SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the
“Agreement”), is entered into and made
effective as of March 19, 2009, by and between BBM HOLDINGS, INC., a Utah
corporation with its principal place of business located at 0000 Xxxxxxxxx Xxxx,
Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000 (the “Grantor”) in favor
YA GLOBAL INVESTMENTS,
L.P. (the “Secured
Party”).
WHEREAS, pursuant to that
certain Secured Party’s Xxxx of Sale of even date herewith between the Company
and the Secured Party (the “Xxxx of Sale”) the
Secured Party shall sell to the Company all of Advanced Viral Research Corp.’s
and Triad Biotherapeutics, Inc.’s right, title, and interest in and to the
certain personal property;
WHEREAS, in connection with
the Securities Purchase Agreement by and among the Company and the Secured Party
of even date herewith (the “Securities Purchase
Agreement”), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue to the Secured Party a
senior secured convertible debenture (the “Convertible
Debenture”) in the face amount of $500,000, which shall be convertible
into shares of the Company’s Common Stock (the “Conversion Shares”);
and
WHEREAS, it is a condition
precedent to the Secured Party purchasing the Convertible Debenture that the
Grantor shall have executed and delivered to the Secured Party this Agreement
providing for the grant to the Secured Party of a security interest in certain
personal property of the Grantor to secure all of the Company's obligations
under the “Transaction Documents” (as defined in the Securities Purchase
Agreement) (the “Transaction
Documents”);
NOW, THEREFORE, in
consideration of the promises and the mutual covenants herein contained, and for
other good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE
1.
DEFINITIONS AND
INTERPRETATIONS
Section
1.1. Interpretations.
Nothing herein expressed or implied is intended or shall be construed to confer
upon any person other than the Secured Party any right, remedy or claim under or
by reason hereof.
Section
1.2. Definitions.
Reference is hereby made to the Securities Purchase Agreement and the
Convertible Debenture for a statement of the terms thereof. All
capitalized terms used in this Agreement and the recitals hereto and not defined
herein shall have the meanings set forth in the Securities Purchase Agreement,
the Convertible Debentures, or in Articles 8 or 9 of the Uniform Commercial Code
as in effect from time to time in the State of New Jersey (the "Code").
Section
1.3. An “Event of Default” shall be deemed to have occurred under this Agreement
upon an Event of Default under and as defined in the Convertible
Debenture.
ARTICLE
2.
PLEDGED
PROPERTY
Section
2.1. Grant of Security
Interest.
(a) As
collateral security for all of the Obligations (as defined in Section 2.2 hereof),
the Grantor hereby pledges and assigns to the Secured Party, and grants to the
Secured Party for its benefit, a continuing security interest in and the
personal property described on Exhibit A attached
hereto (collectively, the Pledged Property).
(b)
Simultaneously with the execution and delivery of this Agreement, the Grantor
shall make, execute, acknowledge, file, record and deliver to the Secured Party
such documents, instruments, and agreements, including, without limitation,
financing statements, certificates, affidavits and forms as may, in the Secured
Party’s reasonable judgment, be necessary to effectuate, complete or perfect, or
to continue and preserve, the security interest of the Secured Party in the
Pledged Property.
Section
2.2 Security for
Obligations. The security interest created hereby in the
Pledged Property constitutes continuing collateral security for the payment by
the Company, as and when due and payable (by scheduled maturity, acceleration,
demand or otherwise), of all amounts from time to time owing by it in respect of
the Convertible Debentures, and other obligations from time to time existing in
respect of any of the Transaction Documents, whether or not now in existence or
hereinafter incurred, including without limitation, with respect to any
conversion rights of the Secured Party under the Convertible
Debenture.
ARTICLE
3.
ATTORNEY-IN-FACT;
PERFORMANCE
Section
3.1. Secured Party
Appointed Attorney-In-Fact.
