EXHIBIT 10.11
SECURITY AGREEMENT
This 15th day of November, 1996, Convention Center Drug, Inc. (hereinafter
called "DEBTOR"), for valuable consideration, receipt whereof is hereby
acknowledged, hereby grants to OPTION CARE, INC., 000 Xxxxxxxxx Xxxxx, Xxxxx
000, Xxxxxxxxxxx, Xxxxxxxx 00000 (hereinafter called "SECURED PARTY"), a
security interest in accounts receivable, contract rights, equipment, furniture,
fixtures, general intangibles, insurance proceeds, inventory, prescription
files, merchandise (including all drugs, prescription stock, proprietaries)
apparatus of every kind, nature and description, together with all accessories
thereto, now in the DEBTOR'S possession or control or hereafter to be acquired
by the DEBTOR, whether or not sold by or acquired from SECURED PARTY, all
additions and accessions thereto, substitutions therefor, as well as all
proceeds from the sale and proceeds of insurance thereon (hereinafter called
"Collateral") to secure the payment of liability and indebtedness of DEBTOR to
SECURED PARTY. This agreement shall apply to all indebtedness, obligations or
liability of DEBTOR to SECURED PARTY reflected in that certain promissory note
entered into between DEBTOR and SECURED PARTY on even date herewith plus
interest accrued at the rate of ten (10%) percent on the unpaid balance until
paid in full (all hereinafter called the "Obligations").
DEBTOR hereby warrants and covenants:
1. That except for the security interest granted hereby to DEBTOR, and
any security interest which has previously been granted to the Bank of America
and Golden State Finance (Bank of America and Golden State Finance shall
hereinafter collectively be referred to as "Other Creditors"), or in the event
that DEBTOR enters into a financing arrangement with a single replacement
creditor ("Replacement Creditor") for the purpose of repaying all indebtedness
of DEBTOR to the Other Creditors as well as terminating the financing statements
of the Other Creditors, and does indeed effectively terminate any and all
financing statements of the Other Creditors with the proper filing of Uniform
Commercial Code Form 3's, then except for that security interest granted to
Replacement Creditor in an amount not to exceed Six Hundred Thousand Dollars
($600,000) of the Collateral, DEBTOR is or will be the owner of the Collateral
free from any secured adverse lien, security interest or encumbrance; and that
DEBTOR will defend the Collateral against all claims and demands of all persons
at any time claiming the same or any interest therein;
2. In the event that the indebtedness of DEBTOR to the Replacement
Creditor or any Other Creditor exceeds $600,000 then SECURED PARTY'S interest in
the Collateral shall be deemed to be in pari passu with the interest in the
collateral of the Creditor most preferred under the law;
3. That the Collateral is not used or bought primarily for personal,
family or household purposes;
4. That the Collateral will be kept at the DEBTOR'S offices located at
0000 X. Xxxxxxxxxx Xxxx., Xxxxx X, Xxx Xxxxx, Xxxxxx 00000, 0000 Xxxxx Xxxxxx,
Xxx Xxxxx, Xxxxxx 00000, and 000 Xxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxx 00000
and that there are no other places of business of DEBTOR;
5. That at the request of SECURED PARTY, DEBTOR will join with SECURED
PARTY in executing one or more Financing Statements pursuant to the Uniform
Commercial Code
in form satisfactory to SECURED PARTY and will file the same in all public
offices wherever filing is deemed by SECURED PARTY to be necessary or desirable;
6. That DEBTOR will not sell or offer to sell in bulk or otherwise
transfer the Collateral in bulk or any interest therein without the written
consent of SECURED PARTY provided, however, that DEBTOR shall be entitled to
sell the Collateral in the ordinary and usual course of business;
7. That DEBTOR will, at all times, maintain in full force and effect
insurance with respect to the Collateral against risks encompassed within the
standard policy of fire insurance with extended coverage endorsement, theft and
other risks as SECURED PARTY may require, and written by such company or
companies as may be satisfactory to SECURED PARTY, such insurance to be payable
to SECURED PARTY and DEBTOR as their interests may appear. All such policies of
insurance shall provide for not less than ten (10) days written notice of
cancellations to SECURED PARTY and, at the request of SECURED PARTY, shall be
delivered to and held by it. SECURED PARTY may act as attorney-in-fact for
DEBTOR in obtaining, adjusting, settling and cancelling such insurance and
endorsing any drafts;
8. That DEBTOR will keep the Collateral free from any adverse lien,
security interest or encumbrance and in good order and repair and will not waste
