EXHIBIT 10.66
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of the ______ day of May, 2007, is by and
between PERFORMANCE HEALTH TECHNOLOGIES, INC., a Delaware corporation having an
address at 000 Xxxxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxxxx 00000 (the "Borrower") and
________________________, with an address at 000 Xxxxxxx Xxxxxxxxx, Xxxxxxxxx,
Xxx Xxxxxx 00000 (the "Lender").
BACKGROUND
ARTICLE I
DEFINITIONS
1.01. For all purposes of this Agreement, except as otherwise expressly
provided herein, the following terms (including both the singulars and plurals
thereof) shall have the meanings respectively assigned to them directly or by
reference below in this Section 1.01:
"Collateral" shall mean:
All present and future accounts, contract rights, chattel paper, documents,
instruments and general intangibles, as defined in the Uniform Commercial Code
(including, without limitation, all patents, trademarks and tax refunds);
merchandise returns and other goods represented thereby; all proceeds of the
foregoing; and the books and records pertaining thereto with the equipment
containing said books and records, wherever located.
All present and hereafter acquired inventory, as defined in the Uniform
Commercial Code, wherever located; including but not limited to raw materials,
work in process and finished goods; all proceeds and products of the foregoing;
and documents relating thereto.
All present and hereafter acquired equipment, as defined in the Uniform
Commercial Code, all furniture and fixtures, and all accessories, improvements,
substitutions, parts, replacements, attachments and additions thereto wherever
located; and proceeds of the foregoing.
All present and hereafter acquired warehouse receipts, bills of lading,
shipping documents, documents of title, chattel paper and instruments, whether
negotiable or not, the goods and inventory relating thereto or represented
thereby in all stages of manufacture, process or production, which arise under
or relate to letters of credit or similar credit mechanisms opened for the
Debtor's account or benefit and all cash and non-cash proceeds thereof, wherever
located.
"Event of Default" means any event or condition described in Article II of
this Agreement.
"Existing Indebtedness" shall mean the existing indebtedness of the
Borrower to Lender.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment for security, security deposit arrangement,
encumbrance, lien (statutory or other), or preference, priority, or other
security agreement or preferential arrangement, charge, or encumbrance of any
kind or nature whatsoever (including, without limitation, any conditional sale
or other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the UCC or comparable law of any jurisdiction to evidence any of
the foregoing).
"Loan Documents" shall mean the Note, this Agreement, and UCC-1 Financing
Statements.
"Note" shall mean the Promissory Note executed by the Borrower in favor of
Lender in the principal amount of $300,000.
"UCC" shall mean the Uniform Commercial Code as enacted in New Jersey, as
the same may be amended from time to time.
ARTICLE II
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SECURITY AGREEMENT
2.01. Collateral. To secure the punctual payment of the Note and the
performance of the Borrower's obligations under the this Agreement, the Borrower
hereby pledges, transfers, assigns, sets over and grants to the Lender a
security interest in, the Collateral.
2.02. Financing Statements. To perfect the Lender's security interest in
and to the Collateral, the Borrower authorized the Lender to file such financing
statements as the Lender may specify, and will pay the cost of filing the same,
in such public offices as the Lender shall designate, and do all other further
acts and things reasonably requested by the Lender to perfect the security
interest granted to the Lender in this Article II.
2.03. Place of Business; Location of Collateral.
(a) The Borrower will notify the Lender prior to (i) any change in the
location of its place of business, (ii) any change in the place where Borrower
keeps the Collateral, its books and records, (iii) the establishment of any new
or the discontinuance of any existing place of business, and (iv) the
establishment of any new or the discontinuance of any location where the
Collateral are kept.
(b) The Borrower will not permit the Collateral to be removed from its
current location without the Lender's prior written consent.
2.04. Collateral. The Borrower represents, warrants and agrees that:
(a) The Borrower is the absolute owner of its Collateral, subject only
to the security interests created prior to the date hereof (the "Existing
Security Interests") and hereby;
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(b) After the occurrence and during the continuance of an Event of
Default, the Lender shall have the right to take possession of the Collateral
subject to the Existing Security Interests;
(c) If any Collateral is or becomes represented by a Document, such
Document shall be in such form as to permit the Lender or anyone to whom the
Lender may negotiate the same to obtain delivery to it of the Collateral
represented thereby. This Section shall not be deemed to be a consent by the
Lender to such conversion;
(d) The Borrower will not dispose of any of the Collateral or permit
any of the Collateral to become a fixture or an accession to other goods without
the prior written consent of the Lender (which will not be unreasonably
withheld) in each instance;
(e) The Borrower shall keep and maintain the Collateral in good
condition; and
(f) The Borrower shall immediately notify the Lender of any material
lien or material damage to the Collateral.
