LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT (this "Agreement"), dated as of
April 1, 1997, made by CATSKILL MEDICAL ASSOCIATES, P.C., a New
York corporation (the "Borrower"), having its principal office at
000 Xxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000, in favor of THE
WELLCARE MANAGEMENT GROUP, INC., a New York corporation ("WCMG"),
having its principal office at Park Xxxx/Xxxxxx Xxxxxx Xxxxxxxxx,
Xxxxxxxx, Xxx Xxxx 00000, and WELLCARE OF NEW YORK, INC., a New
York corporation ("WCNY"), having its principal office at 000
Xxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000 (collectively referred to
as the "Lenders", and each may be referred to as a "Lender").
W I T N E S S E T H:
WHEREAS, Borrower owes WCNY the amount of approximately
$2,212,931.94 (the "Indebtedness") through October 31, 1996
relating to advances known as Enhanced Capitation made by WCNY to
the Borrower during the period from January 1, 1996 through
October 31, 1996, and said sum is immediately due and payable from
the Borrower to WCNY; and
WHEREAS, to evidence the Indebtedness due to WCNY, and in
consideration for an additional loan in the amount of $400,000.00
(the "Additional Loan") made or to be made by WCNY to the
Borrower, the Borrower has issued to WCNY a certain Promissory
Note, of even date herewith, in the principal amount of
$2,612,931.94 (the "Promissory Note"); and
WHEREAS, the Lenders desire that the Borrower enter into
this Agreement to secure the Borrower's obligations to the
Lenders, including the Indebtedness and the Additional Loan, all
as evidenced by the Promissory Note.
NOW, THEREFORE, in consideration of the premises and to
secure the obligations due to the Lenders, including the
Indebtedness, and to induce WCNY to provide the Additional Loan to
the Borrower, the Borrower hereby agrees with the Lenders for
their benefit as follows:
I. DEFINITIONS
1.1. "COLLATERAL" means all of those present or
future assets, real or personal, of the Borrower, including,
without limitation, the Management Agreements, in which a security
interest is granted hereunder.
1.2. "EVENT OF DEFAULT" means an event of the nature
specified in Article IV hereof.
1.3. "LIABILITY" or "LIABILITIES" means any indebt-
edness of the Borrower to either or both Lenders, including,
without limitation, the Indebtedness and the Additional Loan,
whether now or hereafter existing under the Loan Documents, or
hereafter existing pursuant to any future indebtedness of the
Borrower to either or both Lenders.
1.4. "LOAN DOCUMENTS" mean this Agreement, the
Promissory Note, and a certain Pledge Agreement, of even date
herewith, among Xxxxxxx Xxxxxxxxx, M.D., the Borrower and the
Lenders, and any amendments to or substitutions for any such
documents.
1.5. "MANAGEMENT AGREEMENTS" mean those certain
Management Agreements listed on Schedule 1 hereto between the
Borrower and Primergy, Inc., a New York corporation, as successor
to WellCare Medical Management, Inc., a wholly-owned subsidiary of
WCMG.
1.6. "UCC" means the Uniform Commercial Code as
adopted and in effect under the laws of the State of New York.
II. COLLATERAL
2.1. SECURITY INTEREST. In order to secure the
payment in full of all Liabilities of the Borrower to the Lenders
and the prompt and faithful performance of all other covenants,
agreements and obligations of the Borrower under the Loan
Documents, the Borrower hereby grants to the Lenders a security
interest in: (i) all of the Borrower's accounts, equipment,
inventory, general intangibles, chattel paper, instruments,
documents and other property and assets (real or personal),
whether presently owned by Borrower or hereafter acquired and
wherever located; (ii) all of the products and proceeds of all of
the foregoing Collateral (including all proceeds of insurance
policies covering the Collateral) as well as all accessions,
additions, substitutions, replacements and increments thereto; and
(iii) all books and records, including, without limitation,
customer lists, credit files, computer programs, print-outs, and
other computer materials and records of Borrower pertaining to any
of the foregoing items described in clauses (i) and (ii).
