Exhibit 10.2

 

SECURITY AGREEMENT

 

SECURITY AGREEMENT (this “Agreement”), dated as of March    , 2008 by and among
Aspyra, Inc., a California corporation (“Company”), and the secured parties
signatory hereto and their respective endorsees, transferees and assigns
(collectively, the “Secured Party”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to a Loan Purchase Agreement, dated the date hereof, between
Company and the Secured Party (the “Purchase Agreement”), Company has agreed to
issue to the Secured Party and the Secured Party has agreed to purchase from
Company certain of Company’s Secured Promissory Notes, due  July      , 2008
(the “Notes”); and

 

WHEREAS, in order to induce the Secured Party to purchase the Notes, Company has
agreed to execute and deliver to the Secured Party this Agreement for the
benefit of the Secured Party and to grant to it a security interest in certain
property of the Company to secure the prompt payment, performance and discharge
in full of all of Company’s obligations under the Notes, subject to Western
Commercial Bank’s security interest in the Collateral and pari passu with the
security interests of C. Ian Sym-Smith and TITAB, LLC.

 

NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

 

1.             Certain Definitions.  As used in this Agreement, the following
terms shall have the meanings set forth in this Section 1.  Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as “general intangibles” and “proceeds”) shall have the respective
meanings given such terms in Article 9 of the UCC.

 

(a)           “Collateral” means the collateral in which the Secured Party is
granted a security interest by this Agreement, and which shall also include the
following, whether presently owned or existing or hereafter acquired or coming
into existence, and all additions and accessions thereto and all substitutions
and replacements thereof, and all proceeds, products and accounts thereof,
including, without limitation, all proceeds from the sale or transfer of the
Collateral and of insurance covering the same and of any tort claims in
connection therewith:

 

(i)            All Goods of the Company, including, without limitations, all
machinery, equipment, computers, motor vehicles, trucks, tanks, boats, ships,
appliances, furniture, special and general tools, fixtures, test and quality
control devices and other equipment of every kind and nature and wherever
situated, together with all documents of title and documents representing the
same, all additions and accessions thereto, replacements therefor, all parts
therefor, and all substitutes for any of the foregoing and all other items used
and useful in connection with the Company’s businesses and all improvements
thereto (collectively, the “Equipment”); and

 

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(ii)           All Inventory of the Company; and

 

(iii)          All of the Company’s contract rights and general intangibles,
including, without limitation, all partnership interests, stock or other
securities, licenses, distribution and other agreements, computer software
development rights, leases, franchises, customer lists, quality control
procedures, grants and rights, goodwill, Intellectual Property (as defined in
the Note Purchase Agreement), service marks, trade styles, trade names, patents,
patent applications, copyrights, deposit accounts, and income tax refunds
(collectively, the “General Intangibles”); and

 

(iv)          All Receivables of the Company including all insurance proceeds,
and rights to refunds or indemnification whatsoever owing, together with all
instruments, all documents of title representing any of the foregoing, all
rights in any merchandising, goods, equipment, motor vehicles and trucks which
any of the same may represent, and all right, title, security and guaranties
with respect to each Receivable, including any right of stoppage in transit;

 

(v)           All of the Company’s documents, instruments and chattel paper,
files, records, books of account, business papers, computer programs and the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(iv) above;

 

(vi)          All of the capital stock of any corporation owned by the Company.

 

(b)           “Company” shall mean, collectively, Company and the wholly owned
subsidiary of Company.

 

(c)           “Obligations” means all of the Company’s obligations under this
Agreement and the Notes, in each case, whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated, whether or not jointly owed with others, and whether or not
from time to time decreased or extinguished and later decreased, created or
incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from the Secured Party as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time.

 

(d)           “UCC” means the Uniform Commercial Code, as currently in effect in
the State of California.

