SECURITY AGREEMENT
Exhibit
10.35
SECURITY AGREEMENT (this “Agreement”), dated as of September 8, 2006, by and among
Standard Management Corporation, an Indiana corporation (“Company”), and the secured
parties signatory hereto and their respective endorsees, transferees and assigns (collectively, the
“Secured Party”).
W I T N E S S E T H:
WHEREAS, pursuant to a Securities Purchase Agreement, dated the date hereof, between Company
and the Secured Party (the “Purchase Agreement”), Company has agreed to issue to the
Secured Party and the Secured Party has agreed to purchase from Company certain of Company’s 6%
Callable Secured Convertible Notes, due three years from the date of issue (the “Notes”),
which are convertible into shares of Company’s Common Stock, no par value (the “Common
Stock”). In connection therewith, Company shall issue the Secured Party certain Common Stock
purchase warrants (the “Warrants”); and
WHEREAS, in order to induce the Secured Party to purchase the Notes, Company has agreed to
execute and deliver to the Secured Party this Agreement for the benefit of the Secured Party and to
grant to it a first priority security interest in certain property of Company to secure the prompt
payment, performance and discharge in full of all of Company’s obligations under the Notes and
exercise and discharge in full of Company’s obligations under 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 Agreement, the following terms shall have the
meanings set forth in this Section 1. Terms used but not otherwise defined in this Agreement that
are defined in Article 9 of the UCC (such as “general intangibles” and “proceeds”)
shall have the respective meanings given such terms in Article 9 of the UCC.
(a) “Collateral” means the collateral in which the Secured Party is granted a security
interest by this Agreement and which shall include the following, whether presently owned or
existing or hereafter acquired or coming into existence, and all additions and accessions thereto
and all substitutions and replacements thereof, and all proceeds, products and accounts thereof,
including, without limitation, all proceeds from the sale or transfer of the Collateral and of
insurance covering the same and of any tort claims in connection therewith:
(i) All goods of the Company, including, without limitations, all machinery,
equipment, computers, motor vehicles, trucks, tanks, boats, ships, appliances,
furniture, special and general tools, fixtures, test and quality control devices and
other equipment of every kind and nature and wherever situated, together with all
documents of title and documents representing the same, all additions and accessions
thereto, replacements therefor, all parts therefor, and all substitutes for any of
the foregoing and all other items used and useful in
connection with the Company’s businesses and all improvements thereto
(collectively, the “Equipment”); and
(ii) All inventory of the Company; and
(iii) All of the Company’s contract rights and general intangibles, including,
without limitation, all partnership interests, stock or other securities, licenses,
distribution and other agreements, computer software development rights, leases,
franchises, customer lists, quality control procedures, grants and rights, goodwill,
trademarks, service marks, trade styles, trade names, patents, patent applications,
copyrights, deposit accounts, and income tax refunds (collectively, the “General
Intangibles”); and
(iv) All accounts receivable of the Company including all insurance proceeds,
and rights to refunds or indemnification whatsoever owing, together with all
instruments, all documents of title representing any of the foregoing, all rights in
any merchandising, goods, equipment, motor vehicles and trucks which any of the same
may represent, and all right, title, security and guaranties with respect to each
Receivable, including any right of stoppage in transit; and
(v) All of the Company’s documents, instruments and chattel paper, files,
records, books of account, business papers, computer programs and the products and
proceeds of all of the foregoing Collateral set forth in clauses (i)-(iv) above.
Notwithstanding the foregoing, the “Collateral” shall expressly exclude the Excluded Assets.
(b) “Excluded Assets” means the assets and properties of the Company described on
Schedule D attached hereto.
(c) “Obligations” means all of the Company’s obligations under this Agreement and the
Notes, in each case, whether now or hereafter existing, voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with
others, and whether or not from time to time decreased or extinguished and later decreased, created
or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent
all or any part of such payment is avoided or recovered directly or indirectly from the Secured
Party as a preference, fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time. Notwithstanding the forgoing, the
Obligations shall expressly exclude any obligations owing to any Secured Party in its capacity as a
shareholder of the Company.
