SECURITY AGREEMENT
Exhibit 10.3
THIS SECURITY AGREEMENT, ("Agreement") is made May 18, 2007, by and between JMJ TECHNOLOGIES, INC., a Georgia corporation, located at 0000 XxxxxXxxx Xxxxxxx, Xxxxx XX000X, Xxxxxxx, Xxxxxxx 00000 (hereinafter "Borrower"), and WiFiMed Holdings Company, Inc., a Nevada corporation (the "Bridge Lender").
(i) accounts payable;
(ii) fixtures and equipment;
(iii) goods;
(iv) inventory;
(v) computers, hardware and software;
(vi) all patents, trademark, patent applications and trademark applications, domestic or foreign, all licenses relating to any of the foregoing and all income and royalties with respect to any licenses, all rights to xxx for past, present or future infringement thereof; all rights arising therefrom and pertaining thereto and all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof; and
(vii) all Proceeds of any and all of the foregoing Collateral (including license royalties, rights to payment, accounts and proceeds of infringement suits) and, to the extent not otherwise included, all payments under insurance (whether or not Bridge Lender is the loss payee thereof) or any indemnity, warranty or guaranty payable by reason of loss or damage to or otherwise with respect to the foregoing Collateral.
3. Collateral. Except as provided under that certain Security Agreement by and between the Borrower and the Bridge Lender dated March __, 2007 ("Initial Security Agreement") and other security interests disclosed under Schedule 3, no arrangement exists whereby the Collateral will in the future become subject to a security interest senior to the Agreement. Borrower will not sell, assign or otherwise alienate the ownership of the Collateral or its use or operation except any sale or replacement in the ordinary course of Borrower's business; and Borrower will not use the Collateral in violation of any ordinance or state or federal statute or any administrative rule or regulation of law. In the event of the satisfaction of the Initial Security Agreement, this Agreement shall assume the senior position of the Initial Security Agreement.
(a) Sell, lease, or otherwise dispose of, move, relocate or transfer, whether by sale or otherwise, any of Borrower's assets, except in the ordinary and usual course of Borrower's business as presently conducted;
(b) Amend or restate Borrower's articles of incorporation, except as necessary increase Borrower's authorized common shares to comply with Borrower's obligations under the employment agreement of Xxxx Xxxxx as it existed prior to the Initial Security Agreement;
(c) Change Borrower's name or form of entity, or add any new fictitious name;
(d) Acquire, merge or consolidate with or into any other business organization;
(e) Except as otherwise provided for in this Agreement, enter into any transaction not in the ordinary and usual course of Borrower's business;
(f) Guarantee or otherwise become in any way liable with respect to the obligations of any third party except by endorsement of instruments or items of payment for deposit to the general account of Borrower or which are transmitted or turned over to Bridge Lender;
(g) Make any change in the Borrower's financial structure or in any of its business objectives, purposes or operations which could adversely affect the ability of Borrower to repay the Obligations;
(h) Incur any debts outside the ordinary and usual course of Borrower's business;
(i) Make any advance or loan to any person or entity;
(j) Prepay any existing indebtedness owing to any third party;
(k) Cause, permit or suffer any change, direct or indirect, in Borrower's capital ownership, except that Borrower may issue up to 28,019 addition shares of Borrower's common stock to redeem certain stock option previously authorized by Borrower and up to 250,000 additional shares as necessary to comply with Borrower's obligations under the employment agreement of Xxxx Xxxxx as it existed prior to the Initial Security greement;
(l) Make any distribution or declare or pay any dividends (in cash or in stock) on, or purchase, acquire, redeem or retire any of its common stock, membership or partnership interests, of any class, whether now or hereafter outstanding;
(m) Suspend or go out of business;
(n) Pay total compensation to officers of Borrower (or any of their relatives), including salaries, withdrawals, fees, bonuses, commissions, drawing accounts and other payments, whether directly or indirectly, in money or otherwise, during the each fiscal year of Borrower during the term of this Agreement in an aggregate amount for all such officers in excess of one hundred and ten percent (110%) of the total compensation paid in the prior fiscal year.
(o) Make any loans, advances, intercompany transfers or cash flow between the Borrower and any subsidiary, related entity or affiliate of the Borrower or with any company that has common shareholders, officers or directors with the Borrower;
(p) Allow to exist any lien or security interest in the Collateral, except for the security interest granted to Bridge Lender and such other security interests which have been consented to by Bridge Lender (including the Initial Security Agreement and security interests disclosed under Schedule 3);
(q) Reorganize or reincorporate itself under the laws of any jurisdiction other the its state of incorporation;
(r) File any financing statement or amendment or termination statement with respect to any financing statement filed in favor of Bridge Lender; or
(s) Issue any equity interests or right or option to acquire equity interest in the Borrower (except as described in (k) above).
