Exhibit 10.5

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Security Agreement”), is made as of July 20,
2012, by and between Targeted Medical Pharma, Inc., a Delaware corporation,
having an address at 2980 Beverly Glen Circle, Suite 301, Los Angeles, CA 90077
(the “Obligor” or “Company”), and AFH Holding and Advisory, LLC, a Delaware
limited liability company, having an address at 9595 Wilshire Boulevard, Suite
700, Beverly Hills, CA 90212 (the “Secured Party”). (The Company and the Secured
Party may hereinafter be referred to singularly as a “party,” and collectively
as the “parties”).

 

W I T N E S S E T H

 

WHEREAS, concurrently herewith, the Obligor is entering into a letter agreement
with the Secured Party (the “Letter Agreement”), pursuant to which, in
consideration for past services rendered, the Obligor will issue to the Secured
Party (a) a Secured Convertible Promissory Note in the principal amount of
$585,448 (the “Note”); and (b) warrants to purchase 1,063,981 shares of the
Company’s common stock (the “Warrants”); and

 

WHEREAS, the Obligor has agreed to execute and deliver to the Secured Party this
Security Agreement for the benefit of the Secured Party and to grant to the
Secured Party a security interest in certain of the Obligor’s assets, as set
forth in Section 1(a) below, to secure the prompt payment, performance and
discharge in full of all of the Obligor’s obligations under the Security
Agreement, the Note and the Warrants.

 

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 Security Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Security Agreement that are defined in Article 9 of
the UCC shall have the respective meanings given such terms in Article 9 of the
UCC. Each capitalized term used herein, and not otherwise defined, shall have
the meaning ascribed thereto in the Letter Agreement.

 

(a) “Collateral” means the collateral in which the Secured Party is granted a
security interest by this Security and which shall 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 of the Obligor’s rights in and to Allen Salick MD, Inc. open claims from
October 8, 2007 through and including March 9, 2010, in the approximate value of
$2,658,000, as further set forth on Schedule A hereto; and

 

 

 

 

(ii) All of the Obligor’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 clause (i) above,
if any.

 

(b) “Obligations” means all of the Obligor’s obligations under this Security
Agreement, the Letter Agreement, the Note and the Warrants, 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.

 

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

 

2. Grant of Security Interest. To secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of the
Obligations, except for Permitted Liens (as hereinafter defined), the Obligor
hereby, unconditionally and irrevocably, pledges, grants and hypothecates to the
Secured Party, a continuing security interest in, a continuing lien upon, an
unqualified 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
Obligor’s right, title and interest of whatsoever kind and nature in and to the
Collateral (the “Security Interest”).

 

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

 

(a) The Obligor has the requisite corporate power and authority to enter into
this Security Agreement and otherwise to carry out its obligations hereunder.
The execution, delivery and performance by the Obligor of this Security
Agreement and the filings contemplated herein have been duly authorized by all
necessary action on the part of the Obligor and no further action is required by
the Obligor. This Security Agreement constitutes a legal, valid and binding
obligation of the Obligor 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) The Obligor represents and warrants that it has no place of business or
offices where its respective books of account and records are kept (other than
temporarily at the offices of its attorneys or accountants), except as set forth
on Schedule B attached hereto;

 

(c) Except as to those liens existing as of the date hereof that were disclosed
to the Secured Party by the Obligor and are set forth on the attached Schedule C
(the “Permitted Liens”), the Obligor is the sole owner of the Collateral (except
for non-exclusive licenses granted by the Obligor 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. Except as to the Permitted Liens, 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 Security Agreement) covering or affecting
any of the Collateral. Except as to the Permitted Liens, so long as this
Security Agreement shall be in effect, the Obligor 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 Security
Agreement).

 

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(d) No part of the Collateral has been judged invalid or unenforceable. No
written claim has been received that any Collateral or the Obligor’s use of any
Collateral violates the rights of any third party. There has been no adverse
decision to the Obligor’s claim of ownership rights in or exclusive rights to
use the Collateral in any jurisdiction or to the Obligor'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 Obligor,
threatened before any court, judicial body, administrative or regulatory agency,
arbitrator or other governmental authority.

 

(e) The Obligor shall at all times maintain its books of account and records
relating to the Collateral at its principal place of business and may not
relocate such books of account and records unless it delivers to the Secured
Party at least 30 days prior to such relocation (i) written notice of such
relocation and the new location thereof (which must be within the United States)
and (ii) evidence that appropriate financing statements and other necessary
documents have been filed and recorded and other steps have been taken to
perfect the Security Interest to create in favor of the Secured Party a valid,
perfected and continuing lien in the Collateral.

