EXHIBIT 10.11
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), is entered into and made effective as
of May 14, 2004, by and between POP N GO INC., (the "Company"), and the BUYER(S)
listed on Schedule I attached to the Securities Purchase Agreement dated the
date hereof (the "Secured Party").
WHEREAS, the Company shall issue and sell to the Secured Party, as provided in
the Securities Purchase Agreement dated the date hereof, and the Secured Party
shall purchase up to Two Hundred Thousand Dollars ($200,000) of five percent
(5%) secured convertible debentures (the "Convertible Debentures"), which shall
be convertible into shares of the Company's common stock, par value $0.001 (the
"Common Stock") (as converted, the "Conversion Shares"), for a total purchase
price of up to Two Hundred Thousand Dollars ($200,000), in the respective
amounts set forth opposite each Buyer(s) name on Schedule I attached to the
Securities Purchase Agreement;
WHEREAS, to induce the Secured Party to enter into the transaction contemplated
by the Securities Purchase Agreement, the Secured Convertible Debenture, the
Investor Registration Rights Agreement, the Irrevocable Transfer Agent
Instructions, and the Escrow Agreement (collectively referred to as the
"Transaction Documents"), the Company hereby grants to the Secured Party a
security interest in and to the pledged property identified on Exhibit "A"
hereto (collectively referred to as the "Pledged Property") until the
satisfaction of the Obligations, as defined herein below.
NOW, THEREFORE, in consideration of the premises 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. Recitals.
The above recitals are true and correct and are incorporated herein, in their
entirety, by this reference.
Section 1.2. 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 1.3. Obligations Secured.
The obligations secured hereby are any and all obligations of the Company now
existing or hereinafter incurred to the Secured Party, whether oral or written
and whether arising before, on or after the date hereof including, without
limitation, those obligations of the Company to the Secured Party under the
Securities Purchase Agreement, the Secured Convertible Debenture, the Investor
Registration Rights Agreement and Irrevocable Transfer Agent Instructions, and
any other amounts now or hereafter owed to the Secured Party by the Company
thereunder or hereunder (collectively, the "Obligations").
ARTICLE 2.
PLEDGED COLLATERAL, ADMINISTRATION OF COLLATERAL
AND TERMINATION OF SECURITY INTEREST
Section 2.1. Pledged Property.
(a) Company hereby pledges to the Secured Party, and creates in the Secured
Party for its benefit, a security interest for such time until the Obligations
are paid in full, in and to all of the property of the Company as set forth in
Exhibit "A" attached hereto (collectively, the "Pledged Property"):
The Pledged Property, as set forth in Exhibit "A" attached hereto, and the
products thereof and the proceeds of all such items are hereinafter collectively
referred to as the "Pledged Collateral."
(b) Simultaneously with the execution and delivery of this Agreement, the
Company shall make, execute, acknowledge, file, record and deliver to the
Secured Party any documents reasonably requested by the Secured Party to perfect
its security interest in the Pledged Property. Simultaneously with the
execution and delivery of this Agreement, the Company shall make, execute,
acknowledge and deliver to the Secured Party such documents and instruments,
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, and the Secured Party
shall hold such documents and instruments as secured party, subject to the terms
and conditions contained herein.
Section 2.2. Rights; Interests; Etc.
(a) So long as no Event of Default (as hereinafter defined) shall have
occurred and be continuing:
(i) the Company shall be entitled to exercise any and all rights pertaining
to the Pledged Property or any part thereof for any purpose not inconsistent
with the terms hereof; and
(ii) the Company shall be entitled to receive and retain any and all payments
paid or made in respect of the Pledged Property.