(d) “Permitted Liens” means each of the following liens, security interests and
encumbrances against the assets of the Company:
| (i) | liens and security interests described on Schedule C attached hereto, and liens and security interests on Excluded Assets; |
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| (ii) | Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which the Company maintains adequate reserves on its books, so long as they have no priority over the security interest arising hereunder; | ||
| (iii) | purchase money security interests (i) on Equipment acquired or held by the Company incurred for financing the acquisition of the Equipment securing no more than $100,000 in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the security interest is confined to the property and improvements and the proceeds of the Equipment; | ||
| (iv) | statutory liens securing claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other persons imposed without action of such parties; | ||
| (v) | liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business; | ||
| (vi) | liens and security interests incurred in the extension, renewal or refinancing of the indebtedness secured by the security interests described in (i) through (iii) above, but any extension, renewal or replacement security interest must be limited to the property encumbered by the existing security interest and the principal amount of the indebtedness may not increase; | ||
| (vii) | leases or subleases of real property granted in the ordinary course of business, and leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or intellectual property) granted in the ordinary course of the Company’s business; | ||
| (viii) | non-exclusive license of intellectual property granted to third parties in the ordinary course of business; | ||
| (ix) | liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under the Purchase Agreement; | ||
| (x) | liens in favor of other financial institutions arising in connection with the Company’s deposit and/or securities accounts held at such institutions; and | ||
| (xi) | other liens not described above arising in the ordinary course of business and not having or not reasonably likely to have a Material Adverse Effect and not having any priority over the security interest in favor of the Secured Party. |
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(d) “UCC” means the Uniform Commercial Code, as currently in effect in the State of
New York.
2. Grant of Security Interest. As an inducement for the Secured Party to purchase the
Notes and to secure the complete and timely payment, performance and discharge in full, as the case
may be, of all of the Obligations, the Company hereby, unconditionally and irrevocably, pledges,
grants and hypothecates to the Secured Party, a continuing security interest in, a continuing first
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 Company’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 Company. The Company
represents and warrants to, and covenants and agrees with, the Secured Party as follows:
(a) The Company has the requisite corporate power and authority to enter into this Agreement
and otherwise to carry out its obligations thereunder. The execution, delivery and performance by
the Company of this Agreement and the filings contemplated therein have been duly authorized by all
necessary corporate action on the part of the Company and no further corporate action is required
by the Company. This Agreement constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms, except as enforceability may be limited (i) by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of
creditor’s rights generally, and (ii) by the application of equitable principles.
(b) The Company represents and warrants that, as of the date hereof, 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) or places where Collateral is stored or
located, except as set forth on Schedule A attached hereto;
(c) The Company is the sole owner of the Collateral (except for non-exclusive licenses granted
by the Company in the ordinary course of business), free and clear of any liens, security
interests, encumbrances, rights or claims other than Permitted Liens, and is fully authorized to
grant the Security Interest in and to pledge the Collateral. There is not on file in any
governmental or regulatory authority, agency or recording office any effective financing statement,
security agreement, license or transfer or any notice of any of the foregoing (other than those
that have been filed in favor of the Secured Party pursuant to this Agreement) covering or
affecting any of the Collateral, other than in connection with Permitted Liens. So long as this
Agreement shall be in effect, the Company shall not execute and shall not knowingly permit to be on
file in any such office or agency any such financing statement or other document or instrument
(except to the extent filed or recorded in favor of the Secured Party pursuant to the terms of this
Agreement), except in connection with Permitted Liens.
(d) No material part of the Collateral has been judged invalid or unenforceable. No written
claim has been received that any Collateral or the Company’s use of any Collateral violates in any
material respects the rights of any third party. There has been no adverse decision to the
Company’s claim of ownership rights in or exclusive rights to use the
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Collateral in any jurisdiction or to the Company’s right to keep and maintain such Collateral
in full force and effect, and there is no proceeding involving said rights pending or, to the best
knowledge of the Company, threatened in writing before any court, judicial body, administrative or
regulatory agency, arbitrator or other governmental authority.
