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TherapeuticsMD, Inc. 8-K [thera-8k_022412.htm]
 
Exhibit 10.2
 
THERAPEUTICSMD, INC.
SECURITY AGREEMENT
 
This Security Agreement (as amended, modified or otherwise supplemented from
time to time, this “Agreement”), dated as of February 24, 2012, is executed by
TherapeuticsMD, Inc., a Nevada corporation (together with its successors and
assigns, the “Debtor”), in favor of Joel C. Schneider of The Law Offices of Joel
C. Schneider as Collateral Agent (as herein defined) on behalf of the lenders
set forth on Schedule I attached hereto (each, a “Secured Party” and
collectively, the “Secured Parties”).
 
RECITALS
 
A.    The Debtor has issued secured promissory notes in an aggregate principal
amount of up to $2,715,124 in favor of the Secured Parties (as amended, modified
or otherwise supplemented from time to time, each, a “Note” and collectively,
the “Notes”).
 
B.    In order to induce each Secured Party to extend the credit evidenced by
the Notes, the Debtor has agreed to enter into this Agreement and to grant
Collateral Agent, for the benefit of itself and the Secured Parties, the
security interest in the Collateral described below.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the terms, conditions and covenants set
forth herein, the receipt and adequacy of which are hereby acknowledged, the
Debtor hereby agrees with Collateral Agent and the Secured Parties as follows:
 
1. Definitions and Interpretation. When used in this Agreement, the following
terms have the following respective meanings:
 
“Collateral” means all inventory, equipment, accounts, chattel paper,
instruments, letter-of-credit rights, letters of credit, documents, deposit
accounts, investment property, money, other rights to payment and performance,
and general intangibles; all insurance refunds relating to the foregoing
property; all records and data and embedded software related to the foregoing
property, and all equipment, inventory and software to utilize, create, maintain
and process any such records and data on electronic media; and all supporting
obligations relating to the foregoing property; all whether now existing or
hereafter arising, whether now owned, or hereafter acquired or whether now or
hereafter subject to any rights in the foregoing property; and all products and
proceeds (including but not limited to all insurance payments) of or relating to
the foregoing property. The term “Collateral” shall not include any equipment or
other property financed by a third party, provided that such third party’s Liens
are Liens of the type described in subsection (d) of the definition of Permitted
Liens.
 
“Collateral Agent” has the meaning given to such term in Section 7(a) hereof.
 
 
 

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“Lien” means, with respect to any property, any security interest, mortgage,
pledge, lien, claim, charge or other encumbrance in, of, or on such property or
the income therefrom, including, without limitation, the interest of a vendor or
lessor under a conditional sale agreement, capital lease or other title
retention agreement, or any agreement to provide any of the foregoing, and the
filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction; provided, however, that
Lien shall not be deemed to include any Permitted Liens (as defined herein).
 
“Obligations” means the Notes and all interest, fees, charges, expenses,
attorneys’ fees and costs and accountants’ fees and costs chargeable to and
payable by the Debtor hereunder and thereunder, in each case, whether direct or
indirect, absolute or contingent, due or to become due, and whether or not
arising after the commencement of a proceeding under Title 11 of the United
States Code (11 U.S.C. Section 101 et seq.), as amended from time to time
(including post-petition interest) and whether or not allowed or allowable as a
claim in any such proceeding.
 
“Permitted Liens” means (a) Liens for taxes not yet due and payable or Liens for
taxes being contested in good faith; (b) Liens in respect of property or assets
imposed by law which were incurred in the ordinary course of business, such as
carriers’, warehousemen’s, materialmen’s and mechanics’ Liens and other similar
Liens arising in the ordinary course of business which are not delinquent or
remain payable without penalty or which are being contested in good faith and by
appropriate proceedings; (c) Liens incurred or deposits made in the ordinary
course of business in connection with workers’ compensation, unemployment
insurance and other types of social security, and mechanic’s Liens, carrier’s
Liens and other Liens to secure the performance of tenders, statutory
obligations, contract bids, government contracts, performance and return of
money bonds and other similar obligations, incurred in the ordinary course of
business, whether pursuant to statutory requirements, common law or consensual
arrangements; (d) Liens upon any equipment acquired or held by the Debtor to
secure the purchase price of such equipment or indebtedness incurred solely for
the purpose of financing the acquisition of such equipment, so long as such Lien
extends only to the equipment financed, and any accessions, replacements,
substitutions and proceeds (including insurance proceeds) thereof or thereto;
(e) Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default (as defined in the Notes) under the Notes; (f)
Liens which constitute rights of setoff of a customary nature or banker’s liens,
whether arising by law or by contract; (g) any Lien on personal property granted
in a lease for real property; and (h) leases or subleases and licenses or
sublicenses granted in the ordinary course of the Debtor’s business.
 
