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Exhibit 10.50
SECURITY AGREEMENT
This Security Agreement (this "Agreement") is entered and made as of the
29th day of January, 1999, by and between QUEST PHARMACIES, INC., an Arizona
corporation ("Debtor"), and Xxxxx Xxxxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxxx,
Xxxxxxx Xxxxxxx, Xxxxxxx Xxxxxxx and ELK XXXXXXX INVESTMENTS, L.L.C.
(collectively the "Secured Party").
RECITALS
Pursuant to that certain Debtors' First Amended Plan of Reorganization
dated October 15, 1998 (as supplemented), confirmed by a final Order of the
United States Bankruptcy Court dated January 22, 1999 (the "Plan"), Secured
Party is obligated to loan to Debtor certain funds in accordance with the terms
and conditions thereof (the "Loan"), evidenced by the Promissory Note dated of
even date herewith executed and delivered to Secured Party under the Plan (the
"Note"), Debtor has agreed to grant to Secured Party, among other things, a
second priority security interest in the Collateral, as hereinafter described.
NOW, THEREFORE, the parties hereto agree as follows:
AGREEMENTS
1. Definitions. All terms used herein which are defined in the Arizona
Uniform Commercial Code (the "Code") shall have the same meanings herein as in
the Code unless the context in which such terms are used herein indicates
otherwise. All capitalized terms defined in the Plan and which are used as
defined terms in this Security Agreement, unless otherwise defined herein, shall
have the meanings ascribed to them in the Plan.
2. Security Interest. To secure the performance and payment of the Note,
Debtor grants to Secured Party a second priority security interest in all of
Debtor's right, title and interest in the property and property rights more
fully described on Schedule A attached hereto and incorporated herein by
reference (collectively, the "Collateral"). Such security interest shall be
superior and prior to all other liens; subject to the priority of the rights,
liens, and powers granted to Norwest Bank Minnesota, National Association,
Trustee under the Indenture dated _________, 1999 for the 11% Senior Secured
Note due 2003 for up to $26,000,000.00, subject to adjustment ("Norwest").
3. Representations, Warranties and Covenants. Debtor hereby represents,
warrants and covenants to Secured Party as follows:
(a) Debtor Owns Collateral. Debtor is the owner of the Collateral,
except the portion thereof consisting of after-acquired property, and
Debtor will be the owner of such after-acquired property, free from any
lien, except the first priority security interest of Norwest (the "Norwest
Lien").
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(b) Chief Place of Business. There is listed in Schedule B hereto
the location of the chief place of business of Debtor and, if different,
the location where the major tangible collateral and the books and records
of Debtor are kept. Debtor shall not (i) change any such location; or (ii)
change its company name without, in each case, giving to Secured Party 30
days' prior written notice of any such change.
(c) Maintenance of Collateral. Debtor will at all times keep the
Collateral in good operating condition and repair, operate and maintain
the same in compliance with all material laws and insurance policies
applicable thereto, and pay promptly when due all taxes, insurance
premiums and other governmental charges upon or relating to any of the
property, income or receipts of Debtor, unless Debtor reasonably disputes
such payments, taxes, premiums or charges.
4. Protection of Collateral. In the event of the failure of Debtor to (i)
maintain insurance in form and amounts, and with companies, in all respects
comparable to that maintained by entities such as the Debtor, covering all of
the insurable Collateral, (ii) keep the Collateral in good repair and operating
condition, (iii) keep the Collateral free from any liens, except the Norwest
Lien, and (iv) pay when due all taxes, levies and assessments on or in respect
of the Collateral, unless Debtor reasonably disputes such taxes, levies or
assessments, Secured Party, at its option, may (but shall not be required to)
procure and pay for such insurance, place the Collateral in good repair and
operating condition, or otherwise make good any other aforesaid failure of
Debtor and all sums advanced by Secured Party, with interest thereon at the
interest rate set forth in the Note shall be part of Debtor's obligations to
Secured Party, payable on demand.
5. Financing Statements; Further Assurances. Debtor, concurrently with the
execution of this Security Agreement, and from time to time thereafter as
requested by Secured Party, shall execute and deliver to Secured Party such
financing statements, continuation statements, amendments to financing
statements and other documents, in form satisfactory to Secured Party, as
Secured Party may require to perfect and continue in effect the lien of Secured
Party. Debtor irrevocably appoints Secured Party its attorney-in-fact, in the
name of Debtor or Secured Party, to execute and file from time to time any such
financing statements, continuation statements and amendments thereto, which
appointment shall be deemed to be a power coupled with an interest.
6. Events of Default. Debtor shall be in default under this Security
Agreement upon the occurrence of an Event of Default under the Note, the Norwest
Security Documents or if Borrower shall fail to perform any covenant or
condition of this Security Agreement within thirty (30) days after written
notice of such non-compliance, or if any covenant, condition, agreement,
representation or warranty made by Debtor to Secured Party in this Agreement
proves untrue in any material respect or is breached and is not cured upon
thirty (30) days written notice by the Secured Party to the Pledgor.
