Exhibit 10.2
GENERAL BUSINESS SECURITY AGREEMENT
This General Business Security Agreement (this "Security Agreement") is
made as of this 15th day of July, 2005, by MEDSOLUTIONS, INC., a Texas
corporation, on behalf of itself and its Subsidiaries (MedSolutions, Inc. and
its Subsidiaries are collectively referred to herein as the "Borrower"), in
favor of XXXX INVESTMENTS, LLC, a Wisconsin limited liability company (the
"Lender").
R E C I T A L S:
WHEREAS, Borrower wishes to secure: (i) the payment of all indebtedness
evidenced by its One Million Dollars ($1,000,000) 10% Senior Convertible Note,
payable to the Lender, and any promissory notes taken in renewal, exchange or
substitution thereof or therefor, including interest and premium on all of the
foregoing and all costs of collecting the same, (ii) the performance of
Borrower's obligations and liabilities hereunder, and (iii) all other debts,
obligations and liabilities of Borrower to or in favor of the Lender, whether
direct or indirect, absolute or contingent, liquidated or unliquidated, whether
of the same or a different nature and whether now existing or hereafter incurred
or arising (all of the obligations and liabilities described in the preceding
clauses (i) through (ii) being herein collectively called the "Obligations").
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
AGREEMENT
1. Definitions. The following terms shall have the meanings set forth
below:
"Accounts" shall mean all of the Borrower's and its Subsidiaries'
rights to payment for goods (including freight and taxes) sold or leased or
services performed thereby, whether now in existence or arising from time to
time hereafter, including without limitation, rights evidenced by an account,
note, contract, security agreement, chattel paper, or other evidence of
indebtedness or security, together with (i) all security pledged, assigned,
hypothecated or granted to or held by the Borrower or any of its Subsidiaries to
secure the foregoing, (ii) all of the Borrower's and each Subsidiaries' right,
title and interest in and to any goods, the sale of which gave rise thereto,
(iii) all guarantees, endorsements and indemnifications on, or of, any of the
foregoing, (iv) all powers of attorney for the execution of any evidence of
indebtedness or security or other writing in connection therewith, (v) all
books, records, ledger cards, and invoices relating thereto, (vi) all evidences
of the filing of financing statements and other statements and the registration
of other instruments in connection therewith and amendments thereto, notices to
other creditors or secured parties, and certificates from filing or other
registration officers, (vii) all credit information, reports and memoranda
relating thereto and (viii) all other writings related in any way to the
foregoing.
"Collateral" shall mean:
(a) All Accounts;
(b) The Mortgaged Property;
(c) All additions and accessions to and replacements for any
of the foregoing;
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(d) All of Borrower's right, title and interest in and to all
goods and other property, whether or not delivered, (i) the sale or
lease of which gives or purports to give rise to any Accounts,
including, but not limited to, all merchandise returned or rejected by
or repossessed from customers, or (ii) securing any Accounts, including
all of Borrower's rights as an unpaid vendor or lienor, including
stoppage in transit, replevin and reclamation with respect to such
goods and other properties;
(e) All documents, policies and certificates of insurance
pertaining to any of the foregoing; and
(f) Any and all products and proceeds of the foregoing
Collateral (including, but not limited to, any claims to any items
referred to in this definition, and any claims of Borrower against
third parties for loss of, damage to, or destruction of, any or all of
the Collateral or for proceeds payable under or unearned premiums with
respect to policies of insurance) in whatever form, including cash,
negotiable instruments and other instruments for the payment of money,
chattel paper, security agreements or other documents.
"Deed of Trust" shall mean that certain Deed of Trust from the Borrower
to the Lender, granting the Lender the security interest in the Mortgaged
Property described herein and therein, a copy of which is attached hereto as
Exhibit A.
"Event of Default" shall have the meaning set forth in the Investment
Agreement.
"Investment Agreement" shall mean that certain Investment Agreement,
dated of even date hereof, by and between Borrower and the Lender, as it may be
amended from time to time.
"Mortgaged Property" shall mean the Borrower's real estate,
improvements, permits and approvals associated with the Company's
treatment/transfer facility in Garland, Texas, which is more fully described in
the Deed of Trust.
2. Security Interest.
(a) To secure the payment and performance of the Obligations
and for other good and valuable consideration, receipt of which is
hereby acknowledged, Borrower hereby mortgages, pledges and assigns all
of the Collateral to the Lender, and grants to the Lender a continuing
security interest in all of the Collateral (the "Security Interest").
