SECURITY AGREEMENT
This
Security Agreement (this “Agreement”), made and entered
into June 24, 2009, is by and between Compliance Systems Corporation, a Nevada
corporation (“Borrower”), and Xxxxx X.
Xxxxxx, a resident of the State of Connecticut (“Lender”).
WHEREAS, Borrower is indebted
to Lender in the principal amount of $150,000 as of the date of this Agreement
and such indebtedness is evidenced by a demand promissory note of Borrower,
dated April 27, 2006 (the “Original Note”), in favor of
Lender;
WHEREAS, pursuant to that
certain Promissory Note Exchange Agreement, dated as of the date of this
Agreement (the “Note Exchange
Agreement”), between Borrower and Lender, Lender is, simultaneously with
the delivery of this Agreement by Borrower to Lender, exchanging an 18% Senior
Subordinated Secured Promissory Note of Borrower, dated the date of this
Agreement (the “New
Note”), in favor of Lender for the Original Note;
WHEREAS, as security for
payment and performance of Borrower’s obligations under the New Note, and in
accordance with the terms of the Note Exchange Agreement, Borrower has agreed to
grant, and is by executing this Agreement granting, to Lender a security
interest in certain of Borrower’s property and assets, to the extent set forth
in this Agreement;
WHEREAS, Lender would not be
willing to exchange the New Note for the Original Note, nor willing to enter
into the Note Exchange Agreement, if Borrower were not willing to, and did not,
grant Lender a security interest in certain of Borrower’ property and assets, to
the extent set forth in this Agreement; and
WHEREAS, all capitalized terms
not otherwise defined in this Agreement shall have the meanings assigned to such
capitalized terms in Article 9 of the Uniform Commercial Code (the "UCC") as in
effect in New York, and such definitions are hereby incorporated in this
Agreement by reference and made a part hereof.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, for other good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, and in order to induce
Lender to enter into the Note Exchange Agreement and exchange the New Note for
the Original Note, the parties to this Agreement, intended to be legally bound,
agree as follows:
1.
GRANT OF SECURITY INTEREST.
(a) As
collateral security for the timely payment and satisfaction of all obligations
and liabilities of Borrower under the New Note (each, a “Secured Obligation”), Borrower
hereby affirms, grants, pledges and assigns to the Lender a security interest
(the “Security Interest”)
in and to all of the following property of Borrower, whether now owned or
existing or hereafter acquired or arising and wheresoever
located:
(i) All
tangible and intangible assets of Borrower of whatever kind and nature
(including, without limitation, all intellectual property of whatever kind or
nature of Borrower including patents, trademarks, tradenames, copyrights and all
other intellectual property and any applications or registrations therefor,
accounts (“Accounts”),
chattel paper, commercial tort claims, documents, equipment, farm products,
general intangibles, instruments, inventory, investment property, and the stock
of all of Borrower’s subsidiaries), in each case whether now owned or hereafter
acquired and wherever located, and all proceeds thereof, together with all
proceeds, products, replacements and renewals thereof; and
(ii) All
books and records relating to any of the Collateral (as such capitalized term is
defined below) (including, without limitation, customer data, credit files,
computer programs, printouts and other computer materials and records of
Borrower pertaining to any of the assets of Borrower referred to in clause (i)
of this paragraph 2(a)).
All of the property and interests in
property described in clauses (i) and (ii) of this paragraph 2(a) are
collectively referred to in this Agreement as the “Collateral.”
(b) Notwithstanding
anything to the contrary contained in this Agreement, the Security Interest
shall be subordinated to the security interests in the Collateral previously
granted by Borrower to Nascap Corp., Agile Opportunity Fund, LLC and Xxxxx X.
Xxxxxx (collectively, and as amended, modified or enlarged in any respect, the
“Previously Granted Security
Interests”) and the Security Interest shall be and remain subordinated to
the Previously Granted Security Interests.
2. FINANCING
STATEMENTS. Borrower authorizes Lender to file financing
statements limited to the Collateral as prescribed by Article 9 of the UCC and
the Uniform Commercial Code as presently in effect under the laws of all other
applicable jurisdictions, prepared and approved by Lender in form and number
sufficient for filing wherever required with respect to the Collateral, in order
that Lender shall have a duly perfected security interest of record in the
Collateral following the filing of such financing statements with the
appropriate local and state governmental authorities. Borrower
authorizes Lender to prepare and file such financing statements without
Borrower’s signature where permitted under the laws of the applicable
jurisdictions.
