SECURITY AGREEMENT
Exhibit
10.2
Security
Agreement (this “Agreement”) dated as of July 20, 2006 made by Xxxxxx.xxx, Inc.,
a Nevada corporation (the “Grantor”), to W. Xxx Xxxxxxxx, an individual (the
“Secured Party”).
R
E C I T
A L S :
1. The
Secured Party has made a certain loan to Grantor evidenced by a certain Secured
Convertible Promissory Note dated as of the date hereof in the form of Exhibit
A
hereto in the original principal amount of $150,000 (the “Note”); and
2. The
Secured Party and the Grantor have agreed, among other things, that this
Agreement shall be entered into between Grantor and Secured Party in order
to
secure the amounts owed by Grantor to Secured Party under the Note.
NOW,
THEREFORE, Grantor hereby agrees with Secured Party as follows:
SECTION
1. Grant
of Security.
Grantor
hereby assigns, conveys, transfers, delivers and pledges, and hereby grants,
to
Secured Party a continuing first priority perfected security interest in and
first general lien upon (collectively, the “Pledge”), all of Grantors’ right,
title and interest in and to any of the following: (collectively, the
“Collateral”):
(a) all
tangible and intangible assets of Secured Party, including without limitation
all intellectual property assets (including licenses), inventory and other
physical assets, accounts receivable, cash and customer accounts, whether now
owned or hereafter acquired, whether now or hereafter existing (collectively,
the “Assets”);
(b) (i)
the
right to xxx or otherwise recover for any misappropriation of the Assets or
any
rights or interests therein, (ii) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect to the Assets
(including, without limitation, payments under all licenses entered into in
connection therewith, and damages and payments for past and future infringements
thereof) and (iii) all rights corresponding to the Assets throughout the world
and all reissues, divisions, continuations, continuations-in-part, substitutes,
renewals, and extensions thereof, all improvements thereon and all other rights
of any kind whatsoever of Grantor accruing thereunder or pertaining thereto;
(c) all
license agreements with any other person or entity in connection with any of
the
Assets; and
(d) all
proceeds of the foregoing.
SECTION
2. Security
for Obligations.
The
Pledge under this Agreement by Grantor secures the payment of all obligations
of
Grantor to Secured Party now or hereafter existing under the Note whether for
principal, interest, premiums, fees, expenses or otherwise (all such obligations
being the “Secured Obligations”). Without limiting the generality of the
foregoing, this Agreement secures the payment of all amounts that constitute
part of the Secured Obligations and would be owed by Grantor to Secured Party
but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving
Grantor.
SECTION
3. Perfection.
The
security interest created hereby shall be reflected in, and perfected by, a
UCC-1 financing statement filing in the County of Xxxxxxx, Nebraska (the “UCC-1
Filing).
SECTION
4. Grantor
Remains Liable.
Anything herein to the contrary notwithstanding, (i) Grantor shall remain liable
under the contracts and agreements included in the Collateral to the extent
set
further therein to perform all of its duties and obligations thereunder to
the
same extent as if this Agreement had not been executed, (ii) the exercise by
Secured Party of any of the rights or remedies hereunder shall not release
Grantor from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (iii) Secured Party has no obligation or
liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall Secured Party be obligated to perform any
of
the obligations or duties of Grantor thereunder or to take any action to collect
or enforce any claim for payment Pledged hereunder.
SECTION
5. Representations
and Warranties.
Grantor
represents and warrants as to itself and the Collateral as follows, which
representations and warranties shall be deemed repeated by Grantor on each
day
on which any Secured Obligations remain outstanding:
(a) Grantor
is the sole legal and beneficial owner of the entire right, title and interest
in and to the Collateral free and clear of any lien, claim, security interest,
pledge, assignment, option, license or other encumbrance of any kind
(collectively, “Lien”), except for the Pledge created by this Agreement. No
effective financing statement or other instrument similar in effect covering
all
or any part of the Collateral or listing Grantor or any trade name of Grantor
as
debtor is on file in any recording office.
(b) Grantor
has not made a previous assignment, transfer or agreement constituting a present
or future assignment, transfer or encumbrance of any of the Collateral. Grantor
has not granted any license, release, covenant not to xxx or non-assertion
assurance to any person or entity with respect to any part of the
Collateral.