“Person” means and includes an individual, a partnership, a corporation
(including a business trust), a joint stock company, a limited liability
company, an unincorporated association, a joint venture or other entity or a
governmental authority.
 
“Secured Parties” has the meaning set forth in the Preamble of this Agreement.
 
“UCC” means the Uniform Commercial Code as in effect in the State of Nevada and
the State of Florida, from time to time.
 
Unless otherwise defined herein, all terms defined in the UCC have the
respective meanings given to those terms in the UCC.
 
 
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2. Grant of Security Interest. As security for the Obligations, the Debtor
hereby pledges to Collateral Agent and grants to Collateral Agent a security
interest in the Collateral.
 
3. Termination of Security Interest. Upon the satisfaction of the payment in
full of all Obligations, the security interest granted herein shall terminate
and all rights to the Collateral shall revert to the Debtor. Collateral Agent
shall, upon such satisfaction, execute, acknowledge, and deliver to the Debtor
(a) an instrument in writing releasing the security interest in the Collateral
under this Agreement and (b) such other documents as shall be reasonably
requested by the Debtor, to effect the termination and release of the security
interest in the Collateral. Additionally, upon such satisfaction, the Collateral
Agent shall reasonably cooperate with any efforts made by the Debtor to make of
record or otherwise confirm such satisfaction including, but not limited to, the
release and/or termination of this Agreement and any security interest in, to or
under the Collateral.
 
4. Representations and Warranties of Debtor. The Debtor hereby represents and
warrants to the Collateral Agent:
 
(a) The records of Debtor with respect to the Collateral are presently located
at the address listed in Section 8 of this Agreement.
 
(b) The chief executive office and principal place of business of the Debtor is
located at the address listed in Section 9 of this Agreement.
 
(c) The Debtor is a Nevada corporation and the exact legal name of Debtor is
listed in the introductory paragraph of this Agreement.
 
(d) The Debtor has good and marketable title to its assets, free and clear of
all Liens.
 
5. Agreements of Debtor. From and after the date of this Security Agreement, and
until all of the Obligations are paid in full, Debtor shall:
 
(a) Not sell, lease, transfer or otherwise dispose of Collateral or any interest
therein, except as provided for in the Note Purchase Agreement and for sales of
Inventory in the ordinary course of business.
 
(b) At the expense of the Debtor, take such actions and execute such financing
statements and other documents as the Collateral Agent may from time to time
request to maintain the perfected status of the Security Interest.
 
(c) Take any other action reasonably requested by the Collateral Agent to ensure
the attachment, perfection of, and the ability of Collateral Agent to enforce
the security interest in any and all of the Collateral including, without
limitation executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the UCC, to the extent, if any,
that the Debtor’s signature thereon is required therefor.
 
(d) Keep the Collateral consisting of tangible personal property insured against
loss or damage to the Collateral under a policy or policies covering such risks
as are ordinarily insured against by similar businesses.
 
 
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(e) Provide at least 10 days prior written notice to Collateral Agent prior to
changing its name or its place of business.
 
6. Default and Remedies.
 
(a) Default. The Debtor shall be deemed in default under this Agreement upon the
occurrence and during the continuance of an Event of Default (as defined in the
Notes).
 
(b) Remedies. Upon the occurrence and during the continuance of any such Event
of Default, Collateral Agent shall have the rights of a secured creditor under
the UCC, all rights granted by this Agreement and by law, including the right to
(i) require the Debtor to assemble the Collateral and make it available to
Collateral Agent and the Secured Parties at a place to be designated by
Collateral Agent and the Secured Parties, (ii) take physical possession of
inventory and other tangible Collateral, (iii) collect any and all money due or
to become due and enforce in the Debtor’s name all rights with respect to the
Collateral; and (iv) settle, adjust or compromise any dispute with respect to
any account. The Debtor hereby agrees that twenty (20) days’ notice of any
intended sale or disposition of any Collateral is reasonable.
 
