SECURITY AGREEMENT
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SECURITY AGREEMENT
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This SECURITY AGREEMENT, dated as of June 5, 1996, is entered into
between The Care Group, Inc., a Delaware corporation (hereinafter called the
"Guarantor"), The Care Group of New York, Inc., a New York corporation, The
Care Group of Georgia, Inc., a Georgia corporation, The Care Group of Texas,
Inc., a Texas corporation, The Care Group of Los Angeles, Inc., a California
corporation, Care Line of Dallas, Inc., a Texas corporation, Care Line of
Georgia, Inc., a Georgia corporation, Care Line of Houston, Inc., a Texas
corporation, Care line of New York, Inc., a New York corporation, Mail Order
Meds, Inc., a Texas corporation, Advanced Care Associates, Inc., a
Pennsylvania corporation, Advanced Care CPM, Inc., a Pennsylvania corporation,
and Windsor Wholesale, Inc., a New York corporation (collectively the
"Subsidiaries", and collectively with the Guarantor, the "Debtors"), and the
United States of America, acting through the United States Attorney for the
Eastern District of Pennsylvania and the office of Inspector General of the
United States Department of Health and Human Services (herein called the
"Secured Party").
W I T N E S S E T H:
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WHEREAS, the Guarantor entered into a Settlement Agreement on the 5th
day of June, 1996 (herein, as the same may be hereafter amended or modified
from time to time, called the "Settlement Agreement"), with the Guarantor, the
Secured Party, Advanced Care Associates, Inc., Xxxxxx Xxxx, Xxxxxxx Xxxx,
Xxxxxx Xxxxxx, Xxxx Xxxxxx, Xxxxxxxxxxx Xxxxxxxxxx and Xxxxx and Xxxxxxx
L.L.P.;
WHEREAS, the Settlement Agreement provides for the execution and
delivery by the Guarantor and the Subsidiaries of a Security Agreement
substantially in the form of this Security Agreement and a Guaranty (the
"Guaranty") substantially in the form of Exhibit B to the Settlement
Agreement;
WHEREAS, the parties hereto desire that this Security Agreement
secures the obligations of the Guarantor under the Settlement Agreement;
WHEREAS, the parties hereto explicitly acknowledge that The Chase
Manhattan Bank, National Association ("Chase") has a priority security
interest in the Collateral (as defined in Section 1(b) hereof) only to the
extent set forth in the Inter-Creditor Agreement annexed to the Settlement
Agreement as Exhibit E thereto;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and of the benefits to be received by the Guarantor
under the Settlement
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant of Security Interest. Each Debtor hereby grants to the
Secured Party a continuing security interest in the following property,
whether now or hereafter existing or acquired, to secure the payment and
performance of all obligations of the Guarantor under the Guaranty and the
Settlement Agreement (the "Obligations"):
(a) all personal property, including all accounts (as such
term is defined in the Uniform Commercial Code) and equipment, now
owned and hereinafter acquired by such Debtors.
(b) all proceeds (including all insurance proceeds) of
any of the foregoing (all the foregoing herein called the
"Collateral").
"Uniform Commercial Code" shall mean the Uniform Commercial Code of the State
of New York.
2. Warranties. Each of the Debtors represents and warrants to the
Secured Party that: (i) such Debtor is a corporation duly organized, validly
existing and in good standing under the laws of its respective state of
incorporation as stated in the preamble to this Security Agreement; (ii) the
execution and delivery of this Agreement and the performance by such Debtor of
its obligations hereunder are within such Debtor's corporate powers, have been
duly authorized by all necessary corporate action, have received all necessary
governmental approval (if any shall be required), and do not and will not
contravene or conflict with any provision of law or of the charter or by-laws
of such Debtor or of any agreement binding upon such Debtor; (iii) this
Security Agreement is a legal, valid and binding obligation of such Debtor,
enforceable against such Debtor in accordance with its terms; (iv) such Debtor
is and will be the lawful owner of all Collateral; (v) such Debtor is not
aware of any liens, security interests and other encumbrances applicable to
the Collateral, other than a security interest to Chase pursuant to an
agreement dated February 14, 1994, as amended and the permitted encumbrances
disclosed on Schedule 2 hereto; and (vi) all information with respect to the
Collateral set forth in any schedule, certificate or other writing at any time
heretofore or hereafter furnished by such Debtor to the Secured Party, and all
other written information heretofore or hereafter furnished by such Debtor to
the Secured Party, is and will be true and correct as of the date furnished.