Upon the
occurrence and during the continuance of an Event of Default, the Grantor hereby
appoint the Secured Party as its attorney-in-fact, with full authority in the
place and stead of the Grantor and in the name of the Grantor or otherwise,
exercisable from time to time in the Secured Party’s discretion to take any
action and to execute any instrument which the Secured Party may reasonably deem
necessary to accomplish the purposes of this Agreement, including, without
limitation, to (a) receive and collect all instruments made payable to the
Grantor representing any payments in respect of the Pledged Property or any part
thereof and to give full discharge for the same; (b) demand, collect, receipt
for, settle, compromise, adjust, xxx for, foreclose, or realize on the Pledged
Property as and when the Secured Party may determine, and (c) to facilitate
collection, the Secured Party may notify account debtors and obligors on any
Pledged Property to make payments directly to the Secured Party. The
foregoing power of attorney is a power coupled with an interest and shall be
irrevocable until all Obligations are paid in full. The Grantor
agrees that the powers conferred on the Secured Party hereunder are solely to
protect the Secured Party’s interests in the Pledged Property and shall not
impose any duty upon the Secured Party to exercise any such powers.
Section
3.2. Secured Party May
Perform.
If the
Grantor fails to perform any agreement contained in Section 4(h) of the
Securities Purchase Agreement, or upon the occurrence and continuance of an
Event of Default, if the Grantor fails to perform any agreement herein, the
Secured Party, at its option, may itself perform, or cause performance of, such
agreement, and the expenses of the Secured Party incurred in connection
therewith shall be included in the Obligations secured hereby and payable by
such Grantor under Section 8.3.
ARTICLE
4.
REPRESENTATIONS AND
WARRANTIES
Section
4.1. Authorization;
Enforceability.
Each of
the parties hereto represents and warrants that it has taken all action
necessary to authorize the execution, delivery and performance of this Agreement
and the transactions contemplated hereby; and upon execution and delivery, this
Agreement shall constitute a valid and binding obligation of the respective
party, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors’ rights or by the principles governing the
availability of equitable remedies.
Section
4.2. Ownership of
Pledged Property.
The
Grantor represents and warrants that it is the legal and beneficial owner of the
Pledged Property free and clear of any lien, security interest, option or other
charge or encumbrance (each, a “Lien”) except for the security interest created
by this Agreement and other Permitted Liens. For purposes of this
Agreement, “Permitted Liens” means: (1) the security interest created by this
Agreement, (2) existing Liens which have been disclosed by the Company to the
Secured Party on Schedule 4.2 attached hereto; (3) inchoate Liens for taxes,
assessments or governmental charges or levies not yet due, as to which the grace
period, if any, related thereto has not yet expired, or being contested in good
faith and by appropriate proceedings for which adequate reserves have been
established in accordance with generally accepted accounting principles (“GAAP”); (4) Liens of
carriers, materialmen, warehousemen, mechanics and landlords and other similar
Liens which secure amounts which are not yet overdue by more than 60 days or
which are being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP; (5) licenses,
sublicenses, leases or subleases granted to other Persons not materially
interfering with the conduct of the business of the Company; (6) Liens securing
capitalized lease obligations and purchase money indebtedness incurred solely
for the purpose of financing an acquisition or lease; (7) easements,
rights-of-way, restrictions, encroachments, municipal zoning ordinances and
other similar charges or encumbrances, and minor title deficiencies, in each
case not securing debt and not materially interfering with the conduct of the
business of the Company and not materially detracting from the value of the
property subject thereto; (8) Liens arising out of the existence of judgments or
awards which judgments or awards do not constitute an Event of Default; (9)
Liens incurred in the ordinary course of business in connection with workers
compensation claims, unemployment insurance, pension liabilities and social
security benefits and Liens securing the performance of bids, tenders, leases
and contracts in the ordinary course of business, statutory obligations, surety
bonds, performance bonds and other obligations of a like nature (other than
appeal bonds) incurred in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money); (10) Liens in favor
of a banking institution arising by operation of law encumbering deposits
(including the right of set-off) and contractual set-off rights held by such
banking institution and which are within the general parameters customary in the
banking industry and only burdening deposit accounts or other funds maintained
with a creditor depository institution; (11) usual and customary set-off rights
in leases and other contracts; and (12) escrows in connection with acquisitions
and dispositions.