(c) This
Agreement creates a valid, binding, enforceable and perfected Pledge and first
priority security interest in and first general Lien upon the Collateral,
securing the payment of the Secured Obligations.
(d) No
authorization, approval or other action by, and no notice to or filing with,
any
governmental authority or regulatory body or any other third party is required
for (i) the Pledge granted by Grantor hereby or the execution, deliver or
performance of this Agreement by Grantor, (ii) the perfection or maintenance
of
the Pledge created hereby (including the first priority nature of such Pledge)
or (iii) the exercise by Secured Party of its rights provided for in this
Agreement or the remedies in respect of the Collateral pursuant to this
Agreement, in each case other than the filing of financing and continuation
statements under the Uniform Commercial Code, and appropriate filings with
the
United States Patent and Trademark Office.
(e) Grantor
has no knowledge of the existence of any right or any claim that is likely
to be
made by any third party relating to any item of Collateral.
(f) No
claim
has been made and is continuing or threatened that any item of Collateral is
invalid or unenforceable or that the use by grantor of any Collateral does
or
may violate the rights of any person or entity. There is currently no
infringement or unauthorized use of any intellectual property included in the
Collateral.
(g) There
are
no conditions precedent to the effectiveness of this Agreement that have not
been satisfied or waived.
(h) The
Company’s principal place of business is located at 00000 Xxxxxxxxx Xxxxxx,
Xxxxx 000, Xxxxx, XX 00000 (County of Xxxxxxx).
SECTION
6. Further
Assurances and Other Covenants.
(a) Grantor
agrees that from time to time, at its own expense, it shall promptly execute
and
deliver all further instruments and documents, and take all further action,
that
may be necessary or that Secured Party may deem desirable and may reasonably
request, in order to create, maintain, perfect and protect any Pledge,
assignment, lien or security interest granted or purported to be granted hereby
(including, without limitation, the first priority nature thereof) or to enable
Secured Party to exercise and enforce its rights and remedies hereunder wit
respect to all or any part of the Collateral.
(b) Grantor
hereby agrees to cause a UCC-1 Financing Statement to be filed on behalf of
Secured Party as soon as practicable upon delivery of this Agreement. Grantor
hereby authorizes Secured Party to file one or more financing or continuation
statements relating to all or any part of the Collateral, and amendments
thereto, as may be appropriate thereafter to reasonably protect its interests
hereunder, and to do so without the signature of Grantor where permitted by
applicable law. A photocopy or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by applicable
law.
(c) Grantor
shall furnish to Secured Party from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as Secured Party may reasonably request.
(d) Grantor
agrees that, so long as the Secured Obligations remain unsatisfied (i) should
it
obtain an ownership interest in any asset which is not now a part of the
Collateral, (x) the provisions of Section 1 hereof shall automatically apply
thereto and (y) any such asset shall automatically become part of the
Collateral, and (ii) with respect to any ownership interest in any intellectual
property (including wiithout limitation any patent, patent application,
trademark, or service xxxx registration, trademark or service xxxx application,
copyright registration, copyright application or license) that Grantor should
obtain, it shall give prompt written notice thereof to Secured Party in
accordance with Section 15 hereof. Grantor hereby agrees that any such assets
or
intellectual property shall be deemed to be included in the definition of Assets
contained in Section 1 of this Agreement..
(e) With
respect to each trademark or service xxxx application, copyright registration,
copyright application and license included in the Collateral from time to time,
Grantor agrees to take all necessary steps, including, without limitation,
in
the United States Patent and Trademark Office, U.S. Copyright Office, or in
any
court, to (i) preserve and maintain each such trademark or service xxxx
registration, trademark oar service xxxx application, copyright registration,
copyright application and license and (ii) pursue diligently each such
application for any and all copyrights now or hereafter included in the
Collateral, including, without limitation, the filing of responses to the office
actions issued by the United States Copyright Office. Grantor agrees to take
corresponding steps with respect to each new or acquired copyright to which
it
is now or later becomes entitled. Any expenses incurred in connection with
such
activities shall be borne by Grantor. Grantor shall not, without the written
consent of Secured Party, discontinue use of or otherwise abandon any copyright
or abandon any right to file a copyright registration or application for a
copyright or abandon any pending application for a copyright or take any similar
actions or omissions with respect to any other item of intellectual
property.
