Grantor to the Agent
if required, in a collateral account maintained under the sole dominion and
control of the Agent, subject to withdrawal by the Agent for the account of the
Banks only as provided in Section 16, and until so turned over, shall be held by
such Grantor in trust for the Agent and the Banks, segregated from other funds
of such Grantor and (iii) upon written demand by the Agent at any time and from
time to time, remit (and cause the depository bank for such collateral account
to remit) directly to the Agent, as proceeds of the Collateral and for
application to the payment of the Obligations pursuant to Section 16, all
finally collected funds on deposit in such collateral account.
SECTION 8. As to Trademarks, Patents and Copyrights.
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(1) Each Grantor shall, either itself or through licensees, continue
to use the Trademarks as each is currently used in the Grantor's business in
order to maintain the Trademarks in full force free from any claim of
abandonment for nonuse and each such Grantor will not (and will not permit any
licensee thereof to) do any act or knowingly omit to do any act whereby any
Trademark may become invalidated, unless such failure to use a Trademark is not
reasonably likely to have a material adverse effect on the condition (financial
or otherwise), operation or properties of the Grantors taken as a whole.
(2) No Grantor will do any act, or omit to do any act, whereby the
Patents or Copyrights may become abandoned or dedicated and each such Grantor
shall notify the Agent immediately if it knows of any reason or has reason to
know that any application or registration may become abandoned or dedicated,
unless such abandonment or dedication is not reasonably likely to have a
material adverse effect on the condition (financial or otherwise), operations or
properties of the Grantors taken as a whole.
(3) No Grantor will, either itself or through any agent, employee,
licensee or designee, (i) file an application for the registration of any Patent
or Trademark with the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof or
(ii) file any assignment of any patent or trademark, which such Grantor may
acquire from a third party, with the United States Patent and Trademark Office
or any similar office or agency in any other country or any political
subdivision thereof, unless such Grantor shall, within 30 days after the date of
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such filing, notify the Agent thereof, and, upon request of the Agent, execute
and deliver any and all assignments, agreements, instruments, documents and
papers as the Agent may request to evidence the Agent's interest in such Patent
or Trademark and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby, and such Grantor hereby constitutes the Agent
its attorney-in-fact to execute and file all such writings for the foregoing
purposes, all lawful acts of such attorney being hereby ratified and confirmed;
such power being coupled with an interest is irrevocable until the Obligations
are paid in full.
(4) Each Grantor will take all necessary steps in any proceeding
before the United States Patent and Trademark Office, the United States
Copyright Office or any similar office or
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agency in any other country or any political subdivision thereof, to maintain in
all material respects each application and registration of all material
Trademarks, Patents and Copyrights, including, without limitation, filing of
renewals, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings.
(5) Each Grantor will, without further order of the Bankruptcy Court,
perform all acts and execute and deliver all further instruments and documents,
including, without limitation, assignments for security in form suitable for
filing with the United States Patent and Trademark Office, and the United States
Copyright Office, respectively, reasonably requested by the Agent at any time to
evidence, perfect, maintain, record and enforce the Agent's interest in all
material Trademarks, Patents and Copyrights or otherwise in furtherance of the
provisions of this Agreement, and each Grantor hereby authorizes the Agent to
execute and file one or more accurate financing statements (and similar
documents) or copies thereof or of this Security Agreement with respect to
material Patents, Trademarks and Copyrights signed only by the Agent.
(6) Each Grantor will, upon acquiring knowledge of any use by any
person of any term or design likely to cause confusion with any material
Trademark, promptly notify the Agent of such use, and if requested by the Agent,
shall join with the Agent, at such Grantor's expense, in such action as the
Agent, in its reasonable discretion, may deem advisable for the protection of
the Agent's interest in and to the Trademarks.
SECTION 9. As to the Pledged Collateral; Voting Rights; Dividends; Etc.
