EXHIBIT 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of this 30th day of September 2003, by and
between Eastern Medical Technologies, Inc., a Delaware corporation ("EMT"), and
Strax Institute, Inc., a Florida corporation ("Strax") (EMT and Strax are
collectively referred to as, "Debtor"), jointly and severally, both with an
address at 0000 X. Xxxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxx, 00000, and Caprius,
Inc. (the "Secured Party"), a Delaware corporation with an address at Xxx Xxxxxx
Xxxxx, Xxxx Xxx, XX 00000.
WHEREAS, Strax is a wholly-owned subsidiary of EMT and is receiving a
benefit as a result of EMT's transaction with the Secured Party in connection
with the Stock Purchase Agreement of even date herewith.
WHEREAS, the Secured Party and the Debtor have entered into a Stock
Purchase Agreement of even date herewith;
WHEREAS, EMT has executed a Promissory Note ("Note") in favor of the
Secured Party dated of even date herewith in connection with such Stock Purchase
Agreement; and
WHEREAS, the Debtor desires to grant a security interest in certain
collateral to the Secured Party.
NOW, THEREFORE, the parties hereby agree as follows (terms used and not
defined herein shall have the meanings as defined in the Uniform Commercial Code
as in effect in the State of Florida (the "UCC")):
1. Grant of a Security Interest. Debtor hereby grants to Secured Party a
secured interest (the "Security Interest") in the Collateral (as defined in
Section 2), and Debtor shall not challenge the granting of the Security Interest
in favor of the Secured Party.
2. Collateral. The collateral covered by this Agreement consists of the
accounts (as such term is defined in Chapter 679, Florida Statutes) of Strax,
including, without limitation, any amounts Strax receives pursuant to the
Management Services Agreement dated of even date herewith by and between the
Secured Party and Strax ("MSA"), wherever located and whether now existing or
hereafter existing or acquired by Debtor ("Collateral").
3. Debtor's Obligations Secured Hereby. Debtor's obligations (the
"Obligations") to Secured Party secured hereby for the benefit of the Secured
Party are the payment of the principal sum and interest, if any, due to default
thereon, evidenced by the Note, and performance and discharge of each and every
obligation of Debtor under this Agreement, and with respect to Eastern Medical
Technologies, Inc., the Note.
4. Debtor's Representations and Warranties. Debtor represents and warrants
and, so long as this Security Agreement is in effect, shall be deemed
continuously to represent and warrant, that:
(a) Strax owns the Collateral free and clear of any liens, other
security interests, and encumbrances.
(b) Debtor has all necessary corporate power and authority and has
taken all corporate action necessary to execute, deliver and perform this
Agreement and the Note and to encumber and grant the Security Interest in
the Collateral.
(c) There is no effective financing statement or other instrument
similar in effect covering all or any part of the Collateral on file in any
recording office except as may have been filed in favor of Secured Party or
as set forth on Schedule I attached hereto.
(d) This Agreement creates a valid security interest of Secured Party
in the Collateral securing payment of the Obligations. On the filing of the
financing statement and the other instruments similar in effect under
Section 5(b), the Secured Party will have valid first and prior perfected
lien on and a security interest in the Collateral, as to which security
interest can be perfected by the filing of a financing statement.
(e) No consent, authorization, approval or other action by, and no
notice to or filing with, any governmental authority, regulatory body,
lessor, franchise or other person or entity is required for the grant by
Debtor of the Security Interest granted hereby or for the execution,
delivery or performance of this Agreement by Debtor or for the perfection
or exercise by Secured Party of its rights and remedies hereunder, except
filings of financing documents.
(f) Debtor does not transact any part of its business under any trade
names, division names, assumed names or other name, except for its name set
forth in the preamble hereto; Debtor's business address is as set forth in
the preamble hereto; and Debtor's records concerning the Collateral are
kept at such address.
(g) The accounts receivable constituting Collateral are genuine and to
the best of Debtor's knowledge enforceable in accordance with its terms
against the party obligated to pay it (the "Account Debtor"), and to the
best of Debtor's knowledge no Account Debtor has any defense, setoff, claim
or counterclaim against Debtor which can be asserted against Secured Party,
whether in any proceeding to enforce the Collateral or otherwise.