(c) Application of Collateral Proceeds. The proceeds and/or avails of the
Collateral, or any part thereof, and the proceeds and the avails of any remedy
hereunder (as well as any other amounts of any kind held by Collateral Agent at
the time of, or received by Collateral Agent after, the occurrence of an Event
of Default) shall be paid to and applied as follows:
 
(i) First, to the payment of reasonable costs and expenses, including all
amounts expended to preserve the value of the Collateral, of foreclosure or
suit, if any, and of such sale and the exercise of any other rights or remedies,
and of all proper fees, expenses, liability and advances, including reasonable
legal expenses and attorneys’ fees, incurred or made hereunder by Collateral
Agent;
 
(ii) Second, to the payment to each Secured Party of the amount then owing or
unpaid on such Secured Party’s Note, and in case such proceeds shall be
insufficient to pay in full the whole amount so due, owing or unpaid upon such
Note, then its Pro Rata Share of the amount remaining to be distributed (to be
applied first to accrued interest and second to outstanding principal); and
 
(iii) Third, to the payment of the surplus, if any, to the Debtor, its
successors and assigns, or to whomsoever may be lawfully entitled to receive the
same.
 
For purposes of this Agreement, the term “Pro Rata Share” shall mean, when
calculating a Secured Party’s portion of any distribution or amount, that
distribution or amount (expressed as a percentage) equal to a fraction (i) the
numerator of which is the original outstanding principal amount of such Secured
Party’s Note and (ii) the denominator of which is the original aggregate
outstanding principal amount of all Notes. In the event that a Secured Party
receives payments or distributions in excess of its Pro Rata Share, then such
Secured Party shall hold in trust all such excess payments or distributions for
the benefit of the other Secured Parties and shall pay such amounts held in
trust to such other Secured Parties upon demand by such Secured Parties.
 
 
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7. Collateral Agent.
 
(a) Appointment. The Secured Parties hereby appoint Joel C. Schneider of The Law
Offices of Joel C. Schneider as collateral agent for the Secured Parties under
this Agreement (in such capacity, the “Collateral Agent”) to serve from the date
hereof until the termination of the Agreement.
 
(b) Powers and Duties of Collateral Agent, Indemnity by Secured Parties.
 
(i) Each Secured Party hereby irrevocably authorizes the Collateral Agent to
take such action and to exercise such powers hereunder as provided herein or as
requested in writing by the Holders in accordance with the terms hereof,
together with such powers as are reasonably incidental thereto. Collateral Agent
may execute any of its duties hereunder by or through agents or employees and
shall be entitled to request and act in reliance upon the advise of counsel
concerning all matters pertaining to its duties hereunder and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance therewith.
 
(ii) In the case of this Agreement and the transactions contemplated hereby,
each of the Secured Parties agrees to pay to the Collateral Agent, on demand,
its Pro Rata Share of all fees and all expenses incurred in connection with the
operation and enforcement of this Agreement, the Notes or any related agreement
to the extent that such fees or expenses have not been paid by the Debtor. In
the case of this Agreement and each instrument and document relating to any of
the Collateral, each of the Secured Parties hereby agrees to hold the Collateral
Agent harmless, and to indemnify the Collateral Agent from and against any and
all loss, damage, expense or liability which may be incurred by the Collateral
Agent under this Agreement and the transactions contemplated hereby, unless such
liability shall be caused by the willful misconduct or gross negligence of the
Collateral Agent.
 
8. Power of Attorney. Upon the occurrence and during the continuance of an Event
of Default, the Debtor does hereby constitute and appoint the Collateral Agent
as Debtor’s true and lawful attorney with full power of substitution for the
Debtor in the Debtor’s name, place and stead for the purposes of performing any
obligation of the Debtor under this Security Agreement and taking any action and
executing any instrument which the Collateral Agent may deem necessary or
advisable to perform any obligation of the Debtor under this Security Agreement,
which appointment is irrevocable and coupled with an interest, and shall not
terminate until the Obligations are paid in full.
 
 
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9. Miscellaneous.
 
(a) Notices. All notices and other communications required or permitted under
this Agreement shall be in writing and shall be delivered personally by hand or
by courier, mailed by United States first-class mail, postage prepaid, sent by
facsimile or sent by electronic mail directed (a) if to the Collateral Agent, to
its address, facsimile number or electronic mail address set forth below, or at
such other address, facsimile number or electronic mail address as the
Collateral Agent may designate by ten (10) days’ advance written notice to the
Debtor or (b) if to the Debtor, to its address, facsimile number or electronic
mail set forth below, or at such other address, facsimile number or electronic
mail as the Debtor may designate by ten (10) days’ advance written notice to the
Collateral Agent. All such notices and other communications shall be effective
or deemed given upon personal delivery, on the date of mailing, upon
confirmation of facsimile transfer or upon confirmation of electronic mail
delivery.

