ICORIA, INC. SECURITY AGREEMENT
Exhibit 10.6
ICORIA, INC.
To: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
X.X. Xxx 000 XX
Xxxxxx House
South Church Street
Xxxxxx Town
Grand Cayman, Cayman Islands
X.X. Xxx 000 XX
Xxxxxx House
South Church Street
Xxxxxx Town
Grand Cayman, Cayman Islands
Date: October 19, 2004
To Whom It May Concern:
1. To secure the payment of all Obligations (as hereafter defined), Icoria, Inc., a Delaware
corporation (the “Assignor”), hereby assigns and grants to Laurus a continuing security interest in
all equipment and fixed assets listed on Schedule 1.A to this agreement in which the Assignor now
has or hereafter may acquire any right, title or interest in and to, and all additions Assignor may
put on Schedule 1.A in the future, accessions, substitutions thereto or therefor, and all proceeds
and products thereof (including, without limitation, proceeds of insurance)) (the “Collateral”).
Except as otherwise defined herein, all capitalized terms used herein shall have the meaning
provided such terms in the Securities Purchase Agreement referred to below.
2. The term “Obligations” as used herein shall mean and include all debts, liabilities and
obligations owing by the Assignor to Laurus arising under, out of, or in connection with: (i) that
certain Securities Purchase Agreement dated as of the date hereof by and between the Company and
Laurus (the “Securities Purchase Agreement”) and (ii) the Related Agreements referred to in the
Securities Purchase Agreement, as each may be amended, modified, restated or supplemented from time
to time, are collectively referred to herein as the “Documents”), or any documents, instruments or
agreements relating to or executed in connection with the Documents or any documents, instruments
or agreements referred to therein or otherwise, or any other indebtedness, obligations or
liabilities of the Assignor to Laurus, whether now existing or hereafter arising, direct or
indirect, liquidated or unliquidated, absolute or contingent, due or not due and whether under,
pursuant to or evidenced by a note, agreement, guaranty, instrument, or otherwise in each case,
irrespective of the genuineness, validity, regularity or enforceability of
such Obligations or of
any instrument evidencing any of the Obligations or of any collateral therefor or of the existence
or extent of such collateral, and irrespective of the allowability, allowance or disallowance of
any or all of the Obligations in any case commenced by or against the Assignor under Xxxxx 00,
Xxxxxx Xxxxxx Code, including, without limitation, obligations or indebtedness of the Assignor for
post-petition interest, fees, costs and charges that would have accrued or been added to the
Obligations but for the commencement of such case.
3. The Assignor hereby represents, warrants and covenants to Laurus that:
(a) it is a corporation, partnership or limited liability company, as the case may be,
validly existing, in good standing and organized under the laws of the State of Delaware,
and it will provide Laurus thirty (30) days’ prior written notice of any change in its
jurisdiction of organization;
(b) its legal name, as set forth in its Certificate of Incorporation (or equivalent
organizational document) as amended through the date hereof, is Icoria, Inc. and it will
provide Laurus thirty (30) days’ prior written notice of any change in its legal name;
(c) its Employer Identification Number (“EIN”) is 00-0000000, and it will provide
Laurus thirty (30) days’ prior written notice of any change in its EIN;
(d) it is the lawful owner of the Collateral and it has the sole right to grant a
security interest therein and will defend the Collateral against all claims and demands of
all persons and entities;
(e) it will keep the Collateral owned by it free and clear of all attachments, levies,
taxes, liens, security interests and encumbrances of every kind and nature (“Encumbrances”),
except (i) Encumbrances set forth on Schedule B hereto, (ii) Encumbrances securing the
Obligations and (iii) to the extent said Encumbrance does not secure indebtedness in excess
of $100,000 and such Encumbrance is removed or otherwise released within ten (10) days of
the creation thereof;
(f) it will at its own cost and expense keep the Collateral in good state of repair
(ordinary wear and tear excepted) and will not waste or destroy the same or any part thereof
other than ordinary course discarding of items no longer used or useful in its business;
(g) it will not without Laurus’ prior written consent, and which such consent will not
be unreasonably withheld, sell, exchange, lease or otherwise dispose of the Collateral,
whether by sale, lease or otherwise, except for the sale of inventory in the ordinary course
