Exhibit 10.2

 

DYNAMIC HEALTH PRODUCTS, INC. AND CERTAIN OF ITS SUBSIDIARIES

MASTER SECURITY AGREEMENT

 

To: Laurus Master Fund, Ltd.

c/o M&C Corporate Services Ltd.

P.O. Box 309GT

Ugland House

South Church Street

George Town

Grand Cayman, Cayman Islands

 

Date: September 30, 2004

 

To Whom It May Concern:

 

1. To secure the payment of all Obligations (as hereafter defined), Dynamic
Health Products, Inc., a Florida corporation (the “Company”), each of the other
undersigned parties (other than Laurus Master Fund, Ltd, “Laurus”)) and each
other entity that is required to enter into this Master Security Agreement (each
an “Assignor” and, collectively, the “Assignors”) hereby assigns and grants to
Laurus a continuing security interest in all of the following property now owned
or at any time hereafter acquired by any Assignor, or in which any Assignor now
have or at any time in the future may acquire any right, title or interest (the
“Collateral”): all cash, cash equivalents, accounts, accounts receivable,
deposit accounts (including, without limitation, the Lockbox Deposit Accounts
(as defined below)), inventory, equipment, goods, documents, instruments
(including, without limitation, promissory notes), contract rights, general
intangibles (including, without limitation, payment intangibles and an absolute
right to license on terms no less favorable than those current in effect among
our affiliates), chattel paper, supporting obligations, investment property
(including, without limitation, all equity interests owned by any Assignor),
letter-of-credit rights, trademarks, trademark applications, tradestyles,
patents, patent applications, copyrights, copyright applications and other
intellectual property in which any Assignor 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 therefore. In the event any Assignor wishes to finance
the acquisition in the ordinary course of business of any hereafter acquired
equipment and have obtained a commitment from a financing source to finance such
equipment from an unrelated third party, Laurus agrees to release its security
interest on such hereafter acquired equipment so financed by such third party
financing source. Except as otherwise defined herein, all capitalized terms used
herein shall have the meaning provided such terms in the Securities Purchase
Agreement referred to below.

 

2. The term “Obligations” as used herein shall mean and include all debts,
liabilities and obligations owing by each Assignor to Laurus arising under, out
of, or in connection with: (i) that certain Securities Purchase Agreement dated
as of the date hereof by and between the Company and Laurus (the “Securities
Purchase Agreement”) and (ii) the Related Agreements

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referred to in the Securities Purchase Agreement, as each may be amended,
modified, restated or supplemented from time to time (collectively referred to
herein as the “Documents”), and in connection with any documents, instruments or
agreements relating to or executed in connection with the Documents or any
documents, instruments or agreements referred to therein or otherwise, and in
connection with any other indebtedness, obligations or liabilities of any
Assignor to Laurus, whether now existing or hereafter arising, direct or
indirect, liquidated or unliquidated, absolute or contingent, due or not due and
whether under, pursuant to or evidenced by a note, agreement, guaranty,
instrument or otherwise, in each case, irrespective of the genuineness,
validity, regularity or enforceability of such Obligations, or of any instrument
evidencing any of the Obligations or of any collateral therefor or of the
existence or extent of such collateral, and irrespective of the allowability,
allowance or disallowance of any or all of the Obligations in any case commenced
by or against any Assignor under Title 11, United States Code, including,
without limitation, obligations or indebtedness of each Assignor for
post-petition interest, fees, costs and charges that would have accrued or been
added to the Obligations but for the commencement of such case.

 

3. Each Assignor hereby jointly and severally represents, warrants and covenants
to Laurus that:

 

  (a) it is a corporation, partnership or limited liability company, as the case
may be, validly existing, in good standing and organized under the respective
laws of its jurisdiction of organization set forth on Schedule A, and each
Assignor will provide Laurus thirty (30) days’ prior written notice of any
change in any of its respective jurisdiction of organization;

 

  (b) its legal name is as set forth in its respective Articles of Incorporation
or other organizational document (as applicable) as amended through the date
hereof and as set forth on Schedule A, and it will provide Laurus thirty (30)
days’ prior written notice of any change in its legal name;

 

  (c) its organizational identification number (if applicable) is as set forth
on Schedule A hereto, and it will provide Laurus thirty (30) days’ prior written
notice of any change in any of its organizational identification number;

 

  (d) it is the lawful owner of the respective Collateral and it has the sole
right to grant a security interest therein and will defend the Collateral
against all claims and demands of all persons and entities;

 

  (e) it will keep its respective Collateral free and clear of all attachments,
levies, taxes, liens, security interests and encumbrances of every kind and
nature (“Encumbrances”), except (i) Encumbrances securing the Obligations and
(ii) to the extent said Encumbrance does not secure indebtedness in excess of
$50,000 and such Encumbrance is removed or otherwise released within ten (10)
days of the creation thereof;