(f) Grantor
agrees to notify Secured Party promptly and in writing if it learns (i) that
any
item of the Collateral may be determined to have become abandoned or dedicated
or (ii) of any adverse determination or the institution of any proceeding
(including, without limitation, the institution of any proceeding in the United
States Patent and Trademark Office or U.S. Copyright Office or any court)
regarding any item of the Collateral.
(g) In
the
event that Grantor becomes aware that any intellectual property item of the
Collateral is infringed or misappropriated by a third party, Grantor shall
promptly notify Secured Party in writing and shall take such actions as Secured
Party deems reasonable and appropriate under the circumstances to protect such
Collateral, including, without limitation, suing for infringement or
misappropriation and for an injunction against such infringement or
misappropriation. Any expense incurred in connection with such activities shall
be borne by Grantor.
(h) Grantor
shall take all reasonable steps which it or Secured Party deems appropriate
under the circumstances to preserve and protect the Collateral, consistent
with
past practices.
(i) Grantor
shall not change its name or the location of its principal place of business
and
chief executive office identified in section 5(h) hereof without at least ten
(10) days’ prior written notice to Secured Party.
SECTION
7. Transfer
and Other Liens.
Grantor
agrees not to (i) sell, transfer, assign or otherwise dispose of (by operation
of law or otherwise), or grant any lease, license or option with respect to
or
any interest in, any item of the Collateral and (ii) create, grant or suffer
to
exist any Lien upon or with respect to any of the Collateral, except for the
Liens created by this Security Agreement.
SECTION
8. Events
of Default.
The
occurrence of any of the following events or conditions shall constitute an
event of default (each, an “Event of Default”) under this
Agreement:
(a) The
occurrence and continuation of an Event of Default as defined in the Note;
or
(b) Grantor
fails to make, when due, any transfer, delivery, pledge, assignment or grant
of
Collateral required to be made by it hereunder and that failure continues
unremedied for five (5) days after Secured Party gives written notice of that
failure to Grantor; or
(c) Any
representation or warranty relied upon by Secured Party and made or repeated
or
deemed made or repeated by Grantor herein shall prove to be false or misleading
in any material respect as of the date made or repeated or deemed to have been
made or repeated.
(d) The
failure or refusal by Grantor to observe or perform, or the breach or violation
of, any of the terms, obligations, agreements, covenants or warranties of this
Agreement other than those specified in clauses (a) through (c) above and that
failure or refusal continues unremedied for ten (10) business days after Secured
Party gives written notice of such failure or refusal to Grantor.
SECTION
9. Secured
Party Appointed Attorney-in-Fact.
Grantor
hereby irrevocably appoints Secured Party Grantor’s attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor or
otherwise, from time to time upon the occurrence and during the continuance
of
an Event of Default and with prior written notice to Grantor, to take any action
and to execute any instrument or document that may be necessary or that Secured
Party may deem desirable to accomplish the purposes of this Agreement,
including, without limitation:
(a) to
ask
for, demand, collect, xxx for, recover, compromise, receive and give acquittance
and receipts for moneys due and to become due under or in respect of any of
the
Collateral;
(b) to
receive, endorse and collect any drafts, instruments, chattel paper and other
documents in connection with subsection (a) above and give full discharge for
the same; and
(c) to
file
any claims or take any action or to institute any proceedings that may be
necessary or that Secured Party may deem desirable for the collection of any
payments relating to any of the Collateral or otherwise to enforce the rights
of
Secured Party with respect to any of the Collateral.
The
appointment set forth in this Section 9 is coupled with an interest and is
irrevocable.
SECTION
10. Secured
Party May Perform.
If
Grantor fails to perform any agreement contained herein, Secured Party, with
prior written notice to Grantor, may itself perform, or cause performance of,
such agreement, and the expenses of Secured Party incurred in connection
therewith shall be payable by Grantor under Section 13 hereof.