2.2. ASSIGNMENT OF MANAGEMENT AGREEMENTS. Without
limiting the security interest granted in Section 2.1 hereof, in
order to secure the payment in full of all Liabilities of the
Borrower to the Lenders and the prompt and faithful performance of
all other covenants, agreements and obligations of the Borrower
under the Loan Documents, the Borrower hereby assigns, sets over,
transfers and pledges to the Lenders, and grants to the Lenders a
security interest in, all of Borrower's right, title and interest
in the Management Agreements and all replacements, renewals,
substitutions, and proceeds thereof, together with all rights
therein and all amounts payable thereunder, with full right on the
part of a Lender, in its own name or in the name of the Borrower,
to collect and enforce the Management Agreements by legal action,
proof of debt in bankruptcy or other liquidation proceedings, vote
in any proceeding for the arrangement at any time proposed, or
otherwise.
2.3. UCC TERMS. As used herein, the terms accounts,
equipment, inventory, general intangibles, chattel paper,
instruments, documents and account debtor, shall have the meaning
ascribed to the respective terms in the UCC.
2.4. CONTINUING PERFECTION. Borrower will perform
any and all steps requested by the Lenders to create and maintain
in the Lenders' favor a valid and perfected security interest in
the Collateral, including, without limitation, the execution,
delivery, filing and recording of financing statements and any
other documents necessary, in the opinion of the Lenders, to
protect their interest in the Collateral.
2.5. ATTORNEY-IN-FACT. Borrower authorizes the
Lenders and does hereby make, constitute and appoint the Lenders,
acting either jointly or severally, and any officer or agent of
the Lenders, with full power of substitution, as the Borrower's
true and lawful attorney-in-fact, with power, in its own name or
the name of the Lenders, to: (a) do all acts and things which the
Lenders may deem necessary to perfect and to continue to perfect a
security interest in the liens provided for in this Agreement
including, but not limited to, executing financing statements on
behalf of the Borrower; (b) endorse any instrument of payment in
respect of the Management Agreements; (c) demand, collect, receipt
for, compromise, settle and xxx for monies due in respect of the
Management Agreements, whether by legal action, proof of debt in
bankruptcy or other liquidation proceedings, or otherwise; and (d)
do, at the Lenders' option and at the Borrower's expense, all acts
and things which the Lenders determine necessary to protect,
preserve and realize upon the Collateral, all as fully and
effectually as the Lenders might or could do.
2.6. OBLIGATIONS OF LENDERS. Notwithstanding
anything contained in this Agreement to the contrary, the Lenders
shall have no obligations or liabilities by reason of or arising
out of this Agreement, nor shall the Lenders be required or
obligated in any manner to perform any obligations of the Borrower
in connection with the Management Agreements.
III. REPRESENTATIONS, COVENANTS AND WARRANTIES
The Borrower represents, covenants and warrants to the
Lenders as follows:
3.1. GOOD STANDING. The Borrower is a corporation
duly organized, validly existing and in good standing under the
laws of the state of New York.
3.2. TRADE NAMES. There are no trade or fictitious
names under which the Borrower now conducts business or is
registered in any jurisdiction.
3.3. ASSETS. There are no assets of the Borrower
located outside of the County of Ulster, State of New York (other
than goods in transit).
3.4. SALES AND ENCUMBRANCES. Without the prior
written consent of the Lenders, the Borrower shall not: (i) other
than in the ordinary course of business, sell, loan, lease,
assign, transfer, convey or alienate the Collateral or any portion
thereof, or any interest therein; (ii) suffer or permit any
mortgage lien, security interest, encumbrance or charge of any
character upon or against the Collateral (other than the security
interest granted herein); and (iii) cancel or terminate any
contract that is Collateral (including, without limitation, the
Management Agreements) or consent to or accept any cancellation or
termination thereof.
3.5. PAYMENTS UNDER MANAGEMENT AGREEMENTS. Borrower
may not, without the express written consent of the Lenders,
receive and retain for its own account or the account of any other
person, any payments or prepayments of any kind whatsoever under
the Management Agreements; and any such payments and prepayments
actually received by the Borrower shall be held in trust for the
Lenders and not commingled with any other funds of the Borrower,
and shall be delivered forthwith to the Lenders for application to
the Liabilities.