of business and for the disposition or transfer in the ordinary course of business during
any fiscal year of obsolete and worn-out equipment or equipment no longer necessary for its
ongoing needs, having an aggregate fair market value of not more than $100,000 and only to
the extent that:
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(i) the proceeds of any such disposition are used to acquire replacement
Collateral which is subject to Laurus’ first priority perfected security interest or
are used to repay Obligations or to pay general corporate expenses; and
(ii) following the occurrence of an Event of Default which continues to exist,
the proceeds of which are remitted to Laurus, to be held as cash collateral for the
Obligations;
(iii) Notwithstanding anything contained in this Section 3(g) to the contrary,
the Company may upon five (5) days prior written notice to Laurus (which such notice
shall contain reasonable detail regarding the Collateral to be sold) effect sales of
Collateral in the ordinary course of business consistent with past practice, not to
exceed $200,000 per instance or $600,000 in the aggregate during any twelve (12)
month period, and such proceeds may be retained by the Company for working capital
purposes.
(h) it will insure the Collateral in Laurus’ name against loss or damage by fire,
theft, burglary, pilferage, loss in transit and such other hazards as Laurus shall specify
in amounts, not to exceed the fair market value of the Collateral, unless specifically
agreed to by the Assignor, and under policies by insurers acceptable to Laurus and all
premiums thereon shall be paid by the Assignor and the proof of such policies delivered to
Laurus. If the Assignor fails to do so, Laurus may procure such insurance and the cost
thereof shall be promptly reimbursed by the Assignor and shall constitute Obligations;
(i) it will at all reasonable times, with sufficient notice and compliance with
procedures set forth by the Assignor, including showing proof of Laurus’ or Laurus’
representatives’ insurance coverage for such an on-site inspection, allow Laurus or Laurus’
representatives free access to and the right of inspection of the Collateral; and
(j) the Assignor hereby indemnifies and saves Laurus harmless, , from all loss, costs,
damage, liability and/or expense, including reasonable attorneys’ fees, that Laurus may
sustain or incur to enforce payment, performance or fulfillment of any of the Obligations
and/or in the enforcement of this Security Agreement or in the prosecution or defense of any
action or proceeding either against the Assignor or Laurus concerning any matter growing out
of or in connection with this Security Agreement, and/or any of the Obligations and/or any
of the Collateral except to the extent caused by Laurus’ own gross negligence or willful
misconduct (as determined by a court of competent jurisdiction in a final and nonappealable
decision).
4. The occurrence of any of the following events or conditions shall constitute an “Event of
Default” (after the passage of any applicable cure period) under this Security Agreement:
(a) any covenant, warranty, representation or statement made or furnished to Laurus by
the Assignor or on the Assignor’s behalf was breached in any material respect
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or false in
any material respect when made or furnished, as the case may be, and, in the case of a
covenant, shall not be cured for a period of fifteen (15) business days;
(b) the loss, theft, substantial damage, destruction, sale or encumbrance to or of any
of the Collateral or the making of any levy, seizure or attachment thereof or thereon
except to the extent:
(i) such loss is covered by insurance proceeds which are used to replace the
item or repay Laurus; or
(ii) said levy, seizure or attachment does not secure indebtedness in excess of
$200,000 and such levy, seizure or attachment has not been removed or otherwise
released within thirty (30) days of the creation or the assertion thereof;
(c) the Assignor shall cease operations, dissolve, terminate our business existence,
make an assignment for the benefit of creditors, suffer the appointment of a receiver,
trustee, liquidator or custodian of all or any part of the Assignor’s property;
(d) any proceedings under any bankruptcy or insolvency law shall be commenced by or
against the Assignor;
(e) the Assignor shall repudiate, purport to revoke or fail to perform any of its
obligations under the Note (after passage of applicable cure period, if any); or
(f) an Event of Default (or similar term) shall have occurred under and as defined in
the Securities Purchase Agreement or any other Document (after the passage of any applicable
cure period).
