PROMISSORY NOTE AND SECURITY AGREEMENT
$[ ] [ ], Virginia
April 22, 2003
THIS PROMISSORY NOTE AND SECURITY AGREEMENT ("Agreement") is made as of
the 22 day of April, 2003 by and between [ ], M.D. ("Borrower"),
and Dialysis Corporation of America ("Secured Party"). For good and valuable
consideration, the delivery and sufficiency of which is hereby acknowledged,
the parties agree as follows:
1. Payment.
For value received, Borrower promises to pay to the order of Secured
Party the aggregate unpaid principal amount of [
] Dollars ($[ ]), loaned under that certain Loan Agreement dated
April 22, 2003 between Borrower and Secured Party ("Loan Agreement"), together
with interest on any and all principal amounts remaining unpaid under this
Agreement and from time to time outstanding, such interest accruing from the
initial date of disbursement until paid in full, at a simple interest rate
per annum equal to the Prime Rate as of the date of execution of the Loan
Agreement (the "Interest Rate") (the total indebtedness under this Agreement,
including interest, is referred to as the "Loan"). Interest shall be
calculated on the basis of the actual number of days elapsed in a year having
360 days. The entire balance of principal and accrued interest shall be due
and payable in full five (5) years from the date of this Note. Principal and
accrued interest shall be payable to Secured Party at 1344 Ashton Road, Suite
201, Hanover, Maryland 21076 or such other place as Secured Party may
designate.
2. Application of Payments/Prepayments.
The Loan may be prepaid in whole or in part at any time without penalty.
Any such prepayments shall be applied first to the payment of interest on the
Loan and the balance of any such payments shall be applied to the payment of
the principal of the Loan.
3. Additional Charges.
Interest after maturity of any amount due hereunder (whether by reason
of acceleration or otherwise) shall be payable at a rate per annum equal to
the Interest Rate plus an additional four percent (4%) per annum.
4. Grant of Security Interest.
As security ("Security Interest") for the prompt and punctual payment
and performance of (a) all liabilities and obligations of Borrower to Secured
Party in connection with the Loan Agreement, this Agreement and all other
documents required or contemplated under such
agreements (collectively, the "Documents"), whether now existing or hereafter
arising, due or to become due, direct, indirect or contingent, joint or
several; and (b) all expenses and charges, legal or otherwise, including
reasonable attorneys' fees and costs paid or incurred by Secured Party, in
realizing upon or protecting the collateral under this Agreement or the
indebtedness secured hereby, Borrower does hereby assign, transfer, convey,
mortgage and grant to Secured Party a continuing lien upon and a security
interest in the following assets of Borrower (the "Collateral"), wherever
located, whether now owned or existing or hereafter acquired or arising,
together with any and all additions, accessions and substitutions thereto or
therefor (all references to Borrower below shall be deemed to include the
medical practice acquired by Borrower from [ ], M.D. (the "Medical
Practice")):
a. All non-Medicare/Medicaid accounts receivable, cash, chattel
paper, contracts, contract rights and general intangibles (as defined
under the UCC (as defined herein)) of the Medical Practice ("Accounts
Receivable"); and
b. All proceeds, including insurance proceeds, and products of (a)
above, and proceeds paid to the Medical Practice under the
Medicare/Medicaid programs ("Proceeds").
5. Duration of Security Interest.
The Security Interest shall continue in full force and effect until
Borrower shall pay, cause to be paid or otherwise discharge all indebtedness
to Secured Party in connection with the Loan. Borrower expressly agrees that
to the extent a payment or partial payment to Secured Party is subsequently
invalidated, declared to be void or voidable, set aside and is required to be
repaid to a trustee, custodian, receiver, or any other party under any
bankruptcy act, state or federal law, common law or equitable cause, then to
the extent of such payment or repayment, the obligation or part thereof
intended to be satisfied shall be revived and continued in full force and
effect as if said payment had not been made.