 

(f) This Security 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 perfected security interest in such Collateral. Except for the
filing of financing statements on Form-1 under the UCC with the jurisdictions
indicated on Schedule D, 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 Obligor of, or the effectiveness of,
the Security Interest granted hereby or for the execution, delivery and
performance of this Security Agreement by the Obligor or (ii) for the perfection
of or exercise by the Secured Party of its rights and remedies hereunder.

 

(g) The Obligor hereby irrevocably authorizes the Secured Party at any time and
from time to time to file in any Uniform Commercial Code jurisdiction any
initial financing statements and amendments thereto that (a) indicate the
Collateral regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9 of the Uniform Commercial Code of
the State of California as amended from time to time (“CAUCC”), or any other
Uniform Commercial Code jurisdiction; and (b) contain any other information
required by part 5 of Article 9 of the CAUCC for the sufficiency or filing
office acceptance of any financing statement or amendment, including whether the
Obligor is an organization, the type of organization and any organization
identification number issued to the Obligor. The Obligor agrees to furnish any
such information to the Secured Party promptly upon request. The Obligor also
ratifies its authorization for the Secured Party to have filed in any Uniform
Commercial Code jurisdiction any like initial financing statements or amendments
thereto if filed prior to the date hereof with respect to the Collateral.

 

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(h) The execution, delivery and performance of this Security 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 Obligor is a party or by the Obligor is bound. No consent
(including, without limitation, from stockholders or creditors of the Obligor)
is required for the Obligor to enter into and perform its obligations hereunder.

 

(i) The Obligor shall at all times maintain the liens and Security Interest
provided for hereunder as valid and perfected liens and security interests in
the Collateral in favor of the Secured Party until this Security Agreement and
the Security Interest hereunder shall be terminated pursuant to Section 11. The
Obligor hereby agrees to defend the same against any and all persons. The
Obligor shall safeguard and protect all Collateral for the account of the
Secured Party. At the request of the Secured Party, the Obligor will pay the
cost of filing one or more financing statements pursuant to the UCC (or any
other applicable statute) in form reasonably satisfactory to the Secured Party
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 Obligor shall pay
all fees, taxes and other amounts necessary to maintain the Collateral and the
Security Interest hereunder, and the Obligor 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.

 

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

 

(k) The Obligor 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.

 

(l) The Obligor 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 Obligor 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.

 

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(n) The Obligor shall permit the Secured Party and their 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 Obligor 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 Obligor 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 Obligor 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 Obligor 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) A breach by the Obligor of its material obligations under the Letter
Agreement, Note or Warrants, and failure to cure such breach for ten (10) days
after receipt by the Obligor of notice of such breach from the Secured Party;

 

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

 

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

 

5. Duty To Hold In Trust. Upon the occurrence of any Event of Default and at any
time thereafter, the Obligor shall, upon receipt by it of any revenue, income or
other sums subject to the Security Interest, whether payable pursuant to the
Letter Agreement, the Note, or otherwise, or of any check, draft, debenture,
trade acceptance or other instrument evidencing an obligation to pay any such
sum, hold the same in trust for the Secured Party and shall forthwith endorse
and transfer any such sums or instruments, or both, to the Secured Party for
application to the satisfaction of the Obligations.

 

6. 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 Letter Agreement, 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). The Secured Party
shall have the following rights and powers:

 

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(a) 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 Obligor shall assemble the Collateral and make it
available to the Secured Party at places which the Secured Party shall
reasonably select, whether at the Obligor's premises or elsewhere, and make
available to the Secured Party, without rent, all of the Obligor’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) The Secured Party shall have the right to operate the business of the
Obligor 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 Obligor or right of redemption of
the Obligor, 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 Obligor, which are hereby waived and released.

 

7. Applications of Proceeds.

 

(a) 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 Obligor any surplus
proceeds. If, upon the sale, license or other disposition of the Collateral, the
proceeds thereof are insufficient to pay all amounts to which the Secured Party
is legally entitled, the Obligor will be liable for the deficiency, together
with interest thereon, at the rate of 15% per annum (the “Default Rate”), and
the reasonable fees of any attorneys employed by the Secured Party to collect
such deficiency. To the extent permitted by applicable law, the Obligor waives
all claims, damages and demands against the Secured Party arising out of the
repossession, removal, retention or sale of the Collateral, unless due to the
gross negligence or willful misconduct of the Secured Party.