(e) The Company shall at all times maintain its books of account and records relating to the
Collateral at its principal place of business and its Collateral at the locations set forth on
Schedule A attached hereto and may not relocate such books of account and records or
tangible Collateral 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, if any, have been filed and recorded and other steps have been taken to perfect the
Security Interest to create in favor of the Secured Party valid, perfected and continuing first
priority liens in the Collateral, subject only to Permitted Liens.
(f) This Agreement creates in favor of the Secured Party a valid security interest in the
Collateral securing the payment and performance of the Obligations and, upon making appropriate
filings in the jurisdictions indicated on Schedule B attached hereto, such security
interest shall constitute a perfected, first priority security interest in such Collateral, to the
extent that a security interest in such Collateral may be perfected by the filing of a financing
statement under the UCC, subject only to Permitted Liens.
(g) On the date of execution of this Agreement, the Company hereby authorizes the Secured
Party to file financing statements with respect to the Security Interest in the jurisdictions
indicated on Schedule B, attached hereto and in such other jurisdictions as may be
requested by the Secured Party. Such financing statements may describe the Collateral as “all
assets” or “all personal property” or with such other specificity or detail as the Secured Party
may determine.
(h) Except as set forth on Schedule C, the execution, delivery and performance of this
Agreement does not conflict with or cause a breach or default, or an event that with or without the
passage of time or notice, shall constitute a breach or default, under any material agreement to
which the Company is a party or by which the Company is bound. Other than the consent of Laurus
Master Fund, Ltd., no material consent (including, without limitation, from stock holders or
creditors of the Company) is required for the Company to enter into and perform its obligations
hereunder.
(i) The Company shall at all times maintain the liens and Security Interest provided for
hereunder as valid and perfected first priority liens and security interests in the Collateral in
favor of the Secured Party until this Agreement and the Security Interest hereunder shall terminate
pursuant to Section 11. The Company hereby agrees to defend the same against any and all persons.
The Company shall safeguard and protect all Collateral for the account of the Secured Party. At
the request of the Secured Party, the Company will sign and deliver to the Secured Party at any
time or from time to time one or more financing statements pursuant to the UCC (or any other
applicable statute), or authorize the Secured Party to file any such financing statements, in form
reasonably satisfactory to the Secured Party and will pay the cost of filing the same in all public
offices wherever filing is, or is deemed by the Secured Party to be, necessary
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or desirable to effect the rights and obligations provided for herein. Without limiting the
generality of the foregoing, the Company shall pay all fees, taxes and other amounts necessary to
maintain the Collateral and the Security Interest hereunder, and the Company shall use commercially
reasonable efforts to 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 Company will not (except for Permitted Liens, and except for non-exclusive licenses
granted and sales made by the Company in the ordinary course of business, and sales and transfers
of assets that are no longer used or useful in the Company’s business) transfer, pledge,
hypothecate, encumber, license, sell or otherwise dispose of any of the Collateral without the
prior written consent of the Secured Party.
(k) The Company shall keep and preserve its Equipment, inventory and other tangible Collateral
in good condition, repair and order, ordinary wear and tear excepted, 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 Company shall, within ten (10) days of obtaining knowledge thereof, advise the Secured
Party promptly, in sufficient detail, of any substantial change in the Collateral (other than in
the ordinary course of business), and of the occurrence of any event which would have a material
adverse effect on the value of the Collateral or on the Secured Party’s security interest therein.
(m) The Company shall promptly execute and deliver to the Secured Party such further deeds,
mortgages, assignments, security agreements, financing statements or other instruments, documents,
certificates and assurances and take such further action as the Secured Party may from time to time
request and may in its reasonable discretion deem necessary to perfect, protect or enforce its
security interest in the Collateral including, without limitation, the execution and delivery of a
separate security agreement with respect to the Company’s intellectual property (“Intellectual
Property Security Agreement”) in which the Secured Party has been granted a security interest
hereunder, substantially in a form reasonably acceptable to the Secured Party, which Intellectual
Property Security Agreement, other than as stated therein, shall be subject to all of the terms and
conditions hereof.
