EXHIBIT 10.18
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of March 29, 2002, is
made by American Reimbursement, LLC a Delaware limited liability company
("Grantor"), in favor of Med Diversified, Inc., a Nevada corporation ("Secured
Party").
W I T N E S S E T H:
WHEREAS, Grantor desires to enter into a certain Assumption and
Indemnification Agreement, dated as of March 29, 2002, with Secured Party (such
agreement, as amended, supplemented, restated, replaced or refinanced from time
to time, the "Assumption Agreement"; capitalized terms used herein without
definition shall have the meanings ascribed to them in the Assumption
Agreement), pursuant to which, among other things, Grantor has agreed to assume
the payment obligations of Secured Party under the Debentures and to indemnify
Secured Party against any liability that it may incur hereafter in connection
with the Debentures; and
WHEREAS, pursuant to the Assumption Agreement, Grantor is required to enter
into this Agreement granting collateral to Secured Party for Grantor's
assumption and indemnification obligations under the Assumption Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor and Secured Party hereby agree as follows:
1. OBLIGATIONS. The term "Obligations", as used herein, shall mean all
obligations of Grantor to Secured Party arising under Sections 1(a) and 1(b) of
the Assumption Agreement., whether the same are matured or unmatured, including
interest on any such Obligations, whether accruing before or after any
bankruptcy or insolvency case or proceeding involving Grantor or any other
Person and also including (if interest on any portion of such obligations ceases
to accrue by operation of law by reason of the commencement of such case or
proceeding) such interest as would have accrued on any such portion of such
obligations if such case or proceeding had not commenced, and further agrees to
pay all expenses (including reasonable attorneys' fees and legal expenses) paid
or incurred by Secured Party in endeavoring to collect the Obligations, or any
part thereof, and in enforcing this Agreement.
2. SECURITY. As security for the prompt and complete payment and
performance of the Obligations when due, Grantor hereby delivers, pledges and
grants a security interest to Secured Party in all of Grantor's right, title and
interest (whether now owned and existing or hereafter arising or acquired) in
and to the following: all of Grantor's right, title and interest in and to those
accounts receivable listed on SCHEDULES X-0, X-0, X-0, X-0 and A-5 hereto; and
all accessions to, substitutions for, and replacements, proceeds and products of
any of the foregoing (including, without limitation, all rights in, to and under
all policies of insurance, as well as claims or rights to payments thereunder
and proceeds therefrom, and any credit insurance)(collectively, the
"Collateral"). Terms used in the foregoing definition of Collateral shall have
the meanings provided in the Uniform Commercial Code as in effect in the State
of Delaware (the "UCC").
Grantor will not (i) change its name or identity, (ii) establish any other
location other than the address set forth beneath its signature hereto where it
expects to maintain inventory and/or equipment or
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(iii) change its principal place of business or the place where its records
concerning the Collateral are kept from the address set forth beneath its
signature hereto, unless Grantor shall have given Secured Party at least thirty
(30) days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by Secured Party to amend such financing statement or continuation
statement as Secured Party may deem appropriate or otherwise to maintain
perfection of Secured Party's security interest in the Collateral.
Grantor hereby irrevocably constitutes and appoints Secured Party and any
agent or representative thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of Grantor and in the name of Grantor or in its own name, from
time to time in Grantor's discretion, for the purpose of carrying out the terms
of this Agreement, to take any and all appropriate action and to execute and
deliver any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, and, without limiting
the generality of the foregoing, hereby gives Secured Party the power and right,
on behalf of Grantor, without notice to or assent by Grantor to do the
following: (i) to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due under any Collateral and,
in the name of Grantor or its own name or otherwise, to take possession of and
endorse and collect any checks, drafts, notes, acceptances or other Instruments
for the payment of moneys due under any Collateral and to file any claim or to
take any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by Secured Party for the purpose of collecting any and all
such moneys due under any Collateral whenever payable; (ii) to direct any party
liable for any payment under any of the Collateral to make payment of any and
all moneys due, and to become due thereunder, directly to Secured Party or as
Secured Party shall direct, with the exception of accounts receivable payable by
Medicare, Medicaid or any other governmental payor that must be made payable to
the healthcare provider that rendered the underlying healthcare services;
provided, however, that any such direction shall relate only to the Collateral
and shall not relate to any other accounts receivable generated by the
healthcare provider that generated the Collateral; (iii) to receive payment of
and receipt for any and all moneys, claims and other amounts due, and to become
due at any time, in respect of or arising out of any Collateral; and (iv)
generally to sell, transfer, pledge, make any agreement with respect or
otherwise deal with any of the Collateral as fully and completely as though
Secured Party were the absolute owner thereof for all purposes, and to do, at
Secured Party's option and Grantor's expense, at any time, or from time to time,
all acts and things which Secured Party reasonably deems necessary to protect,
preserve or realize upon the Collateral and Secured Party's lien therein, in
order to effect the intent of this Agreement, all as fully and effectively as
Grantor might do, with the exception noted in (ii) above. Grantor hereby
ratifies, to the extent permitted by law, all that said attorneys shall lawfully
do or cause to be done by virtue hereof. The power of attorney granted pursuant
to this Section 2 is a power coupled with an interest and shall be irrevocable
until the Obligations are indefeasibly paid in full.