 

(b) All ordinary costs and expenses incurred by the Secured Party in collection
of the Obligations shall be borne exclusively by the Obligor including, without
limitation, any costs, expenses, fees or disbursements incurred by outside
agencies or attorneys retained by the Secured Party to effect collections of the
Obligations or any Collateral securing the Obligations. The provisions of this
paragraph shall not apply to any suits, actions, proceedings or claims of the
nature referred to herein or otherwise which are based upon or related to the
repayment of, or the taking of security for, any loans and/or advances made by
the Secured Party to the Company that do not arise under the Letter Agreement or
that are not participated in by the Secured Party, and the party making such
loans and/or advances shall be exclusively responsible for such suits, actions,
proceedings or claims and the payment of all such expenses in connection
therewith.

 

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8. Costs and Expenses. The Obligor agrees to pay all reasonable 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
Obligor 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. The Obligor will also, upon demand,
pay to the Secured Party the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts and
agents, which the Secured Party may incur in connection with (i) the enforcement
of this Security Agreement, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, or (iii) the
exercise or enforcement of any of the rights of the Secured Party under the
Letter Agreement. Until so paid, any fees payable hereunder shall be added to
the principal amount of the Note and shall bear interest at the Default Rate.

 

9. Responsibility for Collateral. The Obligor assumes all liabilities and
responsibility in connection with all Collateral, and the obligations of the
Obligor hereunder or under the Letter Agreement 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.

 

10. Security Interest Absolute. All rights of the Secured Party and all
Obligations of the Obligor hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Security
Agreement, the Letter Agreement, or any agreement entered into in connection
with the foregoing, or any portion hereof or thereof; (b) any change in the
time, manner or place of payment or performance of, or in any other term of, all
or any of the Obligations, or any other amendment or waiver of or any consent to
any departure from the Letter Agreement, or any other agreement entered into in
connection with the foregoing; (c) any exchange, release or nonperfection of any
of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guaranty, or any other security,
for all or any of the Obligations; (d) any action by the Secured Party to
obtain, adjust, settle and cancel in its sole discretion any insurance claims or
matters made or arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or equitable defense
available to the Obligor, or a discharge of all or any part of the Security
Interest granted hereby. Until the Obligations shall have been paid and
performed in full, the rights of the Secured Party shall continue even if the
Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy. The Obligor expressly
waives presentment, protest, notice of protest, demand, notice of nonpayment and
demand for performance. In the event that at any time any transfer of any
Collateral or any payment received by the Secured Party hereunder shall be
deemed by final order of a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under the bankruptcy or insolvency
laws of the United States, or shall be deemed to be otherwise due to any party
other than the Secured Party, then, in any such event, the Obligor’s obligations
hereunder shall survive cancellation of this Security Agreement, and shall not
be discharged or satisfied by any prior payment thereof and/or cancellation of
this Security Agreement, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof. The Obligor
waives all right to require the Secured Party to proceed against any other
person or to apply any Collateral which the Secured Party may hold at any time,
or to marshal assets, or to pursue any other remedy. The Obligor waives any
defense arising by reason of the application of the statute of limitations to
any obligation secured hereby.

 

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11. Term of Agreement. This Security Agreement and the Security Interest shall
terminate on the repayment of all amounts due the Secured Party under the Letter
Agreement and the Note. Upon such termination, the Secured Party, at the request
and at the expense of the Obligor, will join in executing any termination
statement with respect to any financing statement executed and filed pursuant to
this Security Agreement.

 

12. Power of Attorney; Further Assurances.

 

(a) The Obligor authorizes the Secured Party, and does hereby make, constitute
and appoint the Secured Party, and the Secured Party’s officers, agents,
successors or assigns with full power of substitution, as the Obligor’s true and
lawful attorney-in-fact, with power, in its own name or in the name of the
Obligor, to, after the occurrence and during the continuance of an Event of
Default, (i) endorse any debentures, checks, drafts, money orders, or other
instruments of payment (including payments payable under or in respect of any
policy of insurance) in respect of the Collateral that may come into possession
of the Secured Party; (ii) to sign and endorse any UCC financing statement or
any invoice, freight or express bill, bill of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications and notices in
connection with accounts, and other documents relating to the Collateral; (iii)
to pay or discharge taxes, liens, security interests or other encumbrances at
any time levied or placed on or threatened against the Collateral; (iv) to
demand, collect, receipt for, compromise, settle and sue for monies due in
respect of the Collateral; and (v) generally, to do, at the option of the
Secured Party, and at the Obligor’s expense, at any time, or from time to time,
all acts and things which the Secured Party deems necessary to protect, preserve
and realize upon the Collateral and the Security Interest granted therein in
order to effect the intent of this Security Agreement and the Letter Agreement,
all as fully and effectually as the Obligor might or could do; and the Obligor
hereby ratifies all that said attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney is coupled with an interest and shall be
irrevocable for the term of this Security Agreement and thereafter as long as
any of the Obligations shall be outstanding.