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(1) So long as no Event of Default shall have occurred and be
continuing and no written notice thereof shall have been given by the Agent to
the Grantors revoking all of the following rights pursuant to Section 9(b)(i)
hereof:
(1) the Grantors (as applicable) shall be entitled to exercise
any and all voting and other consensual rights pertaining to the
Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement;
(2) notwithstanding the provisions of Section 1 hereof, such
Grantors shall be entitled to receive and retain any and all dividends
and other distributions paid in respect of the Pledged Collateral;
provided, that any and all
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(A) dividends paid or payable other than in cash in respect of,
and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any
Pledged Collateral, and
(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a
partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in-
surplus,
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(C) cash paid, payable or otherwise distributed in respect of, or
in redemption of, or in exchange for, any Pledged Shares;
shall be, and shall be forthwith delivered to the Agent, to hold as Pledged
Collateral and shall, if received by any of the Grantors, be received in
trust for the benefit of the Agent, be segregated from the other property or
funds of such Grantor, and be forthwith delivered to the Agent as Pledged
Collateral in the same form as so received (with any necessary endorsement);
and
(3) the Agent shall execute and deliver (or cause to be executed
and delivered) to the Grantors (as applicable) all such proxies and other
instruments as the Grantors (as applicable) may reasonably request for
the purpose of enabling such Grantor to exercise the voting and other
rights which it is entitled to exercise pursuant to paragraph (i) above
and to receive the dividends which it is authorized to receive and retain
pursuant to paragraph (ii) above;
(2) Upon the occurrence and during the continuance of an Event of
Default:
(1) upon written notice from the Agent to the Grantors (as
applicable) to such effect, all rights of such Grantors (as applicable)
to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 9(a)(i) and to
receive the dividends which it would otherwise be authorized to receive
and retain pursuant to Section 9(a)(ii) shall cease, and all such rights
shall thereupon become vested in the Agent, who shall thereupon have the
sole right to exercise such voting and other consensual rights and to
receive and hold as Pledged Collateral any such dividends; and
(2) all dividends which are received by such Grantors contrary to
the provisions of paragraph (i) of this Section 9(b) shall be received in
trust for the benefit of the Agent, shall be segregated from other funds
of the Grantors and shall be forthwith paid over to the Agent as Pledged
Collateral in the same form as so received (with any necessary
endorsement).
SECTION 10. Insurance. Upon the occurrence and during the continuance of
---------
any Event of Default, all insurance payments in respect of Inventory and
Equipment shall be held, applied and paid to the Agent as specified in Section
15 hereof.
SECTION 11. Transfers to Others; Liens; Additional Shares. Each Grantor
---------------------------------------------
shall not:
(1) Sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except for dispositions otherwise permitted by
the Credit Agreement.
(2) Create or suffer to exist any lien, security interest or other
charge or encumbrance upon or with respect to any of the Collateral to secure
any obligation of any person or
11
entity, except for the security interest created by this Agreement and the
Orders, or except as otherwise permitted by the Credit Agreement.
(3) Each of the Grantors (as applicable) agrees that it will (i)
cause each of the Issuers that are wholly-owned Subsidiaries not to issue any
stock or other securities in addition to or substitution for the Pledged Shares
issued by such Issuer, except to the respective Grantor and (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
any and all such additional shares of stock or other securities of each Issuer
of the Pledged Shares.
SECTION 12. Agent Appointed Attorney-in-Fact. Each Grantor hereby
--------------------------------
irrevocably appoints the Agent such Grantor's attorney-in-fact (which
appointment shall be irrevocable and deemed coupled with an interest), with full
authority in the place and stead of such Grantor and in the name of such Grantor
or otherwise, from time to time in the Agent's discretion, upon and during the
occurrence and continuation of an Event of Default, 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:
(1) to obtain and adjust insurance required to be paid to the
Agent pursuant to Section 10,
(2) to ask, demand, collect, xxx for, recover, compound,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral,
(3) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (i)
or (ii) above,
(4) to receive, endorse and collect all instruments made
payable to the Grantors representing any dividend or other distribution
in respect of the Pledged Collateral or any part thereof and to give
full discharge for the same, and
(5) 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.
SECTION 13. Agent May Perform. If any Grantor fails to perform any
-----------------
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the reasonable expenses of the Agent incurred in
connection therewith (as to which invoices have been furnished) shall be payable
by the Grantors under Section 16(b).
SECTION 14. The Agent's Duties. The powers conferred on the Agent
------------------
hereunder are solely to protect its interest and the interests of the Banks in
the Collateral and shall not impose any duty upon it 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
12
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,
including, without limitation, ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relative to
any Pledged Collateral, whether or not the Agent has or is deemed to have
knowledge of such matters.
