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EXHIBIT 10.16
EXECUTION COPY
AMENDMENT NO. 1 TO SECURITY AGREEMENT
Amendment No. 1 dated as of January 9, 1998 (this "Amendment"), to that
certain Security Agreement dated July 10, 1997 (the "Security Agreement"), for
the benefit of SUN HEALTHCARE GROUP, INC., a Delaware corporation ("Sun"), by
RETIREMENT CARE ASSOCIATES, INC., a Colorado corporation ("RCA").
PRELIMINARY STATEMENTS
1. Sun, PEACH ACQUISITION CORPORATION, a Colorado corporation and a
direct wholly-owned subsidiary of Sun ("Merger Sub"), and RCA are parties to
that certain Agreement and Plan of Merger and Reorganization dated as of
February 17, 1997, as amended by Amendment No. 1 thereto dated as of May 27,
1997, Amendment No. 2 thereto dated as of August 21, 1997, and Amendment No. 3
thereto dated as of November 25, 1997 (as amended, the "Merger Agreement").
2. RCA, Capitol Care Management Company, Inc. and Retirement Management
Corporation (collectively, the "Borrowers") are indebted to Sun in the amount of
$5,000,000 pursuant to that certain Promissory Note dated July 10, 1997 (the
"Additional Note"). The Additional Note is secured by, among other things, the
Security Agreement.
3. The Borrowers and HCFP Funding, Inc. ("HCFP"), as lender, have
entered into a Loan and Security Agreement (the "Loan Agreement"). Certain
subsidiaries of RCA, as borrower, and HCFP, as lender, have entered into a Loan
and Security Agreement (the "Affiliated Loan Agreement," the subsidiaries of RCA
party thereto being referred to herein as the "Affiliated Borrowers"). In
connection with the transactions contemplated by the Loan Agreement and the
Affiliated Loan Agreement, the parties hereto have agreed to amend the Security
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises set forth herein, the
parties hereto agree as follows.
SECTION 1. Security Agreement. Section 4 of the Security Agreement is
amended and restated as follows:
4. Collateral Reporting. The Pledgor shall deliver to the
Lender on the date hereof and on the tenth calendar day of each month a
borrowing base
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certificate, attested to by an officer of the Pledgor, indicating the
amount of the Borrowing Base (the "Borrowing Base Certificate"). As
used herein, the term "Borrowing Base" shall mean an amount equal to
(i) one hundred percent (100.0%) of all Eligible Accounts, plus (ii)
the aggregate fair market value of any property pledged to Lender in
accordance with Section 22 hereof, minus (ii) the aggregate principal
amount of indebtedness outstanding under (A) the Fidelity Agreement
referred to in Section 21 hereof, (B) that certain Amended and Restated
Promissory Note made by the Pledgor, RMC and CCMC to the Lender dated
as of even date herewith, (C) that certain Loan and Security Agreement
by and among Pledgor, RMC, CCMC and HCFP Funding, Inc. dated December
15, 1997, and (D) that certain Loan and Security Agreement by and among
certain of Pledgor's subsidiaries and HCFP Funding, Inc. dated December
15, 1997. As used herein, the term "Eligible Accounts" shall mean all
Accounts of the Pledgor, RMC, CCMC and the Subsidiary Guarantors (as
defined in the Note), but not of any other subsidiary of the Pledgor,
which are not more than one hundred twenty (120) days past due, which
are not due and payable from any insider, affiliate, officer or
shareholder of the Pledgor or any of its managed or affiliated
companies, and which are not classified as "Pre-Current" in Pledgor's
books and records pertaining to the Collateral.
SECTION 2. Conditions of Effectiveness. Section 1 of this
Amendment shall be effective as of December 15, 1997, when and if Sun shall have
received counterparts of this Amendment duly executed by each of the parties
hereto.
SECTION 3. Reference to and Effect on the Security Agreement.
(a) On or after the date hereof, each reference in the
Security Agreement to "this Agreement," "hereunder," "hereof," "herein" or words
of like import referring to the Security Agreement, and each reference to the
Security Agreement in the Additional Note and each other documents delivered in
connection therewith (collectively, the "Loan Documents") shall mean and be a
reference to the Security Agreement as amended hereby.
(b) Except as specifically amended under Section 1 hereof,
each of the Loan Documents shall remain in full force and effect and is hereby
ratified and confirmed.
(c) Each Borrower acknowledges and agrees that, except to the
extent specifically amended under Section 1 hereof, it is obligated to comply
with each and every term, covenant, agreement and condition applicable to it
under each of the Loan Documents. The execution, delivery and effectiveness of
this Amendment shall not otherwise operate as a waiver of any right, remedy or
privilege of Sun under any of the Loan Documents, any and all of which rights,
remedies and privileges are reserved.
SECTION 4. Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which, when
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so executed and delivered, shall be an original, but all such counterparts shall
together constitute one and the same agreement.
SECTION 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed and delivered as of the date first above
written.
SUN HEALTHCARE GROUP, INC.
By:
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Name:
Title:
RETIREMENT CARE ASSOCIATES, INC.
By:
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Name:
Title:
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