Exhibit 10.2
SECURITY AGREEMENT
MVA Rehabilitation Associates, a Massachusetts general partnership
("Debtor"), subject to the terms and conditions hereof, hereby grants to MDI
Rehab, Inc. ("MDI") and Middlesex MRI Center, Inc. (together with MDI, the
"Secured Parties"), a continuing security interest in and to:
All Accounts and Accounts Receivable, and all collateral therefor, all
deposits, deposit accounts, all ledger sheets, files, records, documents and
instruments including software, all to the extent necessary to the collection of
such Accounts or Accounts Receivable, provided, however, that the Collateral
shall not include any patient or other medical records.
The foregoing property, whether now owned or hereafter acquired (all of
which property, together with any other property in which the Secured Parties
may in the future be granted a security interest pursuant hereto, is hereafter
collectively referred to as the "Collateral") (capitalized terms shall have the
meanings given them in the Massachusetts Uniform Commercial Code).
The Collateral is pledged, assigned, mortgaged and transferred, and a
security interest therein is granted, to the Secured Parties as security for the
payment and performance of all Deferred Payments (as defined in the Interest
Transfer Agreement referred to herein) by Medical Diagnostics and
Rehabilitation, LLC ("MDR") to the Secured Parties as set forth in paragraph 2
of that certain Interest Transfer Agreement among the parties hereto of even
date herewith (the "Obligations").
1. Subordination and Other Liens. The Secured Parties agree and acknowledge
that their security interest hereunder is subordinate and subject to prior
security interests in the accounts receivables of Debtor held by (i) The MVA
Center for Rehabilitation, Inc. pursuant to an Agreement for Judgment entered in
connection with that certain civil action No. 98-5183-B, filed in the
Massachusetts Superior Court Department of The Trial Court, and (ii) the
Springfield Institution for Savings (the "Bank"), provided, however, that the
indebtedness secured by the Bank shall not, at any time, exceed $555,000 (the
security interests described in subparagraphs (i) and (ii) shall be referred to
herein as the "Permitted Liens").
The Secured Parties acknowledge that nothing contained herein shall prohibit or
restrict Debtor from granting (i) security interests junior to those granted the
Secured Parties herein or (ii) purchase money security interests in new assets
acquired by the Debtor.
2. Debtor's Representations and Warranties. Debtor represents and warrants
that:
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(a) Debtor is a general partnership duly organized and validly existing
under the laws of the Commonwealth of Massachusetts.
(b) Debtor's exact legal name is as set forth in this Agreement and Debtor
will not undertake or commit to undertake any act which will result in a change
of Debtor's legal name, without giving the Secured Parties at least thirty (30)
days prior written notice of the same.
(c) The execution, delivery and performance of this Agreement, and any
other document executed in connection herewith, are within the Debtor's powers,
have been duly authorized, are not in contravention of law or the terms of the
Debtor's partnership agreement, or of any contract, lease, indenture, agreement,
undertaking, order, judgment or decree, to which the Debtor is a party or by
which it or any of its properties may be bound, and does not and will not,
violate or constitute a default under any statute, rule, regulation, order or
ordinance of any governmental, judicial or arbitrating body.
(d) Debtor has the full power and authority to grant the security interest
granted hereunder. The execution, delivery and performance of this Agreement and
any other document executed in connection herewith are within Debtor's powers,
having been respectively duly authorized, and are not in contravention of law or
the term of the Debtor's partnership agreement or in violation of any indenture,
agreement or undertaking to which the Debtor is a party or by which Debtor or
its properties is or may be bound.
(e) Debtor has, on the date hereof, good, clear and marketable title to all
of the Collateral, free and clear of all liens, encumbrances and agreements of
every kind, nature and description, except for the Permitted Liens described in
paragraph 1 hereto.
(f) Debtor shall conduct its business in material compliance with all laws,
ordinances, codes and regulations and requirements of the Commonwealth of
Massachusetts and any political subdivision thereof, and the Federal government
and any political subdivision thereof concerning and applicable to the licensing
or operation of medical clinics.
(g) All representations, warranties and covenants set forth above shall
survive the making of this Agreement.