(n) The Company shall permit the Secured Party and its representatives and agents to inspect
the Collateral at any time during normal business hours and following at least ten (10) business
days’ prior written notice, and to make copies of records pertaining to the Collateral as may be
requested by the Secured Party from time to time.
(o) The Company will take all steps reasonably requested by the Secured Party to diligently
pursue and seek to preserve, enforce and collect any rights, claims, causes of action and accounts
receivable in respect of the Collateral.
(p) The Company shall promptly notify the Secured Party in sufficient detail upon becoming
aware of any attachment, garnishment, execution or other legal process levied against any
Collateral and of any other information received by the Company that may materially
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and adversely affect the value of the Collateral, the Security Interest or the rights and
remedies of the Secured Party hereunder.
(q) All information heretofore, herein or hereafter supplied to the Secured Party by or on
behalf of the Company with respect to the Collateral is accurate and complete in all material
respects as of the date furnished.
(r) Schedule A attached hereto contains a list of all of the subsidiaries of Company.
4. Defaults. The following events shall be “Events of Default”:
(a) The occurrence of an Event of Default (as defined in the Notes) under the Notes;
(b) Any representation or warranty of the Company in this Agreement or in the Intellectual
Property Security Agreement shall prove to have been incorrect in any material respect when made;
(c) The failure by the Company to observe or perform any of its obligations hereunder or in
the Intellectual Property Security Agreement for ten (10) days after receipt by the Company of
notice of such failure from the Secured Party; and
(d) Any breach of, or default under, the Warrants.
5. Duty To Hold In Trust. Following the request of the Secured Party upon the
occurrence and during the continuance of any Event of Default, the Company shall, upon receipt by
it of any revenue, income or other sums subject to the Security Interest, whether payable pursuant
to the Notes or otherwise, or of any check, draft, note, 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 and during the continuance of
any Event of Default, the Secured Party shall have the right to exercise all of the remedies
conferred hereunder and under the Notes, and the Secured Party shall have all the rights and
remedies of a secured party under the UCC and/or any other applicable law (including the Uniform
Commercial Code of any jurisdiction in which any Collateral is then located). Without limitation,
the Secured Party shall have the following rights and powers:
(a) The Secured Party shall have the right to take possession of the Collateral and, for that
purpose, enter, with the aid and assistance of any person, any premises where the Collateral, or
any part thereof, is or may be placed and remove the same, and the Company shall assemble the
Collateral and make it available to the Secured Party at places which the Secured Party shall
reasonably select, whether at the Company’s premises or elsewhere, and make available to the
Secured Party, without rent, all of the Company’s respective premises and facilities for the
purpose of the Secured Party taking possession of, removing or putting the Collateral in saleable
or disposable form.
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(b) The Secured Party shall have the right to operate the business of the Company using the
Collateral and shall have the right to assign, sell, lease or otherwise dispose of and deliver all
or any part of the Collateral, at public or private sale or otherwise, either with or without
special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or
parcels and at such time or times and at such place or places, and upon such terms and conditions
as the Secured Party may deem commercially reasonable, all without (except as shall be required by
applicable statute and cannot be waived) advertisement or demand upon or notice to the Company or
right of redemption of the Company, which are hereby expressly waived. Upon each such sale, lease,
assignment or other transfer of Collateral, the Secured Party may, unless prohibited by applicable
law which cannot be waived, purchase all or any part of the Collateral being sold, free from and
discharged of all trusts, claims, right of redemption and equities of the Company, which are hereby
waived and released.
7. Applications of Proceeds. The proceeds of any such sale, lease or other
disposition of the Collateral pursuant to Section 6 above shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and the like (including,
without limitation, any taxes, fees and other costs incurred in connection therewith) of the
Collateral, to the reasonable attorneys’ fees and expenses incurred by the Secured Party in
enforcing its rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations, and to the payment of any other amounts
required by applicable law, after which the Secured Party shall pay to the Company any surplus
proceeds. 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 Company
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 Company 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.