 

2.             Grant of Security Interest.  As an inducement for the Secured
Party to purchase the Notes and to secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of the
Obligations, the Company hereby, unconditionally and irrevocably, pledges,
grants and hypothecates to the Secured Party, a continuing security interest in,
a right to possession and disposition of and a right of set-off against, in each
case to the fullest extent permitted by law, all of the Company’s right, title
and interest of whatsoever kind and nature in and to the Collateral, subject to
Western Commercial Bank’s security interest in the Collateral (the “Security
Interest”) and pari passu with the security interests of C. Ian Sym-Smith and
TITAB, LLC.

 

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3.             Representations, Warranties, Covenants and Agreements of the
Company.  The Company represents and warrants to, and covenants and agrees with,
the Secured Party as follows:

 

(a)           The Company has the requisite corporate power and authority to
enter into this Agreement and otherwise to carry out its obligations thereunder.
The execution, delivery and performance by the Company of this Agreement and the
filings contemplated therein have been duly authorized by all necessary action
on the part of the Company and no further action is required by the Company. 
This Agreement constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditor’s rights generally.

 

(b)           This Agreement creates in favor of the Secured Party a valid
security interest in the Collateral securing the payment and performance of the
Obligations and, upon making the filings described in the immediately following
sentence, a security interest in such Collateral, subject to a senior security
interest held by Western Commercial Bank and pari passu with the security
interests of C. Ian Sym-Smith and TITAB, LLC.  Except for the filing of
financing statements on Form UCC-1 under the UCC with the jurisdictions
indicated on Schedule I, attached hereto, no authorization or approval of or
filing with or notice to any governmental authority or regulatory body is
required either: (i) for the grant by the Debtor, or the effectiveness of, the
Security Interest granted hereby or for the execution, delivery and performance
of this Agreement by the Debtor; or (ii) for the perfection of or exercise by
the Secured Party of its rights and remedies hereunder.

 

(c)           The Company is the sole owner of the Collateral (except for
non-exclusive licenses granted by the Company in the ordinary course of
business), free and clear of any liens, security interests, encumbrances, rights
or claims, and is fully authorized to grant the Security Interest in and to
pledge the Collateral.  There is not on file in any governmental or regulatory
authority, agency or recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the foregoing (other than
those that have been filed in favor of the Secured Party pursuant to this
Agreement) covering or affecting any of the Collateral.  So long as this
Agreement shall be in effect, the Company shall not execute and shall not
knowingly permit to be on file in any such office or agency any such financing
statement or other document or instrument (except to the extent filed or
recorded in favor of the Secured Party pursuant to the terms of this Agreement).

 

(d)           No part of the Collateral has been judged invalid or
unenforceable.  No written claim has been received that any Collateral or the
Company’s use of any Collateral violates the rights of any third party. There
has been no adverse decision to the Company’s claim of ownership rights in or
exclusive rights to use the Collateral in any jurisdiction or to the Company’s
right to keep and maintain such Collateral in full force and effect, and there
is no proceeding involving said rights pending or, to the best knowledge of the
Company, threatened before any court, judicial body, administrative or
regulatory agency, arbitrator or other governmental authority.

 

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(e)           This Agreement creates in favor of the Secured Party a valid
security interest in the Collateral securing the payment and performance of the
Obligations.

 

(f)            The Company will use its best efforts to deliver to the Secured
Party one or more executed UCC financing statements on Form-1 with respect to
the Security Interest, pursuant to the jurisdictions attached hereto, within 10
calendar days of the execution of this Agreement. Failure to abide by this
Section 3(f) shall constitute an Event of Default.

 

(g)           The execution, delivery and performance of this Agreement does not
conflict with or cause a breach or default, or an event that with or without the
passage of time or notice, shall constitute a breach or default, under any
agreement to which the Company is a party or by which the Company is bound.  No
consent (including, without limitation, from stock holders or creditors of the
Company) is required for the Company to enter into and perform its obligations
hereunder.