 
Collateral Agent:
   
Joel C. Schneider, Esq.
   
The Law Offices of Joel C. Schneider
   
595 Stewart Avenue, Suite 710
   
Garden City, NY 11530
   
Email: Schneiderjoel6@gmail.com
       
the Debtor:
TherapeuticsMD, Inc.
   
951 Broken Sound Parkway
   
Suite 320
   
Boca Raton, FL 33487
   
Attention: Robert Finizio, CEO
   
Email address: robert.finizio@therapeuticsmd.com

(b) Waivers and Amendments. This Agreement and the obligations of the Debtor and
the rights of the Secured Parties under this Agreement may be amended, waived,
discharged or terminated (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely) with the written consent of the Debtor and Secured Parties;
provided, however, that no such amendment or waiver shall reduce the percentage
of the principal amount of Notes that is required for consent to any amendment
or waiver, without the consent of all of the holders of the then outstanding
Notes. Any amendment, waiver discharge or termination effected in accordance
with this Section 9(b) shall be binding upon each Secured Party and the Debtor.
 
(c) Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS
OF THE STATE OF FLORIDA.
 
(d) Aggregation of Notes. All Notes held or acquired by a Secured Party and its
affiliated entities shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
 
(e) Entire Agreement. This Agreement (including the schedule attached hereto)
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
 
(f) Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
 
(g) Successors and Assigns. Except as otherwise expressly provided in this
Agreement, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
 
 
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(h) Delays or Omissions. No delay or omission to exercise any right, power, or
remedy accruing to a Secured Party, upon any breach or default of the Debtor
under this Agreement shall impair any such right, power, or remedy of the
Secured Party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent, or approval of any kind or character on
the part of the Holders of any breach or default under this Agreement or any
waiver on the part of the Holders of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to the Investors, shall be cumulative
and not alternative.
 
(i) Titles and Subtitles. The titles of the paragraphs and subparagraphs of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
 
(j) Telecopy Execution and Delivery. A facsimile, telecopy or other reproduction
of this Agreement may be executed by one or more parties hereto, and an executed
copy of this Agreement may be delivered by one or more parties hereto by
facsimile or similar electronic transmission device pursuant to which the
signature of or on behalf of such party can be seen, and such execution and
delivery shall be considered valid, binding and effective for all purposes. At
the request of any party hereto, all parties hereto agree to execute an original
of this Agreement as well as any facsimile, telecopy or other reproduction
hereof.
 
(k) Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall be deemed to
constitute one instrument.
 
(l) Construction. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
 
(m) Expenses. The Debtor shall pay on demand all reasonable fees and expenses,
including reasonable attorneys’ fees and expenses, incurred by Collateral Agent
in connection with custody, preservation or sale of, or other realization on,
any of the Collateral or the enforcement or attempt to enforce any of the
Obligations which is not performed as and when required by this Agreement.
 
(n) Other Interpretive Provisions. References in this Agreement (a) include all
schedules, and other attachments thereto, (b) include all documents, instruments
or agreements issued or executed in replacement thereof, and (c) mean such
document, instrument or agreement, or replacement or predecessor thereto, as
amended, modified and supplemented from time to time and in effect at any given
time. The words “hereof,” “herein” and “hereunder” and words of similar import
when used in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. The words “include” and “including” and
words of similar import when used in this Agreement shall not be construed to be
limiting or exclusive.
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
executed as of the day and year first above written.
 

 
DEBTOR:
     
THERAPEUTICSMD, INC.
     
By:
/s/ Robert Finizio
   
Robert Finizio
   
Chief Executive Officer

AGREED:
 
COLLATERAL AGENT:
 
The Law Offices of Joel C. Schneider
 
By:
/s/ Joel C. Schneider
   
Joel C. Schneider
 

 
 
 

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

 
SECURED PARTY:
     
PLATO & ASSOCIATES, LLC
     
By:
/s/ Robert J. Smith
   
Robert J. Smith
   
Managing Member
       
STEVEN C. JOHNSON
     
/s/ Steven G. Johnson
 
Steven G. Johnson

 
 

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SCHEDULE I
 
LIST OF SECURED PARTIES

Name and Address
Principal Amount of Note
PLATO & ASSOCIATES, LLC
$1,357,110
STEVEN G. JOHNSON
$1,358,014
   

 
 
 

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