(h) Debtor has delivered to Secured Party a schedule of all accounts
receivable consisting of the Collateral and will provide updated schedules
thereof from time to time as Secured Party may reasonably request. The
amounts represented on such schedules by Debtor to Secured Party as owing
by each Account Debtor or all Account Debtors are and will be the correct
amounts actually and unconditionally owing by such Account Debtor or
Account Debtors individually and in the aggregate, except for normal cash
discounts where applicable.
5. Debtor's Covenants. Debtor agrees and covenants that:
(a) The Collateral will be used solely for business purposes of Debtor
and will remain the property of the Debtor (collection in the ordinary
course excepted) and will not be used for any unlawful purpose. The
Collateral will not be wasted.
(b) Debtor has executed and will promptly file with the appropriate
governmental authorities, or deliver to Secured Party for filing, one or
more UCC-1 Financing Statements with respect to the Collateral. Debtor
shall, at no cost to Secured Party, execute, acknowledge and deliver all
such other documents as Secured Party reasonably deems necessary to create,
perfect and continue the security interest in the Collateral contemplated
hereby. Debtor will pay all costs of title searches and filing of financing
statements, assignments and other documents in all public statements,
assignments and other documents in all public offices reasonably requested
by Secured Party, and will not, without the prior written consent of
Secured Party, file or authorize or permit to be filed in any public office
any financing statement naming Debtor as debtor and not naming Secured
Party, except with respect to other indebtedness not constituting
Collateral.
(c) Debtor will defend the Collateral against the claims and demands
of all other parties, including, without limitation, defenses, setoffs,
claims and counterclaims asserted by any Account Debtor against Debtor or
Secured Party; will keep the Collateral free from all security interests,
liens or other encumbrances except the Security Interest; and will not
sell, transfer, lease, assign, deliver or otherwise dispose of any
Collateral or any interest therein without the prior written consent of
Secured Party, except that Debtor may collect the accounts receivable in
the ordinary course of Debtor's business.
(d) Debtor will, at Secured Party's request, xxxx any and all books
and records to indicate the Security Interest.
(e) Debtor will deliver to Secured Party, upon demand, all documents
constituting, representing or relating to the Collateral or any part
thereof, and any schedules, invoices, receipts, orders, or other documents
representing or relating to the Collateral or any part thereof.
(f) Debtor will notify Secured party promptly in writing of any change
in Debtor's business address or chief executive officer, any change in the
address at which records concerning the Collateral are kept and any change
in Debtor's name, identity or corporate or other structure.
(g) Debtor shall pay all expenses, including reasonable attorneys'
fees and costs, incurred by Secured Party in the preservation, realization,
enforcement or exercise of the Secured Party's rights under this Agreement.
(h) Any and all Collateral described or referred to in the granting
clauses hereof which is hereafter acquired shall, and without any further
conveyance, assignment or act on the part of the Debtor or the Secured
Party, become and be subject to the Security Interest herein granted as
fully and completely as though specifically described herein, but nothing
in this Section 5(h) contained shall be deemed to modify or change the
Obligations of the Debtor under Section 5(b) hereof.
6. Certain Provisions Concerning Collateral.
(a) After the occurrence of an Event of Default (as defined below),
Secured Party may notify all or any Account Debtors of the security
interest created hereby and may also direct such Account Debtors to make
all payments on Collateral to Secured Party. All payments on and from
Collateral received by Secured Party directly or from Debtor shall be
applied to the Obligations in accordance with Section 9. Secured Party may
demand of Debtor in writing, before or after notification to Account
Debtors and without waiving in any manner the security interest created
hereby, that any payments on and from the Collateral received by Debtor (i)
shall be held by Debtor in trust for Secured Party in the same medium in
which received; (ii) shall not be commingled with any assets of Debtor; and
(iii) shall be delivered to Secured Party in the form received, properly
indorsed to permit collection, not later than the next business day
following the day of their receipt; and Debtor shall comply with such
demand.