With respect to only the Mortgaged Property constituting part of the
Collateral, the Lender's security interest shall be subject and
subordinate only to the first deed of trust lien of First American Bank
in an amount not to exceed Two Hundred Eight Thousand Dollars
($208,000) plus accrued and unpaid interest thereon, and shall be pari
passu with the second mortgage liens of The Estate of Xxxxxx Xxxxxxxx
and Xxxx Xxxx in an aggregate amount not to exceed Seven Hundred Ninety
Two Thousand Dollars ($792,000) plus accrued and unpaid interest
thereon.
(b) The Lender's Security Interest in the Collateral under
this Security Agreement extends to all Collateral of the kind which is
subject to this Security Agreement which the Borrower may acquire at
any time during the continuation of this Security Agreement.
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3. Borrower's Warranties. Borrower warrants that while any of the
Obligations remain unpaid:
(a) Except as set forth above, Borrower owns the Collateral
free and clear of all encumbrances and security interests (except
Lender's security interest). No financing statement is on file (other
than Lender's) covering the Collateral or any part of it. Borrower,
acting alone, may grant a security interest in the Collateral.
(b) Each account constituting Collateral as of this date arose
from the performance of services by Borrower or from a bona fide sale
or lease of goods, which have been delivered or shipped to the account
debtor and for which the Borrower has genuine invoices, shipping
documents or receipts.
(c) Each account constituting Collateral as of this date is
genuine and enforceable against the account debtor according to its
terms. It and the transaction out of which it arose comply with all
applicable laws and regulations. The amount represented by Borrower as
owing by each account debtor is the amount actually owing and is not
subject to setoff, credit, allowance or adjustment, except discount for
prompt payment, nor has any account debtor returned the goods or
disputed liability.
(d) As of this date Borrower has no notice or knowledge of
anything which might impair the credit standing of any account debtor.
4. Delivery; Filing; Refiling.
(a) Borrower shall, at its sole cost and expense, take or
cause to be taken all actions which the Lender may reasonably request
and which may be necessary or desirable in order to assure that the
Lender's Security Interest in the Collateral will at all times comply
with the provisions of this Agreement and to enable the Lender to
exercise or enforce its rights hereunder, including, but not limited
to: (i) delivering to the Lender the Deed of Trust fully executed and
in full force and effect; (ii) delivering to the Lender, endorsed or
accompanied by such instruments of assignment as the Lender may
specify, and stamping and marking, in such manner as the Lender may
specify, any and all chattel paper, instruments, letters and advices of
credit, title certificates and documents evidencing or forming a part
of the Collateral; and (iii) executing and delivering such pledges,
designations, hypothecations, notices and assignments, and obtaining
such control agreements in each case in form and substance satisfactory
to the Lender, relating to the creation, validity, perfection,
maintenance or continuation of the Security Interest in the Collateral
under any applicable laws as the Lender may from time to time
reasonably request.
(b) Borrower authorizes the Lender to file Uniform Commercial
Code financing statements describing the Collateral and amendments to
such financing statements. Borrower will cooperate with the Lender in
obtaining control of Collateral or other security for the Obligations
for which control may be required to perfect the Lender's Security
Interest in the Collateral.
(c) Borrower authorizes the Lender to record the Deed of Trust
in the county where the Mortgaged Property is located.
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(d) In the event that any repledge or reassignment, or any
other action, is, in the Lender's reasonable belief, helpful or
required at any time to protect, preserve or maintain the Security
Interest in the Collateral, Borrower authorizes the Lender to take any
such action, and at the Lender's request, Borrower shall, at its sole
cost and expense, cause the same to be done or taken at such time and
in such manner as may be reasonably requested by the Lender.
5. Certain Covenants as to Collateral. So long as any of the
Obligations are outstanding and unpaid and unless the Lender shall otherwise
expressly consent in writing:
(a) Borrower will:
(i) at all times be the sole owner of each and every
item of Collateral;
(ii) keep the Collateral free from all liens,
encumbrances and security interests (other than Lender's);
(iii) defend the Collateral at its own expense
against all claims and legal proceedings by persons other than
Lender;
(iv) at all times keep accurate and complete records
of the Collateral, and permit the Lender to enter upon the
Borrower's place or places of business at any time and from
time to time during reasonable business hours, and without
hindrance or delay, to inspect the Collateral and to inspect,
audit, check and make extracts from and copies of the books,
records, journals, orders, receipts and correspondence which
relate to the Collateral or other transactions between the
parties hereto and the general financial condition of
Borrower;
(v) upon the request of the Lender, execute and
deliver confirmatory written assignments of Accounts to the
Lender, but any failure by Borrower to execute and deliver
such schedules and other materials or assignments shall not
limit or otherwise affect the Lender's Security Interest or
other rights in and to the Collateral;
(vi) procure and maintain insurance against loss,
theft, destruction, or damage to the Collateral for the full
insurable value thereof, with such insurers as are reasonably
acceptable to the Lender, plus other insurance thereon in the
amounts and against such risks as the Lender may reasonably
specify, and promptly deliver an original copy of each policy
to the Lender, with a standard lender's loss payable clause in
favor of the Lender, as well as a clause requiring the insurer
to provide the Lender at least thirty (30) days' prior written
notice of the cancellation, expiration, termination or any
material change in the coverage afforded under any such
policy.