2.05. Condition of Collateral. The Borrower will immediately notify the
Lender of any event of deterioration, loss or depreciation of value of any
substantial portion of the Collateral and the amount of such deterioration, loss
or depreciation.
2.06. Access to Collateral. The Borrower shall permit the Lender's
representatives to have access to the Collateral from time to time during normal
business hours, as reasonably requested by the Lender, for purposes of
examination, inspection, and appraisal thereof and verification of the
Borrower's records pertaining thereto. Except after the occurrence and during
the continuance of an Event of Default, the Lender shall give the Borrower at
least two (2) Business Days prior telephone notice before exercising the rights
granted in the preceding sentence. Upon the occurrence of an Event of Default,
upon demand by the Lender, the Borrower shall assemble the Collateral and make
it available to the Lender at Borrower's place of business. At the request of
the Lender, after the occurrence of an Event of Default, the Borrower shall
provide warehousing space in its own premises to the Lender for the purpose of
taking the Collateral into the custody of the Lender without removal thereof
from such premises and will erect such structures and post such signs as the
Lender may require in order to place such Collateral under the exclusive control
of the Lender.
2.07. Notices. If notice of sale, disposition or other intended action by
the Lender with respect to the Collateral is required by the UCC or other
applicable law, any notice thereof sent to the Borrower at its addresses listed
on the signature page hereof or such other address of the Borrower as may
previously been designated by the Borrower as the address of the Borrower to
which notice should be given under this Agreement, at least ten (10) days prior
to such action, shall constitute reasonable notice to the Borrower.
2.08. Expenses of the Lender. The Borrower will reimburse the Lender on
demand for all reasonable expenses (including the reasonable fees and expenses
of legal counsel for the Lender) in connection with the enforcement of the
Lender's rights to take possession of the Collateral and the
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proceeds thereof and to hold, collect, render in compliance with applicable
environmental laws and regulations, prepare for sale, sell and dispose of the
Collateral.
2.09. Security Agreement. It is the intention of the parties hereto that
this Agreement constitute a security agreement under the UCC in the State of New
Jersey for the purpose of creating the security interests granted herein.
2.10. Further Assurances. From time to time the Borrower will execute and
deliver to the Lender such additional instruments as the Lender may reasonably
request to effectuate the purposes of this Agreement and to assure to the
Lender, as secured party, a first priority, perfected security interest in the
Collateral.
2.11. Continuing Collateral. The Lender shall be under no obligation to
proceed first against any part of the Collateral before proceeding against any
other part of the Collateral. It is expressly agreed that all of the Collateral
stands as equal security for all Obligations under the Loan, and the Lender
shall have the right to proceed against or sell any and/or all of the Collateral
in any order, or simultaneously, as it, in its sole discretion, shall determine.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the Loan, the
Borrower represents and warrants to the Lender that:
3.01. Organization, Powers, etc. The Borrower (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (b) has the requisite power and authority to own its assets and to
carry on its business as now being conducted (and as now contemplated) and (c)
has the requisite power and authority to engage in and consummate the
transactions contemplated by this Agreement, and to execute and deliver the Loan
Documents.
3.02 Execution of Loan Documents. The execution, delivery and performance
by the Borrower of the Loan Documents and the consummation of the transactions
contemplated hereunder, (a) have been duly authorized by all necessary corporate
action, (b) will not violate any provisions of law, rule or regulation, any
order of any court or other agency of government, (c) will not violate any
provision of any material contract, indenture, agreement or other instrument to
which the Borrower is a party or to which the Borrower is bound, or results in
the creation of any Lien except for Liens created hereunder, or (d) will not
violate any provision of the charter documents of the Borrower.