(a) Bridge Lender may, at its option, require Borrower to assemble the Collateral and make it available to Bridge Lender at a place to be designated by Bridge Lender, which is reasonably convenient to both parties. In the event Borrower fails or refuses to assemble the Collateral, Bridge Lender shall have the right, and Borrower hereby authorizes and empowers Bridge Lender, to enter the premises upon which the Collateral is located in order to remove the same.
(b) Bridge Lender will give Borrower reasonable notice of the time and place of any public sale of the Collateral, or of the time after which any private sale or other intended disposition of the collateral is to be made, unless the Collateral is perishable, threatens to decline speedily in value, or is of a type customarily sold on a recognized market. The requirement of reasonable notice shall be met if a written notice is mailed to Borrower, postage prepaid, to the address of Borrower last known to Bridge Lender, at least ten (10) days prior to the date of the sale or disposition.
(c) Borrower agrees to surrender possession of the Collateral to Bridge Lender in event Bridge Lender elects to foreclose this security interest. Borrower waives any notice of the exercise of any and all options reserved to Bridge Lender by this Agreement.
(d) Borrower will, upon Bridge Lender's request, deliver to Bridge Lender all original invoices, bills, charge or credit card receipts, books and records and other documents evidencing or describing any of the account receivable constituting a part of the Collateral. Borrower will also execute and deliver to Bridge Lender an assignment of the right to receive payments under all such Accounts. The parties recognize, however, that in the event of default such Accounts shall be deemed assigned to Bridge Lender, whether or not the assignments described above are actually delivered.
(e) Bridge Lender shall have the right and are hereby authorized to collect all amounts due under the Accounts; xxx or take other actions to collect the same in their own name or as assignee of or in the name of Borrower; compromise or give acquittance for amounts due; and use such other measures as Bridge Lender may in its sole discretion deem appropriate for collection of the Accounts. All such actions shall be taken at the sole expense of Borrower, who agrees to reimburse Bridge Lender for all reasonable amounts expended (including a reasonable attorney's fee), together with interest thereon from the date of expenditure at the rate then applicable under the Promissory Note.
(f) This Agreement constitutes a direction to and full authority to any Account debtor to pay directly to Bridge Lender any such accounts. No proof of default shall be required. Any such debtor is hereby irrevocably and unconditionally authorized to rely upon and comply with any notice from Bridge Lender. The debtor shall not be liable to Borrower or any person claiming under Borrower for making any payment or rendering any performance to Bridge Lender. The debtor shall have no obligation or right to inquire whether any default has occurred or is then existing. By its execution of this Agreement, Borrower irrevocably and unconditionally joins in, authorizes and consents to the above instructions.
(g) The proceeds of any sale of the Collateral shall be applied to the following items in the following order: (a) the reasonable expenses of repossessing the Collateral and preparing for the holding the sale, including without limitation all reasonable attorney's fees incurred by Bridge Lender; (b) interest and principal then due (by acceleration or otherwise) under the Promissory Note and any other debts specifically secured by this Agreement; (c) interest and principal then due (by acceleration or otherwise) under any other debts of Borrower to Bridge Lender (to be applied in whatever order Bridge Lender may in their sole discretion determine); (d) indebtedness of Borrower to other secured parties, provided written notice of demand therefore is received by Bridge Lender before the sale (to be applied in the order Bridge Lender receives the written notices); and (e) the balance, if any, to Borrower.
12. Miscellaneous. The following provisions are additional terms of this Agreement:
(a) Bridge Lender has no duty to maintain, repair or protect the Collateral.
(b) No waiver by Bridge Lender of any default shall operate as a waiver of any other default or of the same default on a future occasion.
(c) All rights and remedies of Bridge Lender are cumulative and may be exercised successively or concurrently, and shall inure to the benefit of Bridge Lender's assigns.
(d) All obligations of Borrower shall bind his trustees, custodians, general partners, successors and assigns.
(e) The captions of the sections of this Agreement are inserted for convenience only and shall not be used in the interpretation or construction of any provisions hereof.
(f) If any provisions of this Agreement are held invalid or unenforceable, the holding shall affect only the provision in question and all other provisions on this Agreement shall remain in full force and effect.
SCHEDULE 3