(vii) pay and discharge all lawful taxes, assessments
and government charges upon Borrower or against its
properties, including the Collateral, prior to the date on
which penalties arise, unless, and to the extent only that,
such taxes, assessments and charges are contested in good
faith and by appropriate proceedings by Borrower; and
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(viii) if any of the Collateral arose out of
contracts with the United States or any of its departments,
agencies or instrumentalities, Borrower shall so notify the
Lender, and shall, upon request of the Lender, execute any
writings required by the Lender in order that any amounts due
or to become due under such contracts shall be properly
assigned to the Lender, with proper notice of the assignment
being given under the Federal Assignment of Claims Act.
(b) Borrower shall not:
(i) except in the ordinary course of business and
prior to an Event of Default, grant any extension of time for
payment of any Accounts or compromise, compound or settle the
same for less than the full amount thereof, or release wholly
or partly any person liable for the payment thereof, or allow
any credit or discount whatsoever thereon; and (ii) sell,
assign, transfer or otherwise dispose of any Collateral to
anyone other than the Lender.
6. Location of Collateral; Change of Name, Etc. Borrower represents
warrants and covenants that:
(a) The Borrower's chief executive office and the books and
records relating to the Collateral are located at Borrower's place of
business at 00000 Xxxxx Xxxxx, Xxxx Xxxxxxx XXX, Xxxxx 000, Xxxxxx,
Xxxxx 00000.
(b) Borrower will not move its chief executive office or the
books and records specified in subsection (a) of this Section 6, change
its name or change the choice of legal entity under which it operates
or the state under whose laws it is organized, without the Lender's
prior written consent.
7. Notice to Account Debtors or Obligors; Possession of Collateral. If
there shall occur any Event of Default, the Lender may do any or all of the
following:
(a) The Lender may (i) notify, or require Borrower to notify,
in writing, any account debtor or other obligor with respect to any of
the Accounts constituting part of the Collateral to make payment to the
Lender or any agent or designee of the Lender, at such address as may
be specified by the Lender, or (ii) direct Borrower to hold all
payments which it receives with respect to any such Collateral in trust
for the Lender, and Borrower shall so hold such funds without
commingling them with other funds of Borrower and shall, in accordance
with the direction of the Lender, deliver the same to the Lender, or
any agent or designee of the Lender, immediately upon receipt by
Borrower in the identical form received, together with any necessary
endorsements. When any notice to make payments directly to the Lender,
or any such agent or designee, shall have been given pursuant to clause
(i) above, Borrower shall no longer have any right to collect the
affected Collateral. If, notwithstanding the giving of any notice, any
account debtor or other obligor shall make payment to Borrower,
Borrower shall hold all such payments it receives in trust for the
Lender, without commingling the same with other funds of Borrower, and
shall deliver the same to the Lender, or any such agent or designee,
immediately upon receipt by Borrower in the identical form received,
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together with any necessary endorsements. The Lender may settle or
adjust disputes and claims directly with account debtors and other
obligors of Borrower for amounts and on terms which the Lender
considers advisable. Nothing herein contained shall be construed as
requiring or obligating the Lender, or any such agent or designee, to
make any demand, or to make an inquiry as to the nature or sufficiency
of any payment received by it, or to present or file any claim or
notice or take any action with respect to any Accounts or the monies
due or to become due thereunder or to take any steps necessary to
preserve any rights against prior parties. The Lender shall not have
any liability to Borrower for actions taken in good faith pursuant to
this Section 7.
(b) All amounts received by the Lender pursuant to paragraph
(a) of this Section 7 shall be applied to the payment of the
Obligations, in such order as is set forth in Section 12 hereof. The
Lender may, but shall not be obligated to, deliver any amounts received
or deposited pursuant to paragraph (a) of this Section above to the
Borrower for use by the Borrower in the ordinary course of its
business, but the Security Interest in any such proceeds delivered to
Borrower shall continue and shall not be affected by such delivery and
Borrower shall not commingle any proceeds so delivered with any of its
other funds.