or destroy the Collateral or any part thereof; that DEBTOR will not use the
Collateral in violation of any statute or ordinance; and that SECURED PARTY may
examine and inspect the Collateral at any time, wherever located;
9. This security interest covers all property of the same character as
that covered by this agreement which the DEBTOR may hereafter acquire at any
time until termination of this security agreement;
10. (a) DEBTOR shall pay for all product ordered within thirty (30) days
following the invoice therefor from SECURED PARTY.;
(b) DEBTOR shall submit all royalty reports when due;
(c) DEBTOR shall pay each month's current royalties and
continuing/national education payments when due;
(d) Franchise Owner shall deliver to Option Care no later than
November 15, 1996 two signed UCC-1s, securing the accounts
receivable, equipment and other assets of Franchise Owner; and
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(e) Franchise Owner covenants and agrees not to increase its
indebtedness (i) to any third party other than a shareholder of
the DEBTOR, (ii) other than to the Replacement Creditor and (iii)
other than normal payables or expenses accrued in the ordinary
course of business without first obtaining the written consent of
SECURED PARTY; and
11. That DEBTOR will pay promptly when due all taxes and assessments upon
the collateral or for its use or operation or upon this agreement or upon any
note or notes evidencing the Obligations.
At its option, SECURED PARTY may discharge taxes, liens or security
interests or other encumbrances at any time levied or placed on the Collateral,
may pay for insurance on the Collateral and may pay for the maintenance and
preservation of the Collateral. DEBTOR agrees to reimburse SECURED PARTY on
demand for any payment made, or expense incurred by SECURED PARTY pursuant to
the foregoing authorization.
Until default, DEBTOR may have possession of the Collateral and use it in
any lawful manner not inconsistent with this agreement and not inconsistent with
any policy of insurance thereon.
DEBTOR shall be in default under this Agreement upon the happening of any of the
following events or conditions without opportunity to cure or notice of the
default:
(a) default in the payment or performance of any obligation, covenant or
liability contained or referred to herein or in any note evidencing the same;
(b) any warranty, representation or statement made or furnished to SECURED
PARTY by or on behalf of DEBTOR proves to have been false in any material
respect when made or furnished;
(c) any event which results in the acceleration of the maturity of the
indebtedness of DEBTOR to others under any indenture, agreement or undertaking;
(d) loss, theft, damage, destruction, unauthorized sale or encumbrance to
or of any of the Collateral, or the making of any levy, seizure or attachment
thereof or thereon; or
(e) death, dissolution, termination of existence, insolvency, business
failure, appointment of a receiver of any part of the property of, assignment
for the benefit of creditors by, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against DEBTOR.
Upon such default and at any time thereafter SECURED PARTY may declare all
Obligations secured hereby immediately due and payable and shall have all the
remedies of a secured party under the Uniform Commercial Code of the applicable
state. SECURED PARTY may require DEBTOR
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to assemble the Collateral and make it available to SECURED PARTY at a place to
be designated by SECURED PARTY which is reasonably convenient to both parties.
Unless the Collateral is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market, SECURED PARTY will give
DEBTOR reasonable notice of the time and place of any public sale thereof or of
the time after which any private sale or any other intended disposition thereof
is to be made.
The requirements of reasonable notice shall be met if such notice is
mailed, postage prepaid, to the address of DEBTOR shown at the beginning of this
agreement at least ten (10) days before the time of the declaration of default
or sale of Collateral.
No waiver by SECURED PARTY of any default shall operate as a waiver of any
other default or of the same default on a future occasion.
All rights of SECURED PARTY hereunder shall inure to the benefit of its
successors and assigns, and all obligations of DEBTOR shall bind its successors
or assigns.
This agreement shall become effective when it is signed by DEBTOR.
CONVENTION CENTER DRUG, INC.
By: /s/ Xxxxxx Memo
---------------------------------
Its: President
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OPTION CARE, INC.
By: /s/ Xxxxx Xxxxxxxxxxx
---------------------------------
Xxxxx Xxxxxxxxxxx
Its: Vice President
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