Grantor waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations and notice of, or proof of reliance by,
Secured Party upon this Agreement or acceptance of this Agreement, and the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Agreement. Grantor unconditionally
waives, to the extent permitted by law: (a) all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by Secured Party upon this Agreement or acceptance of this Agreement
(the Obligations being deemed conclusively to have been created, contracted or
incurred in reliance upon this Agreement); (b) all notices that may be required
by statute, rule of law or otherwise, now or hereafter in
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effect, including without limitation, any demand, presentment, protest, proof or
notice of nonpayment; (c) any requirement of diligence on the part of any
Person; and (d) any requirement of Secured Party to take any action whatsoever,
to exhaust any remedies or to mitigate damages.
3. ASSIGNMENT BY SECURED PARTY. Secured Party may, from time to time,
whether before or after any discontinuance of this Agreement, at its sole
discretion and without notice to Grantor, assign or transfer any or all of its
portion of the Obligations or any interest therein; and, notwithstanding any
such assignment or transfer or any subsequent assignment or transfer thereof,
such Obligations shall be and remain Obligations for the purposes of this
Agreement, and each and every immediate and successive assignee or transferee of
any of the Obligations or of any interest therein shall, to the extent of such
assignee's or transferee's interest in the Obligations, be entitled to the
benefits of this Agreement to the same extent as if such assignee or transferee
were Secured Party, as appropriate.
4. NO WAIVER. No delay in the exercise of any right or remedy shall
operate as a waiver thereof, and no single or partial exercise of any right or
remedy shall preclude other or further exercise thereof or the exercise of any
other right or remedy; nor shall any modification or waiver of any of the
provisions of this Agreement be binding upon Secured Party except as expressly
set forth in a writing duly signed and delivered on its behalf. No action
permitted hereunder shall in any way affect or impair Secured Party's rights or
Grantor's obligations under this Agreement. For the purposes of this Agreement,
Obligations shall include all of the obligations described in the definition
thereof, notwithstanding any right or power of Grantor or anyone else to assert
any claim or defense as to the invalidity or unenforceability of any such
obligation, and no such claim or defense shall affect or impair the obligations
of Grantor hereunder. Grantor's obligations under this Agreement shall be
absolute and unconditional irrespective of any circumstance whatsoever that
might constitute a legal or equitable discharge or defense of Grantor. Grantor
hereby acknowledges that there are no conditions to the effectiveness of this
Agreement.
6. REPRESENTATIONS AND WARRANTIES. Grantor hereby represents and warrants
to Secured Party that:
(a) Grantor has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement and such other instruments or
agreements relating thereto to which it is or may become a party;
(b) Grantor has duly executed and delivered this Agreement, and this
Agreement is the legal, valid and binding obligation of Grantor, enforceable in
accordance with its terms;
(c) the execution, delivery and performance of this Agreement by
Grantor does not conflict with, or constitute a violation under, any law,
regulation order, agreement or instrument to which Grantor is a party or by
which Grantor or its properties is bound.
7. EVENTS OF DEFAULT. An "Event of Default" shall exist under this
Agreement if at any time: (a) any representation or warranty of made by Grantor
under this Agreement shall have been false or misleading in any material respect
when made; or (b) Grantor shall fail to make any payment hereunder upon demand
therefor.
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8. REMEDIES.
(a) In case an Event of Default shall occur and be continuing, the
Obligations shall become immediately due and payable and Secured Party shall be
entitled to exercise all of Secured Party's rights, powers and remedies (whether
pursuant to applicable law or this Agreement) with respect thereto and for the
protection and enforcement of Secured Party's rights in the Collateral,
including, without limitation, the following:
(i) the right to receive all monies or other property which,
but for the occurrence of the Event of Default, Grantor would have been entitled
to retain;
(ii) to transfer registration of the Collateral into Secured
Party's name;
(iii) to sell, assign or otherwise dispose of the Collateral, in
the entirety or in separate lots, and generally in such manner, at such time or
times, at such place or places and on such terms as Secured Party, in compliance
with any mandatory requirements of applicable law, may determine to be
commercially reasonable, and, to the extent permitted by any such requirement of
law, Secured Party may bid (which may be a credit bid) for and become the
purchaser of the Collateral (or any portion thereof), offered for sale in
accordance with this section without accountability to Grantor, except pursuant
to subsection (b)(iii) below.