7. Remedies Upon Default. Upon the occurrence of an Event of Default and
the acceleration of Debtor's obligations, subject to the prior rights, liens and
powers of Norwest, Secured
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Party shall have all the rights and remedies of a Secured Party under the
Arizona Uniform Commercial Code and all other rights and remedies accorded to
Secured Party in equity or law. Upon the request of Secured Party, Debtor shall
assemble and make the Collateral available to Secured Party at a place
designated by Secured Party. Any notice of sale or other disposition of the
Collateral given not less than ten days prior to such proposed action shall
constitute reasonable and fair notice of such action. Debtor shall be liable for
any deficiency. Debtor expressly waives any right to have the collateral
marshalled on any foreclosure, sale or other enforcement hereof.
8. Notices. All notices, requests, demands and consents to be made
hereunder to the parties hereto shall be in writing and shall be delivered by
hand or sent by registered mail or certified mail, postage prepaid, return
receipt requested, through the United States Postal Service to the parties at
the respective addresses listed on the signature page of this Security Agreement
or such other address which the parties may provide to one another in accordance
herewith. Notices to Norwest shall be delivered to:
____________________________________________. Such notices, requests, demands
and consents, if sent by mail shall be deemed given 2 (two) Business Days after
deposit in the United States mail, and if delivered by hand, shall be deemed
given when delivered.
9. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of Secured Party and Debtor.
10. APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA, EXCEPT TO THE
EXTENT THAT APPLICABLE LAW REQUIRES THAT THE LAWS OF ANOTHER JURISDICTION GOVERN
THE PERFECTION AND ENFORCEMENT OF THE SECURITY INTERESTS GRANTED TO SECURED
PARTY.
11. Termination. This Security Agreement shall terminate upon the payment
in full of Debtor's obligations to Secured Party as set forth in the Note.
12. Release of Lien. Notwithstanding anything else contained herein this
Agreement to the contrary, Secured Party shall release its lien with respect to
the Collateral in the event Quest is sold provided that (i) no Event of Default
shall have occurred and be continuing; (ii) Quest is sold to a third party
unrelated to Borrower for fair market value, and (iii) the proceeds from any
such sale in excess of those needed to pay the obligations due and payable to
Norwest are remitted to Secured Party for application to the Loan.
This Security Agreement has been executed and delivered by each of the
parties hereto by a duly authorized officer of each such party on the date first
set forth above.
QUEST PHARMACIES, INC., an Arizona
corporation
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By:_______________________________________
Name:____________________________________
Title:___________________________________
Address:
00000 X. Xxxxxxxxx Xxx. #000
Xxxxxx, XX 00000
"DEBTOR"
ELK XXXXXXX INVESTMENTS, L.L.C., a
Colorado limited liability company
By:________________________________________
Xxxxx Xxxxxxx, Managing Member
___________________________________________
Xxxxx Xxxxxxx
___________________________________________
Xxxxxxx Xxxxxxx by her attorney-in-fact,
Xxxxx Xxxxxxx
___________________________________________
Xxxxx Xxxxxxx by her attorney-in-fact,
Xxxxx Xxxxxxx
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___________________________________________
Xxxxxxx Xxxxxxx by his attorney-in-fact,
Xxxxx Xxxxxxx
___________________________________________
Xxxxxxx Xxxxxxx by his attorney-in-fact,
Xxxxx Xxxxxxx
Address:
c/o Xxxxx Xxxxxxx
000 Xxxxxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
"SECURED PARTY"
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SCHEDULE A
COLLATERAL
All equipment of Debtor, whether now owned or hereafter acquired and
wherever located, including but not limited to all present and future machinery,
furniture, fixtures, and office and record keeping equipment.
All general intangibles of Debtor, whether now owned or hereafter
acquired, including, but not limited to, applications for patents, copyrights,
trademarks, trade secrets, good will, trade names, customers lists, permits and
franchises, and the right to use Debtor's name.
All inventory of Debtor, whether now owned or hereafter acquired and
wherever located including without limitation, all inventory, wherever located
in which the Debtor now has or hereafter may acquire any right, title or
interest, including, without limitation, all goods and other personal property
now or hereafter owned by the Debtor which are held for sale or lease or are
furnished or are to be furnished under a contract of service.
Each and every right of Debtor to the payment of money, including but not
limited to all present and future debt instruments, chattel papers, accounts,
loans and obligations receivable, and tax refunds, whether such right to payment
now exists or hereafter arises, whether such right to payment arises out of a
sale, lease or other disposition of goods or other property by Debtor, out of a
rendering of services by Debtor, out of a loan by Debtor, out of the overpayment
of taxes or other liabilities of Debtor, or otherwise arises under any contract
or agreement, whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be evidenced, together with
all other rights and interests (including all liens and security interests)
which Debtor may at any time have by law or agreement against any account debtor
or other obligor obligated to make any such payment or against any of the
property of such account debtor or other obligor.
All of Debtor's rights, title and interest in and to any fixtures.
Together with all substitutions and replacements for and products of any of the
foregoing property and together with all proceeds of the sale, lease or other
disposition of any and all of the foregoing property, any and all proceeds of
insurance thereon and, in the case of all tangible collateral, together with all
accessions and, together with (i) all accessories, attachments, additions,
parts, equipment and repairs now or hereafter attached or affixed to or used in
connection with any such collateral, and (ii) all warehouse receipts, bills of
lading and other documents of title now or hereafter covering such collateral.
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SCHEDULE B
Chief Place of Business of Debtor:
Location of major Collateral and Books and Records of Debtor:
