SECURITY AGREEMENT
Exhibit
10.3
This
Security Agreement (this "Security Agreement") is made
and entered into effective April 15, 2010, by AEQUITAS CAREPAYMENT FOUNDERS
FUND, LLC, a Delaware limited liability company ("Purchaser"), in favor of
CAREPAYMENT TECHNOLOGIES, INC. ("Seller").
RECITALS
A. Purchaser
and Seller are parties to a Series D Convertible Preferred Stock Purchase
Agreement of even date herewith (the "Purchase Agreement") pursuant
to which Purchaser has purchased from Seller 200,000 shares of Seller's Series D
Convertible Preferred Stock. The Purchase Price is evidenced by a
Note made and delivered by Purchaser. Capitalized terms used in this
Security Agreement that are not defined herein have the meanings assigned to
such terms in the Purchase Agreement and the Note.
B. To
secure the payment of the Purchase Price and the obligations of Purchaser under
the Purchase Agreement and the Note (the "Obligations"), Purchaser has
agreed to grant a security interest in the Purchased Shares as contemplated by
this Security Agreement.
NOW,
THEREFORE, for valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, Purchaser agrees as follows:
AGREEMENT
1. Grant of Security
Interest. Purchaser hereby grants to Seller a first priority
security interest in the following property of Purchaser (together with all
other collateral security for the Obligations, collectively, the "Collateral"):
200,000
shares of the Series D Convertible Preferred Stock of CarePayment Technologies,
Inc. and a Warrant to purchase up to 1,200,000 shares of the Class A Common
Stock of CarePayment Technologies, Inc.
2. Obligations
Secured. The security interest granted by Purchaser herein in
the Collateral secures payment and performance of the Obligations.
3. Perfection. Purchaser
hereby authorizes Seller to file such financing statements and any other
documents that Seller reasonably believes are necessary or desirable to perfect,
amend or continue the perfection of Seller's security interests in the
Collateral. Furthermore, Purchaser promptly shall take all other
actions reasonably deemed necessary or desirable by Seller to enable Seller to
perfect (or continue the perfection of) Seller's security interests in the
Collateral. Purchaser shall pay upon demand all reasonable fees and
costs reasonably incurred by Seller in perfecting (and maintaining the
perfection of) Seller's security interests in the Collateral and in obtaining
lien searches confirming the priority of Seller's security interests in the
Collateral.
4. Seller as Limited Attorney in
Fact. To the fullest extent allowed by law, Purchaser appoints
Seller as Purchaser's attorney in fact, coupled with an interest, for the
purpose of executing and filing financing statements and similar documents or
endorsing chattel paper, documents, promissory notes, or instruments, all of
which, in Seller's reasonable judgment, may be necessary or advisable for
perfecting, continuing and reperfecting the security interests of Seller in the
Collateral, or any item thereof or interest therein.
5. Optional Performance by
Seller. If Purchaser fails to perform any agreement contained
herein, Seller may (but is not obligated to) perform, or cause performance of,
such agreement, and the expenses of Seller incurred in connection therewith
shall become part of the Obligations secured by this Security
Agreement.
6. Seller's Limited
Duties. The powers conferred on Seller hereunder and under the
Purchase Agreement are solely to protect the security interests of Seller in the
Collateral and shall not impose any duty upon Seller to exercise any such
powers. Except for the safe custody of any Collateral in Seller's
possession and the accounting for monies actually received by Seller hereunder,
Seller shall have no duty as to any Collateral, or as to the taking of any steps
to preserve rights against other persons that have or claim to have a lien
against the Collateral, or any other rights pertaining to any
Collateral.
7. Representations and
Warranties. Purchaser represents and warrants to Seller
that:
(a) Removal of
Collateral. Except in the ordinary course of Purchaser’s
business, Purchaser will not remove the Collateral from its existing location
without Seller’s prior written consent. Purchaser will, whenever
requested, advise Seller of the exact location of the Collateral.