Section
4.3 RESERVED.
Section
4.4 Location, State of
Incorporation and Name of Grantor.
The
Grantor’s principal place of business, state of organization, organization
identification number, and exact legal name is as set forth on each such
Grantor’s signature page to this Agreement.
Section
4.5 Priority of
Security Interest.
The
security interest granted to the Secured Party hereunder shall be a first
priority security interest subject to no other Liens.
ARTICLE
5.
DEFAULT;
REMEDIES
Section
5.1 Method of
Realizing Upon the Pledged Property: Other Remedies.
If any
Event of Default shall have occurred and be continuing:
(a) The
Secured Party may exercise in respect of the Pledged Property, in addition to
any other rights and remedies provided for herein or otherwise available to it,
all of the rights and remedies of a secured party upon default under the Code
(whether or not the Code applies to the affected Pledged Property), and also may
(i) take absolute control of the Pledged Property, including, without
limitation, transfer into the Secured Party's name or into the name of its
nominee or nominees (to the extent the Secured Party has not theretofore done
so) and thereafter receive, for the benefit of the Secured Party, all payments
made thereon, give all consents, waivers and ratifications in respect thereof
and otherwise act with respect thereto as though it were the outright owner
thereof, (ii) require the Grantor to assemble all or part of the Pledged
Property as directed by the Secured Party and make it available to the Secured
Party at a place or places to be designated by the Secured Party that is
reasonably convenient to both parties, and the Secured Party may enter into and
occupy any premises owned or leased by a Grantor where the Pledged Property or
any part thereof is located or assembled for a reasonable period in order to
effectuate the Secured Party's rights and remedies hereunder or under law,
without obligation to the Grantor in respect of such occupation, and
(iii) without notice except as specified below and without any obligation
to prepare or process the Pledged Property for sale, (A) sell the Pledged
Property or any part thereof in one or more parcels at public or private sale,
at any of the Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, and at such price or prices and upon such other terms as the
Secured Party may deem commercially reasonable and/or (B) lease, license or
dispose of the Pledged Property or any part thereof upon such terms as the
Secured Party may deem commercially reasonable. The Grantor agrees
that, to the extent notice of sale or any other disposition of the Pledged
Property shall be required by law, at least ten (10) days' notice to the Grantor
of the time and place of any public sale or the time after which any private
sale or other disposition of the Pledged Property is to be made shall constitute
reasonable notification. The Secured Party shall not be obligated to
make any sale or other disposition of any Pledged Property regardless of notice
of sale having been given. The Secured Party may adjourn any public
or private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. The Grantor hereby waives any
claims against the Secured Party arising by reason of the fact that the price at
which the Pledged Property may have been sold at a private sale was less than
the price which might have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Secured Party accepts the first
offer received and does not offer such Pledged Property to more than one
offeree, and waives all rights that the Grantor may have to require that all or
any part of such Pledged Property be marshaled upon any sale (public or private)
thereof. The Grantor hereby acknowledges that (i) any such sale
of the Pledged Property by the Secured Party may be made without warranty,
(ii) the Secured Party may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth
in clauses (i) and (ii) above shall not adversely affect the commercial
reasonableness of any such sale of Pledged Property.
(b) Any
cash held by the Secured Party as Pledged Property and all cash proceeds
received by the Secured Party in respect of any sale of or collection from, or
other realization upon, all or any part of the Pledged Property shall be applied
(after payment of any amounts payable to the Secured Party pursuant to Section
8.3 hereof) by the Secured Party against, all or any part of the Obligations in
such order as the Secured Party shall elect, consistent with the provisions of
the Securities Purchase Agreement. Any surplus of such cash or cash
proceeds held by the Secured Party and remaining after the indefeasible payment
in full in cash of all of the Obligations shall be paid over to whomsoever shall
be lawfully entitled to receive the same or as a court of competent jurisdiction
shall direct.