3. General Agreements of Debtor. Debtor covenants and agrees that from the
date hereof until full payment of the Obligations, unless the Secured Parties
otherwise consent in writing Debtor shall:
(a) Pay and discharge when due all taxes, general and special, charges and
assessments, and other governmental obligations, which may have been or shall be
levied, charged or
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assessed on or against Debtor, except when in dispute, and file all appropriate
tax returns (subject to any permitted extensions).
(b) Pay to the Secured Parties, on demand, any and all reasonable expenses
including but not limited to reasonable attorney's, appraiser's or accountant's
fees, incurred or expended by the Secured Parties in the collection of the
Obligations hereunder upon any default (after any applicable notice and cure
periods); Debtor specifically authorizes MDI to pay all such fees and expenses
and add same to the amount otherwise due on the Obligations.
(c) Make, procure, execute and deliver all writings and assurances and take
such actions as MDI may at any time reasonably require to protect, assure, or
enforce the Secured Parties' interest, rights and remedies, created by, provided
in or emanating from this Agreement, including without limitation of the
foregoing, Uniform Commercial Code Financing Statements and Continuation
Statements, and will pay for the cost of filing same. Debtor hereby does
irrevocably appoint MDI its true and lawful attorney-in-fact, and in its name,
place and stead, to execute and deliver all such Uniform Commercial Code
Financing Statements and Continuation Statements as MDI deems reasonably
necessary to accomplish the purposes of this paragraph, but only if Debtor does
not comply with MDI's written request within sixty (60) days.
(d) At all times keep accurate and complete records of the Collateral, and
the Secured Parties, or any of their agents, shall have the right to call at
Debtor's place or places of business upon reasonable notice to Debtor, and
during normal business hours, to inspect, audit, check, and make extracts from
any copies of the books, records, journals, orders, receipts, correspondence
which relate to the Collateral.
(e) Maintain its existence, provided that, if MDR becomes the sole partner
of the Partnership, all agreements and covenants of the Debtor shall be binding
upon MDR) and conduct its business in material compliance with all laws,
ordinances, codes and regulations and requirements of the Commonwealth of
Massachusetts and any political subdivision thereof, and the federal government
and any political subdivision thereof, concerning and applicable to the
licensing or operation of medical practices, to the extent applicable to the
Debtor.
(f) Pay all real and personal property taxes, assessments and charges and
all franchises, income, unemployment, old age benefits, withholding, sales and
other taxes assessed against it, or payable by it at such times and in such
manner as to prevent any penalty from accruing or any lien or charge from
attaching to its property.
(g) Provide the Secured Parties with annual financial statements within
ninety (90) days of fiscal year end, quarterly financial statements within sixty
(60) days of the end of a fiscal
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quarter, and monthly financial statements within sixty (60) days of month end,
all internally prepared and in accordance with generally accepted principals of
accounting consistently applied, for Debtor certified by the chief financial
officer of Debtor. In addition, the Secured Parties shall be provided with
access to the work papers of Debtor after the completion of each annual audit.
(h) Reimburse the appropriate Secured Party on demand (i) if such Secured
Party has, after two days written notice prior to any such advance, advanced
funds for the payment of any insurance premiums for policies required to be
maintained in force by Debtor or (ii) if such Secured Party has discharged any
taxes levied, placed or assessed on the Collateral, provided that such Secured
Party shall only be reimbursed if the non-payment of any such tax might result
in a lien on any of the Collateral and has provided Debtor not less than 30
days' written notice prior to any such payment (provided further that, if
non-payment might result in a lien or claim against such Secured Party, then
such notice shall not be required).
(i) Provide immediate written notice to the Secured Parties of (i) any
change in the address or name of Debtor; (ii) any event causing material loss or
diminution in the value of, or any material adverse change in or to, the
Collateral; (iii) any change in the location of any material portion of the
Collateral; (iv) any material adverse change in any fact or circumstance
warranted or represented by the Debtor in this Agreement or any other written
agreement with either of the Secured Parties; or (v) the occurrence of any
default pursuant to Section 6 of this Agreement.
(j) Pay on a timely basis all licensing fees or assessments for property of
Debtor subject to license unless any such license fee is in good faith disputed
or if Debtor is terminating the license, and pay all taxes, fees or assessments
relating to the Collateral and file all returns and pay or make provision for
the payment of all taxes.