 

  (f) it will, at its and the other Assignors joint and several cost and expense
keep the Collateral in good state of repair (ordinary wear and tear excepted)
and will not

 

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waste or destroy the same or any part thereof other than ordinary course
discarding of items no longer used or useful in its or such other Assignors’
business;

 

  (g) it will not without Laurus’ prior written consent, sell, exchange, lease
or otherwise dispose of the Collateral, whether by sale, lease or otherwise,
except for the sale of inventory in the ordinary course of business and for the
disposition or transfer in the ordinary course of business during any fiscal
year of obsolete and worn-out equipment or equipment no longer necessary for its
ongoing needs, having an aggregate fair market value of not more than $25,000
and only to the extent that:

 

(i) the proceeds of any such disposition of equipment are used to acquire
replacement Collateral which is subject to Laurus’ first priority perfected
security interest, or are used to repay Obligations or to pay general corporate
expenses; and

 

(ii) following the occurrence of an Event of Default which continues to exist
the proceeds of which are remitted to Laurus to be held as cash collateral for
the Obligations;

 

  (h) it will insure or cause the Collateral to be insured in Laurus’ name
against loss or damage by fire, theft, burglary, pilferage, loss in transit and
such other hazards as Laurus shall specify in amounts and under policies by
insurers acceptable to Laurus and all premiums thereon shall be paid by such
Assignor and the policies delivered to Laurus. If any such Assignor fails to do
so, Laurus may procure such insurance and the cost thereof shall be promptly
reimbursed by the Assignors, jointly and severally, and shall constitute
Obligations;

 

  (i) it will at all reasonable times allow Laurus or Laurus’ representatives
free access to and the right of inspection of the Collateral;

 

  (j) such Assignor (jointly and severally with each other Assignor) hereby
indemnifies and saves Laurus harmless from all loss, costs, damage, liability
and/or expense, including reasonable attorneys’ fees, that Laurus may sustain or
incur to enforce payment, performance or fulfillment of any of the Obligations
and/or in the enforcement of this Master Security Agreement or in the
prosecution or defense of any action or proceeding either against Laurus or any
Assignor concerning any matter growing out of or in connection with this Master
Security Agreement, and/or any of the Obligations and/or any of the Collateral
except to the extent caused by Laurus’ own gross negligence or willful
misconduct (as determined by a court of competent jurisdiction in a final and
nonappealable decision); and

 

  (k) On or prior to the 30th day following the date of the consummation by the
Company of the acquisition of Bob O’Leary Health Food Distributor Co., Inc., a
Pennsylvania corporation (“BOSS”), BOSS will (x) irrevocably direct all of its
present and future BOSS Account Debtors (as defined below) and other persons
obligated to

 

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make payments constituting Collateral owned by BOSS to make such payments
directly to the lockboxes maintained by BOSS (the “Lockboxes”) with [Wachovia
Bank, N.A.], with its principal place of business at [Insert Address] or such
other financial institution accepted by Laurus in writing as may be selected by
BOSS (the “Lockbox Bank”) (each such direction pursuant to this clause (x), a
“Direction Notice”) and (y) provide Laurus with copies of each Direction Notice,
each of which shall be agreed to and acknowledged by the respective BOSS Account
Debtor. Upon receipt of such payments, the Lockbox Bank has agreed to deposit
the proceeds of such payments in a deposit account maintained at the Lockbox
Bank and accepted by Laurus in writing (collectively, the “Lockbox Deposit
Accounts”). On or prior to the Closing Date, BOSS shall and shall cause the
Lockbox Bank to enter into all such documentation acceptable to Laurus pursuant
to which, among other things, the Lockbox Bank agrees to, following notification
by Laurus (which notification Laurus shall only give following the occurrence
and during the continuance of an Event of Default), comply only with the
instructions or other directions of Laurus concerning the Lockboxes and the
Lockbox Deposit Account. All of BOSS’s invoices, account statements and other
written or oral communications directing, instructing, demanding or requesting
payment of any BOSS Account (as defined below) of any BOSS or any other amount
constituting Collateral of BOSS shall conspicuously direct that all payments be
made to the Lockbox or such other address as Laurus may direct in writing. If,
notwithstanding the instructions to BOSS Account Debtors, any Assignor receives
any payments referred to in this Section 3(k), such Assignor shall immediately
remit such payments to the Lockbox Deposit Account in their original form with
all necessary endorsements. Until so remitted, such Assignor shall hold all such
payments in trust for and as the property of Laurus and shall not commingle such
payments with any of its other funds or property. For the purpose of this Master
Security Agreement, (x) “BOSS Accounts” shall mean all “accounts”, as such term
is defined in the Uniform Commercial Code as in effect in the State of New York
on the date hereof, now owned or hereafter acquired by BOSS (or any other
Assignor for the benefit of BOSS) and (y) “BOSS Account Debtor” shall mean any
person or entity who is or may be obligated with respect to, or on account of, a
BOSS Account.