6. Representations and Warranties.
Borrower hereby represents and warrants to Secured Party that:
a. Borrower has all requisite individual and corporate power and
authority to own property and to execute, deliver and perform this
Agreement and all other Documents;
b. The execution, delivery and performance of this Agreement and all
other Documents will not violate any provision of law or of the Articles
of Incorporation, Bylaws or any other agreement or instrument to which
Borrower is a party or, other than as created in this Agreement, result
in the creation or imposition of any security interest, lien or
encumbrance on any of the Collateral. This Agreement and all other
Documents, when executed and delivered by Borrower, will be valid and
binding obligations of Borrower, enforceable against Borrower in
accordance with their respective terms; and
c. Borrower is or will be the sole and absolute owner of the
Collateral.
7. Covenants and Agreements.
Borrower hereby covenants and agrees with Secured Party that so long as
Borrower shall owe any amounts to Secured Party, Borrower shall:
a. Maintain the Collateral free from all liens, security interests
or encumbrances, other than the Security Interest granted in this
Agreement, and defend the Collateral against all claims and demands of
all persons at any time claiming any interest therein;
b. Provide, upon the request of Secured Party, a listing of the
Collateral specifying the current condition or status of the Collateral;
c. Execute and deliver such other instruments or papers and perform
such other or further acts as may be reasonably necessary or proper to
effectively carry out the purposes of this Agreement and to continue the
perfection of this Agreement, including but not limited to, financing,
continuation or termination statements and immediate notice to Secured
Party of any change of name or address by Borrower;
d. Upon reasonable request, grant to Secured Party, or any attorney,
accountant or agent of Secured Party, access to and the right to audit
the Accounts Receivable records and such other business records as
reasonably required to confirm that the Collateral is maintained and
preserved by Borrower in accordance with the provisions of this
Agreement;
e. Make due and timely payment or deposit of all federal, state and
local taxes, assessments or contributions required by law;
f. Assume liability or responsibility for the safekeeping of any of
the Collateral, for any loss or damage of the Collateral, for any
diminution in the value thereof, or for the collection of any proceeds of
the Collateral; and
g. Comply with all provisions and conditions of this Agreement.
8. Events of Default.
The following occurrences shall constitute Events of Default by Borrower
under this Agreement:
a. Failure of Borrower to timely make payment required under this
Agreement;
b. Failure of Borrower to perform or observe any of the covenants or
agreements contained in this Agreement, other than as provided in
paragraph 8(a), above, if such failure continues for thirty (30) days;
c. Occurrence and continuance of an event of default under any other
Document;
d. If any representation or warranty of Borrower under this Agreement
proves to be incorrect or misleading in any material respect; or
e. Any material default under the Loan Agreement.
9. Remedies.
Upon the occurrence of an Event of Default, Secured Party shall have full
power and authority to, and may at any time, at its election, without further
notice, except such as required by the Uniform Commercial Code ("UCC"), and to
the extent permitted by law:
a. Declare the entire unpaid principal amount of the Loan, plus any
unpaid accrued interest on said unpaid principal amount, immediately due
and payable;
b. Exercise all or any one or more of the remedies and shall have
the rights of a creditor under the UCC, including the right to collect,
settle, compromise, adjust, sue for foreclosure or otherwise realize upon
any of the Collateral and to dispose of any of the Collateral at public
or private sale(s) or other proceedings, and Borrower agrees that Secured
Party or its nominee may become the purchaser at any such sale(s). Any
requirement of the UCC for reasonable notice shall be met if such notice
is given to Borrower in the manner set forth in this Agreement at least
ten (10) days prior to the time of the sale, disposition or other event
giving rise to the requirement of notice. The proceeds of any Collateral
received by Secured Party at any time before or after default, whether
from the sale of Collateral or otherwise, shall be applied to the payment
of Borrower's liabilities to Secured Party in such order as Secured Party
may, in its sole discretion, elect;
c. Take immediate possession of the Collateral with or without legal
process, for the purpose of which Secured Party through its
representatives may enter any premises to search for, take possession of,
remove and sell any part of the Collateral. Further, the parties shall
set up a lock-box arrangement for Medicare/Medicaid proceeds; or
d. Proceed to protect and enforce this Agreement by suit(s) or
proceeding(s) in equity, at law or otherwise, whether for the foreclosure
upon the collateral or for the enforcement of any other proper, legal or
equitable remedy available under applicable law.