SECTION 15. Remedies. If any Event of Default shall have occurred and be
--------
continuing, and subject to the provisions of Section 7 of the Credit Agreement:
(1) The Agent may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
and without application to or order of the Bankruptcy Court, all the rights and
remedies of a secured party on default under the Uniform Commercial Code and
also may (i) require each Grantor to, and each Grantor 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 a place to be designated by the Agent which is reasonably convenient to
both parties and (ii) without notice except as specified in the following
sentence, 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 at such price or prices and upon such other
terms as the Agent may deem commercially reasonable. Each Grantor agrees that,
to the extent notice of such sale shall be required by law, at least ten days'
notice to the Grantors 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.
(2) The Agent may instruct the Grantors not to make any further use
of the Patents, Copyrights or Trademarks or any xxxx similar thereto for any
purpose to the extent that such use would be inconsistent with the exercise by
the Agent of any other remedies under this Section.
(3) The Agent may license, whether general, special or otherwise, and
whether on an exclusive or nonexclusive basis, any of the Trademarks, Patents or
Copyrights throughout the world for such term or terms, on such conditions, and
in such manner, as the Agent shall in its sole discretion determine; provided,
--------
however, that any such license shall not conflict with any existing license or
sublicense.
(4) The Agent may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of the
Grantors in, to and under any one or more license agreements with respect to the
Collateral, and take or refrain from taking any action under any thereof, and
each of the Grantors hereby releases the Agent from, and agrees to hold the
Agent free and harmless from and against any claims arising out of, any action
taken or omitted to be taken with respect to any such license agreement except
claims involving gross negligence, willful misconduct or bad faith of the Agent.
13
(5) In the event of any such license, assignment, sale or other
disposition of the Collateral, or any of it, each Grantor shall supply its know-
how and expertise relating to the Trademarks, Patents or Copyrights, and its
customer lists and other records relating to the Trademarks, Patents or
Copyrights to the Agent or its designee.
(6) In order to implement the assignment, sale or other disposal of
any of the Trademarks, Patents or Copyrights, the Agent may, at any time,
pursuant to the authority granted in Section 12 hereof, execute and deliver on
behalf of the Grantors, one or more instruments of assignment of the Trademarks,
Patents or Copyrights (or any application of registration thereof), in form
suitable for filing, recording or registration in any country.
(7) 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
then or at any time thereafter applied (after payment of any amounts payable to
the Agent pursuant to Section 16 hereof) in whole or in part against, all or any
part of the Obligations in such order as the Agent shall elect. 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 Grantors or to whomsoever may
be lawfully entitled to receive such surplus.
(8) If at any time when the Agent shall determine to exercise its
right to sell all or any part of the Pledged Collateral pursuant to this Section
15, such Pledged Collateral or the part thereof to be sold shall not be
effectively registered under the Securities Act of 1933, as amended, and as from
time to time in effect, and the rules and regulations thereunder (the
"Securities Act"), the Agent is hereby expressly authorized to sell such Pledged
--------------
Collateral or such part thereof by private sale in such manner and under such
circumstances as the Agent may deem necessary or advisable in order that such
sale may legally be effected without such registration. Without limiting the
generality of the foregoing, in any such event the Agent, in compliance with
applicable securities laws, (a) may proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Pledged Collateral or such part thereof shall have been filed under such
Securities Act, (b) may approach and negotiate with a restricted number of
potential purchasers to effect such sale and (c) may restrict such sale to
purchasers as to their number, nature of business and investment intention
including without limitation to purchasers each of whom will represent and agree
to the satisfaction of the Agent that such purchaser is purchasing for its own
account, for investment, and not with a view to the distribution or sale of such
Pledged Collateral, or part thereof, it being understood that the Agent may
cause or require each Grantor, and each Grantor hereby agrees upon the written
request of the Agent, to cause (i) a legend or legends to be placed on the
certificates to be delivered to such purchasers to the effect that the Pledged
Collateral represented thereby have not been registered under the Securities Act
and setting forth or referring to restrictions on the transferability of such
securities; and (ii) the issuance of stop transfer instructions to such Issuer's
transfer agent, if any, with respect to the Pledged Collateral, or, if such
Issuer transfers its own securities, a notation in the appropriate records of
such Issuer. In the event of any such sale, each Grantor does hereby consent
and agree that the Agent shall incur no responsibility or liability for selling
all or any part of the Pledged Collateral at a price which the Agent may deem
reasonable
14
under the circumstances, notwithstanding the possibility that a substantially
higher price might be realized if the sale were public and deferred until after
registration as aforesaid.
SECTION 16. Indemnity and Expenses.