3.6. CORPORATE AUTHORITY. The Borrower has the
corporate power to execute, deliver and carry out this Agreement
and the Loan Documents and its Board of Directors has duly
authorized and approved the terms of this Agreement and the Loan
Documents and the taking of any and all action contemplated herein
by the Borrower.
3.7. NO VIOLATION. The execution of this Agreement
and the Loan Documents, and the performance by the Borrower of its
obligations hereunder and thereunder, do not, at the date of
execution hereof, violate the charter or by-laws of the Borrower,
or violate and/or create a breach or default under any agreement
or undertaking to which the Borrower is a party or by which it is
bound, including, without limitation, any agreement or undertaking
with the Key Bank of New York.
3.8. NO LITIGATION. There are no judgments against
the Borrower as of the date of this Agreement and no material
litigation or administrative proceeding before any governmental
body is presently pending now, or to the knowledge of the
Borrower, threatened, against the Borrower or any of its property.
3.9. GOOD TITLE. On the date of this Agreement, the
Borrower has good and valid title to all of the Collateral, free
and clear of any mortgage, pledge, lien, security interest,
encumbrance, charge or title retention or other security agreement
or arrangement of any character whatsoever, except as set forth on
Exhibit A hereto.
3.10. CONTRACTS IN FULL FORCE AND EFFECT. On the
date of this Agreement, all of the Borrower's contracts that are
Collateral, including, without limitation, the Management
Agreements, are in full force and effect and to the best of
Borrower's knowledge, binding upon and enforceable against all
parties thereto in accordance with their respective terms. On the
date of this Agreement, no defaults exist under said contracts by
any party thereto.
3.11. PLACE OF OFFICE, RECORDS, INVENTORY AND
EQUIPMENT. Borrower represents that its only office, which is the
only location where it keeps its records concerning its accounts,
the only location of its inventory and equipment and the only
location from which it conducts business, is located at the
address for the Borrower set forth in the first paragraph of this
Agreement.
3.12. CONTROL OF ACCOUNTS. Upon the occurrence of an
Event of Default: (i) the Lenders shall have the right at any time
and from time to time, without notice, to notify account debtors
of the Borrower to make payments to the Lenders; to endorse all
items of payment which may come into its hands payable to the
Borrower; to take control of any cash or non-cash proceeds of
accounts and of any returned or repossessed goods; to compromise,
extend or renew any account or deal with it as it may deem
advisable; to make exchanges, substitutions or surrenders of
Collateral and to notify the postal authorities, after an Event of
Default, to deliver all mail, correspondence or parcels addressed
to the Borrower to the Lenders at such address as the Lenders may
choose; and (ii) Borrower herewith appoints each of the Lenders or
their designees as attorney-in-fact to endorse the Borrower's name
on any checks, notes, acceptances, drafts or any other instrument
or document requiring said endorsement and to sign the Borrower's
name on any invoice or bills of lading relating to any account, or
drafts against its customers, or schedules or confirmatory
assignment on accounts, or notices of assignment, financing
statements under the UCC, and other public records, and in
verification of accounts and in notices to account debtors.
3.13. INSPECTION. The Lenders or their designated
representatives shall have the right, at any time or times during
Borrower's usual business hours, to inspect the Collateral, all
records related thereto (and to make extracts from such records)
and the premises upon which any of the Collateral is located, to
discuss the Borrower's affairs and finances with any person and to
verify in any manner the Lenders deems advisable, the amount,
quality, quantity, value and condition of, or any other matter
relating to, the Collateral.
3.14. DUTY TO UPDATE. In the event that any of the
representations, covenants or warranties of the Borrower contained
herein ceases to be true in any respect, the Borrower shall
immediately inform the Lenders of such situation and provide all
details relating thereto.