8. Costs and Expenses. The Company agrees to pay all reasonable and out-of-pocket
fees, costs and expenses incurred in connection with any filing required hereunder, including
without limitation, any financing statements, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches reasonably required by the
Secured Party. The Company shall also pay all other claims and charges which in the reasonable
opinion of the Secured Party could be expected to prejudice, imperil or otherwise affect the
Collateral or the Security Interest therein. The Company 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 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 Notes. Until so paid, any fees
payable hereunder shall be added to the principal amount of the Notes and shall bear interest at
the Default Rate.
9. Responsibility for Collateral. The Company assumes all liabilities and
responsibility in connection with all Collateral, and the obligations of the Company hereunder or
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under the Notes and the Warrants 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 Company hereunder, shall be absolute and unconditional, irrespective of: (a) any lack of
validity or enforceability of this Agreement, the Notes, the Warrants 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 Notes,
the Warrants 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 Company, 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
Company 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 Company’s obligations hereunder
shall survive cancellation of this Agreement, and shall not be discharged or satisfied by any prior
payment thereof and/or cancellation of this Agreement, but shall remain a valid and binding
obligation enforceable in accordance with the terms and provisions hereof. The Company 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 Company waives any defense arising by reason of the application of the statute of limitations
to any obligation secured hereby.
11. Term of Agreement. This Agreement and the Security Interest shall terminate on
the date on which (i) the indebtedness under the Notes has been paid in full and/or the Notes have
been converted to capital stock of the Company (or its successor) in accordance with their terms,
and (ii) all other Obligations have been paid or discharged. Upon such termination, the Secured
Party, at the request and at the expense of the Company, will join in executing any termination
statement with respect to any financing statement executed and filed pursuant to this Agreement.
12. Power of Attorney; Further Assurances.
(a) The Company authorizes the Secured Party, and does hereby make, constitute and appoint it,
and its respective officers, agents, successors or assigns with full power of substitution, as the
Company’s true and lawful attorney-in-fact, with power, in its own name or in the name of the
Company, to, after the occurrence and during the continuance of an Event
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of Default, (i) endorse any notes, 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 xxxx, xxxx 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 xxx for monies due in
respect of the Collateral; and (v) generally, to do, at the option of the Secured Party, and at the
Company’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 Agreement, the Notes and the Warrants, all as
fully and effectually as the Company might or could do; and the Company 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 Agreement and thereafter as
long as any of the Obligations shall be outstanding.
(b) On a continuing basis, the Company 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 B, attached hereto,
all such instruments, and take all such action as may be reasonably requested by the Secured Party,
to perfect the Security Interest granted hereunder and otherwise to carry out the intent and
purposes of this Agreement, or for assuring and confirming to the Secured Party the grant or
perfection of a security interest in all the Collateral.
(c) The Company hereby irrevocably appoints the Secured Party as the Company’s
attorney-in-fact, with full authority in the place and stead of the Company and in the name of the
Company, and authorizes the Secured Party, from time to time in the Secured Party’s discretion, to
take any action and to execute any instrument which the Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including the filing, in its sole
discretion, of one or more financing or continuation statements and amendments thereto, relative to
any of the Collateral without the signature of the Company where permitted by law. Such financing
statements may describe the Collateral as “all assets” or “all personal property” or with such
other specificity or detail as the Secured Party may determine.
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:
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If to the Company:
|
Standard Management Corporation | |
| 00000 X. Xxxxxxxxxxxx Xxxxxx | ||
| Xxxxxxxxxxxx, XX 00000 | ||
| Attention: Chief Executive Officer | ||
| Telephone: (000) 000-0000 | ||
| Facsimile: (317) | ||
With a copy to:
|
Xxxxxxxx Xxxxxxx LLP | |
| 000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000 | ||
| Xxxxxxx, Xxxxxxx 00000-0000 | ||
| Attention: Xxxxx X. Xxxxx | ||
| Telephone: (000) 000-0000 | ||
| Facsimile: (000) 000-0000 | ||
| Email: Xxxxxx.xxxxx@xxxxxxxxxxxxxxx.xxx | ||
If to the Secured Party:
|
AJW Partners, LLC | |
| AJW Offshore, Ltd. | ||
| AJW Qualified Partners, LLC | ||
| New Millennium Capital Partners II, LLC | ||
| 0000 Xxxxxxxx Xxxxxxxxx | ||
| Xxxxx 000 | ||
| Xxxxxx, Xxx Xxxx 00000 | ||
| Attention: Xxxxx Xxxxxxxx | ||
| Facsimile: 000-000-0000 | ||
With a copy to:
|
Xxxxxxx Xxxxx Xxxxxxx & Ingersoll, LLP | |
| 0000 Xxxxxx Xxxxxx, 00xx Xxxxx | ||
| Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 | ||
| Attention: Xxxxxx X. Xxxxxxxx, Esq. | ||
| Facsimile: 000-000-0000 |
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.
