SECURITY AGREEMENT
Exhibit
10.6
THIS SECURITY AGREEMENT (this “Agreement”), made on the 27th day of July,
2006, by Rainier Home Health Care Pharmacy, Inc., a Washington corporation, having its chief
executive office at 0000 Xxxxx Xxxx, Xxxxxxx, XX 00000 (Organizational I.D. No. 600 635 804)
(“Rainier”), Precision HealthCare, Inc., a Tennessee corporation, having its chief
executive office at 000 Xxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 (Organizational I.D. No.
0384185) (“Precision”), Long Term Rx, Inc., an Indiana corporation, having its chief
executive office at 000 X. Xxxxxxxx, Xxx Xxxxxx, XX 00000 (Organizational I.D. No. 1996010564)
(“Long Term Rx”), Home Med Channel, Inc., an Indiana corporation having its chief executive
office at 00000 Xxxxx Xxxxxxxxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxx 00000 (Organizational I.D. No.
1996011223) (“Home Med”), Holland Compounding Pharmacy, Inc., a Washington corporation
having its chief executive office at 000 Xxxxxxx, Xxxxx-Xxxxxxx, Xxxxxxxxxx 00000 (Organizational
I.D. No. 602 536 908) (“Xxxxxxx XX”), and Holland Drug Stores, Inc., a Washington
corporation, having its chief executive office at 000 Xxxxxxx, Xxxxx-Xxxxxxx, Xxxxxxxxxx 00000
(Organizational I.D. No. 602 531 315) (“Holland,” and collectively with Rainier, Precision, Long
Term Rx, Home Med, and Xxxxxxx XX, “Guarantors”) in favor of Xxxxxxx X. Xxxxxxxx
(“Secured Party”).
WITNESSETH THAT:
WHEREAS, Guarantors have executed a Guaranty dated as of the date hereof (the
“Guaranty”) in favor of Secured Party to secure the obligations of Standard Management
Corporation (“Borrower”) under a Secured Promissory Note of even date herewith in the
original principal amount of $2,837,087.67 (the “Note”) and under the Fee Letter (as
defined in the Guaranty); and
WHEREAS, as security for the satisfaction and payment of the Note and the obligations under
the Fee Letter and to secure their obligations under the Guaranty, Guarantors have agreed to grant
Secured Party a security interest in the Collateral (as hereinafter defined), on the terms and
subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained
and for other good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, Guarantors hereby agree as follows:
1. Grant of Security Interest. Each Guarantor hereby grants to Secured Party a
continuing security interest in all of the following tangible and intangible personal property of
such Guarantor, whether now owned or existing or hereafter acquired or arising, and wherever
located (collectively, the “Collateral”):
(a) all accounts, contract rights, general intangibles (including without limitation,
Guarantor’s right, title and interest in trademarks, trade names, servicemarks and symbols,
patents and/or patent applications now or hereafter used), investment property, instruments,
chattel paper, invoices, contracts, claims, agreements, commercial tort claims, electronic
chattel paper, letter-of-credit rights, payment intangibles, books and records, securities,
whether constituting uncertificated or certificated securities, policies or certificates of
insurance (including unearned premiums thereon), cash funds, deposits, deposit accounts and
other rights and evidence of rights to cash, now or hereafter created, documents, documents
of title and choses in action;
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(b) all inventory, equipment, goods, machinery, motor vehicles, and all other goods and
personal property; and
(c) all additions, accessions and accessories to, substitutions for, replacements,
products and cash and non-cash proceeds of, any or all of the foregoing, including without
limitation, insurance proceeds.