4. Debtor's Negative Covenants. Debtor will not at any time, without the
consent of one or both of the Secured Parties:
(a) (Mergers, Consolidations or Sales) (i) merge or consolidate with or
into any corporation or convey a controlling ownership interest in the Debtor or
its constituent partners; (ii) enter into any joint venture or partnership with
any person, firm or corporation; (iii) convey, lease or sell all or any material
portion of its property or assets or business to any other person, firm or
corporation, except for the sale of inventory in the ordinary course of its
business; or (iv) convey, lease or sell any of its assets to any person, firm or
corporation for less than the fair market value thereof.
(b) (Disposition of Accounts) Sell, assign, or otherwise dispose of any
Accounts, with or without recourse, except to the Secured Parties.
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5. MDI as Debtor's Attorney. Debtor hereby irrevocably appoints MDI the
true and lawful attorney for Debtor with full power of substitution, in the name
of the Secured Parties or in the name of Debtor or otherwise, for the sole
benefit of the Secured Parties but at the sole expense of Debtor, in the event
of default hereunder, with respect to any account included in the Collateral:
(a) to demand, collect, receive payment of, receipt for, settle, compromise
or adjust, and give discharges and releases in respect of the accounts or any of
them;
(b) to commence and prosecute any suits, actions or proceedings at law or
in equity in any court of competent jurisdiction to collect the accounts or any
of them and to enforce any other rights in respect thereof or in respect of the
goods which have given rise thereto;
(c) to defend any suit, action, or proceeding brought against Debtor in
respect of any account or the goods which have given rise thereto;
(d) to settle, compromise or adjust any suit, action or proceeding
described in clause (b) or (c) above and, in connection therewith, to give such
discharges or releases as MDI may deem appropriate;
(e) to endorse checks, notes, drafts, acceptances, money orders, bills of
lading, warehouse receipts or other instruments or documents evidencing or
securing the accounts or any of them;
(f) generally to sell, assign, transfer, pledge, make any agreement in
respect of or otherwise deal with any account receivable or the goods which have
given rise thereto as fully and completely as though MDI were absolute owner
thereof for all purposes; and
(g) to receive and open mail and all other communications addressed to
Debtor and to change the post office address of Debtor to such other address as
MDI may deem appropriate.
The powers conferred on the Secured Parties by this Agreement are solely to
protect the interest of the Secured Parties and shall not impose any duty upon
the Secured Parties to exercise any such power, and if the Secured Parties shall
exercise any such power, it shall be accountable only for amounts that it
actually receives as a result thereof; and shall not be responsible to Debtor
except for willful misconduct or gross negligence.
6. Events of Default, Acceleration. Any or all Obligations shall, at the
option of one or both of the Secured Parties, become immediately due and
payable, without presentment, protest, notice or demand, upon the occurrence of
any of the following events of default:
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(a) if any payment of a Deferred Payment (as defined in the Interest
Transfer Agreement) shall not be fully paid after the same shall fall due,
subject to any applicable notice and grace periods; or,
(b) if default exists in the due observance of any covenants or agreements
of Debtor contained herein or in any other agreements with the Secured Parties
including without limitation the Interest Transfer Agreement and is not remedied
within thirty (30) days after either Secured Party shall have delivered to
Debtor a written notice requesting that such default be remedied; or,
(c) if Debtor becomes insolvent as evidenced by an inability to pay its
debts as they mature; or,
(d) if Debtor becomes bankrupt, provided that with respect to an
involuntary bankruptcy, the bankruptcy is not released or discharged within
ninety (90) days of its filing; or,
(e) if Debtor makes an assignment for the benefit of its creditors; or,
(f) if Debtor consents to the appointment of a trustee or receiver of all
or a substantial part of its properties or such appointment is made without its
consent, and not vacated within thirty (30) days; or,
(g) if any warranty, statement or representation by Debtor contained herein
proves materially incorrect as of the date given and is not corrected within
sixty (60) days after one or both Secured Parties shall have delivered to Debtor
a written notice requesting such correction; or,
(h) the acceleration of the maturity of the indebtedness of Debtor to any
other secured creditor of Debtor (excepting only any holder of purchase money
security interests to the extent of such interests) under any indenture,
agreement, judicial order, decree, or undertaking, and after five (5) days the
acceleration is not rescinded or the accelerated obligation satisfied in full;
provided, however, that if the acceleration of the maturity of the indebtedness
of Debtor to any other secured creditor of Debtor is cured within 15 days of the
acceleration, the Secured Parties will rescind the acceleration hereunder; or,
(i) failure of the Debtor to furnish financial information or to permit the
inspection of books and records, all as required hereunder, continuing for more
than sixty (60) days after written notice.