 

(h)           The Company hereby agrees to defend the Security Interest against
any and all persons, subject to any currently existing senior security
interests.  The Company shall safeguard and protect all Collateral for the
account of the Secured Party.  At the request of the Secured Party, the Company
will sign and deliver to the Secured Party at any time or from time to time one
or more financing statements pursuant to the UCC (or any other applicable
statute) in form reasonably satisfactory to the Secured Party and will pay the
cost of filing the same in all public offices wherever filing is, or is deemed
by the Secured Party to be, necessary or desirable to effect the rights and
obligations provided for herein. Without limiting the generality of the
foregoing, the Company shall pay all fees, taxes and other amounts necessary to
maintain the Collateral and the Security Interest hereunder, and the Company
shall obtain and furnish to the Secured Party from time to time, upon demand,
such releases and/or subordinations of claims and liens which may be required to
maintain the priority of the Security Interest hereunder.

 

(i)            The Company will not transfer, pledge, hypothecate, encumber,
license (except for non-exclusive licenses granted by the Company in the
ordinary course of business), sell or otherwise dispose of any of the Collateral
without the prior written consent of the Secured Party.

 

(j)            The Company shall keep and preserve its Equipment, Inventory and
other tangible Collateral in good condition, repair and order and shall not
operate or locate any such Collateral (or cause to be operated or located) in
any area excluded from insurance coverage.

 

(k)           The Company shall take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each Intellectual Property application (and to obtain the relevant
registration) and to maintain each registration of the Patents, Trademarks and
Copyrights, including, without limitation, filing of applications for renewal,
affidavits of use and affidavits of incontestability.

 

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In the event that any Patent, Trademark or Copyright included in the
Intellectual Property is infringed, misappropriated or diluted by a third party,
promptly notify the Secured Party after it learns thereof and shall, unless it
shall reasonably determine that such Patent, Trademark or Copyright is of
negligible economic value to it, which determination it shall promptly report to
the Secured Party, promptly sue for infringement, misappropriation or dilution,
to seek injunctive relief where appropriate and to recover any and all damages
for such infringement, misappropriation or dilution, or take such other actions
as it shall reasonably deem appropriate under the circumstances to protect such
Patent, Trademark or Copyright.  If the Company lacks the financial resources to
comply with this Section 3(k), the Company shall so notify the Secured Party and
shall cooperate fully with any enforcement action undertaken by the Secured
Party on behalf of the Company.

 

(l)            The Company shall, within ten (10) days of obtaining knowledge
thereof, advise the Secured Party promptly, in sufficient detail, of any
substantial change in the Collateral, and of the occurrence of any event which
would have a material adverse effect on the value of the Collateral or on the
Secured Party’s security interest therein.

 

(m)          The Company shall promptly execute and deliver to the Secured Party
such further deeds, mortgages, assignments, security agreements, financing
statements or other instruments, documents, certificates and assurances and take
such further action as the Secured Party may from time to time request and may
in its sole discretion deem necessary to perfect, protect or enforce its
security interest in the Collateral including, without limitation, the execution
and delivery of a separate security agreement with respect to the Company’s
intellectual property in which the Secured Party has been granted a security
interest hereunder, substantially in a form acceptable to the Secured Party.

 

(n)           The Company shall permit the Secured Party and its representatives
and agents to inspect the Collateral at any time, and to make copies of records
pertaining to the Collateral as may be requested by the Secured Party from time
to time.

 

(o)           The Company will take all steps reasonably necessary to diligently
pursue and seek to preserve, enforce and collect any rights, claims, causes of
action and accounts receivable in respect of the Collateral.

 

(p)           The Company shall promptly notify the Secured Party in sufficient
detail upon becoming aware of any attachment, garnishment, execution or other
legal process levied against any Collateral and of any other information
received by the Company that may materially affect the value of the Collateral,
the Security Interest or the rights and remedies of the Secured Party hereunder.

 

(q)           All information heretofore, herein or hereafter supplied to the
Secured Party by or on behalf of the Company with respect to the Collateral is
accurate and complete in all material respects as of the date furnished.