3. MAINTENANCE
OF SECURITY INTEREST.
(a) Subject
to the rights of the holders of the Previously Granted Security Interests,
Borrower will, from time to time, upon the request of the Lender, deliver
specific assignments of Collateral, together with such other instruments and
documents, financing statements, amendments thereto, assignments or other
writings as Lender may reasonably request to carry out the terms of this
Agreement or to protect or enforce the Security Interest in the
Collateral.
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(b) With
respect to any and all Collateral to be secured and conveyed under this
Agreement, Borrower agrees to do and cause to be done all things necessary to
perfect and keep in full force the Security Interest granted in favor of the
Lender, including, but not limited to, the filing of any amendments to
previously filed financing statements and the prompt payment of all fees and
expenses incurred in connection with any filings made to perfect or continue the
Security Interest in favor of Lender.
(c) Borrower
agrees to make appropriate entries upon its financial statements and books and
records disclosing the Security Interest granted to Lender pursuant to this
Agreement.
4. RECEIPT OF
PAYMENT. In the event an Event of Default (as such capitalized
term is defined below) shall occur and be continuing and Borrower (or any of its
affiliates, subsidiaries, stockholders, directors, officers, employees or
agents) shall receive any proceeds of Collateral, including, without limitation,
monies, checks, notes, drafts or any other items of payment, subject to the
rights of the holders of the Previously Granted Security Interests, Borrower
shall hold all such items of payment in trust for, and for the benefit and as
the property of, Lender, and no later than the first Business Day (as defined
hereinafter) following the receipt of such proceeds, Borrower shall cause the
same to be forwarded to Lender for Lender’s custody and possession as additional
Collateral. For purposes of this Agreement, the term “Business Day” shall mean any
day on which banks are open for business and are neither required nor authorized
to close in the State of New York.
5. COLLECTIONS;
LENDER'S RIGHT TO NOTIFY ACCOUNT DEBTORS AND TO ENDORSE BORROWER’S
NAME.
(a) Borrower
hereby authorizes Lender, at all times after the occurrence and during the
continuation of an Event of Default, but subject to the rights of the holders of
the Previously Granted Security Interests, to:
(i)
to open Borrower’s mail and collect any and all amounts due to
Borrower from parties obligated on any of Borrower’s Accounts ("Account
Debtors");
(ii) to
take over Borrower’s post office boxes or make other arrangements as Lender
deems necessary to receive Borrower’s mail, including notifying the post office
authorities to change the address for delivery of Borrower’s mail to such
address as Lender may designate; and
(iii) to
notify any or all Account Debtors that their respective Accounts have been
assigned to Lender and that Lender has a security interest in the Accounts
(provided that Lender may at any time give such notice to an Account Debtor that
is a department, agency or authority of the United States
government).
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(b) Borrower,
at all times after the occurrence and during the continuation of an Acceleration
Event (as such capitalized term is defined below), but subject to the rights of
the holders of the Previously Granted Security Interests, irrevocably makes,
constitutes and appoints Lender (and all agents designated by Lender for that
purpose) as Borrower’s true and lawful attorney (and agent-in-fact) to endorse
Borrower’s name on any checks, notes, drafts or any other payment relating to or
constituting proceeds of the Collateral which comes into Lender's possession or
Lender's control, and deposit the same to the account of Lender on account and
for payment of the Secured Obligations. Lender shall promptly furnish
Borrower with a copy of any such notice sent with respect to Collateral pursuant
to this section 5 and Borrower hereby agrees that any such notice, in Lender's
sole discretion, may be sent on Borrower’s stationery, in which event Borrower
shall co-sign such notice with Lender. For purposes of this
Agreement, the term “Acceleration Event” means
that:
(i)
an Event of Default has occurred and is continuing
and
(ii) the
Secured Obligations have become due and payable (whether by acceleration, at
final maturity or otherwise).