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) All rights of the Company to exercise the rights which it would
otherwise be entitled to exercise pursuant to Section 2.2(a)(i) hereof and to
receive payments which it would otherwise be authorized to receive and retain
pursuant to Section 2.2(a)(ii) hereof shall be suspended, and all such rights
shall thereupon become vested in the Secured Party who shall thereupon have the
sole right to exercise such rights and to receive and hold as Pledged Collateral
such payments; provided, however, that if the Secured Party shall become
entitled and shall elect to exercise its right to realize on the Pledged
Collateral pursuant to Article 5 hereof, then all cash sums received by the
Secured Party, or held by Company for the benefit of the Secured Party and paid
over pursuant to Section 2.2(b)(ii) hereof, shall be applied against any
outstanding Obligations; and
(ii) All interest, dividends, income and other payments and distributions
which are received by the Company contrary to the provisions of Section 2.2(b)
(i) hereof shall be received in trust for the benefit of the Secured Party,
shall be segregated from other property of the Company and shall be forthwith
paid over to the Secured Party; or
(iii) The Secured Party in its sole discretion shall be authorized to sell any
or all of the Pledged Property at public or private sale in order to recoup all
of the outstanding principal plus accrued interest owed pursuant to the
Convertible Debenture as described herein
(c) Each of the following events shall constitute a default under this
Agreement (each an "Event of Default"):
(i) any default, whether in whole or in part, shall occur in the payment to
the Secured Party of principal, interest or other item comprising the
Obligations as and when due or with respect to any other debt or obligation of
the Company to a party other than the Secured Party;
(ii) any default, whether in whole or in part, shall occur in the due
observance or performance of any obligations or other covenants, terms or
provisions to be performed under this Agreement or the Transaction Documents;
(iii) the Company shall: (1) make a general assignment for the benefit of its
creditors; (2) apply for or consent to the appointment of a receiver, trustee,
assignee, custodian, sequestrator, liquidator or similar official for itself or
any of its assets and properties; (3) commence a voluntary case for relief as a
debtor under the United States Bankruptcy Code; (4) file with or otherwise
submit to any governmental authority any petition, answer or other document
seeking: (A) reorganization, (B) an arrangement with creditors or (C) to take
advantage of any other present or future applicable law respecting bankruptcy,
reorganization, insolvency, readjustment of debts, relief of debtors,
dissolution or liquidation; (5) file or otherwise submit any answer or other
document admitting or failing to contest the material allegations of a petition
or other document filed or otherwise submitted against it in any proceeding
under any such applicable law, or (6) be adjudicated a bankrupt or insolvent by
a court of competent jurisdiction; or
(iv) any case, proceeding or other action shall be commenced against the
Company for the purpose of effecting, or an order, judgment or decree shall be
entered by any court of competent jurisdiction approving (in whole or in part)
anything specified in Section 2.2(c)(iii) hereof, or any receiver, trustee,
assignee, custodian, sequestrator, liquidator or other official shall be
appointed with respect to the Company, or shall be appointed to take or shall
otherwise acquire possession or control of all or a substantial part of the
assets and properties of the Company, and any of the foregoing shall continue
unstayed and in effect for any period of thirty (30) days.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
Section 3.1. Secured Party Appointed Attorney-In-Fact.
Upon the occurrence of an Event of Default, the Company hereby appoints the
Secured Party as its attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company or otherwise, 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 receive and
collect all instruments made payable to the Company representing any payments in
respect of the Pledged Collateral or any part thereof and to give full discharge
for the same. The Secured Party may demand, collect, receipt for, settle,
compromise, adjust, xxx for, foreclose, or realize on the Pledged Property as
and when the Secured Party may determine. To facilitate collection, the Secured
Party may notify account debtors and obligors on any Pledged Property or Pledged
Collateral to make payments directly to the Secured Party.
Section 3.2. Secured Party May Perform.
If the Company fails to perform any agreement contained 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 the
Company 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.
Except as set forth in the Company's SEC Documents (as defined in the Standby
Equity Distribution Agreement), the Company warrants and represents 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 except for the
security interest created by this Agreement.
ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
Section 5.1. Default and Remedies.
(a) If an Event of Default described in Section 2.2(c)(i) and (ii) occurs,
then in each such case the Secured Party may declare the Obligations to be due
and payable immediately, by a notice in writing to the Company, and upon any
such declaration, the Obligations shall become immediately due and payable. If
an Event of Default described in Sections 2.2(c)(iii) or (iv) occurs and is
continuing for the period set forth therein, then the Obligations shall
automatically become immediately due and payable without declaration or other
act on the part of the Secured Party.
(b) Upon the occurrence of an Event of Default, the Secured Party shall: (i)
be entitled to receive all distributions with respect to the Pledged Collateral,
(ii) to cause the Pledged Property to be transferred into the name of the
Secured Party or its nominee, (iii) to dispose of the Pledged Property, and (iv)
to realize upon any and all rights in the Pledged Property then held by the
Secured Party.