3.03. Validity of Agreement and Loan Documents. This Agreement constitutes,
and the Loan Documents when duly executed and delivered will constitute, valid
and legally binding obligations of the Borrower, enforceable in accordance with
the respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance or other similar laws affecting
the enforcement of creditors' rights generally and by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
at law or in equity).
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ARTICLE IV
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COVENANTS OF BORROWER
To induce the Lender to enter into this Agreement, the Borrower covenants
and agrees that:
4.01. Preservation of Existence, Business and Property. The Borrower will
at all times preserve and maintain its existence, rights and privileges, conduct
the same line of business as presently conducted or as contemplated hereby and
will preserve and protect its assets in good repair, working order and condition
(ordinary wear and tear excepted), and will make, or will cause to be made, all
needed and proper repairs, renewals, replacements, betterment and improvements
thereto.
4.02. Payment of Taxes. The Borrower will promptly pay and discharge or
cause to be promptly paid and discharged, all taxes, assessments and
governmental charges or levies imposed upon them or in respect of any of its
assets and any and all payroll taxes, social security payments or similar
payroll deductions before the same shall become in default except for (i) taxes,
assessments and governmental charges or levies which are being contested in good
faith for which an adequate reserve or accrual has been established or (ii)
taxes, assessments and governmental charges or levies which are payable without
penalty or interest for which an adequate reserve or accrual has been
established or extensions duly filed, as well as all lawful claims which, if
unpaid, might become a lien or charge upon such property and assets or any part
thereof except for claims which are being contested in good faith for which an
adequate reserve or accrual has been established.
4.03. Insurance. During the term of this Agreement, the Borrower agrees to
maintain insurance to the extent and against such hazards and liabilities as is
customarily maintained by companies similarly situated.
4.04. Payment of Legal Fees and Expenses. The Borrower shall pay to the
Lender, upon demand, together with interest at the Default Rate set forth in the
Note from the date when incurred or advanced by the Lender until repaid by the
Borrower all reasonable costs, expenses or other sums incurred or advanced by
the Lender after an Event of Default and during the continuance thereof
(including legal fees and disbursements), to enforce the Lender's rights against
the Borrower, or in the prosecution or defense of any action or proceeding
related to this Agreement, including without limitation, reasonable legal fees,
expenses and disbursements.
4.05. Merger; Corporate Structure. The Borrower will not enter into any
merger or consolidation or change its corporate structure or the nature or
character of its stock.
4.06. Compliance with Laws. The Borrower will comply with all laws and
regulations applicable to it in the operation of its business if the failure to
so comply could have a material adverse effect on the Borrower's financial
condition, its ability to do business, or its operations.
4.07. Liens. The Borrower shall not incur, create or otherwise permit to
exist any Liens on the Collateral other than the Lien created hereby.
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ARTICLE V
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DEFAULTS AND REMEDIES
5.01. Event of Default. Any one or more of the following events shall
constitute an event of default hereunder (an "Event of Default"):
(a) The Borrower's failure to pay any payment of principal, interest
or other charges due and owing to the Lender under the Note or this Agreement
when due;
(b) If the Borrower fails to observe or perform any covenant,
condition or agreement on the part of the Borrower to be observed or performed
pursuant to the terms hereof or any other Loan Document (other than a payment
default under the Note or this Agreement which shall be governed by (a) above),
and such default shall continue uncured for fifteen (15) days after written
notice of default from the Lender;
(c) If any representation or warranty made herein or in any other Loan
Document or in any report, certificate, financial statement or other instrument
furnished in connection with this Agreement shall be false or misleading in any
material respect on the date on which it was made;
(d) If the Borrower admits in writing its inability to pay its debts
as they mature, or make an assignment for the benefit of its creditors; or if
the Borrower shall apply for or consent to the appointment of any receiver,
trustee, or similar officer or the equivalent under any law for the Borrower or
for all or any substantial part of its property; or such receiver, trustee or
similar officer or the equivalent under any law shall be appointed without the
application or consent of the Borrower and shall continue undischarged for a
period of sixty (60) days; or if the Borrower shall institute (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding relating to it under the laws of any jurisdiction; or if any
such proceeding shall be instituted (by petition, application or otherwise)
against the Borrower and an order for relief or similar remedy shall be entered
in such proceeding or such proceeding shall remain undismissed for a period of
sixty (60) days; or if any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against any substantial portion of the
properties of the Borrower and such judgment, writ, or similar process shall not
be released, vacated, stayed or fully bonded within ninety (90) days after its
issue or levy;
(e) If any default as defined in any loan or similar agreement to
which the Borrower is now or hereafter a party, or any other event thereunder
upon the occurrence of which any holder or holders of indebtedness outstanding
thereunder may declare the same due and payable, shall occur and shall continue
beyond any grace period, provided therein.