6. COVENANTS. Borrower
covenants with Lender that from and after the date of this Agreement until
termination of this Agreement in accordance with section 21:
(a) Inspection. Lender
(directly or through Lender’s agents) shall have the right, upon reasonable
request and prior notice, and at any reasonable times during Borrower’s usual
business hours, to inspect the Collateral, all records related to the Collateral
(and to make extracts or copies from such records), and the premises upon which
any of the Collateral is located, to discuss Borrower’s affairs and finances
with any party (other than Account Debtors) and to verify with any party other
than Account Debtors the amount, quality, quantity, value and condition of, or
any other matter relating to, the Collateral and, if an Event of Default has
occurred and is continuing, to discuss Borrower’s affairs and finances with
Account Debtors and to verify the amount, quality, value and condition of, or
any other matter relating to, the Collateral and such Account Debtors. Upon or
after the occurrence and during the continuation of an Acceleration Event,
Lender may at any time and from time to time employ and maintain on Borrower’s
premises a custodian selected by Lender who shall have full authority to do all
acts necessary to protect Lender’s interest. All expenses incurred by
Lender by reason of the employment of such custodian shall be paid by Borrower,
added to the Secured Obligations and secured by the Collateral.
(b) Assignments, Records and
Schedules of Accounts. Borrower shall keep accurate and
complete records of its Accounts (“Account Records”) and from
time to time, at intervals designated by Lender, Borrower shall provide Lender
with a schedule (each, a “Schedule of Accounts”) of
Account Records in form and substance reasonably acceptable to Lender describing
all Collateral created or acquired by Borrower; provided, however, that
Borrower’s failure to execute and deliver any Schedule of Accounts shall not
affect or limit the Security Interest or Lender's other rights in and to any
Collateral for the benefit of Lender. If requested by Lender,
Borrower shall furnish Lender with copies of proof of delivery and other
documents relating to the Collateral so scheduled, including, without
limitation, repayment histories and present status reports (collectively, “Account Documents”) and such
other matter and information relating to the status of then existing Collateral
as Lender shall reasonably request. Borrower shall not remove any
Account Records or Account Documents or change its chief executive offices from
the address set forth on Schedule A to this Agreement
without 30 days prior written notice to Lender as provided in section 16 and
delivery to Lender by Borrower prior to such removal of executed financing
statements, amendments and other documents necessary to maintain the Security
Interest as granted under this Agreement.
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(c) Notice Regarding Disputed
Accounts. In the event any amounts due and owing in excess of
$25,000 are in dispute between any Account Debtor and Borrower (which shall
include, without limitation, any dispute in which an offset claim or
counterclaim may result), Borrower shall provide Lender with written notice of
such dispute as soon as practicable, explaining in detail the reason for the
dispute, all claims related to the dispute and the amount in
controversy.
(d) Verification of
Accounts. If an Event of Default has occurred and is
continuing, any of Lender's agents shall have the right, at any reasonable time
or times hereafter, to verify with Account Debtors the validity, amount or any
other matter relating to any Accounts and, whether or not an Event of Default
has occurred, any of Lender's agents shall have the right to verify the same
with Borrower.
(e) Corporate Name; Jurisdiction
of Incorporation. Borrower shall not (i) change or otherwise
modify its corporate name in any respect, (ii) reincorporate in a jurisdiction
other than Nevada or (iii) merge, convert or otherwise change its form of
organization from a Nevada corporation without 30 days prior written notice to
Lender in each instance. Upon the request of Lender, the chief
executive officer of Borrower shall execute and deliver a certificate to Lender,
in form reasonably satisfactory to Lender, certifying that no change has been
made to Borrower’s corporate name, organization or jurisdiction of incorporation
since the date of this Agreement or the last notice of change provided pursuant
to this section 6(e) was given, as the case may be.
7. WARRANTIES AND REPRESENTATIONS
REGARDING COLLATERAL GENERALLY. Borrower warrants and
represents that Borrower is and will continue to be the owner of the Collateral,
now owned and upon the acquisition of the same, free and clear of all liens,
claims, charges, encumbrances and security interests (“Liens”) other than the
Previously Granted Security Interests or security interests in the Collateral
specifically junior and subordinated to the Security Interest, and that Borrower
will defend such Collateral and any products and proceeds of the Collateral
against all claims and demands of all parties at any time claiming the same or
any interest in the Collateral adverse to Lender, other than claims or demands
by holders of the Previously Granted Security Interests.