Section 5.2. Method of Realizing Upon the Pledged Property: Other Remedies.
Upon the occurrence of an Event of Default, in addition to any rights and
remedies available at law or in equity, the following provisions shall govern
the Secured Party's right to realize upon the Pledged Property:
(a) Any item of the Pledged Property may be sold for cash or other value in
any number of lots at brokers board, public auction or private sale and may be
sold without demand, advertisement or notice (except that the Secured Party
shall give the Company ten (10) days' prior written notice of the time and place
or of the time after which a private sale may be made (the "Sale Notice")),
which notice period shall in any event is hereby agreed to be commercially
reasonable. At any sale or sales of the Pledged Property, the Company may bid
for and purchase the whole or any part of the Pledged Property and, upon
compliance with the terms of such sale, may hold, exploit and dispose of the
same without further accountability to the Secured Party. The Company will
execute and deliver, or cause to be executed and delivered, such instruments,
documents, assignments, waivers, certificates, and affidavits and supply or
cause to be supplied such further information and take such further action as
the Secured Party reasonably shall require in connection with any such sale.
(b) Any cash being held by the Secured Party as Pledged Collateral and all
cash proceeds received by the Secured Party in respect of, sale of, collection
from, or other realization upon all or any part of the Pledged Collateral shall
be applied as follows:
(i) to the payment of all amounts due the Secured Party for the expenses
reimbursable to it hereunder or owed to it pursuant to Section 8.3 hereof;
(ii) to the payment of the Obligations then due and unpaid.
(iii) the balance, if any, to the person or persons entitled thereto,
including, without limitation, the Company.
(c) In addition to all of the rights and remedies which the Secured Party
may have pursuant to this Agreement, the Secured Party shall have all of the
rights and remedies provided by law, including, without limitation, those under
the Uniform Commercial Code.
(i) If the Company fails to pay such amounts due upon the occurrence of an
Event of Default which is continuing, then the Secured Party may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company and collect the monies adjudged or decreed to be payable in
the manner provided by law out of the property of Company, wherever situated.
(ii) The Company agrees that it shall be liable for any reasonable fees,
expenses and costs incurred by the Secured Party in connection with enforcement,
collection and preservation of the Transaction Documents, including, without
limitation, reasonable legal fees and expenses, and such amounts shall be deemed
included as Obligations secured hereby and payable as set forth in Section 8.3
hereof.
Section 5.3. Proofs of Claim. In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relating to the Company or the property
of the Company or of such other obligor or its creditors, the Secured Party
(irrespective of whether the Obligations shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Secured Party shall have made any demand on the Company for the payment of the
Obligations), subject to the rights of Previous Security Holders, shall be
entitled and empowered, by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of the Obligations and to
file such other papers or documents as may be necessary or advisable in order to
have the claims of the Secured Party (including any claim for the reasonable
legal fees and expenses and other expenses paid or incurred by the Secured Party
permitted hereunder and of the Secured Party allowed in such judicial
proceeding), and
(ii) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by the Secured Party to
make such payments to the Secured Party and, in the event that the Secured Party
shall consent to the making of such payments directed to the Secured Party, to
pay to the Secured Party any amounts for expenses due it hereunder.
Section 5.4. Duties Regarding Pledged Collateral.
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.
ARTICLE 6.
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless the Secured Party shall
consent otherwise in writing (as provided in Section 8.4 hereof):
Section 6.1. Existence, Properties, Etc.
