Exhibit 10.6
SECURITY AGREEMENT
(ProCath Corporation)
To: Laurus Master Fund, Ltd.
c/o Onshore Corporate Services, Ltd.
X.X. Xxx 0000 G.T
Queensgate House
South Church Street
Grand Cayman, Cayman Islands
Gentlemen:
1. To secure the payment of all Obligations (as hereafter defined), we
hereby grant to you a continuing security interest in all of the following
property now owned or at any time hereafter acquired by us, or in which we now
have or at any time in the future may acquire any right, title or interest (the
"Collateral"): all accounts, inventory, equipment, goods, documents, instruments
(including, without limitation, promissory notes), contract rights, general
intangibles (including, without limitation, payment intangibles, but excluding
intellectual property), chattel paper, supporting obligations, investment
property, letter-of-credit rights, trademarks and tradestyles in which we now
have or hereafter may acquire any right, title or interest, all proceeds and
products thereof (including, without limitation, proceeds of insurance) and all
additions, accessions and substitutions thereto or therefor.
2. The term "Obligations" as used herein shall mean and include all debts,
liabilities and obligations owing by us and/or EP MedSystems, Inc. ("EP
MedSystems") to you and all loans, advances, extensions of credit, endorsements,
guaranties, benefits and/or financial accommodations heretofore or hereafter
made, granted or extended by you to us and/or EP MedSystems or which you have or
will become obligated to make, grant or extend to us and/or EP MedSystems or for
our account or EP MedSystems' account and any and all interest, charges and/or
expenses heretofore or hereafter owing by us and/or EP MedSystems to you and any
and all renewals or extensions of any of the foregoing, no matter how or when
arising, direct or indirect, absolute or contingent, liquidated or unliquidated,
and whether under any present or future agreement or instruments between or
among us, you, EP MedSystems or otherwise, including, without limitation, all
obligations owing by us to you under the Secured Convertible Note dated as of
the date hereof made by us in favor of you in the original principal amount of
$4,000,000 (as amended, modified and supplemented from time to time, the
"Note").
3. We hereby represent, warrant and covenant to you that: (a) we are a
company validly existing, in good standing and formed under the laws of the
State of New Jersey and we will provide you thirty days prior written notice of
any change in our state of formation; (b) our legal name is "ProCath
Corporation", as set forth in our Certificate of Incorporation as amended
through the date hereof; (c) we are the lawful owner of the Collateral and have
the sole right to grant a security interest therein and will defend the
Collateral against all claims and demands of all persons and entities; (d) we
will keep the Collateral free and clear of all attachments, levies, taxes,
liens, security interests and encumbrances of every kind and nature; (e) we will
at our own cost and expense keep the Collateral in good state of repair and will
not waste or destroy the same or any part thereof; (f) we will not without your
prior written consent, sell, exchange, lease or otherwise dispose of the
Collateral or any of our rights therein or permit any lien or security interest
to attach to same, except that created by this Agreement; (g) we will insure the
Collateral in your name against loss or damage by fire, theft, burglary,
pilferage, loss in transit and such other hazards as you shall specify in
amounts and under policies by insurers acceptable to you and all premiums
thereon shall be paid by us and the policies delivered to you. If we fail to do
so, you may procure such insurance and the cost thereof shall constitute
Obligations; (h) we will at all times allow you or your representatives free
access to and the right of inspection of the Collateral; and (i) we hereby
indemnify and save you harmless from all loss, costs, damage, liability and/or
expense, including reasonable attorneys' fees, that you may sustain or incur to
enforce payment, performance or fulfillment of any of the Obligations and/or in
the enforcement of this Agreement or the Note or in the prosecution or defense
of any action or proceeding either against you or us concerning any matter
growing out of or in connection with this Agreement, the Note and/or any of the
Obligations and/or any of the Collateral.
4. We shall be in default under this Agreement upon the happening of any of
the following events or conditions, each such event or condition an "Event of
Default" (a) we shall fail to pay when due or punctually perform any of the
Obligations; (b) any covenant, warranty, representation or statement made or
furnished to you by us or on our behalf shall be false in any material respect;
(c) the loss, theft, substantial damage, destruction, sale or encumbrance to or
of any of the Collateral or the making of any levy, seizure or attachment
thereof or thereon; (d) we shall become insolvent, cease operations, dissolve,
terminate our business existence, make an assignment for the benefit of
creditors, suffer the appointment of a receiver, trustee, liquidator or
custodian of all or any part of our property; (e) any proceedings under any
bankruptcy or insolvency law shall be commenced by or against us; or (f) an
Event of Default shall have occurred under and as defined in the Security
Agreement dated as of the date hereof between you and EP MedSystems, as the same
may be amended, modified and supplemented from time to time.