(c) The
Grantor hereby acknowledges that if the Secured Party complies with any
applicable state, provincial, or federal law requirements in connection with a
disposition of the Pledged Property, such compliance will not adversely affect
the commercial reasonableness of any sale or other disposition of the Pledged
Property.
(d) The
Secured Party shall not be required to marshal any present or future collateral
security (including, but not limited to, this Agreement and the Pledged
Property) for, or other assurances of payment of, the Obligations or any of them
or to resort to such collateral security or other assurances of payment in any
particular order, and all of the Secured Party's rights hereunder and in respect
of such collateral security and other assurances of payment shall be cumulative
and in addition to all other rights, however existing or arising. To
the extent that the Grantor lawfully may, the Grantor hereby agrees that it will
not invoke any law relating to the marshaling of collateral which might cause
delay in or impede the enforcement of the Secured Party's rights under this
Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that it lawfully may, the Company hereby irrevocably waives the
benefits of all such laws.
Section
5.2 Duties Regarding
Pledged Property.
The
Secured Party shall have no duty as to the collection or protection of the
Pledged Property or any income thereon or as to the preservation of any rights
pertaining thereto, beyond the safe custody and reasonable care of any of the
Pledged Property actually in the Secured Party’s possession.
Section
5.3 Non-Recourse. As
set forth in the Convertible Debentures, the Obligations are made without
recourse to the Grantor and therefore, in the event that the proceeds of any
sale, collection, or realization of any Pledged Property hereunder are
insufficient to pay all the Obligations the Grantor shall not be liable for any
deficiency.
ARTICLE
6.
AFFIRMATIVE
COVENANTS
So long
as any of the Obligations shall remain outstanding, unless the Secured Party
shall otherwise consent in writing:
Section
6.1. Existence,
Properties, Etc.
(a) The
Grantor shall do, or cause to be done, all things, or proceed with due diligence
with any actions or courses of action, that may be reasonably necessary
(i) to maintain Grantor’s due organization, valid existence and good
standing under the laws of its state of incorporation, and (ii) to preserve
and keep in full force and effect all qualifications, licenses and registrations
in those jurisdictions in which the failure to do so could have a Material
Adverse Effect (as defined below); and (b) the Grantor shall not do, or
cause to be done, any act impairing the Grantor’s corporate power or authority
(i) to carry on the Grantor’s business as now conducted, and (ii) to
execute or deliver this Agreement or any other document delivered in connection
herewith, including, without limitation, any UCC-1 Financing Statements required
by the Secured Party (which other loan instruments collectively shall be
referred to as the “Loan
Instruments”) to which it is or will be a party, or perform any of
its obligations hereunder or thereunder. For purpose of this
Agreement, the term “Material Adverse
Effect” shall mean any material and adverse affect as determined by
Secured Party in its reasonable discretion, whether individually or in the
aggregate, upon (a) the Grantor’s assets, business, operations, properties
or condition, financial or otherwise; (b) the Grantor’s ability to make
payment as and when due of all or any part of the Obligations; or (c) the
Pledged Property.
Section
6.2. Financial
Statements and Reports.
The
Grantor shall furnish to the Secured Party within a reasonable time such
financial data as the Secured Party may reasonably request.
Section
6.3. RESERVED.
Section
6.4. Maintenance of
Books and Records; Inspection.
The
Grantor shall maintain its books, accounts and records in accordance with GAAP,
and permit the Secured Party, its officers and employees and any professionals
designated by the Secured Party in writing, at any time during normal business
hours and upon reasonable notice to visit and inspect any of its properties
(including but not limited to the collateral security described in the
Transaction Documents and/or the Loan Instruments), corporate books and
financial records, and to discuss its accounts, affairs and finances with any
employee, officer or director thereof (it being agreed that, unless an Event of
Default shall have occurred and be continuing, there shall be no more than two
(2) such visits and inspections in any calendar year).
Section
6.5. Maintenance and
Insurance.
(a) The
Grantor shall maintain or cause to be maintained, at its own expense, all of
Pledged Property in good working order and condition, ordinary wear and tear
excepted, making all necessary repairs thereto and renewals and replacements
thereof.
(b) The
Grantor shall maintain or cause to be maintained, at its own expense, insurance
in form, substance and amounts (including deductibles), which the Grantor deems
reasonably necessary with respect to the Pledged Property, (i) adequate to
insure all Pledged Property of a character usually insured by persons engaged in
the same or similar business against loss or damage resulting from fire or other
risks included in an extended coverage policy; (ii) against public
liability and other tort claims that may be incurred by the Grantor;
(iii) as may be required by the Transaction Documents and/or applicable law
and (iv) as may be reasonably requested by Secured Party, all with financially
sound and reputable insurers.
Section
6.6. Contracts and
Other Collateral.
The
Grantor shall perform all of its obligations under or with respect to each
instrument, receivable, contract and other intangible included in the Pledged
Property to which the Grantor is now or hereafter will be party on a timely
basis and in the manner therein required, including, without limitation, this
Agreement, except to the extent the failure to so perform such obligations would
not reasonably be expected to have a Material Adverse Effect.
Section
6.7. Defense of
Collateral, Etc.
The
Grantor shall defend and enforce its right, title and interest in and to any
part of: (a) the Pledged Property; and (b) if not included
within the Pledged Property, those assets and properties whose loss would
reasonably be expected to have a Material Adverse Effect, each against all
manner of claims and demands on a timely basis to the full extent permitted by
applicable law (other than any such claims and demands by holders of Permitted
Liens).
Section
6.8. Taxes and
Assessments.
The
Grantor shall (a) file all material tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency (taking into account any extensions of the original due date),
(b) pay and discharge all material taxes, assessments and governmental
charges or levies imposed upon the Grantor, upon its income and profits or upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all material taxes, assessments and governmental
charges or levies that, if unpaid, might become a lien or charge upon any of its
properties; provided,
however, that the Grantor in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves are maintained with respect thereto if
and to the extent required by GAAP.
Section
6.9. Compliance with
Law and Other Agreements.
The
Grantor shall maintain its business operations and property owned or used in
connection therewith in compliance with (a) all applicable federal, state
and local laws, regulations and ordinances governing such business operations
and the use and ownership of such property, and (b) all agreements,
licenses, franchises, indentures and mortgages to which the Grantor is a party
or by which the Grantor or any of its properties is bound, except where the
failure to so comply would not reasonably be expected to have a Material Adverse
Effect.
Section
6.10. Notice of
Default.
The
Grantor will immediately notify the Secured Party of any event causing a
substantial loss or diminution in the value of all or any material part of the
Pledged Property and the amount or an estimate of the amount of such loss or
diminution and any Event of Default.
Section
6.11. Notice of
Litigation.
The
Grantor shall give notice, in writing, to the Secured Party of (a) any
actions, suits or proceedings wherein the amount at issue is in excess of
$250,000, instituted by any persons against the Grantor, or affecting any of the
Pledged Property, and (b) any dispute, not resolved within fifteen (15)
days of the commencement thereof, between the Grantor on the one hand and any
governmental or regulatory body on the other hand, which might reasonably be
expected to have a Material Adverse Effect on the Pledged Property.
Section
6.13. Future
Subsidiaries.
If any
Grantor shall hereafter create or acquire any subsidiary to hold any of the
Pledged Property, simultaneously with the creation or acquisition of such
subsidiary, such Grantor shall cause such subsidiary to become a party to this
Agreement as an additional "Grantor" hereunder, and to duly execute and deliver
a guaranty of the Obligations in favor of the Secured Party in form and
substance reasonably acceptable to the Secured Party, and to duly execute and/or
deliver such opinions of counsel and other documents, in form and substance
reasonably acceptable to the Secured Party, as the Secured Party shall
reasonably request with respect thereto.
Section
6.14. Changes to
Identity.
The
Grantor will (a) give the Secured Party at least 30 days' prior written notice
of any change in such Grantor's name, identity or organizational structure, (b)
maintain its jurisdiction of incorporation, organization or formation as set
forth on its respective signature page attached hereto, (C) immediately notify
the Secured Party upon obtaining an organizational identification number, if on
the date hereof such Grantor did not have such identification
number.
Section
6.15. RESERVED.
Section
6.16 Perfection of
Security Interests.
(a) Financing
Statements. The Grantor hereby irrevocably authorizes
the Secured Party, at the sole cost and expense of the Grantor, at any time and
from time to time to file in any filing office in any jurisdiction any initial
financing statements and amendments thereto that (a) indicate the Pledged
Property (i) as all assets of Grantor set forth on Exhibit A, regardless of
whether any particular asset comprised in the Pledged Property falls within the
scope of Article 9 of the Code of such jurisdiction, or (ii) as being of an
equal or lesser scope or with greater detail, and (b) contain any other
information required by Part 5 of Article 9 of the Code for the sufficiency or
filing office acceptance of any financing statement or amendment, including (i)
whether such Grantor is an organization, the type of organization and any
organization identification number issued to such Grantor, and (ii) in the case
of a financing statement filed as a fixture filing, a sufficient description of
real property to which the Pledged Property relates. Grantor agrees
to furnish any such information to the Secured Party promptly upon
request. Grantor also ratify their authorization for the Secured
Party to have filed in any jurisdiction any initial financing statements or
amendments thereto if filed prior to the date hereof. The Grantor acknowledges
that they are not authorized to file any financing statement or amendment or
termination statement with respect to any financing statement without the prior
written consent of the Secured Party and agree that they will not do so without
the prior written consent of the Secured Party. The Grantor
acknowledges and agree that this Agreement constitutes an authenticated
record.
(b) Possession. The
Grantor (i) shall be entitled to have possession of the Pledged Property, except
where expressly otherwise provided in this Agreement or where the Secured Party
is required under the UCC to perfect its security interest by taking possession
in addition to the filing of a financing statement; and (ii) will, where Pledged
Property is in the possession of a third party, join with the Secured Party in
notifying the third party of the Secured Party’s security interest and use
commercially reasonable effort to obtain an acknowledgment from the third party
that it is holding the Pledged Property for the benefit of the Secured
Party.
(c) Control. The Grantor
will cooperate with the Secured Party in obtaining control with respect to the
Pledged Property consisting of (i) Investment Property, (ii) Letters of Credit
and Letter-of-Credit Rights and (iii) electronic Chattel Paper.
(d) Marking of Chattel
Paper. The Grantor will not create any Chattel Paper without placing a
legend on the Chattel Paper acceptable to the Secured Party indicating that the
Secured Party has a security interest in the Chattel Paper.
Section
6.17 RESERVED.
Section
6.18 Location of
Pledged Property.
Within 30
days of the date hereof the Grantor shall given the Secured Party written notice
of the location of all the Pledged Property and shall keep all the Pledged
Property at such disclosed location, and unless otherwise provided herein, the
Grantor shall not remove any Pledged Property from such locations without the
prior written consent of the Secured Party which consent shall not be
unreasonably withheld.
ARTICLE
7.
NEGATIVE
COVENANTS
So long
as any of the Obligations shall remain outstanding, unless the Secured Party
shall otherwise consent in writing the Grantor covenants and agrees that it
shall not:
Section
7.1. Transfers, Liens
and Encumbrances.
(a) Sell,
assign (by operation of law or otherwise), lease, license, exchange or otherwise
transfer or dispose of any of the Pledged Property.
(b)
Directly or indirectly make, create, incur, assume or permit to exist any Lien
in, to or against any part of the Pledged Property other than Permitted
Liens.
Section
7.2. RESERVED
Section
7.3. Incurrence of
Indebtedness.