2. Secured Indebtedness. Guarantors pledge and grant a security interest in the
Collateral to Secured Party, according to the terms of this Agreement, to secure the following
(collectively, the “Liabilities”):
(a) the due and punctual payment by Borrower of the principal of and interest
(including interest accruing under the terms of the Note during the pendency of any
bankruptcy, insolvency, receivership, or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Note, when and as due, whether at maturity,
by acceleration, upon one or more dates set for prepayment or otherwise;
(b) the due and punctual payment and performance by Borrower of its obligations under
the Fee Letter;
(c) the full and prompt payment and performance of all of the provisions, agreements,
covenants, and obligations herein contained and contained in the Guaranty;
(d) any and all additional advances made by Secured Party to protect or preserve the
Collateral or the lien created on such property, or for taxes, assessments or insurance
premiums as hereinafter provided, or for performance of any of Guarantors’ obligations
hereunder or Borrower’s obligations under the Note or the Fee Letter or for any other
purpose provided herein or in the Note (whether or not the original Guarantor remains the
owner of the Collateral at the time of such advances and it being understood that Secured
Party is not under any obligation to make future advances);
(e) all costs and expenses, including attorneys’ fees and expenses, incurred by Secured
Party in the collection or enforcement of any of the Liabilities described in (a), (b), (c),
or (d) above; and
(f) all extensions, renewals, and modifications of any of the Liabilities described in
(a), (b), (c), (d), or (e) above.
3. Representations and Warranties of Guarantors. To further secure the payment,
performance and satisfaction of the Liabilities, Guarantors hereby represent and warrant the
following to Secured Party:
(a) Name. Rainier is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Washington with the exact legal name of
“Rainier Home Health Care Pharmacy, Inc.” and a Washington organizational number of 600 635
804. Precision is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Tennessee with the exact legal name of “Precision Healthcare,
Inc.” and a Tennessee organizational number of 0384185. Long Term Rx is a corporation duly
organized, validly existing, and in good standing under the laws of the State of Indiana
with the exact legal
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name of “Long Term Rx, Inc.” and an Indiana organizational number of 1996010564. Home
Med is a corporation duly organized, validly existing, and in good standing under the laws
of the State of Indiana with the exact legal name of “Home Med Channel, Inc.,” and an
Indiana organizational number of 1996011223. Xxxxxxx XX is a corporation duly organized,
validly existing and in good standing under the laws of the State of Washington with the
exact legal name of “Holland Compounding Pharmacy, Inc.” and a Washington organizational
number of 602 536 908. Holland is a corporation duly organized, validly existing and in
good standing under the laws of the State of Washington with the exact legal name of
“Holland Drug Store, Inc.” and a Washington organizational number of 602 531 315.
(b) Title. Guarantors have full and absolute title to the Collateral, except
for the lien created hereby and any other liens specifically described on Schedule
3(b) (the “Permitted Liens”), and Guarantors have the right to subject the
Collateral to the security interest granted by this Agreement. There are no security
agreements or financing statements affecting the Collateral, or any part thereof, other than
with respect to (i) the Permitted Liens and (ii) security interests created in Secured
Party.
(c) Possession. Except for Collateral in the possession of Secured Party, or
any lender holding a Permitted Lien, Guarantors have possession of all the Collateral. All
the Collateral is located at the locations described in Schedule 3(c)
hereto. Each Guarantor maintains its principal place of business at the address set forth
in the introductory paragraph hereto.
(d) Financing Statements. Fully executed Uniform Commercial Code financing
statements or other appropriate filings, recordings, or registrations containing a
description of the Collateral have been delivered to Secured Party for filing in each
governmental, municipal, or other office required under the Uniform Commercial Code, which
are all the filings, recordings, and registrations that are necessary to publish notice of
and protect the validity of and to establish a legal, valid and perfected security interest
in favor of Secured Party in respect of all Collateral in which a security interest may be
perfected by filing of a financing statement, and no further or subsequent filing, refiling,
recording, rerecording, registration, or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing of
continuation statements.
(e) Perfection. The security interest granted hereby constitutes (i) a legal
and valid security interest in all the Collateral securing the payment and performance of
the Liabilities, and (ii) subject to the completion of the filings described in Section
3(d) above, a perfected security interest in all Collateral in which a security interest
may be perfected by filing of a financing statement pursuant to the Uniform Commercial Code
or other applicable law in such jurisdictions.