3.15. NO CONSENT REQUIRED. The execution of this
Agreement and the Loan Documents, and the performance by the
Borrower of its obligations hereunder and thereunder, do not, at
the date of execution hereof, require the consent, approval or act
of, or the sending of any notice to, any person or entity,
including, without limitation, Key Bank of New York.
IV. EVENTS OF DEFAULT
The occurrence of any of the following shall
constitute an Event of Default:
4.1. NON-PERFORMANCE. Failure on the part of
Borrower to perform any term, covenant or condition contained in
any of the Loan Documents, including, but not limited to, the
payment of any Liability when due.
4.2. MISREPRESENTATION. Any representation, covenant
or warranty made by Borrower in this Agreement, or in any of the
Loan Documents, shall have proved to have been inaccurate in any
material respect as of the date or dates with respect to which it
is deemed to have been made.
4.3. INSOLVENCY. Borrower shall have applied for or
consented to the appointment of a custodian, receiver, trustee or
liquidator of all or a substantial part of its assets; a custodian
shall have been appointed with or without consent of Borrower;
Borrower is generally not paying its debts as they become due; has
made a general assignment for the benefit of creditors; has been
adjudicated insolvent; or has filed a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or
an arrangement with creditors or to take advantage of any
insolvency law, or an answer admitting the material allegations of
a petition in any bankruptcy, reorganization or insolvency pro-
ceeding; or taken corporate action for the purpose of effecting
any of the foregoing; or an order, judgment or decree shall have
been entered, without the application, approval or consent of
Borrower by any court of competent jurisdiction approving a
petition seeking reorganization of Borrower, or appointing a
receiver, trustee, custodian or liquidator of Borrower, or a
substantial part of its assets; or a petition in bankruptcy shall
have been filed against Borrower; or if an Order for Relief has
been entered under the Bankruptcy Code for Borrower; or if the
Borrower shall have suspended the transaction of its usual
business.
4.4. JUDGMENT OR LIEN. Entry of a judgment, issuance
of any garnishment, attachment or distraint, the filing of any
lien or of any governmental attachment against any property of
Borrower, except as set forth on Exhibit A hereto.
4.5. ADVERSE CHANGE. The determination by the
Lenders that a Material Default has occurred or that there is a
material adverse change in the business or financial condition of
Borrower. A "Material Default" means any default having a
material adverse effect on the contractual relationship between
the Borrower and third parties.
V. CONSEQUENCE OF EVENT OF DEFAULT
In case any Event of Default shall have occurred, then
and in every such Event of Default, the Lenders may take any or
all of the following actions, at the same time or at different
times:
5.1. ACCELERATION. Declare all amounts owing the
Lenders from the Borrower under the Loan Documents to be forthwith
due and payable, whereupon all such sums shall forthwith become
due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by
the Borrower.
5.2. RIGHTS UNDER MANAGEMENT AGREEMENTS. The
Lenders, with or without notice to the Borrower and without demand
of performance or other demand, may forthwith exercise all rights
of the Borrower under the Management Agreements available under
law, and may sell, assign, contract to sell or otherwise dispose
of and deliver the Management Agreements as the Lenders may deem
best, for cash or on credit or for future delivery, and otherwise
to exercise any and all rights afforded to a secured party under
the UCC or other applicable law. The proceeds of any collection,
recovery, receipt, appropriation, realization, disposition or sale
of the Management Agreements shall be applied as follows:
First, to the cost and expenses of every kind
incurred in connection therewith or incidental to the collection
of payments or the care, safekeeping or otherwise of the
Management Agreements or the preparing for the sale, selling and
the like, or in any way relating to the rights of the Lenders
hereunder, including the reasonable attorneys' fees and legal
expenses incurred by the Lenders;
Second, to the satisfaction of the Liabilities;
Third, to the payment of any other amounts
required by applicable law; and
Fourth, to the Borrower to the extent of any
surplus proceeds.