8. COLLATERAL WARRANTIES AND
REPRESENTATIONS. With respect to the Collateral, Borrower warrants and
represents to Lender that Lender may rely on all statements or representations
made by Borrower on or with respect to any Schedule of Accounts prepared and
delivered by it and that:
(i) All
Account Records and Account Documents are located only at Borrower’s location as
set forth on Schedule A to this Agreement and incorporated herein by
reference;
(ii) The
Collateral is genuine, are in all respects what they purport to be, are not
evidenced by an instrument or document or, if evidenced by an instrument or
document, are only evidenced by one original instrument or
document;
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(iii) The
Collateral covers, in part, bona fide sales and deliveries of inventory usually
dealt in by Borrower, or the rendition by Borrower of services, to an Account
Debtor in the ordinary course of business;
(iv) The
amounts of the face value shown on any Schedule of Accounts or invoice statement
delivered to the Lender with respect to any Collateral, as applicable, are
actually owing to Borrower and are not contingent for any reason; and there are
no setoffs, discounts, allowances, claims, counterclaims or disputes of any kind
or description in an amount greater than $25,000 in the aggregate, or greater
than $5,000 individually, existing or asserted with respect thereto and Borrower
has not made any agreement with any Account Debtor thereunder for any deduction
therefrom, except as may be stated in the Schedule of Accounts and reflected in
the calculation of the face value of each respective invoice related
thereto;
(v) Except
for conditions generally applicable to Borrower’s industry and markets, there
are no facts, events, or occurrences known to Borrower pertaining particularly
to any Collateral which is reasonably expected to materially impair in any way
the validity, collectibility or enforcement of Collateral that would reasonably
be likely, in the aggregate, to be of material economic value, or in the
aggregate materially reduce the amount payable thereunder from the amount of the
invoice face value shown on any Schedule of Accounts, and on all contracts,
invoices and statements delivered to the Lender, with respect
thereto;
(vi) The
goods or services giving rise to the Collateral are not, and were not at the
time of the sale or performance thereof, subject to any Liens, except those of
Lender and the holders of the Previously Granted Security
Interests;
(vii) Except
as previously described elsewhere in this Agreement, the Collateral has not been
pledged to any Person other than to Lender under this Agreement and the holders
of the Previously Granted Security Interests and is owned by Borrower free and
clear of any Liens; and
(viii) The
Security Interest will not be subject to any offset, deduction, counterclaim,
Lien or other adverse condition.
9. EVENTS OF
DEFAULT. It is understood and agreed that the occurrence of
any one or more of the following shall constitute an “Event of Default” under this
Agreement and shall entitle Lender to take such actions as are elsewhere
provided in this Agreement in respect of Events of Default:
(i)
an Event of Default (as such term is defined in the New Note) under the Note
shall have occurred and be continuing;
(ii) Borrower
shall have failed to pay Lender any of the Secured Obligations in accordance
with the New Note and such failure has not been cured within five Business Days
of the giving of notice of such failure to Borrower by Lender;
(iii) any
representation or warranty made by the Borrower in the New Note or this
Agreement shall prove to have been false in any material respect when
made;
(iv) any
covenant made by Borrower in this Agreement (other than those covenants
contained in section 6(a)) is breached, violated or not complied with and not
been cured within five Business Days of the giving of notice of such breach,
violation or non-compliance to Borrower by Lender; provided, however, that any
breach, violation or non-Borrower with any covenant contained in section 6(a)
shall immediately result in an Event of Default; or
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(v) any
covenant made by the Borrower in the New Note is breached, violated, or not
complied with and not been cured within five Business Days of the giving of
notice of such breach, violation or non-compliance to Borrower by Lender, and
such breach, violation or non-compliance results in a material adverse change to
the Collateral or the Collateral’s value, in either case, taken as a
whole.
10. RIGHTS AND REMEDIES UPON ACCELERATION
EVENT.