(b) Until the occurrence of an Event of Default, Debtor reserves the
right to receive all income from or interest on the Collateral. Upon the
occurrence of an Event of Default, Debtor will not demand or receive any
income from or interest on such Collateral and, if Debtor received any such
income or interest without any demand by it, the same shall be held by
Debtor in trust for Secured Party in the same medium in which received,
shall not be commingled with any assets of Debtor and shall be delivered to
Secured Party in the form received, properly indorsed to permit collection,
not later than the next business day following the day of its receipt.
Secured Party may apply the net cash receipts from such income or interest
to payment of the Obligations, provided that Secured Party shall account
for and pay over to Debtor any such income or interest remaining after
payment in full of the Obligations.
7. Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this Security Agreement:
(a) EMT shall fail to make any payment of principal of, or interest on
(if any due to an Event of Default), the Note when due after the expiration
of any grace period specified in the Note, if any.
(b) Any representation or warranty made by Debtor in this Agreement or
the Note, as the case may be, shall prove to have been incorrect in any
material respect when made.
(c) Debtor shall fail to perform or observe any other term, covenant
or agreement of Debtor contained in this Agreement or the Note, or EMT
shall fail to perform or observe any term, covenant or agreement of EMT
under the Stock Purchase Agreement, or Strax shall fail to perform or
observe any term, covenant or agreement of Strax under the MSA, as the case
may be, to be performed or observed, if such failure shall continue for 10
days after written notice thereof to Debtor, unless such failure reasonably
cannot be cured with such 10-day period and the Debtor is diligently
attempting to cure such failure and cures such failure within a reasonable
period.
(d) Any other event which is an "Event of Default" under the Note (as
such term is defined in the Notes) shall occur and be continuing.
8. Remedies on Default.
(a) Upon the occurrence of an Event of Default, the Secured Party may,
by notice to the Debtor, declare the aggregate unpaid principal balance of
the Note, together with all unpaid accrued interest thereon, if any, due to
the Event of the Default, to be immediately due and payable and thereupon
all such amounts shall be and become immediately due and payable to Secured
Party. Upon such acceleration, the Secured Party, shall have the rights,
privileges, powers and remedies provided a secured party under the UCC and
any other applicable law. Upon the existence or occurrence of an Event of
Default, Secured Party may require Debtor to make the Collateral available
to Secured Party at a place or places designated by Secured Party.
(b) Without in any way requiring notice to be given in the following
time and manner, Debtor agrees that any notice by Secured Party of sale,
disposition, or other intended action hereunder or in connection herewith,
whether required by the UCC or otherwise, shall constitute reasonable
notice to Debtor if such notice is mailed by regular or certified mail
postage prepaid, at least five days prior to such action, to Debtor's
address specified above or to any other address which Debtor has specified
in writing to Secured Party as the address to which notices hereunder shall
be given to Debtor.
(c) After an Event of Default, Secured Party may demand, collect and
xxx on any of the Collateral (in either Debtor's or Secured Party's name at
the latter's option); may enforce, compromise, settle or discharge such
Collateral without discharging the Obligations or any part thereof; and may
indorse Debtor's name on any and all checks, or other instruments
pertaining to or constituting Collateral.
9. Payments After an Event of Default. All payments received and amounts
realized by the Secured Party pursuant to Section 8, including all payments and
amounts received after the entire unpaid principal and interest, if any, amount
of the Note has been declared due and payable, as well as all payments or
amounts then held or thereafter received by the Secured Party as part of the
Collateral while an Event of Default shall be continuing, shall be promptly
applied and distributed by the Secured Party in the following order of priority:
(a) first, to the payment of all costs and expenses, including
reasonable legal expenses and attorneys' fees, incurred or made hereunder
by the Secured Party, including any such costs and expenses of suit, if
any, and any remedy under Section 8, and of all taxes, assessments or liens
superior to the lien granted under this Security Agreement, except any
taxes, assessments or other superior lien subject to which any disposition
under Section 8 hereof may have been made; and
(b) second, to the Secured Party the amount then owing or unpaid on
the Note, and in case the payments received and amounts realized by the
Secured Party shall be insufficient to pay in full the whole amount so due,
owing or unpaid upon the Note; and
(c) third, to the payment of the balance or surplus, if any, to the
Debtor, their successors and assigns, or to whomsoever may be lawfully
entitled to receive the same.