3. Turnover upon Event of Default. Upon the occurrence and during the
continuance of an Event of Default (as such term is defined below), each
Debtor will, (except as the Secured Party may otherwise consent in writing)
forthwith, upon receipt, transmit and 2 deliver to the Secured Party, in the
form received, all cash, checks, drafts, chattel paper and other instruments
or writings for the payment of money (properly endorsed, where required, so
that such items may be collected by the Secured Party) which may be received
by such Debtor at any time in full or partial payment or otherwise as proceeds
of any of the Collateral. Except as the Secured Party may otherwise consent in
writing, any such items which may be received by each Debtor
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will not be commingled with any other of its funds or property, but will be
held separate and apart from its own funds or property and upon express trust
for the Secured Party until delivery is made to the Secured Party. Each Debtor
will comply with the terms and conditions of any consent given by the Secured
Party pursuant to the provisions of this paragraph. For purposes of this
Agreement, "Event of Default" shall mean the failure of Advanced Care
Associates, Inc. or the Guarantor to comply with the terms and provisions of
the Settlement Agreement, including the failure of Advanced Care Associates,
Inc. or the Guarantor to make any payment required thereby.
4. Further Encumbrance of Collateral. None of the Debtors will,
without the consent of the Secured Party, pledge, sell, exchange or otherwise
dispose of the Collateral or any part thereof or any interest therein except
in the ordinary course of business, which pledges, sales, exchanges and other
dispositions by any of the Debtors in the ordinary course of business are
hereby authorized by the Secured Party. Such further authorized encumbrances
by the Debtors shall not affect the priority of the United States liens.
5. Agreements of the Debtors. Each Debtor
(a) will, upon request of the Secured Party, execute such
financing statements and other documents (and pay the cost of filing
or recording the same in all public offices deemed reasonably
necessary by the Secured Party) and do such other acts and things,
all as the Secured Party may from time to time reasonably request to
establish and maintain a valid perfected security interest in the
Collateral to secure the payment of the obligations, provided that
notwithstanding the foregoing such Debtor shall not be required to
file fixture filings (other than standard Uniform Commercial Code
financing statements), mortgages or deeds of trusts with respect to
any fixtures;
(b) will keep at its principal place of business, its
records concerning the Collateral, which records will be of such
character as will enable the Secured Party or their designees to
determine at any time the status thereof, and such Debtor will not,
unless the Secured Party shall otherwise consent in writing,
duplicate any such records at any other address; and
(c) will furnish the Secured Party such information
concerning such Debtor and the Collateral as the Secured Party may
from time to time reasonably request.
6. Remedies. Whenever an Event of Default shall exist, the Secured
Party may from time to time exercise any rights and remedies available to it
under applicable law. Each Debtor agrees, in the case of an Event of Default,
to assemble (to the extent reasonably possible), at its expense, all
Collateral at a convenient place acceptable to the Secured Party.
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7. General. No delay on the part of the Secured Party in exercising
any right, power or remedy hereunder shall operate as a waiver thereof nor
shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. No amendment, modification or waiver of, or any
consent with respect to, any provision of this Security Agreement shall in any
event be effective unless the same shall be in writing, and signed and
delivered by the party to be bound thereby, and then such amendment,
modification, waiver or consent shall be effective only in the specific
instance and for the purpose for which given.
All notices and other communications hereunder shall be given as
provided in Paragraph 7 of the Settlement Agreement. The Subsidiaries shall be
notified at the addresses attached hereto as Schedule 7.
The Guarantor shall pay all reasonable attorneys, fees and costs, as
approved by a court, incurred by the Secured Party in enforcing its rights
under this Agreement.
All obligations of the Guarantor and all rights, powers and remedies
of the Secured Party expressed herein are in addition to all other rights,
powers and remedies possessed by them, including, without limitation, those
provided by applicable law.
The parties hereto explicitly acknowledge that Chase Bank has a
priority security interest in the Collateral (as defined in Section 1(b)
hereof) only to the extent set forth in the Inter- Creditor Agreement annexed
to the Settlement Agreement as Exhibit E thereto.
THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. WHEREVER POSSIBLE, EACH
PROVISION OF THIS SECURITY AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER AS TO
BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS
SECURITY AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER SUCH LAW, SUCH
PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS SECURITY AGREEMENT.
This Security Agreement shall be binding upon and inure to the
benefit of the Debtors and the Secured Party and their respective successors
and assigns.
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IN WITNESS WHEREOF, the parties have caused this Security Agreement
to be executed as of the date first above written.
THE CARE GROUP, INC.
By:
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Its
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UNITED STATES OF AMERICA
By:
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Its
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THE CARE GROUP OF NEW YORK, INC.
By:
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Its
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THE CARE GROUP OF GEORGIA, INC.
By:
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Its
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THE CARE GROUP OF TEXAS, INC.
By:
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Its
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THE CARE GROUP OF LOS ANGELES, INC.
By:
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Its
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CARE LINE OF DALLAS, INC.
By:
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Its
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CARE LINE OF GEORGIA, INC.
By:
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Its
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CARE LINE OF HOUSTON, INC.
By:
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Its
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CARE LINE OF NEW YORK, INC.
By:
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Its
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MAIL ORDER MEDS, INC.
By:
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Its
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ADVANCED CARE ASSOCIATES, INC.
By:
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Its
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ADVANCED CARE CPM, INC.
By:
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Its
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WINDSOR WHOLESALE, INC.
By:
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Its
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