(a) Subject
to the rights and remedies of the holders of Previously Granted Security
Interests, upon and after an Acceleration Event, Lender shall have the following
rights and remedies in addition to any rights and remedies set forth elsewhere
in this Agreement, all of which may be exercised with or, if allowed by law,
without notice to Borrower:
(i) All
of the rights and remedies of a secured party under Article 9 of the UCC and the
Uniform Commercial Code of any other state or jurisdiction where such rights and
remedies are asserted, or under other applicable law, all of which rights and
remedies shall be cumulative, and none of which shall be exclusive, to the
extent permitted by law, in addition to any other rights and remedies contained
in this Agreement or the New Note;
(ii) The
right to foreclose the Security Interest by any available judicial procedure or
without judicial process;
(iii) The
right to:
(A) enter
upon the premises of Borrower through self-help and without judicial process,
without first obtaining a final judgment or giving Borrower notice and
opportunity for a hearing on the validity of Lender's claim and without any
obligation to pay rent to Borrower, or any other place or places where any
Collateral is located and kept, and remove the Collateral from such premises to
the premises of Lender or any agent of Lender, for such time as Lender may
desire, in order effectively to collect or liquidate the Collateral,
and/or
(B) require
Borrower to assemble the Collateral and make it available to Lender at a place
to be designated by Lender that is reasonably convenient to both
parties;
(iv)
The right to:
(A)
demand payment of any Accounts;
(B) enforce
payment of Accounts, by legal proceedings or otherwise;
(C) exercise
all of Borrower’s rights and remedies with respect to the collection of the
Accounts;
(D) settle,
adjust, compromise, extend or renew the Accounts;
(E) settle,
adjust or compromise any legal proceedings brought to collect the
Accounts;
(F) if
permitted by applicable law, sell or assign the Accounts upon such terms, for
such amounts and at such time or times as Lender deems advisable;
(G) discharge
and release the Accounts;
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(H) take
control, in any manner, of any item of payment or proceeds referred to in
section 4;
(I) prepare,
file and sign Borrower’s name on a Proof of Claim in bankruptcy or similar
document against any Account Debtor;
(J) prepare,
file and sign Borrower’s name on any notice of Lien, assignment or satisfaction
of Lien or similar document in connection with the Collateral;
(K) endorse
the name of Borrower upon any chattel paper, document, instrument, invoice,
freight xxxx, xxxx of lading or similar document or agreement relating to the
Accounts or Inventory;
(L) use
Borrower’s stationery for verifications of the Collateral and notices thereof to
Account Debtors;
(M) use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to any Collateral to which Borrower has
access; and/or
(N) do
all acts and things and execute all documents necessary, in Lender's sole
discretion, to collect the Accounts; and
(v) Borrower acknowledges
that Lender has no obligation to preserve rights to the Collateral against prior
parties or to marshal any Collateral for the benefit of any person or
entity.
(b) The
net cash proceeds resulting from the collection, liquidation, sale, lease or
other disposition of the Collateral shall be applied first to the expenses
(including all attorneys' fees) of retaking, holding, storing, processing and
preparing for sale, selling, collecting, liquidating and the like, and then to
the satisfaction of all Secured Obligations. Any sale or other disposition of
the Collateral and the possession of the Collateral by Lender shall be in
compliance with all provisions of applicable law (including applicable
provisions of the UCC). Borrower shall be liable to Lender, and shall
pay to Lender on demand any deficiency which may remain after such sale,
disposition, collection or liquidation of the Collateral. Lender
shall remit to Borrower or other party entitled thereto any surplus remaining
after all Secured Obligations and any other obligations of Borrower to Lender
under this Agreement have been fully satisfied.
11. ANTI-MARSHALLING
PROVISIONS. The right is hereby given by Borrower to Lender to
make releases (whether in whole or in part) of all or any part of the Collateral
agreeable to Lender without notice to, or the consent, approval or agreement of
other parties and interests, including junior lienors, which releases shall not
impair in any manner the validity of or priority of the Liens and security
interests in the remaining Collateral conferred under such documents, nor
release Borrower from personal liability for the Secured Obligations hereby
secured. Notwithstanding the existence of any other security interest
in the Collateral held by Lender, Lender shall have the right to determine the
order in which any or all of the Collateral shall be subjected to the remedies
provided in this Agreement. The proceeds realized upon the exercise
of the remedies provided in this Agreement shall be applied by Lender in the
manner herein provided in this Agreement. Borrower hereby waives any
and all right to require the marshalling of assets in connection with the
exercise of any of the remedies permitted by applicable law or provided in this
Agreement.