Directly
or indirectly, incur or guarantee, assume or suffer to exist any indebtedness,
other than the indebtedness evidenced by the Convertible Debentures and other
Permitted Indebtedness. “Permitted
Indebtedness” means: (i) indebtedness evidenced by Convertible
Debentures; (ii) indebtedness described on the Disclosure Schedule to the
Securities Purchase Agreement; (iii) indebtedness incurred solely for the
purpose of financing the acquisition or lease of any equipment by the Company,
including capital lease obligations with no recourse other than to such
equipment; (iv) indebtedness, the repayment of which has been subordinated to
the payment of the Convertible Debentures, including with regard to interest
payments and repayment of principal; (v) indebtedness solely between the Grantor
and/or one of its domestic subsidiaries, on the one hand, and the Grantor and/or
one of its domestic subsidiaries, on the other which indebtedness is not secured
by any assets of the Grantor or any of its subsidiaries, provided that (x) in
each case a majority of the equity of any such domestic subsidiary is directly
or indirectly owned by the Grantor, such domestic subsidiary is controlled by
the Grantor and such domestic subsidiary has executed a security agreement in
the form of this Agreement and (y) any such loan shall be evidenced by an
intercompany note that is pledged by the Grantor or its subsidiary, as
applicable, as collateral pursuant to this Agreement; (vi) reimbursement
obligations in respect of letters of credit issued for the account of the
Grantor or any of its subsidiaries for the purpose of securing performance
obligations of the Grantor or its subsidiaries incurred in the ordinary course
of business so long as the aggregate face amount of all such letters of credit
does not exceed $500,000 at any one time; (vii) other indebtedness of any type
not to exceed $150,000, and (viii) renewals, extensions and refinancing of any
indebtedness described in clauses (i) or (iii) of this subsection.
Section
7.4. Places of
Business.
Change
the location of its chief place of business, chief executive office or any place
of business disclosed to the Secured Party, unless such change in location is to
a different location within the United States and the Grantor provides notice to
the Secured Party of new location within 10 days’ of such change in
location.
ARTICLE
8.
MISCELLANEOUS
Section
8.1. Notices.
Any
notices, consents, waivers or other communications required or permitted to be
given under the terms hereof must be in writing and will be deemed to have been
delivered: (i) upon delivery, when delivered personally; (ii) upon
confirmation of receipt, when sent by facsimile; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
|
If
to the Secured Party:
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YA
Global Investments, L.P.
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000
Xxxxxx Xxxxxx-Xxxxx 0000
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|
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Xxxxxx
Xxxx, Xxx Xxxxxx 00000
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|
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Attention:
Xxxx Xxxxxx
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|
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Portfolio
Manager
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Telephone:
(000) 000-0000
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Facsimile:
(000) 000-0000
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With
a copy to:
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Xxxxx
Xxxxxxxx, Esq.
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000
Xxxxxx Xxxxxx, Xxxxx 0000
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Xxxxxx
Xxxx, XX 00000
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Telephone:
(000) 000-0000
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Facsimile:
(000) 000-0000
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If
to the Company:
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|
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0000
Xxxxxxxxx Xxxx, Xxxxx 000
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Xxxx
Xxxx Xxxx, Xxxx 00000
|
|
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Attention: Chief
Executive Officer
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|
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Telephone:
|
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Facsimile:
|
|
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With
a copy to:
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Xxxxx
Xxxxxx
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Xxxx
& Hessen LLP
|
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000
Xxxxxxx Xxx, 00xx Xxxxx
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Xxx
Xxxx, XX 00000
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Telephone:
(000) 000-0000
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Facsimile:
(000) 000-0000
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If
to any other Grantor
|
To
the address listed on the respective signature pages attached
hereto
|
Any party
may change its address by giving notice to the other party stating its new
address. Commencing on the tenth (10th) day
after the giving of such notice, such newly designated address shall be such
party’s address for the purpose of all notices or other communications required
or permitted to be given pursuant to this Agreement.
Section
8.2. Severability.
If any
provision of this Agreement shall be held invalid or unenforceable, such
invalidity or unenforceability shall attach only to such provision and shall not
in any manner affect or render invalid or unenforceable any other severable
provision of this Agreement, and this Agreement shall be carried out as if any
such invalid or unenforceable provision were not contained herein.