10. Power of Attorney. Debtor hereby appoints Secured party the
attorney-in-fact of Debtor to prepare, sign and file or record, for Debtor in
Debtor's name, any financing statement and to take any other action reasonably
deemed by Secured Party necessary or desirable to perfect and continue the
security interest of Secured Party hereunder, and to perform any obligations of
Debtor hereunder, at Debtor's expense, but without obligation to do so. Such
power of attorney is coupled with an interest and is irrevocable so long as this
Agreement is in effect.
11. Secured Party's Right to Cure; Reimbursement. In the event Debtor
should fail to do any act as herein provided, Secured Party may, but without
obligation to do so, without notice to Debtor, and without releasing Debtor from
any obligation hereof, make or do the same in such manner and to such extent as
Secured Party may deem necessary to protect the Collateral, including, without
limitation, the defense of any action purporting to affect the Collateral or the
rights or powers of Secured Party hereunder, at Debtor's expense. Debtor shall
reimburse Secured Party for expenses reasonably incurred under this Section 11.
12. Miscellaneous.
(a) This Agreement, together with the covenants and warranties
contained in it, shall inure to the benefit of Secured Party, its
respective successors, assigns, and shall be binding upon Debtor, and their
successors and assigns.
(b) Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered against receipt to the
party to whom it is to be given at the address of such party set forth in
the preamble to this Agreement (or to such other address as the party shall
have furnished in writing in accordance with the provisions of this Section
12(b)). Any notice given to the Debtor shall be to the attention of EMT's
President. Any notice given to the Secured Party shall be to the attention
of its Chief Executive Officer. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given
at the time of receipt thereof. Any notice given by other means permitted
by this Section 12(b) shall be deemed given at the time of receipt thereof.
(c) This Agreement shall terminate on the satisfaction in full of all
of Obligations and, on such termination, Secured Party shall release to
Debtor the Security Interest granted in the Collateral hereunder, provided,
that if, after receipt of any payment of all or any part of the
Obligations, Secured Party is for any reason compelled to surrender such
payment to any person or entity, because such payment is determined to be
void or voidable as a preference, impermissible setoff, or a diversion of
trust funds, or for any other reason, this Agreement shall continue in full
force notwithstanding any contrary action which may have been taken by
Secured Party in reliance upon such payment, and any such contrary action
so taken shall be without prejudice to Secured Party's rights under this
Agreement and shall be deemed to have been conditioned upon such payment
having become final and irrevocable.
(d) If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in effect, and if
any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
(e) The headings in this Agreement are solely for the convenience of
reference and shall be given no effect in the construction or
interpretation of this Agreement.
(f) This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(g) This Agreement has been negotiated and consummated in the State of
Florida and shall be governed by and construed in accordance with the laws
of the State of Florida without giving effect to conflict the laws.
(h) No course of dealing and no delay or omission on the part of the
Secured Party in exercising any right or remedy shall operate as a waiver
thereof or otherwise prejudice the Secured Party's rights, powers or
remedies. No right, power or remedy conferred by this Agreement upon the
Secured Party shall be exclusive of any other right, power or remedy
referred to herein or now or hereafter available at law, in equity, by
statute or otherwise, and all such remedies may be exercised singly or
concurrently.
(i) This Agreement sets forth the entire understanding of the parties
with respect to the subject matter hereof, supersedes all existing
agreements among them concerning such subject matter, and may be modified
only by a written instrument duly executed by each party.
IN WITNESS WHEREOF, the parties have executed this Security Agreement on
the date set forth above.
Caprius, Inc.
By: /s/ Xxxxxx Xxxxx
-------------------------------------
Xxxxxx Xxxxx, Chief Executive Officer
Eastern Medical Technologies, Inc.
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Xxxxxx Xxxxxx, President
Strax Institute, Inc.
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Xxxxxx Xxxxxx, President
SCHEDULE I
PERMITTED FINANCING STATEMENT