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12. APPOINTMENT OF LENDER AS BORROWER’S
LAWFUL ATTORNEY. Without limitation of any other provision of
this Agreement, upon and after an Acceleration Event, Borrower irrevocably
designates, makes, constitutes and appoints Lender (and all parties designated
by Lender) as Borrower’s true and lawful attorney (and agent-in-fact) to take
all actions and to do all things required to be taken or done by Borrower under
this Agreement. All acts of Lender or Lender’s designee taken
pursuant to this section 12 are hereby ratified and confirmed and Lender or
Lender’s designee shall not be liable for any acts of omission or commission nor
for any error of judgment or mistake of fact or law, other than as a result of
Lender’s or Lender’s designee’s gross negligence or willful
misconduct. This power, being coupled with an interest, is
irrevocable by Borrower until this Agreement has been terminated in accordance
with section 21.
13. RIGHTS AND REMEDIES CUMULATIVE;
NON-WAIVER; ETC. The enumeration of the rights and remedies of
Lender set forth in this Agreement is not intended to be exhaustive and the
exercise by Lender of any right or remedy shall not preclude the exercise of any
other rights or remedies, all of which shall be cumulative, and shall be in
addition to any other right or remedy given under this Agreement, or under any
other agreement between Borrower and Lender or which may now or hereafter exist
in law or in equity or by suit or otherwise. No delay or failure to
take action on the part of Lender in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude other or further exercise thereof or
the exercise of any other right, power or privilege or shall be construed to be
a waiver of any Event of Default. No waiver by a party hereunder
shall be effective unless it is in writing and signed by the party making such
waiver, and then only to the extent specifically stated in such
writing. No course of dealing between Borrower and Lender or Lender's
agents shall be effective to change, modify or discharge any provision of this
Agreement or to constitute a waiver of any Event of Default. Lender
shall not have any liability for any error, omission or delay of any kind
occurring in the handling or liquidation of the Collateral or for any damages
resulting such error, omission or delay, other than as a result of Lender’s or
Lender’s agent’s gross negligence or willful misconduct.
14. SUPPLEMENTAL
DOCUMENTATION. At Lender's request, Borrower shall execute and
deliver to Lender all documents, instruments and other written matter that
Lender may request to perfect and maintain perfected the Security Interest, in
form and substance reasonably acceptable to Lender, and pay all charges,
expenses and fees that Lender may reasonably incur in filing any of such
documents, and all taxes relating thereto. Borrower acknowledges that
a carbon, photographic, photostatic or other reproduction of this Agreement or a
financing statement is sufficient as a financing statement and may be filed by
Lender in any appropriate filing office.
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15. WAIVERS. In
addition to the other waivers contained herein, Borrower hereby expressly
waives, to the extent permitted by law: presentment for payment, demand,
protest, notice of demand, notice of protest, notice of default or dishonor,
notice of payments and non-payments and all other notices and consents to any
action taken by Lender unless expressly required by this Agreement.
16. NOTICE. All
requests, demands, notices and other communications required or otherwise given
under this Agreement shall be deemed sufficiently given if (a) delivered by
hand, against written receipt therefor, (b) forwarded via a nationally
recognized overnight courier requiring delivery the next business day and
written acknowledgment of receipt or (c) mailed by postage prepaid, registered
or certified mail, return receipt requested, in any event, addressed as
follows:
If to
Borrower,
to: Xxxx
Xxxxxxxxx, President
Compliance Systems
Corporation
00 Xxxxx Xxxx
Xxxx Xxxx, Xxx Xxxx 00000
with a copy
to: Xxxxxx
X. X’Xxxxxx, Esq.
Moritt Xxxx Hamroff & Xxxxxxxx
LLP
000 Xxxxxx Xxxx Xxxxx
Xxxxxx Xxxx, Xxx Xxxx
00000
If to
Lender,
to: Xxxxx
X. Xxxxxx
000 Xxxx Xxxxxx – Xxxx 00
Xxx Xxxxxxxx, Xxxxxxxxxxx
00000
with a copy to:
or, in
the case of any of the parties to this Agreement, at such other address as such
party shall have furnished in writing, in accordance with this section 16, to
the other party to this Agreement. Each such request, demand, notice
or other communication shall be deemed given (i) on the date of delivery by
hand, (ii) on the first business day following the date of delivery to an
overnight courier or (iii) three business days following mailing by registered
or certified mail.