7. Rights and Remedies on Default.
(a) Debtor does hereby irrevocably appoint MDI its true and lawful
attorney-in-fact and in its name, place and stead, if Debtor is then in default
under any of its obligations to the Secured
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Parties, after any applicable grace periods and opportunity to cure, to enter
into a lock-box agreement with a bank of MDI's choice, which will provide that
all accounts of the Debtor shall be paid to the lock-box bank and that MDI shall
have the right to elect to control the distribution of all funds received by the
lock-box bank. At all times after MDI shall have elected to control the
distribution of such funds, MDI shall account to the Debtor for all funds
withdrawn from the lock box and the lock box bank shall provide reports to the
Debtor of all funds coming into and out of the lock box, all not less often than
monthly, and MDI shall also provide copies of deposits and the checkbook
register on a weekly basis.
(b) Upon the occurrence of any such event of default, and at any time
thereafter, the Secured Parties shall have the rights and remedies of a secured
party under the Uniform Commercial Code in addition to the rights and remedies
provided herein. In addition, Debtor agrees to assist the Secured Parties to
provide necessary information to payors or other third parties to assist Secured
Parties in receiving payment on the Accounts Receivable of Debtor if the Secured
Parties cannot access certain records due to limits of applicable law.
(c) At any time after an event of default (subject to all applicable rights
to cure and grace periods), and after compliance with any notice requirements
under this Agreement, if any, and at the expense of the Debtor, MDI, in its name
or in the name of its nominee or of the Debtor, subject to Section 7(a), may but
shall not be obligated to:
(i) collect by legal proceedings or otherwise all payments and
interest due thereon, and other sums now or hereafter payable upon or on
account of said Collateral;
(ii) make any compromise or settlement it deems desirable or proper
with reference to the Collateral;
(iii) discharge taxes, liens or any other encumbrances placed on the
Collateral;
(iv) insure, process, preserve and maintain the Collateral;
(v) notify any other person of its rights under this Agreement;
(vi) renew, extend, or accelerate any Obligation or any part thereof;
and
(vii) release or substitute any party to any of the Obligations.
(d) Upon default (subject to all applicable rights to cure and grace
periods), MDI, at its option, may declare any or all
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of the Obligations immediately due and payable and, subject to Section
7(a), shall have all of the rights and remedies of a secured party as
provided in the Uniform Commercial Code, including but not limited to the
right to notify account debtors (including without limitation patients,
third party payors and counsel) at Debtor's expense that the Collateral has
been assigned to the Secured Parties and that payments shall be made
directly to MDI or its nominee and upon request of MDI, Debtor will so
notify such account debtors that their accounts must be paid to MDI or its
nominee. Debtor will immediately upon receipt of all remittances deliver
the same in kind to MDI. MDI shall have full power to collect, compromise,
endorse, sell or otherwise deal with the Collateral or proceeds thereof in
its own name or in the name of Debtor and Debtor hereby irrevocably
appoints MDI its attorney-in-fact for this purpose.
Pursuant to the foregoing paragraph, MDI as Debtor's attorney-in-fact may
endorse the name of Debtor upon any assignments, notes, checks, drafts, money
orders, or other instruments of payment or Collateral that may come into
possession of the Secured Parties; may sign and endorse the name of Debtor upon
any negotiable instrument, invoice, freight or express ▇▇▇▇, ▇▇▇▇ of lading,
storage or warehouse receipts, drafts, assignments, verifications and notices in
connection with accounts, and any instruments or documents relating thereto or
to Debtor's rights therein; may give notice to the United States Post Office to
effect changes of address to allow delivery of mail addressed to the Debtor to
be accepted by the MDI or its nominee; or any other activity consistent with its
rights as a Secured Party in order to take possession of such account receivable
monies and with full power to do all things necessary regarding said account
receivables as Debtor might or could do.
(e) All rights and remedies of the Secured Parties, whether provided for in
this Agreement or in other instruments or documents covered by law, are
cumulative and not alternative and may be enforced successively or concurrently.