(b) Transactions Involving
Collateral. Purchaser will not sell, offer to sell or
otherwise transfer or dispose of the Collateral. Purchaser will not
pledge, mortgage, encumber or otherwise permit the Collateral to be subject to
any lien, security interest, encumbrance or charge, other than the security
interest provided for in this Security Agreement and the security interest in
favor of Aequitas Commercial Finance, LLC, without the prior written consent of
Seller. This includes security interests even if junior in right to
the security interests granted under this Security Agreement. Unless
waived by Seller, all proceeds from any disposition of the Collateral (for
whatever reason) shall be held in trust for Seller and shall not be commingled
with any other funds; provided however, this requirement shall not constitute
consent by Seller to any sale or other disposition. Upon receipt,
Purchaser shall immediately deliver any such proceeds to Seller.
(c) Title. Purchaser
holds good and marketable title to the Collateral, free and clear of all liens
and encumbrances except for the lien of this Security Agreement and the security
interest in favor of Aequitas Commercial Finance, LLC. No
financing statement covering any of the Collateral is on file in any public
office other than those which reflect the security interest created by this
Security Agreement or to which Seller has specifically
consented. Purchaser will defend Seller’s rights in the Collateral
against the claims and demands of all other persons.
(d) Inspection of
Collateral. Purchaser’s representatives
and agents will have the right at all reasonable times to examine and inspect
the Collateral wherever located.
(e) Taxes, Assessments and
Liens. Purchaser will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or
with respect to any of its income or profits derived from the Collateral, as
well as all claims of any kind (including, without limitation, claims for labor,
materials and supplies) against or with respect to the Collateral, except that
no such charge need be paid if (i) the validity of such charge is being
contested in good faith by appropriate proceedings, (ii) such proceedings do not
involve any material danger of the sale, forfeiture or loss of any of the
Collateral or any interest in the Collateral and (iii) such charge is adequately
reserved against on Purchaser’s books in accordance with generally accepted
accounting principles.
(f) Compliance with Governmental
Regulations. Purchaser will comply promptly with all laws,
ordinances, rules and regulations of all governmental authorities, now or
hereafter in effect, applicable to the ownership, production, disposition or use
of the Collateral. Purchaser may contest in good faith any such law,
ordinance or regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Seller’s interest in the Collateral, in Seller’s
sole opinion, is not jeopardized.
(g) Notice of
Changes. Purchaser will give prompt written notice to Seller
(and in any event not later than thirty (30) days following any change described
below in this subsection) of: (i) any change in the location of Purchaser’s
chief executive office or principal place of business, (ii) any change in its
name, (iii) any changes in its identity or structure in any manner which might
make any financing statement filed hereunder incorrect or misleading; and (iv)
any change in its jurisdiction of organization; provided that Purchaser shall
not locate any Collateral outside of the United States nor shall Purchaser
change its jurisdiction of organization to a jurisdiction outside of the United
States.
(h) Insurance. Purchaser
will carry and maintain in full force and effect, at its own expense and with
financially sound and reputable insurance companies, insurance with respect to
the Collateral in such amounts, with such deductibles and covering such risks as
is customarily carried by companies engaged in the same or similar businesses
and owning similar properties in the localities where Purchaser
operates.
8. Preference
Payments. Any monies Seller pays because of an asserted
preference in Purchaser’s bankruptcy will become a part of the Obligations and,
at Seller’s option, will be payable by Purchaser as provided in this Security
Agreement.
9. Default. Purchaser
will be in default under this Security Agreement if an Event of Default occurs
under the Note.