4. Covenants of Guarantors. To further secure the payment, performance and
satisfaction of the Liabilities, Guarantors hereby covenant and agree as follows:
(a) Maintenance of Possession. Guarantors will preserve their interest in and
title to the Collateral and will warrant and defend the validity of the lien and security
interest created herein against the claims of all Persons whomsoever, subject to the
Permitted Liens.
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(b) Condition of Collateral. Guarantors will maintain the Collateral in good
condition, repair and operating order, ordinary wear and tear excepted, and from time to
time make, or cause to be made, all reasonable repairs, renewals and replacements thereto
and will not permit it to be wasted, destroyed, or used in material violation of any local,
state or federal ordinance, rule, or law, or contrary to the provisions of any insurance
policy related thereto.
(c) Inspection. Secured Party, its agents and representatives may enter upon
Borrower’s property to examine and inspect the Collateral at any reasonable time or times.
(d) Insurance. Guarantors will keep the Collateral at all times insured
against risk of loss or damage by fire and theft, all in such amounts, under such forms of
policies, upon such terms, for such periods and written by such companies as are reasonably
acceptable to Secured Party (such insurance, the “Required Insurance”). Such
policies shall provide that losses will be payable to Secured Party, other lien holders and
Guarantors as their interests may appear, and that Secured Party shall receive at least
thirty (30) days’ prior written notice of any alteration, cancellation or termination
thereof. Upon request by Secured Party from time to time, Guarantors will furnish to
Secured Party certificates of insurance from the insurer with respect to each of the
policies providing Required Insurance.
(e) Protection of Collateral. Except for disposition of inventory in the
ordinary course of business, Guarantors will not, without the prior written consent of
Secured Party, sell, assign, transfer, or otherwise dispose of any material portion of the
Collateral. Guarantors will give Secured Party at least ten (10) days’ prior written notice
of any change in any Guarantor’s name, the jurisdiction in which such Guarantor is
organized, the location of any Guarantor’s principal place of business or the location of
any part of the Collateral, or records thereof in the case of accounts and general
intangibles.
(f) Financing Statements, Certificates, Etc. Guarantors will perform such acts
as Secured Party reasonably deems necessary or appropriate to establish and maintain in
Secured Party a valid priority lien and security interest (subject only to Permitted Liens)
in the Collateral to secure full and prompt performance and payment of the Liabilities.
Guarantors authorize Secured Party to sign and file, without Guarantors’ signature, such
financing and continuation statements, amendments and supplements thereto, notices to third
parties, and other documents which Secured Party may from time to time reasonably deem
necessary to perfect, preserve and protect its security interest in the Collateral.
Guarantors will execute and deliver to Secured Party any such financing statements and
documents and furnish, execute, and endorse such other documents, agreements, instruments,
certificates, and certificates of title with Secured Party’s security interest noted thereon
or executed applications for said certificates as Secured Party may from time to time
reasonably request to evidence, perfect, preserve, and protect its security interest in the
Collateral.
(g) Taxes and Assessments. Guarantors will pay promptly when due all taxes,
assessments, and governmental charges or levies upon or against the Collateral before the
same become delinquent and before penalties accrue thereon. Notwithstanding the foregoing,
Guarantors shall not be required to pay or discharge such obligations, so long as (i) the
applicability, validity, or amount thereof shall be contested in good faith by appropriate
proceedings or actions, and (ii) Guarantors diligently pursues such lawful claims.
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5. Survival of Warranties and Covenants. All of Guarantors’ representations,
warranties and covenants made herein shall survive the execution of this Agreement, until all
Liabilities are satisfied in full, at which time they shall expire and be of no further force or
effect.
6. Events of Default. Each of the following (each, an “Event of Default”)
shall constitute a breach of and default under this Agreement:
(a) non-payment or default by Guarantors in the timely and full payment or performance
of any of the Liabilities;
(b) non-performance or breach by Guarantors of any covenant or agreement in this
Agreement; or
(c) the untruth, inaccuracy or breach of any representation or warranty of Guarantors
contained in this Agreement.
7. Remedies Upon Default. Time is of the essence under this Agreement. Upon the
occurrence and during the continuance of any Event of Default, Secured Party shall be entitled to
declare all of the Liabilities to be immediately due and payable, whereupon the same shall become
immediately due and payable, without notice, presentation, demand, protest, notice of protest, or
other notice of dishonor of any kind, all of which are hereby expressly waived. In addition, upon
the occurrence and during the continuance of any Event of Default, Secured Party shall have all the
remedies of a secured party under the Uniform Commercial Code as adopted and in effect in the State
of Indiana and as otherwise provided by applicable law, including, but not limited to, the
following:
(a) Secured Party may take possession of the Collateral and may use it after having
done so. For purposes of taking possession, Secured Party may enter upon any premises on
which the Collateral may be situated without legal process and remove the Collateral.
(b) Secured Party may notify any Person indebted to Guarantors to pay Secured Party
directly any amounts due Guarantors under any account, general intangible, contract,
instrument, agreement, chattel paper or any other item that is part of the Collateral, and
Secured Party may enforce payment of the same through legal proceedings, or otherwise, in
its own name or in the name of Guarantors.
(c) Secured Party may require Guarantors to assemble the Collateral and make it
available at a place designated by Secured Party, whether at Guarantors’ premises or
elsewhere.
(d) Unless the Collateral threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Secured Party shall give Guarantors at least ten
(10) days’ prior written notice, at its address for notices stated in paragraph 9 below, 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. A disposition complying with this
subparagraph shall be deemed a commercially reasonable disposition of the Collateral. The
reasonable expenses of retaking, holding, preparing for sale, selling and the like, and
reasonable attorneys’ fees and expenses incurred by Secured Party, may be paid from the
proceeds of the disposition.
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(e) Secured Party may obtain the appointment of a receiver respecting the Collateral
upon such notice as may be required by applicable law and without notice (if permitted by
such law) or the requirement of the posting of a bond, and may obtain immediate possession
thereof in replevin.
(f) Guarantors will not insist upon or claim the benefit or advantage of any
appraisement, valuation, stay, extension, moratorium, redemption, or similar law now or
hereafter in force to prevent, delay or hinder the enforcement of this Agreement or the
absolute sale of any part of the Collateral or the possession thereof by any purchaser at
any sale pursuant hereto. Guarantors hereby waive the benefit of all such laws, and all
right to have the Collateral marshaled upon any foreclosure of this Agreement, and agrees
that any court having jurisdiction to foreclose this Agreement may order the sale of the
Collateral as an entirety.
All remedies of Secured Party shall be cumulative to the fullest extent provided by law. Pursuit
by Secured Party of certain judicial or other remedies shall not xxxxx or bar resort to other
remedies with respect to the Collateral, and pursuit of certain remedies with respect to all or
some of the Collateral shall not bar other remedies with respect to the Liabilities or to other
portions of the Collateral. Secured Party may exercise its rights to the Collateral without
resorting or regard to other collateral or sources of security or reimbursement for the
Liabilities.
8. Nonwaiver, Expenses, Proceeds of Collateral. No waiver by Secured Party of any of
its rights or of any Event of Default shall be effective unless in writing, and in no event shall
such a waiver operate as a waiver of any other of its rights, any other Event of Default or of the
same rights or an Event of Default on any future occasion. No delay or omission on the part of
Secured Party in exercising any right shall operate as a waiver of such right or any other right.
Guarantors shall pay to Secured Party on demand any and all reasonable costs and expenses,
including reasonable attorneys’ fees and costs, incurred or paid by Secured Party in perfecting,
protecting or enforcing its rights and interest with respect to the Collateral. After deducting
all of such costs and expenses the residue of any proceeds of collection or sale of the Collateral
shall be applied to the payment of the Liabilities and Guarantors shall remain fully liable for any
deficiency. Every right and remedy given this Agreement or under any applicable law available to
Secured Party may be exercised from time to time and as often as may be deemed expedient by Secured
Party.