If the payments received by the Lenders under the Management
Agreements, or upon the sale, lease or other disposition of the
Management Agreements and the proceeds thereof are insufficient to
pay all amounts to which the Lenders are legally entitled, the
Borrower will be liable for the deficiency, together with interest
thereon, at the rate prescribed in the Promissory Note, and the
reasonable fees of any attorneys employed by the Lenders to
collect such deficiency, to the extent permitted by applicable
law, the Borrower waives all claims, damages and demands against
the Lenders arising out of the receipt of payments under the
Management Agreements or the sale of the Management Agreements.
5.3. POSSESSION. Except as set forth in Section 5.2
hereof as to the Management Agreements, proceed with or without
judicial process to take possession of all or any part of the
Collateral and the Borrower agrees that upon receipt of notice of
the Lenders' intention to take possession of all or any part of
said Collateral, the Borrower will do everything reasonably
necessary to assemble the Collateral and make the same available
to the Lenders at a place to be designated by the Lenders. The
Borrower hereby waives any and all rights it may have, by statute,
constitution or otherwise to notice or a hearing to determine the
probable cause of the Lenders to obtain possession, by Court
proceedings or otherwise, of the Collateral.
5.4. METHODS OF SALE. So long as the Lenders act in
a commercially reasonable manner, the Lenders may assign, transfer
and deliver at any time or from time to time the whole or any
portion of the Collateral or any rights or interest therein in
accordance with the UCC, and without limiting the scope of the
Lenders' rights thereunder, the Lenders may sell the Collateral at
public or private sale, or in any other manner, at such price or
prices as the Lenders may deem best, and either for cash or
credit, or for future delivery, at the option of the Lenders, in
bulk or in parcels and with or without having the Collateral at
the sale or other disposition. The Lenders shall have the right
to conduct such sales on the Borrower's premises or elsewhere and
shall have the right to use the Borrower's premises without charge
for such sales for such time or times as the Lenders may see fit.
The Lenders are hereby granted a license or other right to use,
without charge, the Borrower's labels, patents, copyrights, rights
of use of any name, trade secrets, trade names, trademarks and
advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in advertising for sale and selling
any Collateral and the Borrower's rights under all licenses and
franchise agreements shall inure to the Lenders' benefit. The
Borrower agrees that a reasonable means of disposition of accounts
shall be for the Lenders to hold and liquidate any and all
accounts. In the event of a sale of the Collateral, or any other
disposition thereof, the Lenders shall apply all proceeds first to
all costs and expenses of disposition, including attorneys' fees,
and then to the Liabilities of the Borrower to the Lenders.
5.5. ATTORNEYS' FEES AND EXPENSES. Add to the
Liabilities of Borrower, the Lenders' expenses to obtain or
enforce payment of any Liabilities and to exercise any of their
other rights under the Loan Documents, including, without
limitation, fees and expenses of counsel.
5.6. RELEASE OF PHYSICIANS FROM RESTRICTIVE
COVENANTS. At Lenders' request, Borrower shall release all of
those physicians with whom it employs or has under contract from
any and all restrictive covenants (including, without limitation,
those covenants set forth in their respective Employment
Agreements) that may interfere with a Lender's ability to contract
with said physicians or to assign said contracts to a Lender or
any subsidiary or affiliate of a Lender or to any professional
corporation or physician that a Lender may designate. If Lenders
make such a request, Borrower shall evidence such releases by
executing a Waiver and Release for each physician in the form to
be provided by Lenders.
VI. MISCELLANEOUS
6.1. NO WAIVER. The Borrower agrees that no delay on
the part of the Lenders in exercising any power or right hereunder
or any other Loan Document shall operate as a waiver of any such
power or right, preclude any other or further exercise thereof, or
the exercise of any other power or right. No waiver whatsoever
shall be valid unless in writing signed by the Lenders and then
only to the extent set forth therein.
6.2. WAIVER OF NOTICE. The Borrower waives
presentment, dishonor and notice of dishonor, protest and notice
of protest by the Lenders.
6.3. LAW OF NEW YORK. This Agreement and the rights
of the parties hereto shall be governed by and construed in
accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of New York.