 

4. The occurrence of any of the following events or conditions shall constitute
an “Event of Default” under this Master Security Agreement:

 

  (a) any covenant, warranty, representation or statement made or furnished to
Laurus by the Assignor or on the Assignor’s behalf was breached in any material
respect or false in any material respect when made or furnished, as the case may
be, and, in the case of a covenant, if subject to cure, shall not be cured for a
period of fifteen (15) days;

 

  (b) the loss, theft, substantial damage, destruction, sale or encumbrance to
or of any material portion of the Collateral or the making of any levy, seizure
or attachment thereof or thereon except to the extent:

 

(i) such loss is covered by insurance proceeds which are used to replace the
item or repay Laurus; or

 

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(ii) said levy, seizure or attachment does not secure indebtedness in excess of
$100,000 and such levy, seizure or attachment has not been removed or otherwise
released within ten (10) days of the creation or the assertion thereof;

 

  (c) any Assignor 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 Assignors’ property;

 

  (d) any proceedings under any bankruptcy or insolvency law shall be commenced
by any Assignor, or any proceedings under any bankruptcy law or insolvency law
shall be commenced against any Assignor, and such proceedings are not dismissed
within sixty (60) days after the date commenced;

 

  (e) the Company shall repudiate, purport to revoke or fail to perform any or
all of its obligations under any Note (after passage of applicable cure period,
if any); or

 

  (f) an Event of Default shall have occurred under and as defined in any
Document and any applicable cure period shall have elapsed without such Event of
Default having been cured.

 

5. Upon the occurrence of any Event of Default and at any time thereafter,
Laurus may declare all Obligations immediately due and payable and Laurus 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.
Upon the occurrence of any Event of Default and at any time thereafter, Laurus
will 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 Laurus may desire. Upon Laurus’ request, each of the
Assignors shall assemble or cause the Collateral to be assembled and make it
available to Laurus at a place designated by Laurus. 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
(10) days before such disposition, postage prepaid, addressed to any Assignor
either at such Assignor’s address shown herein or at any address appearing on
Laurus’ records for such Assignor. Any proceeds of any disposition of any of the
Collateral shall be applied by Laurus 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 Laurus toward the payment of the Obligations in
such order of application as Laurus may elect, and each Assignor shall be liable
for any deficiency. For the avoidance of doubt, following the occurrence and
during the continuance of an Event of Default, Laurus shall have the immediate
right to withdraw any and all monies contained in the Lockbox Deposit Accounts
or any other deposit accounts in the name of the Assignor and controlled by
Laurus and apply same to the repayment of the Obligations (in such order of
application as Laurus may elect).

 

6. If any Assignor defaults in the performance or fulfillment of any of the
terms, conditions, promises, covenants, provisions or warranties on such
Assignor’s part to be

 

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performed or fulfilled under or pursuant to this Master Security Agreement,
Laurus may, at its option without waiving its right to enforce this Master
Security Agreement according to its terms, immediately or at any time thereafter
and without notice to any Assignor, perform or fulfill the same or cause the
performance or fulfillment of the same for each Assignor’s joint and several
account and at each Assignor’s joint and several 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 default
rate set forth in Section 4.11 under the Note made by the Company to the Holder,
or, at Laurus’ option, debited by Laurus from the Lockbox Deposit Accounts or
any other deposit accounts in the name of the Assignor and controlled by Laurus.

 

7. Each Assignor appoints Laurus, any of Laurus’ officers, employees or any
other person or entity whom Laurus may designate as our attorney, with power to
execute such documents in each of our behalf and to supply any omitted
information and correct patent errors in any documents executed by any Assignor
or on any Assignor’s behalf; to file financing statements against us covering
the Collateral (and, in connection with the filing of any such financing
statements, describe the Collateral as “all assets and all personal property,
whether now owned and/or hereafter acquired” (or any substantially similar
variation thereof)); to sign our name on public records; and to do all other
things Laurus deem necessary to carry out this Master Security Agreement. Each
Assignor hereby ratifies and approves all acts of the attorney and neither
Laurus 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 other than gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and non-appealable decision). This power being coupled
with an interest, is irrevocable so long as any Obligations remains unpaid.