15. Miscellaneous.
(a) No course of dealing between the Company and the Secured Party, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Party, any right, power or
privilege hereunder or under the Notes shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
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(b) All of the rights and remedies of the Secured Party with respect to the Collateral,
whether established hereby or by the Notes or by any other agreements, instruments or documents or
by law shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement, together with the Purchase Agreement, the Warrants, the Notes and the
other agreements, documents and instruments executed in connection therewith constitute the entire
agreement of the parties with respect to the subject matter hereof and thereof and are intended to
supersede all prior negotiations, understandings and agreements with respect thereto. Except as
specifically set forth in this Agreement, no provision of this Agreement may be modified or amended
except by a written agreement specifically referring to this Agreement and signed by the parties
hereto.
(d) In the event that any provision of this Agreement is held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason, unless such provision is narrowed by judicial
construction, this Agreement shall, as to such jurisdiction, be construed as if such invalid,
prohibited or unenforceable provision had been more narrowly drawn so as not to be invalid,
prohibited or unenforceable. If, notwithstanding the foregoing, any provision of this Agreement is
held to be invalid, prohibited or unenforceable in any jurisdiction, such provision, as to such
jurisdiction, shall be ineffective to the extent of such invalidity, prohibition or
unenforceability without invalidating the remaining portion of such provision or the other
provisions of this Agreement and without affecting the validity or enforceability of such provision
or the other provisions of this Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under this Agreement shall be considered
valid unless in writing and signed by the party giving such waiver, and no such waiver shall be
deemed a waiver of any subsequent breach or default or right, whether of the same or similar nature
or otherwise.
(f) This Agreement shall be binding upon and inure to the benefit of each party hereto and its
successors and assigns.
(g) Each party shall take such further action and execute and deliver such further documents
as may be necessary or appropriate in order to carry out the provisions and purposes of this
Agreement.
(h) This Agreement shall be construed in accordance with the laws of the State of New York,
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
New York in which case such law shall govern. Each of the parties hereto irrevocably submit to the
exclusive jurisdiction of any New York State or United States Federal court sitting in Manhattan
county over any action or proceeding arising out of or relating to this 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 New York 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
12
New York and any objection to an action or proceeding in the State of New York on the basis of
forum non conveniens.
(i) EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS 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 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 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 WAIVES 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 AGREEMENT. IN THE EVENT
OF A LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(j) This Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together shall constitute one
and the same Agreement. In the event that any signature is delivered by facsimile transmission,
such signature shall create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed
on the day and year first above written.
| STANDARD MANAGEMENT CORPORATION | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
| Chief Executive Officer | ||||||
| AJW PARTNERS, LLC | ||||||
| By: SMS Group, LLC | ||||||
| By: | /s/ Xxxxx Xxxxxxxx | |||||
| Manager | ||||||
| AJW OFFSHORE, LTD. | ||||||
| By: First Street Manager II, LLC | ||||||
| By: | /s/ Xxxxx Xxxxxxxx | |||||
| Manager | ||||||
| AJW QUALIFIED PARTNERS, LLC | ||||||
| By: AJW Manager, LLC | ||||||
| By: | /s/ Xxxxx Xxxxxxxx | |||||
| Manager | ||||||
| NEW MILLENNIUM CAPITAL PARTNERS II, LLC | ||||||
| By: First Street Manager II, LLC | ||||||
| By: | /s/ Xxxxx Xxxxxxxx | |||||
| Manager | ||||||
14