8. Appointment as Attorney and Agent for Borrower With Respect to
Security Interest. Borrower hereby irrevocably appoints the Lender, or any agent
or designee of the Lender, as its lawful attorney and agent, with full power of
substitution, to execute and deliver, on behalf of and in the name of Borrower,
such financing statements, assignments, mortgages, notices, pledges and other
documents and agreements, and to take such other action as the Lender may deem
necessary for the purpose of the creation, perfection, maintenance or
continuation of the Security Interest in the Collateral under applicable law,
and the Lender is hereby authorized to record the Deed of Trust and to file on
behalf of and in the name of Borrower, at Borrower's expense, such financing
statements, assignments, mortgages, notices, pledges and other documents and
agreements in any appropriate governmental office. The right is expressly
granted to the Lender in its discretion, to file one or more financing
statements under the Uniform Commercial Code of any applicable jurisdiction,
without any further authentication or authority from Borrower, naming Borrower
as debtor and naming the Lender, as secured party and indicating therein the
types, or describing the items, of the Collateral and providing such other
information as may be required or requested by the filing office.
9. Appointment to Act for Borrower After an Event of Default. Borrower,
effective immediately upon the occurrence of an Event of Default and without the
necessity of further action, and until the Event of Default is waived in
writing:
(a) Irrevocably authorizes the Lender, or any agent or
designee of the Lender, to perform any and all of the acts that the
Lender is permitted to perform under any provision of this Security
Agreement;
(b) Constitutes and appoints the Lender, or any agent or
designee of the Lender, as Borrower's true and lawful attorney and
agent, with full power of substitution, in the place and stead of
Borrower and either in its own name or in the name of Borrower, if any
Event of Default shall have occurred and be continuing:
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(i) to endorse Borrower's name on any checks, notes,
acceptances, money orders, drafts or other forms of payment or
security that may come into the Lender's possession;
(ii) to sign Borrower's name on any invoice or xxxx
of lading relating to any Collateral, on drafts against
customers, on schedules and assignments of Accounts, on
notices of assignment, financing and continuation statements
and other public records, on verifications of accounts, on
notices to or from customers and on any and all documents
necessary to effectuate drawings under letters of credit; and
(iii) to send requests for verification of Accounts
to customers or account debtors; and
(c) Ratifies and approves all actions taken pursuant to the
foregoing power of attorney whether taken by the Lender or by any other
person or persons designated by the Lender, and the Lender will not be
liable for any acts or omissions or for any error of judgment or
mistake of fact or law other than those occasioned by its gross
negligence or willful misconduct. This power shall be deemed coupled
with an interest and shall be irrevocable until the Obligations have
been fully satisfied. The Lender may appoint such persons, firms or
corporations as, in its sole discretion, it may determine for the
purpose of exercising any powers and taking any action permitted to be
exercised or taken by the Lender under or pursuant to any of the
provisions of this Security Agreement.
10. Marshalling, Etc. The Lender shall not be required to make any
demand upon or pursue or exhaust any of its rights or remedies against Borrower
or others with respect to the payment of Obligations, and shall not be required
to marshal the Collateral or to resort to the Collateral in any particular order
and all of the rights of the Lender hereunder shall be cumulative. To the extent
that it lawfully may, Borrower hereby agrees to waive, and does hereby
absolutely and irrevocably waive and relinquish the benefit and advantage of,
and does hereby covenant not to assert against the Lender, any valuation, stay,
appraisement, extension or redemption laws now existing or which may hereafter
exist which, but for this provision, might be applicable to any sale made under
the judgment, order or decree of any court, or privately under the power of sale
conferred by this Security Agreement or in respect of the Collateral. To the
extent it lawfully may, without limiting the generality of the foregoing,
Borrower hereby agrees that it will not invoke or utilize any law which might
cause delay in, or impede, the enforcement of the Lender's rights under this
Security Agreement and hereby waives the same.
11. Sale. In addition to any other rights or remedies available to
Lender by law or under the terms of this Security Agreement, any item of the
Collateral may be sold for cash or other value in any number of lots at public
auction or private sale without demand or notice (excepting only that the Lender
shall give the Borrower at least ten (10) days' prior written notice of the time
and place of any public sale, or the time after which a private sale may be
made, which notice each of Borrower and the Lender hereby agrees to be
reasonable). At any sale or sales of the Collateral (except at private sale) the
Lender may bid for and purchase the whole or any part of the property and rights
so sold and, upon compliance with the terms of such sale, may hold, exploit, and
dispose of such property and rights without further accountability to Borrower
except for the proceeds of such sale or sales. Borrower will execute and
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deliver, or cause to be executed and delivered, such instruments, documents,
deeds, registrations statements, assignments, waivers, certificates and
affidavits, and supply or cause to be supplied such further information and take
such further action as the Lender shall reasonably require in connection with
such sale.