 

4.             Defaults.  The following events shall be “Events of Default”:

 

(a)           The occurrence of an Event of Default (as defined in the Notes)
under the Notes;

 

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(b)           Any representation or warranty of the Company in this Agreement
shall prove to have been incorrect in any material respect when made;

 

(c)           The failure by the Company to observe or perform any of its
obligations hereunder for ten (10) days after receipt by the Company of notice
of such failure from the Secured Party; and

 

5.             Rights and Remedies Upon Default.  Upon occurrence of any Event
of Default and at any time thereafter, the Secured Party shall have the right to
exercise all of the remedies conferred hereunder and under the Notes, and the
Secured Party shall have all the rights and remedies of a secured party under
the UCC and/or any other applicable law (including the Uniform Commercial Code
of any jurisdiction in which any Collateral is then located).  Without
limitation, the Secured Party shall have the following rights and powers:

 

(a)           Subject to any senior security interests as described herein, the
Secured Party shall have the right to take possession of the Collateral and, for
that purpose, enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed and remove the
same, and the Company shall assemble the Collateral and make it available to the
Secured Party at places which the Secured Party shall reasonably select, whether
at the Company’s premises or elsewhere, and make available to the Secured Party,
without rent, all of the Company’s respective premises and facilities for the
purpose of the Secured Party taking possession of, removing or putting the
Collateral in saleable or disposable form.

 

(b)           Subject to any senior security interests as described herein, the
Secured Party shall have the right to operate the business of the Company using
the Collateral and shall have the right to assign, sell, lease or otherwise
dispose of and deliver all or any part of the Collateral, at public or private
sale or otherwise, either with or without special conditions or stipulations,
for cash or on credit or for future delivery, in such parcel or parcels and at
such time or times and at such place or places, and upon such terms and
conditions as the Secured Party may deem commercially reasonable, all without
(except as shall be required by applicable statute and cannot be waived)
advertisement or demand upon or notice to the Company or right of redemption of
the Company, which are hereby expressly waived.  Upon each such sale, lease,
assignment or other transfer of Collateral, the Secured Party may, unless
prohibited by applicable law which cannot be waived, purchase all or any part of
the Collateral being sold, free from and discharged of all trusts, claims, right
of redemption and equities of the Company, which are hereby waived and released.

 

6.             Applications of Proceeds.  The proceeds of any such sale, lease
or other disposition of the Collateral hereunder shall be applied first, to the
expenses of retaking, holding, storing, processing and preparing for sale,
selling, and the like (including, without limitation, any taxes, fees and other
costs incurred in connection therewith) of the Collateral, to the reasonable
attorneys’ fees and expenses incurred by the Secured Party in enforcing its
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations, and to the payment of
any other amounts required by applicable law, after which the Secured Party
shall pay to the Company any surplus proceeds.

 

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7.             Costs and Expenses.  The Company agrees to pay all out-of-pocket
fees, costs and expenses incurred in connection with any filing required
hereunder, including without limitation, any financing statements, continuation
statements, partial releases and/or termination statements related thereto or
any expenses of any searches reasonably required by the Secured Party.  The
Company shall also pay all other claims and charges which in the reasonable
opinion of the Secured Party might prejudice, imperil or otherwise affect the
Collateral or the Security Interest therein.

 

8.             Responsibility for Collateral.  The Company assumes all
liabilities and responsibility in connection with all Collateral, and the
obligations of the Company hereunder or under the Notes shall in no way be
affected or diminished by reason of the loss, destruction, damage or theft of
any of the Collateral or its unavailability for any reason.

 

9.             Term of Agreement.  This Agreement and the Security Interest
shall terminate on the date on which all payments under the Notes have been made
in full and all other Obligations have been paid or discharged.  Upon such
termination, the Secured Party, at the request and at the expense of the
Company, will join in executing any termination statement with respect to any
financing statement executed and filed pursuant to this Agreement.