----------------------
(1) Each Grantor, jointly and severally, agrees to indemnify the
Agent from and against any and all claims, losses and liabilities growing out of
or resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities directly arising from the
Agent's own gross negligence, willful misconduct or bad faith.
(2) The Grantors will upon demand pay to the Agent the amount of any
and all reasonable expenses (as to which invoices have been furnished),
including the reasonable fees and disbursements 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 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
Agent hereunder or (iv) the failure by any of the Grantors to perform or observe
any of the provisions hereof.
(3) The Grantors assume all responsibility and liability arising from
the use of the Trademarks, Patents and Copyrights.
(4) Each of the Grantors agrees that the Agent does not assume, and
shall have no responsibility for, the payment of any sums due or to become due
under any agreement or contract included in the Collateral or the performance of
any obligations to be performed under or with respect to any such agreement or
contract by any of the Grantors, and except as the same may have resulted from
the gross negligence, willful misconduct or bad faith of the Agent, each of the
Grantors hereby jointly and severally agree to indemnify and hold the Agent
harmless with respect to any and all claims by any person relating thereto.
SECTION 17. Security Interest Absolute. All rights of the Agent and
--------------------------
security interests hereunder, and all obligations of each of the Grantors
hereunder, shall be absolute and unconditional, irrespective of any circumstance
which might constitute a defense available to, or a discharge of, any guarantor
or other obligor in respect of the Obligations.
SECTION 18. Amendments; Etc. No amendment or waiver of any provision of
---------------
this Agreement, nor any consent to any departure by any of the Grantors
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the party against whom enforcement is sought, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 19. Addresses for Notices. All notices and other communications
---------------------
provided for hereunder shall be in writing and shall be given in accordance with
the applicable provisions of the Credit Agreement.
15
SECTION 20. Continuing Security Interest. This Agreement shall create a
----------------------------
continuing security interest in the Collateral and shall (i) remain in full
force and effect until payment in full of the Obligations, (ii) be binding upon
each of the Grantors, their successors and assigns and (iii) inure, together
with the rights and remedies of the Agent hereunder, to the benefit of the Agent
and each of the Banks and their respective successors, transferees and assigns.
Upon the payment in full of the Obligations, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
Grantors subject to any existing liens, security interests or encumbrances on
such Collateral. Upon any such termination, the Agent will, at the Grantor's
expense, execute and deliver to the Grantors such documents as the Grantors
shall reasonably request to evidence such termination.
SECTION 21. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York, except as
required by mandatory provisions of law and except to the extent that the
validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the State of New York and by Federal law (including,
without limitation, the Bankruptcy Code) to the extent the same has pre-empted
the law of the State of New York or such other jurisdiction.
SECTION 22. Headings. Section headings in this Agreement are included
--------
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, each of the Grantors and the Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
GRANTORS:
MARINER POST-ACUTE NETWORK, INC.
By:__________________________________
Name:
Title:
AMERICAN MEDICAL INSURANCE BILLING SERVICES, INC.
AMERICAN PHARMACEUTICAL SERVICES, INC.
AMERICAN REHABILITY SERVICES, INC.
AMERICAN-CAL MEDICAL SERVICES, INC.
AMERRA PROPERTIES, INC.
AMS GREEN TREE, INC.
16
AMS PROPERTIES, INC.
APS HOLDING COMPANY, INC.
APS PHARMACY MANAGEMENT, INC.
XXXXX CENTER HEALTH &
RETIREMENT/ALLEGHANY, INC.
XXXXX CENTER HEALTH &
RETIREMENT/XXXXXXX, INC.
XXXXX CENTER HEALTH &
RETIREMENT/TAMPA, INC.
XXXXX CENTER HEALTH &
RETIREMENT/XXXXXXX, INC.
XXXXX CENTER MANAGEMENT CORPORATION
XXXXX CENTER NURSING CARE/AUSTELL, INC.
XXXXX CENTER NURSING CARE/FINCASTLE, INC.
XXXXX CENTER NURSING CARE/HICKORY, INC.
XXXXX CENTER NURSING CARE/POWDER SPRINGS, INC.
XXXXX CENTER OF ASHEBORO, INC.
XXXXX CENTER OF CENTRAL COLUMBIA, INC.
CAMBRIDGE BEDFORD, INC.
CAMBRIDGE EAST, INC.
CAMBRIDGE NORTH, INC.
CAMBRIDGE SOUTH, INC.