(a) The Company 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 Company'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 Company shall not do, or cause to be
done, any act impairing the Company's corporate power or authority (i) to carry
on the Company'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
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 sole discretion, whether individually or in the aggregate, upon (a)
the Company's assets, business, operations, properties or condition, financial
or otherwise; (b) the Company's 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 Company shall furnish to the Secured Party such financial data as the
Secured Party may reasonably request. Without limiting the foregoing, the
Company shall furnish to the Secured Party (or cause to be furnished to the
Secured Party) the following:
(a) as soon as practicable and in any event within ninety (90) days after
the end of each fiscal year of the Company, the balance sheet of the Company as
of the close of such fiscal year, the statement of earnings and retained
earnings of the Company as of the close of such fiscal year, and statement of
cash flows for the Company for such fiscal year, all in reasonable detail,
prepared in accordance with generally accepted accounting principles
consistently applied, certified by the chief executive and chief financial
officers of the Company as being true and correct and accompanied by a
certificate of the chief executive and chief financial officers of the Company,
stating that the Company has kept, observed, performed and fulfilled each
covenant, term and condition of this Agreement during such fiscal year and that
no Event of Default hereunder has occurred and is continuing, or if an Event of
Default has occurred and is continuing, specifying the nature of same, the
period of existence of same and the action the Company proposes to take in
connection therewith;
(b) within thirty (30) days of the end of each calendar month, a balance
sheet of the Company as of the close of such month, and statement of earnings
and retained earnings of the Company as of the close of such month, all in
reasonable detail, and prepared substantially in accordance with generally
accepted accounting principles consistently applied, certified by the chief
executive and chief financial officers of the Company as being true and correct;
and
(c) promptly upon receipt thereof, copies of all accountants' reports and
accompanying financial reports submitted to the Company by independent
accountants in connection with each annual examination of the Company.
Section 6.3. Accounts and Reports.
The Company shall maintain a standard system of accounting in accordance with
generally accepted accounting principles consistently applied and provide, at
its sole expense, to the Secured Party the following:
(a) as soon as available, a copy of any notice or other communication
alleging any nonpayment or other material breach or default, or any foreclosure
or other action respecting any material portion of its assets and properties,
received respecting any of the indebtedness of the Company in excess of $15,000
(other than the Obligations), or any demand or other request for payment under
any guaranty, assumption, purchase agreement or similar agreement or arrangement
respecting the indebtedness or obligations of others in excess of $15,000,
including any received from any person acting on behalf of the Secured Party or
beneficiary thereof; and
(b) within fifteen (15) days after the making of each submission or filing,
a copy of any report, financial statement, notice or other document, whether
periodic or otherwise, submitted to the shareholders of the Company, or
submitted to or filed by the Company with any governmental authority involving
or affecting (i) the Company that could have a Material Adverse Effect; (ii) the
Obligations; (iii) any part of the Pledged Collateral; or (iv) any of the
transactions contemplated in this Agreement or the Loan Instruments.
Section 6.4. Maintenance of Books and Records; Inspection.
The Company shall maintain its books, accounts and records in accordance with
generally accepted accounting principles consistently applied, and permit the
Secured Party, its officers and employees and any professionals designated by
the Secured Party in writing, at any time 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.
Section 6.5. Maintenance and Insurance.
(a) The Company shall maintain or cause to be maintained, at its own
expense, all of its assets and properties in good working order and condition,
making all necessary repairs thereto and renewals and replacements thereof.
(b) The Company shall maintain or cause to be maintained, at its own
expense, insurance in form, substance and amounts (including deductibles), which
the Company deems reasonably necessary to the Company's business, (i) adequate
to insure all assets and properties of the Company, which assets and properties
are 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 Company; (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 adequate, financially sound and reputable insurers.
Section 6.6. Contracts and Other Collateral.
The Company 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 Company is now or hereafter will be party on a timely
basis and in the manner therein required, including, without limitation, this
Agreement.
Section 6.7. Defense of Collateral, Etc.
The Company 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 could have a Material Adverse
Effect, the Company shall defend the Secured Party's right, title and interest
in and to each and every part of the Pledged Property, each against all manner
of claims and demands on a timely basis to the full extent permitted by
applicable law.
Section 6.8. Payment of Debts, Taxes, Etc.
The Company shall pay, or cause to be paid, all of its indebtedness and other
liabilities and perform, or cause to be performed, all of its obligations in
accordance with the respective terms thereof, and pay and discharge, or cause to
be paid or discharged, all taxes, assessments and other governmental charges and
levies imposed upon it, upon any of its assets and properties on or before the
last day on which the same may be paid without penalty, as well as pay all other
lawful claims (whether for services, labor, materials, supplies or otherwise) as
and when due
Section 6.9. Taxes and Assessments; Tax Indemnity.
The Company shall (a) file all tax returns and appropriate schedules thereto
that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Company, 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 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 Company 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.