 

8. No delay or failure on Laurus’ 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 Laurus and then only to the extent therein set forth, and no
waiver by Laurus of any default shall operate as a waiver of any other default
or of the same default on a future occasion. Laurus’ books and records
containing entries with respect to the Obligations shall be admissible in
evidence in any action or proceeding, shall be binding upon each Assignor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof. Laurus shall have the right to enforce any one or
more of the remedies available to Laurus, successively, alternately or
concurrently. Each Assignor agrees to join with Laurus in executing financing
statements or other instruments to the extent required by the Uniform Commercial
Code in form satisfactory to Laurus and in executing such other documents or
instruments as may be required or deemed necessary by Laurus for purposes of
affecting or continuing Laurus’ security interest in the Collateral.

 

9. This Master Security 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
Laurus hereunder shall inure to the benefit of Laurus’ successors and assigns.
The term “Laurus” as herein used shall include Laurus, any parent of Laurus’,
any of Laurus’ subsidiaries and any co-subsidiaries of Laurus’ parent, whether
now existing or hereafter created or acquired, and all of the terms, conditions,
promises, covenants, provisions and warranties of this Agreement shall inure to
the benefit of each of the foregoing, and shall bind the representatives,
successors and assigns of each

 

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Assignor. Laurus and each Assignor hereby (a) waive any and all right to trial
by jury in litigation relating to this Agreement and the transactions
contemplated hereby and each Assignor agrees 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 and (c)
waive any objection Laurus or each Assignor may have as to the bringing or
maintaining of such action with any such court.

 

10. It is understood and agreed that any person or entity that desires to become
an Assignor hereunder, or is required to execute a counterpart of this Master
Security Agreement after the date hereof pursuant to the requirements of any
Document, shall become an Assignor hereunder by (x) executing a Joinder
Agreement in form and substance satisfactory to Laurus, (y) delivering
supplements to such exhibits and annexes to such Documents as Laurus shall
reasonably request and (z) taking all actions as specified in this Agreement as
would have been taken by such Assignor had it been an original party to this
Agreement, in each case with all documents required above to be delivered to
Laurus and with all documents and actions required above to be taken to the
reasonable satisfaction of Laurus.

 

11. All notices from Laurus to any Assignor shall be sufficiently given if
mailed or delivered to such Assignor’s address set forth below.

 

Very truly yours,

DYNAMIC HEALTH PRODUCTS, INC.

By:

 

/s/ Mandeep K. Taneja

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Name:

 

Mandeep K. Taneja

Title:

 

CEO

Address:

 

6911 Bryan Dairy Road, Suite 210

   

Largo, FL 33777

PHARMA LABS RX, INC.

By:

 

/s/ Mandeep K. Taneja

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Name:

 

Mandeep K. Taneja

Title:

 

CEO

Address:

 

SAME AS ABOVE

HERBAL HEALTH PRODUCTS, INC.

By:

 

/s/ Mandeep K. Taneja

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Name:

 

Mandeep K. Taneja

Title:

 

CEO

Address:

 

6911 Bryan Dairy Road, Suite 210

   

Largo, FL 33777

 

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DYNAMIC LIFE PRODUCTS, INC.

By:

 

/s/ Mandeep K. Taneja

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Name:

 

Mandeep K. Taneja

Title:

 

CEO

Address:

 

SAME AS ABOVE

ONLINE MEDS RX, INC.

By:

 

/s/ Mandeep K. Taneja

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Name:

 

Mandeep K. Taneja

Title:

 

CEO

Address:

 

SAME AS ABOVE

DYNAMIC FINANCIAL CONSULTANTS, LLC

By:

 

/s/ Mandeep K. Taneja

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Name:

 

Mandeep K. Taneja

Title:

 

CEO

Address:

 

SAME AS ABOVE

BRYAN CAPITAL LIMITED PARTNERSHIP

By:

 

/s/ Mandeep K. Taneja

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Name:

 

Mandeep K. Taneja

Title:

 

CEO

Address:

 

SAME AS ABOVE

 

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PHARMA LABS RX, INC.

By:

 

/s/ Mandeep K. Taneja

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Name:

 

Mandeep K. Taneja

Title:

 

CEO

Address:

 

SAME AS ABOVE

BOB O’LEARY HEALTH FOOD DISTRIBUTOR

CO, INC. (valid after acquisition closing)

By:

 

/s/ Mandeep K. Taneja

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Name:

 

Mandeep K. Taneja

Title:

 

CEO

Address:

 

6911 Bryan Dairy Road, Suite 210

Largo, FL 33777

ACKNOWLEDGED:

LAURUS MASTER FUND, LTD.

By:

 

/s/ David Grin

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Name:

 

David Grin

Title

 

Partner

 

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