(b) The proceeds of any disposition of any Collateral obtained
pursuant to this section shall be applied as follows:
(i) first, to the payment of any and all expenses and fees
(including reasonable attorney's fees) incurred by Secured Party in foreclosing
on and disposing of the Collateral;
(ii) next, any surplus then remaining to the payment of the
Obligations (whether matured or unmatured) in such order as Secured Party may
determine in its sole discretion; and
(iii) thereafter, if no other Obligations are outstanding, any
surplus then remaining shall be paid to Grantor or to such other person legally
entitled to same; it being understood that Grantor will remain liable to Secured
Party to the extent of any deficiency between the amount of the Obligations and
the aggregate of all amount realized from Collateral.
9. COSTS, ETC. Grantor agrees to pay all reasonable costs of Secured
Party, including, without limitation, reasonable attorneys' fees, incurred in
connection with the enforcement of any of its rights and remedies hereunder.
10. CUMULATIVE RIGHTS. Secured Party's rights, powers and remedies under
this Agreement shall be in addition to all rights, powers and remedies given to
Secured Party under law or otherwise, all of which rights, powers and remedies
shall be cumulative and may be exercised successively or concurrently.
11. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Grantor and upon Grantor's successors; and all references herein to Grantor
shall be deemed to include any successor or successors, whether immediate or
remote, to such Person. Grantor shall have no right to assign its
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obligations hereunder. This Agreement shall inure to the benefit of Secured
Party and its successors, assigns and transferees.
(b) SEVERABILITY. Wherever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable laws and regulations, but if any provision of this Agreement shall be
prohibited by or invalid thereunder, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
(c) SERVICE OF PROCESS. Grantor agrees that service of process in any
such action or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to it at its address set forth below or at such other address
of which Secured Party shall have been notified in writing, and agrees that
nothing herein shall affect the right to effect service of process in any other
manner permitted by law.
(d) NOTICES. All notices, demands, declarations, consents,
directions, approvals, instructions, requests and other communications required
or permitted by this Agreement shall be in writing and shall be deemed to have
been duly given when addressed to the appropriate Person and deposited in the
U.S. Postal Service via registered mail. The initial address for notices to
Grantor is set forth beneath its signature below.
(e) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
(f) WAIVER OF JURY TRIAL. GRANTOR, BY ITS EXECUTION AND DELIVERY OF
THIS AGREEMENT, AND SECURED PARTY, BY ACCEPTING THIS AGREEMENT, EACH EXPRESSLY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH
THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
(g) COUNTERPARTS. This Agreement may be executed in counterparts
(including counterparts delivered by facsimile), each of which shall be deemed
an original, but all of which, taken together, shall constitute one and the same
document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, Grantor has caused this Agreement to be executed and
delivered as of the date first above written.
"Grantor" AMERICAN REIMBURSMENT, LLC, a Delaware limited liability company
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Manager
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SCHEDULE A-1
TLCS ACCOUNTS RECEIVABLE
$20,098,000
Due to the voluminous nature of the information required to precisely
describe each of the accounts receivable included as part of the total pool
of accounts receivable, such information is not included herewith and is
separately available for review upon request.
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SCHEDULE A-2
HMA ACCOUNTS RECEIVABLE
$63,346,673
Due to the voluminous nature of the information required to precisely
describe each of the accounts receivable included as part of the total pool
of accounts receivable, such information is not included herewith and is
separately available for review upon request.
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SCHEDULE A-3
IMS ACCOUNTS RECEIVABLE
$3,344,074
Due to the voluminous nature of the information required to precisely
describe each of the accounts receivable included as part of the total pool
of accounts receivable, such information is not included herewith and is
separately available for review upon request.
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SCHEDULE A-4
MILLENIUM ACCOUNTS RECEIVABLE
$23,413,000
Due to the voluminous nature of the information required to precisely
describe each of the accounts receivable included as part of the total pool
of accounts receivable, such information is not included herewith and is
separately available for review upon request.
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SCHEDULE A-5
CHARTWELL ACCOUNTS RECEIVABLE
$6,500,000
Due to the voluminous nature of the information required to precisely
describe each of the accounts receivable included as part of the total pool
of accounts receivable, such information is not included herewith and is
separately available for review upon request.
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