 

10.           Power of Attorney; Further Assurances.

 

(a)           Subject to any senior security interests as described herein, the
Company hereby irrevocably appoints the Secured Party as the Company’s
attorney-in-fact, with full authority in the place and stead of the Company and
in the name of the Company, from time to time in the Secured Party’s discretion,
to take any action and to execute any instrument which the Secured Party may
deem necessary or advisable to accomplish the purposes of this Agreement,
including the filing, in its sole discretion, of one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of the Company where permitted by law.

 

(b)           The Company shall execute such additional agreements and documents
necessary or advisable to accomplish the purposes of this Agreement, including
without limitation pledge agreements relating to the capital stock included as
Collateral pursuant to Section 1(a)(vi) above.

 

11.           Notices.  All notices, requests, demands and other communications
hereunder shall be in writing, with copies to all the other parties hereto, and
shall be deemed to have been duly given when (i) if delivered by hand, upon
receipt, (ii) if sent by facsimile, upon receipt of proof of sending thereof,
(iii) if sent by nationally recognized overnight delivery service (receipt
requested), the next business day or (iv) if mailed by first-class registered or
certified mail, return receipt requested, postage prepaid, four days after
posting in the U.S. mails, in each case if delivered to the following addresses:

 

If to the Company:

Aspyra, Inc.

 

26115-A Mureau Road

 

Calabasas, CA 91302

 

Attn: Anahita Villafane, Chief Financial Officer, Secretary

 

Tel:

 

Fax:

 

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with a copy (which shall not constitute notice) to:

 

 

 

Sichenzia Ross Friedman Ference LLP

 

61 Broadway, 32nd Floor

 

New York, New York 10006

 

Attn:

Darrin Ocasio, Esq.

 

Tel:

212-930-9700

 

Fax:

212-930-9725

 

 

If to the Secured Party:

 

 

 

 

 

 

Attention:

 

Facsimile:

 

 

With a copy to:

 

 

 

 

 

 

Attention:

 

Facsimile:

 

12.           Other Security.  To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Party shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Party’s rights and
remedies hereunder.

 

13.           Miscellaneous.

 

(a)           No course of dealing between the Company and the Secured Party,
nor any failure to exercise, nor any delay in exercising, on the part of the
Secured Party, any right, power or privilege hereunder or under the Notes shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.

 

(b)           All of the rights and remedies of the Secured Party with respect
to the Collateral, whether established hereby or by the Notes or by any other
agreements, instruments or documents or by law shall be cumulative and may be
exercised singly or concurrently.

 

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(c)           This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and is intended to supersede all prior
negotiations, understandings and agreements with respect thereto.  Except as
specifically set forth in this Agreement, no provision of this Agreement may be
modified or amended except by a written agreement specifically referring to this
Agreement and signed by the parties hereto.

 

(d)           In the event that any provision of this Agreement is held to be
invalid, prohibited or unenforceable in any jurisdiction for any reason, unless
such provision is narrowed by judicial construction, this Agreement shall, as to
such jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable.  If, notwithstanding the foregoing, any provision of this
Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other jurisdiction.

 

(e)           No waiver of any breach or default or any right under this
Agreement shall be considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default or right, whether of the same or similar nature or
otherwise.

 

(f)            This Agreement shall be binding upon and inure to the benefit of
each party hereto and its successors and assigns.

 

(g)           Each party shall take such further action and execute and deliver
such further documents as may be necessary or appropriate in order to carry out
the provisions and purposes of this Agreement.

 

(h)           This Agreement shall be governed by and construed under the laws
of the State of New York applicable to contracts made and to be performed
entirely within the State of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
and County of New York for the adjudication of any dispute hereunder or any
other Transaction Document or in connection herewith or therewith or with any
transaction contemplated hereby or thereby, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper.  Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.

 

(i)            This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and, all of
which taken together shall constitute one and the same Agreement.  In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed on the day and year first above written.

 

 

ASPYRA, INC.

 

 

 

 

 

By:

 

 

James Zierick

 

Chief Executive Officer

 

 

 

 

 

SECURED PARTY

 

 

 

 

 

By:

 

 

J. Shawn Chalmers Revocable Trust DTD 8/13/96

 

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