Section 6.10. Compliance with Law and Other Agreements.
The Company 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 Company is a party or by which
the Company or any of its properties is bound. Without limiting the foregoing,
the Company shall pay all of its indebtedness promptly in accordance with the
terms thereof.
Section 6.11. Notice of Default.
The Company shall give written notice to the Secured Party of the occurrence of
any default or Event of Default under this Agreement, the Transaction Documents
or any other Loan Instrument or any other agreement of Company for the payment
of money, promptly upon the occurrence thereof.
Section 6.12. Notice of Litigation.
The Company 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
$50,000, instituted by any persons against the Company, or affecting any of the
assets of the Company, and (b) any dispute, not resolved within fifteen (15)
days of the commencement thereof, between the Company 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 business operations or
financial condition of the Company.
ARTICLE 7.
NEGATIVE COVENANTS
The Company covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Company shall not, unless
the Secured Party shall consent otherwise in writing:
Section 7.1. Indebtedness.
The Company shall not directly or indirectly permit, create, incur, assume,
permit to exist, increase, renew or extend on or after the date hereof any
secured indebtedness (except for extensions relating to the debt owed to the
Xxxxx law firm) on its part, including commitments, contingencies and credit
availabilities, or apply for or offer or agree to do any of the foregoing.
Section 7.2. Liens and Encumbrances.
The Company shall not directly or indirectly make, create, incur, assume or
permit to exist any assignment, transfer, pledge, mortgage, security interest or
other lien or encumbrance of any nature in, to or against any part of the
Pledged Property or of the Company's capital stock, or offer or agree to do so,
or own or acquire or agree to acquire any asset or property of any character
subject to any of the foregoing encumbrances (including any conditional sale
contract or other title retention agreement), or assign, pledge or in any way
transfer or encumber its right to receive any income or other distribution or
proceeds from any part of the Pledged Property or the Company's capital stock;
or enter into any sale-leaseback financing respecting any part of the Pledged
Property as lessee, or cause or assist the inception or continuation of any of
the foregoing.
Section 7.3. Certificate of Incorporation, By-Laws, Mergers, Consolidations,
Acquisitions and Sales.
Without the prior express written consent of the Secured Party, the Company
shall not: (a) Amend its Certificate of Incorporation or By-Laws; (b) issue or
sell its stock, stock options, bonds, notes or other corporate securities or
obligations; (c) be a party to any merger, consolidation or corporate
reorganization, (d) purchase or otherwise acquire all or substantially all of
the assets or stock of, or any partnership or joint venture interest in, any
other person, firm or entity, (e) sell, transfer, convey, grant a security
interest in or lease all or any substantial part of its assets, nor (f) create
any subsidiaries nor convey any of its assets to any subsidiary.
Section 7.4. Management, Ownership.
The Company shall not materially change its ownership, executive staff or
management without the prior written consent of the Secured Party. The
ownership, executive staff and management of the Company are material factors in
the Secured Party's willingness to institute and maintain a lending relationship
with the Company.
Section 7.5. Dividends, Etc.
The Company shall not declare or pay any dividend of any kind, in cash or in
property, on any class of its capital stock, nor purchase, redeem, retire or
otherwise acquire for value any shares of such stock, nor make any distribution
of any kind in respect thereof, nor make any return of capital to shareholders,
nor make any payments in respect of any pension, profit sharing, retirement,
stock option, stock bonus, incentive compensation or similar plan (except as
required or permitted hereunder), without the prior written consent of the
Secured Party.
Section 7.6. Guaranties; Loans.
The Company shall not guarantee nor be liable in any manner, whether directly or
indirectly, or become contingently liable after the date of this Agreement in
connection with the obligations or indebtedness of any person or persons, except
for (i) the indebtedness currently secured by the liens identified on the
Pledged Property identified on Exhibit A hereto and (ii) the endorsement of
negotiable instruments payable to the Company for deposit or collection in the
ordinary course of business. The Company shall not make any loan, advance or
extension of credit to any person other than in the normal course of its
business.
Section 7.7. Debt.