 

(b) On a continuing basis, the Obligor will make, execute, acknowledge, deliver,
file and record, as the case may be, in the proper filing and recording places
in any jurisdiction, including, without limitation, the jurisdictions indicated
on Schedule C, attached hereto, all such instruments, and take all such action
as may reasonably be deemed necessary or advisable, or as reasonably requested
by the Secured Party, to perfect the Security Interest granted hereunder and
otherwise to carry out the intent and purposes of this Security Agreement, or
for assuring and confirming to the Secured Party the grant or perfection of a
security interest in all the Collateral.

 

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(c) The Obligor hereby irrevocably appoints the Secured Party as the Obligor’s
attorney-in-fact, with full authority in the place and stead of the Obligor and
in the name of the Obligor, from time to time at the discretion of the Secured
Party, to take any action and to execute any instrument which the Secured Party
may deem necessary or advisable to accomplish the purposes of this Security
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 Obligor where permitted by law.

 

13. 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 Obligor: to the address first set forth in the Preambles to this
Security Agreement.

 

With copies to:

 

 

 

 

If to the Secured Party: to the address first set forth above.

 

With copies to:

 

 

 

 

14. 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.

 

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15. Miscellaneous.

 

(a) No course of dealing between the Obligor 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 Letter Agreement
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 Letter Agreement or by any
other agreements, instruments or documents or by law shall be cumulative and may
be exercised singly or concurrently.

 

(c) This Security 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 Security Agreement, no provision of this Security
Agreement may be modified or amended except by a written agreement specifically
referring to this Security Agreement and signed by the parties hereto.

 

(d) In the event that any provision of this Security Agreement is held to be
invalid, prohibited or unenforceable in any jurisdiction for any reason, unless
such provision is narrowed by judicial construction, this Security 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 Security 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 Security Agreement and without affecting the validity or enforceability of
such provision or the other provisions of this Security Agreement in any other
jurisdiction.

 

(e) No waiver of any breach or default or any right under this Security
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 Security 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 Security Agreement.

 

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(h) This Security Agreement shall be construed in accordance with the laws of
the State of California, except to the extent the validity, perfection or
enforcement of a security interest hereunder in respect of any particular
Collateral which are governed by a jurisdiction other than the State of
California in which case such law shall govern. Each of the parties hereto
irrevocably submit to the exclusive jurisdiction of any California State or
United States federal court sitting in Los Angeles county over any action or
proceeding arising out of or relating to this Security Agreement, and the
parties hereto hereby irrevocably agree that all claims in respect of such
action or proceeding may be heard and determined in such California State or
Federal court. The parties hereto agree that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. The parties hereto
further waive any objection to venue in the State of California and any
objection to an action or proceeding in the State of California on the basis of
forum non conveniens.

 

(i) EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY
TRAIL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SECURITY
AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY
DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATER OF
THIS SECURITY AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR
EACH PARTY TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY
RELIED ON THIS WAIVER IN ENTERING INTO THIS SECURITY AGREEMENT AND THAT EACH
PARTY WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS.
EACH PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH
ITS LEGAL COUNSEL, AND THAT SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS
RIGHTS TO A JURY TRIAL FOLLOWING SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE,
MEANING THAT, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS
SECURITY AGREEMENT. IN THE EVENT OF A LITIGATION, THIS SECURITY AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

(j) This Security 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 Security 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.

 

 

  OBLIGOR:           TARGETED MEDICAL PHARMA, INC.                 By:  /s/
William E. Shel     Name:
Title: William E. Shell, MD
Chief Executive Officer                   SECURED PARTY:             AFH HOLDING
AND ADVISORY, LLC                     By: /s/ Amir F. Heshmatpour     Name: Amir
F. Heshmatpour     Title: Managing Director

 

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