In addition, upon any Event of Default, Borrower shall pay all
attorney's fees and other costs of collection of the Loan, whether or
not suit is brought.
10. Secured Party's Appointment as Attorney in Fact.
Borrower hereby irrevocably appoints Secured Party, with full power of
substitution, upon the occurrence and continuation of any Event of Default
under this Agreement or any other Document, as its true and lawful attorney-
in-fact with full irrevocable power and authority in the name of Borrower or
in its own name, at Secured Party's discretion, for the purpose of carrying
out the provisions of this Agreement, to take all and any appropriate action
and to execute any and all documents and instruments which may be necessary
and desirable to accomplish the purposes of this Agreement or any other
Document.
11. Indemnification.
Borrower hereby agrees to indemnify, defend and hold Secured Party
harmless from and against all loss, costs (including attorney's fees),
liability and claims arising in connection with the Collateral or with this
Agreement. This indemnification shall survive termination of this Agreement.
12. Miscellaneous.
a. Successors and Assigns. This Agreement shall inure to the benefit
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of and is and shall continue to be binding upon the parties, their
successors, representatives, receivers, trustees, heirs and assigns.
However, nothing contained this Agreement shall be construed to permit
Borrower to assign this Agreement or any of Borrower's rights or
obligations under this Agreement without first obtaining Secured Party's
express written approval.
b. Applicable Law. This Agreement shall be governed by and construed
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under the laws of the State of Maryland, without regard to its choice of
laws principles. The parties acknowledge the jurisdiction of the State,
Federal and local courts located within the State of Maryland over
controversies arising from or relating to this Agreement.
c. Waiver of Trial by Jury. The parties hereby waive any right to a
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jury trial in any action arising under this Agreement.
d. Severability. If any provision of this Agreement shall for any
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reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision of this Agreement.
e. Remedies Cumulative. All rights, remedies and powers of Secured
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Party under this Agreement, the Documents or any other obligation shall
be cumulative and may be exercised singly or concurrently.
f. Waiver by Secured Party. Secured Party shall not, by any act,
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delay, omission or otherwise be deemed to have waived any of its rights
or remedies under this Agreement. A waiver shall be valid only if in
writing and signed by Secured Party. A waiver by Secured Party of any
right or remedy under this Agreement on any one
occasion shall not bar Secured Party from asserting any right or remedy
on any future occasion.
g. Waiver by Borrower. Borrower agrees that presentment, demand for
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payment, notice of intent to accelerate maturity upon an Event of
Default, protest, notice of protest, notice of dishonor and all other
notices in connection with this Agreement, filing of suit and diligence
in collecting payment under this Agreement are waived.
h. Notices. All communications in connection with this Agreement
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shall be in writing and shall be deemed properly given if hand delivered
or sent by overnight courier with adequate evidence of delivery or sent
by registered or certified mail return receipt requested to the
appropriate address determined in accordance with the Loan Agreement.
Any notice shall be deemed given on the earlier of the date actually
received, or two (2) business days after delivery in compliance with this
Section.
i. Complete Agreement and Amendment. This Agreement, together with
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the other Documents, is the complete written agreement of the parties
with respect to the subject matter of this Agreement and supersedes any
prior understandings or written agreements. This Agreement may be
amended only upon the written agreement of the parties.
j. Counterparts. This Agreement may be executed in any number of
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counterparts and all of such counterparts taken together shall be deemed
to constitute one and the same document.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
SECURED PARTY:
DIALYSIS CORPORATION OF AMERICA
/s/ Stephen W. Everett
By:----------------------------------
Its: President
BORROWER:
[ ], M.D.
/s/ [ ], M.D.
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