SECTION
11. Secured
Party’s Duties.
The
powers conferred on Secured Party hereunder are solely to protect its interest
in the Collateral and shall not impose any duty upon it to exercise any such
powers.
SECTION
12. Remedies.
If any
Event of Default shall have occurred and be continuing:
(a) Secured
Party may exercise in respect of the Collateral, in addition to other rights
and
remedies provided for herein or otherwise available to it, all the right and
remedies of a secured party upon default under the Uniform Commercial Code
in
effect in the State of Nebraska at such time (the “Nebraska UCC”) whether or not
the Nebraska UCC applies to the affected Collateral, and also may (i) require
Grantor to, and Grantor hereby agrees that it shall at its own expense and
upon
request of Secured Party forthwith, assemble all or part of the documents and
things embodying any part of the Collateral as directed by Secured Party and
make them available to Secured Party at a place to be designated by Secured
Party that is reasonably convenient to both parties, and (ii) without notice
except as specified below, sell the Assets or any part thereof in one or more
parcels at public or private sale, for cash, on credit or for future delivery,
and upon such other terms as Secured Party may deem commercially reasonable.
Grantor agrees that, to the extent notice of sale shall be required by law,
at
least ten (10) business days’ notice to Grantor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Secured Party shall not be obligated to
make
any sale of Collateral regardless of notice of sale having been given. Secured
Party may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale, without further notice,
may
be made at the time and place to which it was so adjourned.
(b) Any
and
all cash proceeds received by Secured Party in respect of any sale of,
collection from, or other realization upon, all or any part of the Collateral
may, in the discretion of Secured Party, be held by Secured Party as collateral
for and/or then or at any time thereafter applied in whole or in part by Secured
Party against, all or any part of the Secured Obligations in such order as
specified in the Note to the extent such order of application is not
inconsistent with applicable law.
(c) It
is
understood that Grantor shall remain liable to the extent of any deficiency
between the amount of the proceeds of the Collateral and the aggregate amount
of
the Secured Obligations.
(d) Secured
Party may exercise any and all rights and remedies of Grantor in respect to
the
Collateral, including, without limitation, any and all rights of Grantor to
demand or otherwise require payment of any amount under, or performance of
any
provision of, any of the Collateral.
(e) All
payments received by Grantor in respect of the Collateral shall be received
in
trust for the benefit of Secured Party, shall be segregated from other funds
of
Grantor and shall be forthwith paid over to Secured Party in the same form
as so
received (with any necessary endorsement or assignment).
SECTION
13. Indemnity
and Expenses.
(a)
Grantor agrees to indemnify Secured Party and its shareholders, officers,
directors, employees, agents and advisors, if any (each an “Indemnified Party”)
from and against any and all claims, losses, damages, liabilities, costs and
expenses, including, without limitation, the reasonable fees and expenses of
counsel (collectively, “Losses”) arising out of or resulting from this Agreement
(including, without limitation enforcement of this Agreement), except to the
extent that such Losses are found in a final, non-appealable judgment by a
court
of competent jurisdiction to have resulted form such Indemnified Party’s gross
negligence or willful misconduct. This Section 13 shall survive any termination
of this Agreement.
(b) Grantor
agrees to pay to Secured Party, upon written demand, the amount of any and
all
reasonable expenses (including, without limitation, the reasonable fees and
expenses of its counsel) that Secured Party may incur in connection with (i)
the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from or other realization upon, any
of
the Collateral, (iii) the exercise or enforcement of any of the rights of
Secured Party, or (iv) the failure by Grantor to perform or observe any of
the
provisions hereof.
SECTION
14. Amendments;
Waivers; Etc.
(a) No
amendment or waiver of any provision of this Agreement, and no consent to any
departure by Grantor herefrom, shall in any event be effective unless the same
shall be in writing and signed by the parties hereto, except as otherwise
expressly provided herein, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which
given.
(b) No
failure on the part of Secured Party to exercise, and no delay in exercising,
any right, power or privilege hereunder shall operate as a waiver thereof or
consent thereto; nor shall any single or partial exercise of any such right,
power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
SECTION
15. Notices,
Etc.