CLINTONAIRE NURSING HOME, INC.
CONNERWOOD HEALTHCARE, INC.
CORNERSTONE HEALTH MANAGEMENT COMPANY
CRESTMONT HEALTH CENTER, INC.
DEVCON HOLDING COMPANY
EH ACQUISITION CORP.
EH ACQUISITION CORP. II
EH ACQUISITION CORP. III
EVERGREEN HEALTHCARE LTD., L.P.
EVERGREEN HEALTHCARE, INC.
FRENCHTOWN NURSING HOME, INC.
GC SERVICES, INC.
GCI BELLA VITA, INC.
GCI CAMELLIA CARE CENTER, INC.
GCI XXXXXX VILLAGE, INC.
17
GCI EAST VALLEY MEDICAL & REHABILITATION CENTER, INC.
GCI FAITH NURSING HOME, INC.
GCI HEALTH CARE CENTERS, INC.
GCI XXXXXX ACRES, INC.
GCI PALM COURT, INC.
GCI PRINCE XXXXXX, INC.
GCI REHAB, INC.
GCI SPRINGDALE VILLAGE, INC.
GCI THERAPIES, INC.
GCI VILLAGE GREEN, INC.
GCI-CAL THERAPIES COMPANY
GCI-WISCONSIN PROPERTIES, INC.
GRANCARE HOME HEALTH SERVICES, INC.
GRANCARE OF MICHIGAN, INC.
GRANCARE OF NORTH CAROLINA, INC.
GRANCARE OF NORTHERN CALIFORNIA, INC.
GRANCARE SOUTH CAROLINA, INC.
GRANCARE, INC.
HAWK'S-PERIMETER, INC.
HERITAGE NURSING HOME, INC.
HERITAGE OF LOUISIANA, INC.
HMI CONVALESCENT CARE, INC.
HOSPICE ASSOCIATES OF AMERICA, INC.
HOSTMASTERS, INC.
INTERNATIONAL HEALTH CARE MANAGEMENT, INC.
INTERNATIONAL X-RAY, INC.
LC MANAGEMENT COMPANY
LCA OPERATIONAL HOLDING COMPANY
LCR, INC.
LIVING CENTERS - EAST, INC.
LIVING CENTERS - PHCM, INC.
LIVING CENTERS - ROCKY MOUNTAIN, INC.
LIVING CENTERS - SOUTHEAST DEVELOPMENT CORPORATION
LIVING CENTERS - SOUTHEAST, INC.
LIVING CENTERS DEVELOPMENT COMPANY
LIVING CENTERS HOLDING COMPANY
18
LIVING CENTERS LTCP DEVELOPMENT COMPANY
LIVING CENTERS OF TEXAS, INC.
XXXXXXX NURSING CENTER, INC.
MED-THERAPY REHABILITATION SERVICES, INC.
MIDDLEBELT NURSING HOME, INC.
MIDDLEBELT-HOPE NURSING HOME, INC.
XXX-XXX CORP.
NATIONAL HERITAGE REALTY, INC.
NIGHTINGALE EAST NURSING CENTER, INC.
OMEGA/INDIANA CARE CORP.
PROFESSIONAL HEALTH CARE MANAGEMENT, INC.
PROFESSIONAL RX SYSTEMS, INC.
REHABILITY HEALTH SERVICES, INC.
RENAISSANCE MENTAL HEALTH CENTER, INC.
ST. XXXXXXX NURSING HOME, INC.
SUMMIT HOSPITAL HOLDINGS, INC.
SUMMIT HOSPITAL OF EAST GEORGIA, INC.
SUMMIT HOSPITAL OF SOUTHEAST ARIZONA, INC.
SUMMIT HOSPITAL OF SOUTHEAST TEXAS, INC.
SUMMIT HOSPITAL OF SOUTHWEST LOUISIANA, INC.
SUMMIT HOSPITAL OF WEST GEORGIA, INC.
SUMMIT INSTITUTE FOR PULMONARY MEDICINE AND
REHABILITATION, INC.
SUMMIT INSTITUTE OF AUSTIN, INC.
SUMMIT INSTITUTE OF WEST MONROE, INC.
SUMMIT MEDICAL HOLDINGS, LTD.
SUMMIT MEDICAL MANAGEMENT, INC.
By: _______________________________
Name:
Title:
00
XXX XXXXX XXXXXXXXX BANK
as Agent
By:_____________________________
Name:
Title:
20