12. Application of Proceeds. The proceeds of all sales and collections
hereunder, and any other monies (including any cash contained in the Collateral)
the application of which is not otherwise herein provided for, shall be applied
as follows:
First, to the payment of the reasonable costs and expenses of
such collection, sale or other realization, and all expenses and
advances made or incurred by the Lender in connection therewith
including, without limitation, attorneys' fees and expenses, including
all fees and costs covered by Section 14 below;
Second, to the payment in full of the Obligations; and
Third, to the payment to Borrower, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds which relate to the
Collateral.
13. Course of Dealing. No course of dealing between Borrower and the
Lender shall operate as a waiver of any rights of the Lender under this Security
Agreement or in respect of the Collateral or the Obligations. No delay or
omission on the part of the Lender in exercising any right under this Security
Agreement in respect of the Collateral or any Obligations shall operate as a
waiver of such right or any other right hereunder. A waiver on any one occasion
shall not be construed as a bar or waiver of any right and/or remedy on any
other occasion. No waiver, amendment to, or other modification of this Security
Agreement shall be effective unless it is in writing and signed by the Lender.
14. Attorneys' Fees and Costs. All costs and expenses, including
attorneys' fees incurred by the Lender in any and all efforts made to enforce
payment of the Obligations or otherwise to effect collection of or against any
of the Collateral, all of the Lender's costs and expenses, including reasonable
attorneys' fees and legal expenses incurred in connection with the entering
into, modification, administration and enforcement of this Security Agreement
and/or the instituting, maintaining, preserving, enforcing and foreclosing the
Lender's security interest in the Collateral, whether through judicial process
(in or outside of bankruptcy proceedings) or otherwise shall be charged to and
paid by Borrower, upon demand by the Lender, and shall be part of the
Obligations.
15. Miscellaneous.
(a) This Security Agreement shall be deemed to have been made
in the State of Wisconsin and shall be governed by the laws of the
State of Wisconsin. In the event of a conflict between any of the terms
or provisions contained herein, and the Investment Agreement, the
parties hereby acknowledge and agree that the Investment Agreement
shall control. All terms which are used in this Security Agreement
shall have the meanings set forth herein. Terms not defined herein
shall have the meanings given them in the Investment Agreement. The
headings in this instrument are for convenience of reference only and
shall not limit or otherwise affect the meaning of any provision
thereof.
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(b) All communications or notices required or permitted by
this Security Agreement shall be in writing and shall be deemed to have
been given or made when delivered in hand, sent by confirmed facsimile
transmission, or three (3) days following deposit in the United States
mails. Communications or notices shall be delivered personally, sent by
facsimile transmission or sent by first class mail, postage prepaid,
and shall be addressed as follows, unless and until either of the
parties notifies the other in accordance with this Section 15 of a
change of address:
if to Borrower: MedSolutions, Inc.
Attn: President
00000 Xxxxx Xxxxx
Xxxx Xxxxxxx XXX, Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
with a copy to: Fish & Xxxxxxxxxx, P.C.
Attn: Xxxxxx X. Xxxxx
0000 Xxxx One Center
0000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
if to Lender: Xxxx Investments, LLC
Attn: Xxxxxx X. Xxxx
0000 X. Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
with copy to: Xxxxx & Xxxxxxxx, s.c.
Attn: Xxxxx X. Xxxx, Esq.
000 X. Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
(c) In the event that any provision hereof shall be deemed to
be invalid by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Security Agreement
shall be construed as not containing such provision, but only as to
such locations where such law or interpretation is operative, and the
invalidity of such provision shall not affect the validity of any
remaining provision hereof, and any and all provisions hereof which are
otherwise lawful and valid shall remain in full force and effect.
(d) This Security Agreement is intended by Borrower and the
Lender as a final expression of the intent of the parties with respect
to its subject matter, and as a complete and exclusive statement of its
terms, there being no conditions to the enforceability of this Security
Agreement. This Security Agreement may not be supplemented or modified
except in writing, signed by both Borrower and the Lender.
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IN WITNESS WHEREOF, the Borrower has executed this Security Agreement
on the day and year first above written.
MEDSOLUTIONS, INC.,
a Texas corporation
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------
Xxxxxxx X. Xxxxxxx, President
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EXHIBIT A
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Deed of Trust