All
notices and other communications provided for hereunder shall be in writing
and
shall be given and be effective as set forth in the Note.
SECTION
16. Continuing
Security Interest; Assignments.
This
Agreement shall create a continuing security interest and Pledge in the
Collateral and shall (i) remain in full force and effect until the payment
in
full of the Secured Obligations, (ii) be binding upon Grantor, its successors
and permitted assigns and (iii) inure, together with the rights and remedies
of
Secured Party hereunder, to the benefit of, and be enforceable by, Secured
Party
and its respective successors, and permitted transferees and assigns. Neither
party hereto may assign, transfer or otherwise dispose of this Agreement or
any
of its rights, remedies, duties, agreements or obligations hereunder without
the
prior written consent of the other party hereto. Any purported assignment,
transfer or other disposition in violation of this Section 16 shall be null
and
void.
SECTION
17. Release
and Termination.
Upon
the payment in full of the Secured Obligations, the Pledge granted hereby shall
automatically terminate and all rights to the Collateral shall revert to
Grantor. Upon any such termination and reversion, Secured Party shall, at
Grantor’s expense, execute and deliver to Grantor such instruments and documents
as Grantor shall reasonably request in writing to evidence such termination
and
reversion.
Section
18. Governing
Laws, Jurisdiction, etc. (a)
This
agreement and the rights and obligations of the parties hereunder shall be
construed in accordance with and be governed by the internal laws of the state
of New York applicable to contracts made and to be performed entirely in such
state without reference to choice of law principles. Unless otherwise defined
herein, terms used in Article 9 of the New York UCC are used herein as therein
defined. Any legal action or proceeding with respect to this Agreement or the
Note shall be brought in the courts of the State of New York or of the United
States for the Southern District of New York, and by execution and delivery
of
this Agreement, each party to this Agreement hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Each such party hereby further irrevocably
waives any claim that any such courts lack personal jurisdiction over such
party, and agrees not to plead or claim, in any legal action or proceeding
with
respect to this Agreement or the Note brought in any of the aforesaid courts,
that any such court lack personal jurisdiction over such party. Each such party
further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to such party at
its
address identified pursuant to section 15 hereof.
(b) Each
party to this Agreement hereby irrevocably waives to the fullest extent
permitted under applicable law any objection which it may now or hereafter
have
to the laying of venue of any of the aforesaid actions or proceedings arising
out of or in connection with this Agreement or the Note brought in the courts
referred to in clause (a) above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient
forum.
(c) Each
of
the parties to this agreement hereby irrevocably waives all right to a trial
by
jury in any action, proceeding or counterclaim arising out of or relating to
this Agreement or the Note or the transactions contemplated hereby or thereby.
SECTION
19. Cumulative
Rights.
All of
Secured Partys’ rights and remedies with respect to the Collateral, whether
established hereby or by any other agreements or by law, shall be cumulative
and
may be exercised singularly or concurrently.
SECTION
20. Severability.
If any
provision of this Agreement is invalid or unenforceable, then, to the extent
possible, all of the remaining provisions of this Agreement shall remain in
full
force and effect and shall be binding on the parties hereto.
SECTION
21. Entire
Agreement.
This
Agreement, together with the Note, contains the entire agreement between the
parties relating to the subject matter hereof and supersedes all oral statements
and prior writings with respect thereto.
SECTION
22. Counterparts.
This
Agreement may be executed in any number of counterparts each of which when
so
executed and delivered shall be deemed an original and all of which taken
together shall constitute one agreement.
IN
WITNESS WHEREOF, Grantor has caused this Agreement to be duly executed and
delivered by its officer thereunto duly authorized, and Secured Party has
acknoledged acceptance hereof, as of the date first above written.
XXXXXX.XXX, INC. | ||
|
|
|
By:
|
/s/ Xxxxxx Xxxxxx | |
Name: Xxxxxx Xxxxxx | ||
Title: President & Chief Executive Officer |
Agreed
and consented to as of the
date
first above written:
By:
/s/ W. Xxx Xxxxxxxx
Name:
W.
Xxx Xxxxxxxx
EXHIBIT
A
CONVERTIBLE
SECURED PROMISSORY NOTE