10. Remedies. Following
the occurrence of an Event of Default, Seller may exercise any or all of its
rights and remedies under the Purchase Agreement and/or the Note and all
applicable laws. Among other things, Seller shall be entitled to
(a) take immediate possession of any or all of the Collateral,
(b) require Purchaser to assemble the Collateral and make it available to
Seller at a place to be designated by Seller that is reasonably convenient to
Seller and Purchaser, and (c) sell, lease or otherwise dispose of any or
all of the Collateral in its then condition or following any commercially
reasonable preparation or processing. Purchaser agrees that a letter
hand-delivered to Purchaser (or delivered to Purchaser by overnight courier or
by certified mail) at least ten days before a public or private sale or
other disposition of all or any part of the Collateral is reasonable
notification of such sale or disposition. All rights and remedies of
Seller are cumulative and not exclusive, and the commencement or partial
exercise of any such right or remedy will not preclude Seller from exercising
any other right or remedy until Purchaser's debts, liabilities and obligations
to Seller have been fully paid and performed. Seller's rights
specifically include the right of setoff and recoupment of any obligations owed
by Seller to Purchaser against Purchaser's obligations to Seller.
11. Assignment. This
Security Agreement shall bind and inure to the benefit of the respective
successors and permitted assigns of Purchaser and Seller. However,
Purchaser shall not transfer or assign any of Purchaser's rights or obligations
under this Security Agreement without Seller's prior written consent (which
consent may be withheld by Seller in its sole and absolute
discretion). Seller may transfer, assign or participate its rights
and obligations under this Security Agreement without the consent of
Purchaser.
12. Choice of Law;
Jurisdiction. Purchaser and Seller have selected Oregon law,
except for any of its choice-of-law provisions that would make the law of
another jurisdiction applicable to this Security Agreement, to govern the
construction and enforcement of this Security Agreement. Purchaser
hereby submits to the jurisdiction and venue of any state or federal court
sitting in Portland, Oregon, in any action or proceeding relating to this
Security Agreement and hereby waives any claim that such a forum is
inconvenient, or that there is a more convenient forum.
13. Attorneys'
Fees. Purchaser shall pay all reasonable fees and costs,
including reasonable attorneys' fees, incurred by Seller in enforcing
Purchaser's obligations under this Security Agreement, protecting the Collateral
or Seller's interest in the Collateral, or asserting Seller's rights and
remedies in the Collateral, even if no action, case or proceeding is
commenced. If any legal action or other proceeding is brought to
enforce the terms of this Security Agreement, the losing party shall pay all
fees and costs, including reasonable attorneys' fees, incurred by the prevailing
party in any arbitration or litigation involving this Security Agreement, the
Collateral or the security interests granted to Seller herein, including but not
limited to any bankruptcy case or any proceeding or contested matter in any
bankruptcy case.
14. No Waiver. No delay
or omission by Seller in exercising any right or remedy provided herein shall
impair any such right or remedy, or shall be construed to be a waiver of such
right or remedy or any acquiescence therein.
15. Invalidity. If any
term of this Security Agreement is determined to be illegal or unenforceable,
that term shall be deemed deleted from this Security Agreement without
invalidating the remaining terms of this Security Agreement.
16. Entire Agreement;
Merger. This Security Agreement, together with the Purchase
Agreement, constitutes and sets forth the entire understanding among Seller and
Purchaser with respect to Purchaser's grant of security interests in the
Collateral in favor of Seller. Purchaser hereby agree that no course
of prior dealing between or among the parties, no usage of trade, and no parol
or extrinsic evidence of any nature shall be used to supplement or modify any
terms of this Security Agreement and that there are no conditions to the full
effectiveness of this Security Agreement.
17. Interpretation. In
the event of any conflict between the terms and conditions of this Security
Agreement and the terms and conditions of the Purchase Agreement, the terms and
conditions of the Purchase Agreement shall control.
18. Counterparts and
Facsimiles. This Security Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument. Facsimile
signatures or signatures delivered by electronic means will be considered
original signatures for purposes of this Security Agreement.
IN
WITNESS WHEREOF, the undersigned has executed and delivered this Security
Agreement as of the date and year first above written.
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AEQUITAS
CAREPAYMENT FOUNDERS FUND, LLC
By:
Aequitas Investment Management, LLC, its Manager
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By:
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/s/ Xxxxxx X. Jesenik | |
| Name: Xxxxxx X. Jesenik | |||
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Title: President
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