The Company shall not create, incur, assume or suffer to exist any additional
indebtedness of any description whatsoever in an aggregate amount in excess of
$25,000 (excluding any indebtedness of the Company to the Secured Party, trade
accounts payable and accrued expenses incurred in the ordinary course of
business and the endorsement of negotiable instruments payable to the Company,
respectively for deposit or collection in the ordinary course of business).
Section 7.8. Conduct of Business.
The Company will continue to engage, in an efficient and economical manner, in a
business of the same general type as conducted by it on the date of this
Agreement.
Section 7.9. Places of Business.
The location of the Company's chief place of business is 00000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxx, Xxxxxxxxxx, 00000. The Company shall not change the location
of its chief place of business, chief executive office or any place of business
disclosed to the Secured Party or move any of the Pledged Property from its
current location without thirty (30) days' prior written notice to the Secured
Party in each instance.
ARTICLE 8.
MISCELLANEOUS
Section 8.1. Notices.
All notices or other communications required or permitted to be given pursuant
to this Agreement shall be in writing and shall be considered as duly given on:
(a) the date of delivery, if delivered in person, by nationally recognized
overnight delivery service or (b) five (5) days after mailing if mailed from
within the continental United States by certified mail, return receipt requested
to the party entitled to receive the same:
If to the Secured Party: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx-Xxxxx 0000
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxx
Portfolio Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxx Xxxxxxxx LLP
0000 Xxxxxx Xxxxxx - Xxxxx 000
Xxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
And if to the Company: Pop N Go Inc.
00000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx-Xxxxx 0000
Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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 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
Company 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 Company of any undertakings, agreements or covenants shall
not waiver, 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 Company 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.
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 until payment in full of
the Obligations; and (ii) be binding upon the Company and its successors and
heirs 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, the
Company 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 5.2 hereof or
otherwise applied pursuant to the terms hereof.
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 Delaware 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.
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 Agreement as of the
date first above written.
COMPANY:
POP N GO INC.
By: /s/ Xxxxxx Xxxxx
------------------------
Name: Xxxxxx Xxxxx
Title: CEO
SECURED PARTY:
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx Xxxxxx
-----------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
EXHIBIT A
DEFINITION OF PLEDGED PROPERTY
For the purpose of securing prompt and complete payment and performance by the
Company of all of the Obligations, the Company unconditionally and irrevocably
hereby grants to the Secured Party a continuing security interest in and to, and
lien upon, the following Pledged Property of the Company:
(a) all goods of the Company, including, without limitation, machinery,
equipment, furniture, furnishings, fixtures, signs, lights, tools, parts,
supplies and motor vehicles of every kind and description, now or hereafter
owned by the Company or in which the Company may have or may hereafter acquire
any interest, and all replacements, additions, accessions, substitutions and
proceeds thereof, arising from the sale or disposition thereof, and where
applicable, the proceeds of insurance and of any tort claims involving any of
the foregoing;
(b) all inventory of the Company, including, but not limited to, all goods,
wares, merchandise, parts, supplies, finished products, other tangible personal
property, including such inventory as is temporarily out of Company's custody or
possession and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any of
the foregoing;
(c) all contract rights and general intangibles of the Company, including,
without limitation, goodwill, trademarks, trade styles, trade names, leasehold
interests, partnership or joint venture interests, patents and patent
applications, copyrights, deposit accounts whether now owned or hereafter
created;
(d) all documents, warehouse receipts, instruments and chattel paper of the
Company whether now owned or hereafter created;
(e) all accounts and other receivables, instruments or other forms of
obligations and rights to payment of the Company (herein collectively referred
to as "Accounts"), together with the proceeds thereof, all goods represented by
such Accounts and all such goods that may be returned by the Company's
customers, and all proceeds of any insurance thereon, and all guarantees,
securities and liens which the Company may hold for the payment of any such
Accounts including, without limitation, all rights of stoppage in transit,
replevin and reclamation and as an unpaid vendor and/or lienor, all of which the
Company represents and warrants will be bona fide and existing obligations of
its respective customers, arising out of the sale of goods by the Company in the
ordinary course of business;
(f) to the extent assignable, all of the Company's rights under all present
and future authorizations, permits, licenses and franchises issued or granted in
connection with the operations of any of its facilities;
(g) all products and proceeds (including, without limitation, insurance
proceeds) from the above-described Pledged Property.