5.02. Remedies. Upon the occurrence and during the continuance of an Event
of Default, the Lender may take one or more of the following remedial steps:
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(a) At the option of the Lender upon notice to the Borrower if any
Event of Default other than those described in Section 5.01(d) shall occur and
be continuing, and automatically if any Event of Default described in Section
5.01(d) shall occur, the entire principal amount of the Note shall become
immediately due and payable, without presentment, demand for payment, protest,
notice of nonpayment or protest, notice of dishonor or any other notice or
demand whatsoever all of which are hereby expressly waived. Upon such
acceleration, the Borrower may only cure an Event of Default by paying to the
Lender the entire unpaid principal balance of the Notes, with interest accrued
thereon, and all other sums due and payable under the Note, this Agreement or
the Loan Documents;
(b) Take any action at law or in equity to collect from the Borrower
the payments then due and thereafter to become due under the Note or to enforce
performance and observance of any obligation, agreement or covenant of the
Borrower under the Loan Documents;
(c) Endorse the name of the Borrower upon any and all checks, drafts,
money orders and other instruments for the payment of monies which are payable
to the Borrower and constitute Proceeds of the Collateral;
(d) The Lender may give written notice to the Borrower, whereupon the
Borrower shall, at its expense, promptly deliver any and all Collateral to such
place as the Lender may designate, or the Lender shall have the right to enter
upon the premises where the Collateral is located and take immediate possession
of and remove the Collateral without liability to the Lender, except as a result
of the gross negligence or willful misconduct of the Lender. In the event the
Lender obtains possession of the Collateral, the Lender may sell, assign or
otherwise dispose of the Collateral, but the Lender shall give the Borrower
reasonable notice of the time after which any private sale or other intended
disposition thereof is to be made; the requirement of reasonable notice shall be
met if notice of the sale or other intended disposition is mailed (by certified
mail, postage prepaid) to the Borrower at its address specified herein at least
ten (10) days prior to the time of sale or disposition; at such sale the Lender
may sell the Collateral for cash or upon credit or otherwise, at such prices and
upon such terms as it deems advisable and the Lender may bid or become purchaser
at such sale, free of the right of redemption, which is hereby waived. The
Lender may adjourn such sales at the time and place fixed therefor without
further notice or advertisement, and may sell such Collateral as an entirety or
in such parts as it deems advisable, but the Lender shall not be obligated to
sell all or any part of such Collateral at the time and placed fixed for such
sale if it determines not to do so. The Lender may apply the Proceeds of any
such sale first to the Lender's reasonable expenses in preparing the Collateral
for sale (including reasonable attorneys' fees) and second to the complete
satisfaction of the Borrower's obligation hereunder and under the other Loan
Documents;
(e) The Lender shall have the right immediately, and without notice or
other action, to set-off any money owed by the Lender in any capacity to the
Borrower against the liability of the Borrower to the Lender, and the Lender
shall be deemed to have exercised such right to set-off and to have made a
charge against any such money immediately upon the occurrence of such Event of
Default, even though the actual book entries may be made at some time subsequent
thereto; and
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(f) Exercise any and all of the remedies of a secured party under the
UCC and otherwise available to it as a matter of law or equity or under any of
the other Loan Documents.
5.03. No Remedy Exclusive. No remedy herein conferred or reserved to the
Lender is intended to be exclusive of any other available remedy or remedies,
but each and every such remedy shall be cumulative and shall be in addition to
every other remedy given under this Loan Agreement or now or hereafter existing
at law or in equity or by statute. No delay or omission to exercise any right or
power accruing upon any Event of Default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle the Lender to exercise any remedy reserved to it in this Article, it
shall not be necessary to give notice, other than such notice as may be required
in this Article.
5.04. No Additional Waiver Implied by One Waiver. In the event any
agreement contained in any Loan Document should be breached by any party and
thereafter such breach should be waived by any party, such waiver shall be
limited to the particular breach so waived and shall not be deemed to waive any
other breach hereunder.