6.4. JURISDICTION. The Borrower hereby irrevocably
consents to the nonexclusive jurisdiction of the Courts of the
State of New York or any Federal Court in such State in connection
with any action or proceeding arising out of or related to this
Agreement or any of the Loan Documents. In any such litigation,
the Borrower waives personal service of any summons, complaint or
other process and agrees that service of any summons, complaint or
other process may be made by certified or registered mail to it,
at the address provided herein. THE BORROWER WAIVES TRIAL BY JURY
IN ANY LITIGATION ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
ANY OF THE LOAN DOCUMENTS.
6.5. SUCCESSORS OR ASSIGNS. This Agreement and all
other Loan Documents shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs,
administrators, executors, legal representatives, successors and
assigns.
6.6. RIGHTS CUMULATIVE. The rights and remedies
herein expressed or in any other Loan Document to be vested in or
conferred upon the Lenders shall be cumulative and shall be in
addition to and not in substitution for or in derogation of the
rights and remedies conferred upon secured creditors by the UCC or
any other applicable law.
6.7. NOTIFICATION OF DISPOSITION OF COLLATERAL. Any
notification of a sale or other disposition of the Collateral or
of any other action by the Lenders required to be given by the
Lenders to the Borrower will be sufficient if given personally or
mailed to the Borrower, by registered or certified mail (return
receipt requested), to the address set forth for the Borrower in
the first paragraph of this Agreement not less than five (5) days
prior to the day on which such sales or other disposition will be
made and such notification shall be deemed reasonable notice,
notwithstanding Section 6.8 hereof.
6.8. ADDRESS FOR NOTICE. All notices and other
communications hereunder shall be of no force or effect unless in
writing and shall be deemed given when delivered personally
(including by express courier) or, if mailed by registered or
certified mail (return receipt requested), five (5) calendar days
after having been so mailed, to the parties at their respective
addresses set forth in the first paragraph hereof (or at such
other address for a party as shall be specified by like notice).
Notice given by any other means shall be deemed given upon actual
receipt.
6.9. TITLES. The titles and headings indicated
herein are inserted for convenience only and shall not be
considered a part of this Agreement or in any way limit the
construction or interpretation of this Agreement.
6.10. COUNTERPARTS. This Agreement may be signed in
one or more counterparts which, taken together, shall constitute
one and the same document.
IN WITNESS WHEREOF, the Lenders have executed and
delivered this Agreement and the Borrower has caused this
Agreement to be executed and delivered by its proper and duly
authorized officer as of the day and year first above written.
Borrower:
CATSKILL MEDICAL ASSOCIATES, P.C.
By:/s/ Xxxxxxx Xxxxxxxxx, M.D.
Xxxxxxx Xxxxxxxxx, President
ATTEST:
/s/ Xxxx Xxxxxx
Xxxx Xxxxxx
(Corporate Seal)
Lenders:
THE WELLCARE MANAGEMENT GROUP, INC.
BY:/s/ Xxxxxx X. Xxxx
ATTEST: Xxxxxx X. Xxxx
President
/s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
(Corporate Seal)
WELLCARE OF NEW YORK
BY:/s/ Xxxxxx X. Xxxx
ATTEST: Xxxxxx X. Xxxx
President
/s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
(Corporate Seal)
SCHEDULE A
The "Management Agreements" mean the following Management
Agreements between the Borrower and Primergy, Inc. ("Primergy"), a
New York corporation having its principal place of business at 00
Xxxxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx, 00000 (as successor to
WellCare Medical Management, Inc., a New York corporation and
wholly-owned subsidiary of WCMG):
(1) Agreement, dated October 8, 1992, between Primergy and
Borrower (as successor to Kingston Family Medicine, P.C., a
New York professional services corporation).
(2) Agreement, dated October 8, 1992, between Primergy and
Borrower (as successor to WellCare Family Medicine, P.C., a
New York professional services corporation).
(3) Management Agreement, dated March 22, 1993, between Primergy
and Borrower (as successor to Dutchess Family Medicine,
P.C., a New York professional services corporation).
(4) Management Agreement, dated October 2, 1993, between
Primergy and Borrower.
EXHIBIT A