The Secured Parties shall not be deemed to have waived any of its rights unless
such waiver be in writing and signed by the Secured Parties. No delay or
omission on the part of the Secured Parties in exercising any right shall
operate as a waiver of such right or any other right. A waiver on one occasion
shall not be construed as a bar to or a waiver of any right or remedy on any
future occasion.
8. Agreements of Secured Parties.
(a) The Secured Parties agree and acknowledge that they may have access to
information which is confidential or proprietary to Debtor, including without
limitation Debtor's financial statements and operating procedures. The Secured
Parties agree to receive and maintain all such confidential or proprietary
information in strictest confidence using at least the same degree of care they
take in protecting their own confidential or proprietary
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information and, except as necessary for the enforcement of its rights
hereunder, will not use such confidential or proprietary information for their
own benefit nor disclose it to third parties without the written consent of
Debtor, except that the Secured Parties may disclose any of such information (i)
to their legal, financial and accounting advisors, provided that such advisors
are advised of the confidential nature of such information and (ii) as may be
required by law. The Secured Parties will have no obligations hereunder with
respect to information which is publicly available at the time of disclosure or
becomes publicly available after disclosure through no act of the Secured
Parties.
(b) The Secured Parties agree, upon payment in full of all Obligations, to
promptly execute and deliver Uniform Commercial Code Termination Statements as
are reasonably requested by Debtor. The Secured Parties hereby do irrevocably
appoint Debtor their true and lawful attorney-in-fact, and in their name, place
and ▇▇▇▇▇, to execute and deliver all such Uniform Commercial Code Termination
Statements as Debtor deems necessary to accomplish the purposes of this
paragraph, but only if the Secured Parties do not comply with Debtor's written
request within sixty (60) days.
12. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or mailed by certified or registered mail, return receipt requested or
by overnight delivery service such as Federal Express, to the following
addresses or such other addresses, notice of which may be given from time to
time to all parties hereto:
IF TO DEBTOR: MVA Rehabilitation Associates
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
AND: ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
IF TO THE SECURED PARTIES: MDI Rehab, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Middlesex MRI Center Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
AND: Posternak, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
13. General.
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(a) Any condition or restriction hereinabove imposed with respect to Debtor
may be waived, modified or suspended by one or both of the Secured Parties, but
only on the prior action in writing of such Secured Party or Secured Parties and
only as so expressed in such writing and not otherwise.
(b) This Agreement and every representation, warranty, covenant, promise
and other term herein contained shall survive until all Obligations of the
Debtor have been paid in full.
(c) All terms used herein are used as defined in the Uniform Commercial
Code unless otherwise defined.
(d) This Agreement is made and executed in and is to be construed under the
laws of the Commonwealth of Massachusetts.
(e) The captions for the paragraphs contained in this Agreement have been
inserted for convenience only and form no part of this Agreement, and shall not
be deemed to affect the meaning or construction or any of the covenants,
agreements, conditions or terms thereof.
(f) This Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and assigns.
(g) Debtor expressly agrees to waive its right to a hearing, judicial or
otherwise, prior to repossession of the property, and, upon seventy-two (72)
hours written notice, to voluntarily relinquish possession of said property at
the request of one or both of the Secured Parties in the event of default
hereunder or under any of the other Obligations (subject to any applicable right
to cure and grace periods), notwithstanding any claims Debtor may have against
the Secured Parties with respect to such property or for any other cause.
(h) In the event any provision of this Agreement or any document executed
in connection with this Agreement shall be invalid or void for any reason, such
invalid or void provisions shall not affect the whole of this Agreement or any
document executed with reference thereto, and the balance of the provisions
thereof shall remain in full force and effect and enforced to the fullest extent
and in the broadest application permitted by law.
(i) This Agreement may be signed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
(j) Any terms used in the singular or plural, and masculine, feminine or
neuter form shall be singular or plural, and masculine, feminine or neuter as
the proper reading of this Agreement may require.
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IN WITNESS WHEREOF, the said parties have hereunto executed this Agreement
under seal as of March 11, 1999.
MVA REHABILITATION ASSOCIATES
By Medical Diagnostics and
Rehabilitation, LLC
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D.
Title: Manager
By Middlesex MRI Center, Inc.,
general partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Pres.
MDI REHAB, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Pres.
MIDDLESEX MRI CENTER, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Pres.
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