Section
8.3. Expenses.
In the
event of an Event of Default, the Company will pay to the Secured Party the
amount of any and all reasonable out-of-pocket expenses, including the
reasonable fees and expenses of its counsel, which the Secured Party may incur
in connection with: (i) the custody or preservation of, or the
sale, collection from, or other realization upon, any of the Pledged Property;
(ii) the exercise or enforcement of any of the rights of the Secured Party
hereunder or (iii) the failure by the Grantor to perform or observe any of
the provisions hereof.
Section
8.4. Waivers,
Amendments, Etc.
The
Secured Party’s delay or failure at any time or times hereafter to require
strict performance by Grantor of any undertakings, agreements or covenants shall
not waive, affect, or diminish any right of the Secured Party under this
Agreement to demand strict compliance and performance herewith. Any
waiver by the Secured Party of any Event of Default shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type. None of the
undertakings, agreements and covenants of the Grantor contained in this
Agreement, and no Event of Default, shall be deemed to have been waived by the
Secured Party, nor may this Agreement be amended, changed or modified, unless
such waiver, amendment, change or modification is evidenced by an instrument in
writing specifying such waiver, amendment, change or modification and signed by
the Secured Party in the case of any such waiver, and signed by the Secured
Party and the Grantor in the case of any such amendment, change or
modification. Further, no such document, instrument, and/or agreement
purported to be executed on behalf of the Secured Party shall be binding upon
the Secured Party unless executed by a duly authorized representative of the
Secured Party.
Section 8.5. Continuing Security
Interest.
This
Agreement shall create a continuing security interest in the Pledged Property
and shall: (i) remain in full force and effect so long as any of the
Obligations shall remain outstanding; (ii) be binding upon the Grantor and
its successors and assigns; and (iii) inure to the benefit of the Secured
Party and its successors and assigns. Upon the payment or
satisfaction in full of the Obligations, this Agreement and the security
interest created hereby shall terminate, and, in connection therewith, the
Grantor shall be entitled to the return, at its expense, of such of the Pledged
Property as shall not have been sold in accordance with Section 5.1 hereof
or otherwise applied pursuant to the terms hereof and the Secured Party shall
deliver to the Grantor such documents as the Grantor shall reasonably request to
evidence such termination.
Section
8.6. Independent
Representation.
Each
party hereto acknowledges and agrees that it has received or has had the
opportunity to receive independent legal counsel of its own choice and that it
has been sufficiently apprised of its rights and responsibilities with regard to
the substance of this Agreement.
Section
8.7. Applicable
Law: Jurisdiction.
This
Agreement shall be governed by and interpreted in accordance with the laws of
the State of New Jersey without regard to the principles of conflict of
laws. The parties further agree that any action between them shall be
heard in Xxxxxx County, New Jersey, and expressly consent to the jurisdiction
and venue of the Superior Court of New Jersey, sitting in Xxxxxx County and the
United States District Court for the District of New Jersey sitting in Newark,
New Jersey for the adjudication of any civil action asserted pursuant to this
Paragraph, provided, however, that nothing
herein shall prevent the Secured Party from enforcing its rights and remedies
(including, without limitation, by filing a civil action) with respect to the
Pledged Property and/or the Grantor in any other jurisdiction in which the
Pledged Property and/or the Grantor may be located.
Section
8.8. Waiver of Jury
Trial.
AS A
FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT AND TO
MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS
AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS
TRANSACTION.
Section
8.9 Entire
Agreement.
This
Agreement constitutes the entire agreement among the parties and supersedes any
prior agreement or understanding among them with respect to the subject matter
hereof.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
COMPANY:
|
||
|
By:
|
||
| Name: | ||
|
Title:
|
||
|
Jurisdiction
of Incorporation, Organization or Formation:
|
||
|
Organizational
ID:
|
IN WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
SECURED
PARTY:
|
||
|
YA
GLOBAL INVESTMENTS, L.P.
|
||
|
By:
Yorkville Advisors, LLC
|
||
|
Its:
Investment Manager
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