9. Notices. All notices or other written communications contemplated by this
Agreement shall be deemed to have been properly given (i) upon delivery, if delivered in person or
by facsimile transmission with receipt acknowledged by the recipient thereof, (ii) one (1) business
day after having been deposited for overnight delivery with any reputable overnight courier
service, (iii) on the day of receipt of a confirmed transmission, if delivered by facsimile to the
number set forth below, or (iv) three (3) business days after having been deposited in any post
office or mail depository regularly maintained by the U.S. Postal Service and sent by registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
If to Secured Party: | Xx. Xxxxxxx X. Xxxxxxxx | |||
c/o Browning Investments, Inc. | ||||
0000 Xxxx 00xx Xxxxxx | ||||
Xxxxx 000 | ||||
Xxxxxxxxxxxx, XX 00000 |
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and copy to: | Xxxxx & Xxxxxxx LLP | |||
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000 | ||||
Xxxxxxxxxxxx, Xxxxxxx 00000 | ||||
Facsimile No.: 000-000-0000 | ||||
Attention: Xxxxx X. Xxxx | ||||
If to Guarantors: | Standard Management Corporation | |||
00000 X. Xxxxxxxxxxxx Xx. | ||||
Xxxxxxxxxxxx, XX 00000 | ||||
Attention: Xxxxxx X. Xxxxxx | ||||
Facsimile No.: 000-000-0000 | ||||
and copy to: | Xxxxxx Xxxxxxx | |||
Xxx Xxxxxxx Xxxxxx, Xxxxx 0000 | ||||
Xxxxxxxxxxxx, XX 00000 | ||||
Attention: Xxxxxx X. Xxxxx | ||||
Facsimile No.: 000-000-0000 |
or addressed as such party may from time to time designate by written notice to the other party.
10. Governing Law. This Agreement shall be governed, construed, applied and enforced
in accordance with the internal laws of the State of Indiana, without regard to its conflicts of
law rules.
11. Partial Invalidity. In case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement,
but this Agreement shall be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein.
12. Titles and Headings; Rules of Construction. Titles and headings to articles and
sections herein are inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement. Whenever the context so requires the
use of or reference to any gender includes the masculine, feminine and neuter genders; and all
terms used in the singular shall have comparable meanings when used in the plural and vice versa.
13. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be considered an original hereof and all of which, taken together, shall constitute one
and the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, Guarantors caused this Agreement to be executed as of the day and year
first above written.
Rainier Home Health Care Pharmacy, Inc. | ||||
By: | /s/ Xxxxxxx X. Xxxxx | |||
Printed: Xxxxxxx X. Xxxxx | ||||
Title: Treasurer | ||||
Precision Healthcare, Inc. | ||||
By: | /s/ Xxxxxxx X. Xxxxx | |||
Printed: Xxxxxxx X. Xxxxx | ||||
Title: Treasurer | ||||
Long Term Rx, Inc. | ||||
By: | /s/ Xxxxxxx X. Xxxxx | |||
Printed: Xxxxxxx X. Xxxxx | ||||
Title: Treasurer | ||||
Home Med Channel, Inc. | ||||
By: | /s/ Xxxxxxx X. Xxxxx | |||
Printed: Xxxxxxx X. Xxxxx | ||||
Title: Treasurer | ||||
Holland Compounding Pharmacy, Inc. | ||||
By: | /s/ Xxxxxxx X. Xxxxx | |||
Printed: Xxxxxxx X. Xxxxx | ||||
Title: Treasurer | ||||
Holland Drug Store, Inc. | ||||
By: | /s/ Xxxxxxx X. Xxxxx | |||
Printed: Xxxxxxx X. Xxxxx | ||||
Title: Treasurer |
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Schedule 3(b)
Permitted Liens
Schedule 3(c)
Collateral Locations