5. Upon the occurrence of any Event of Default and at any time thereafter,
you may declare all Obligations immediately due and payable and you shall have
the remedies of a secured party provided in the Uniform Commercial Code as in
effect in the State of New York, this Agreement and other applicable law. You
will at all times have the right to take possession of the Collateral and to
maintain such possession on our premises or to remove the Collateral or any part
thereof to such other premises as you may desire. Upon your request, we shall
assemble the Collateral and make it available to you at a place designated by
you. If any notification of intended disposition of any Collateral is required
by law, such notification, if mailed, shall be deemed properly and reasonably
given if mailed at least ten days before such disposition, postage prepaid,
addressed to us either at our address shown herein or at any address appearing
on your records for us. Any proceeds of any disposition of any of the Collateral
shall be applied by you to the payment of all expenses in connection with the
sale of the Collateral, including reasonable attorneys' fees and other legal
expenses and disbursements and the reasonable expense of retaking, holding,
preparing for sale, selling, and the like, and any balance of such proceeds may
be applied by you toward the payment of the Obligations in such order of
application as you may elect, and we shall be liable for any deficiency.
6. If we default in the performance or fulfillment of any of the terms,
conditions, promises, covenants, provisions or warranties on our part to be
performed or fulfilled under or pursuant to this Agreement, you may, at your
option without waiving your right to enforce this Agreement according to its
terms, immediately or at any time thereafter and without notice to us, perform
or fulfill the same or cause the performance or fulfillment of the same for our
account and at our sole cost and expense, and the cost and expense thereof
(including reasonable attorneys' fees) shall be added to the Obligations and
shall be payable on demand with interest thereon at the highest rate permitted
by law.
7. We appoint you, any of your officers, employees or any other person or
entity whom you may designate as our attorney, with power to execute such
documents in our behalf and to supply any omitted information and correct patent
errors in any documents executed by us or on our behalf; to file financing
statements against us covering the Collateral; to sign our name on public
records; and to do all other things you deem necessary to carry out this
Agreement. We hereby ratify and approve all acts of the attorney and neither you
nor the attorney will be liable for any acts of commission or omission, nor for
any error of judgment or mistake of fact or law. This power being coupled with
an interest, is irrevocable so long as any Obligations remains unpaid.
8. No delay or failure on your part in exercising any right, privilege or
option hereunder shall operate as a waiver of such or of any other right,
privilege, remedy or option, and no waiver whatever shall be valid unless in
writing, signed by you and then only to the extent therein set forth, and no
waiver by you of any default shall operate as a waiver of any other default or
of the same default on a future occasion. Your books and records containing
entries with respect to the Obligations shall be admissible in evidence in any
action or proceeding, shall be binding upon us for the purpose of establishing
the items therein set forth and shall constitute prima facie proof thereof. You
shall have the right to enforce any one or more of the remedies available to
you, successively, alternately or concurrently. We agree to join with you in
executing financing statements or other instruments to the extent required by
the Uniform Commercial Code in form satisfactory to you and in executing such
other documents or instruments as may be required or deemed necessary by you for
purposes of affecting or continuing your security interest in the Collateral.
9. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York and cannot be terminated orally. All of the
rights, remedies, options, privileges and elections given to you hereunder shall
enure to the benefit of your successors and assigns. The term "you" as herein
used shall include your company, any parent of your company, any of your
subsidiaries and any co-subsidiaries of your parent, whether now existing or
hereafter created or acquired, and all of the terms, conditions, promises,
covenants, provisions and warranties of this Agreement shall enure to the
benefit of and shall bind the representatives, successors and assigns of each of
us and them. You and we hereby (a) waive any and all right to trial by jury in
litigation relating to this Agreement and the transactions contemplated hereby
and we agree not to assert any counterclaim in such litigation, (b) submit to
the nonexclusive jurisdiction of any New York State court sitting in the borough
of Manhattan, the city of New York; provided, that nothing in this Agreement
shall be deemed to preclude you from bringing suit or taking other legal action
in any other jurisdiction and (c) waive any objection you or we may have as to
the bringing or maintaining of such action with any such court. We hereby waive
personal service of process in any such action and agree that service of such
process may be made by registered or certified mail addressed to us at the
address set forth below.
[CONTINUED ON FOLLOWING PAGE]
10. All notices from you to us shall be sufficiently given if mailed or
delivered to us at our address set forth below.
Very truly yours,
PROCATH CORPORATION
By:_/s/ Xxxxxxxx Xxxxxxx
Name: Xxxxxxxx Xxxxxxx
Title: President and Chief Executive Officer
Address: 575 Route 00 Xxxxx
Xxxxxxxx X
Xxxx Xxxxxx, Xxx Xxxxxx 00000
Dated as of: August 28, 2003
ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By: /s/ Xxxxx Grin
Name: Xxxxx Grin
Title: Partner