17. ENTIRE
AGREEMENT. This Agreement constitutes and expresses the entire
understanding between the parties to this Agreement with respect to the subject
matter of this Agreement, and supersedes all prior agreements and
understandings, inducements, commitments or conditions, express or implied, oral
or written, except as herein contained. The express terms of this
Agreement control and supersede any course of performance or usage of the trade
inconsistent with any of the terms of this Agreement. Neither this
Agreement nor any portion or provision hereof may be changed, altered, modified,
supplemented, discharged, canceled, terminated, or amended orally or in any
manner other than by an agreement, in writing signed by the parties to this
Agreement.
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18. SEVERABILITY. The
provisions of this Agreement are independent of and separable from each
other. If any provision hereof shall for any reason be held invalid
or unenforceable, such invalidity or unenforceability shall not affect the
validity or enforceability of any other provision hereof, but this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained in this Agreement.
19. SUCCESSORS AND
ASSIGNS. This Agreement shall be binding upon the successors
and assigns of Borrower, and the rights, remedies, powers, and privileges of
Lender under this Agreement shall inure to the benefit of the successors,
assigns and heirs of Lender; provided, however, that
Borrower shall not make any assignment of any of Borrower’s obligations or
rights under this Agreement without the prior written consent of
Lender.
20. COUNTERPARTS. This
Agreement may be executed in any number of counterparts and all the counterparts
taken together shall be deemed to constitute one and the same
instrument.
21. TERMINATION;
RELEASE. This Agreement, the Security Interest and all
obligations of Borrower under this Agreement shall terminate without delivery of
any instrument or performance of any act by any party, and the Collateral shall
automatically be released from the Security Interest and other Liens created by
this Agreement and all rights to such Collateral shall automatically revert to
Borrower upon the full satisfaction and cancellation of the New
Note. Notwithstanding the immediately preceding sentence, upon such
termination of the Security Interest, Lender shall reassign and redeliver such
Collateral then held by or for Lender and execute and deliver to Borrower such
documents as Borrower shall reasonably request to evidence such termination, as
well as filing such documents as may be required under Article 9 of the UCC and
other applicable laws to note the termination of the Security
Interest.
22. APPLICABLE LAW; JURISDICTION; WAIVER
OF JURY TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED THEREIN, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAW. BORROWER HEREBY IRREVOCABLY CONSENTS THAT ANY LEGAL
ACTION OR PROCEEDING AGAINST BORROWER ARISING OUT OF OR IN ANY WAY CONNECTED
WITH THIS AGREEMENT MAY BE INSTITUTED IN ANY STATE COURT OF GENERAL JURISDICTION
LOCATED IN EITHER THE COUNTIES OF NASSAU OR SUFFOLK OF THE STATE OF NEW YORK, OR
THE UNITED STATES FEDERAL COURT FOR THE EASTERN DISTRICT OF NEW YORK AND
BORROWER HEREBY SUBMITS TO THE JURISDICTION AND VENUE OF SUCH
COURTS. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS ARISING OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY POSTAGE PREPAID CERTIFIED OR
REGISTERED FIRST-CLASS MAIL, RETURN RECEIPT REQUESTED, TO
BORROWER. THE FOREGOING, HOWEVER, SHALL NOT LIMIT THE RIGHT OF LENDER
TO SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE ANY
LEGAL ACTION OR PROCEEDING OR TO OBTAIN EXECUTION OF JUDGMENT IN ANY APPROPRIATE
JURISDICTION. IN THE EVENT OF LITIGATION BETWEEN THE PARTIES OVER ANY
MATTER CONNECTED WITH THIS AGREEMENT, THE RIGHT TO A TRIAL BY JURY IS HEREBY
WAIVED BY SUCH PARTIES.
11
IN WITNESS WHEREOF, the
parties have duly executed this Security Agreement on the day and year first
written above.
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BORROWER:
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Compliance
Systems Corporation
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By:
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/s/ Xxxx Xxxxxxxxx
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Xxxx
Xxxxxxxxx, President
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LENDER:
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/s/ Xxxxx X. Xxxxxx
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Xxxxx
X.
Xxxxxx
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12
Schedule
A
Borrower’s
Location
00 Xxxxx
Xxxx
Xxxx
Xxxx, Xxx Xxxx 00000
13