5.05. Waiver of Automatic Stay. In consideration of the Lender's agreement
to enter into the Loan and other accommodations being made to Borrower, the
Borrower agrees that, in the event the Borrower shall (i) file with any
bankruptcy court of competent jurisdiction or be the subject of a petition under
Title 11 of the U.S. Code, as amended (the "Bankruptcy Code"), (ii) be the
subject of any order for relief under the Bankruptcy Code, (iii) file or be the
subject of any petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any present or
future federal or state act or law relating to bankruptcy, insolvency, or other
relief for debtors, (iv) have sought or consented to or acquiesced in the
appointment of any trustee, receiver, conservator or liquidator, or (v) be the
subject of any order, judgment, or decree entered by any court of competent
jurisdiction approving a petition filed against such party for any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency, or other relief for debtors, Lender
shall thereupon be entitled, and the Borrower irrevocably consents, to the
extent not otherwise prohibited by law, to immediate and unconditional relief
from any automatic stay imposed by Section 362 of the Bankruptcy Code, or
otherwise, in addition to the exercise of rights and remedies otherwise
available to Lender, or any other documents or instruments executed and
delivered in connection with the Loans and as otherwise provided by law, and the
Borrower irrevocably waives any right to object to such relief and will not
contest any motion by Lender seeking relief from the automatic stay.
ARTICLE VI
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MISCELLANEOUS
6.01. Notice. Any notice to the parties to this Agreement shall be
conclusively deemed to have been received by, and to be effective on the date on
which delivered to it, at the address set forth on page one (1) of this
Agreement, or if sent by certified mail, on the third Business Day after
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the day on which mailed, addressed to the party at said address set forth on
page one (1) of this Agreement, as evidenced by a signed receipt.
6.02. Successors and Assigns. Whenever in this Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such party except that the Borrower shall not have the right to
assign its rights or obligations hereunder or any interest herein.
6.03. Survival. All covenants, agreements, representations and warranties
made by the Borrower herein or in any of the Loan Documents or any certificate
or instrument contemplated hereby shall survive any independent examination made
by the Lender and the execution and delivery of this Agreement and the Note, and
said certificates or instruments and shall continue so long as any obligations
are outstanding and unsatisfied, applicable statute of limitations to the
contrary notwithstanding.
6.04. New Jersey Law Governs. This Agreement and the other Loan Documents
shall be construed in accordance with and governed by the laws of the State of
New Jersey.
6.05. Waivers in Writing. The waiver of any provisions of this Agreement or
any other Loan Documents, or consent to any departure by the Borrower therefrom,
shall in no event be effective unless the same shall be in writing and signed by
the Lender by an authorized person. Any such waiver shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on the Borrower in any case shall entitle it to any other further notice
or demand in the same circumstances.
6.06. Failure to Exercise Rights. Neither any failure nor any delay on the
part of the Lender in exercising any right, power or privilege hereunder or
under any Loan Document shall operate as a waiver hereof or thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
other right, power or privilege.
6.07. Captions. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
6.08. Severability. In the event any provision of this Agreement or any
Loan Document shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof or thereof.
6.09. Judicial Proceedings. Any judicial proceeding brought against the
Borrower with respect to this Agreement or the Note shall be brought in any
court of competent jurisdiction in the State of New Jersey, and, by execution
and delivery of this Agreement, the Borrower accepts, generally and
unconditionally, the jurisdiction of such courts and any related appellate
court.
6.10. Advice of Counsel. The Borrower hereby confirms actual and full
knowledge and acceptance of the terms and provisions of the Loan Documents and
this Agreement, as to all of which the Borrower further acknowledges that the
Borrower has received the advice of counsel.
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6.11. Release of Lien in Collateral. Upon the payment in full of the Note,
the Lien of the Lender in the Collateral shall be released and discharged by the
Lender. The Lender shall execute such release documents to evidence such release
and discharge as the Borrower may reasonably request.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers on the date first hereinabove written.
PERFORMANCE HEALTH TECHNOLOGIES, INC.
By: _________________________________
Xxxxxx X. Xxxxxxxx
President and Chief Executive Officer
By: _________________________________
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