5. Upon the occurrence of any Event of Default and at any time thereafter, Laurus may declare
all Obligations immediately due and payable and Laurus shall have the remedies of a secured party
provided in the Uniform Commercial Code as in effect in the State of New York, this Master Security
Agreement and other applicable law. Upon the occurrence of any Event of Default and at any time
thereafter, Laurus will have the right to take possession of the Collateral and to maintain such
possession on the Assignor’s premises or to remove the Collateral or any part thereof to such other
premises as Laurus may desire. Upon the occurrence of an Event of Default and Laurus’ request, the
Assignor shall assemble the Collateral and make it available to Laurus for marketing in place and,
if sold, the shipping costs will be initially paid by Laurus and subsequently subtracted from the
proceeds. If any notification of intended disposition of any Collateral is required by law, such
notification, if mailed, shall be deemed properly and reasonably given if mailed at least ten (10)
days before such disposition, postage prepaid, addressed to the Assignor either at the Assignor’s
address shown herein or at any address appearing on Laurus’ records for the Assignor. Any proceeds
of any disposition of any of the Collateral shall be applied by Laurus to the payment of all
expenses in connection with the sale of the Collateral, including reasonable attorneys’ fees and
other legal expenses and disbursements and the reasonable expense of retaking, holding, preparing
for sale, selling, and the like, and any balance of such proceeds may be applied by Laurus toward
the payment of the Obligations in such order of application as Laurus may elect, and the Assignor
shall be liable for any deficiency.
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6. If the Assignor defaults in the performance or fulfillment of any of the terms, conditions,
promises, covenants, provisions or warranties on the Assignor’s part to be performed or fulfilled
under or pursuant to this Security Agreement, Laurus may, at its option while waiving its right to
enforce this Security Agreement according to its terms, immediately or at any time thereafter and
without notice to the Assignor, perform or fulfill the same or cause the performance or fulfillment
of the same for the Assignor’s account and at the Assignor’s cost and expense, and the cost and
expense thereof (including reasonable attorneys’ fees) shall be added to the Obligations and shall
be payable within seven business days with interest thereon at the highest rate permitted by law.
7. The Assignor hereby appoints Laurus, any of Laurus’ officers, employees or any other person
or entity whom Laurus may designate as our attorney, with power to execute such documents in our
behalf and to supply any omitted information and correct patent errors in any documents executed by
the Assignor or on our behalf; to file financing statements against the Assignor covering the
Collateral; to sign the Assignor’s name on public records; and to do all other things Laurus deems
necessary to carry out this Security Agreement. The Assignor hereby ratifies and approve all acts
of the attorney and neither Laurus nor the attorney will be liable for any acts of commission or
omission, nor for any error of judgment or mistake of fact or law other than their gross negligence
or willful misconduct (as determined by a court of competent jurisdiction in a final and
non-appealable decision). This power being coupled with an interest, is irrevocable so long as any
Obligations remains unpaid.
8. No delay or failure on Laurus’ part in exercising any right, privilege or option hereunder
shall operate as a waiver of such or of any other right, privilege, remedy or option, and no waiver
whatever shall be valid unless in writing, signed by Laurus and then only to the extent therein set
forth, and no waiver by Laurus of any default shall operate as a waiver of any other default or of
the same default on a future occasion. Laurus’ books and records containing entries with respect
to the Obligations shall be admissible in evidence in any action or proceeding, shall be binding
upon the Assignor for the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof. Laurus shall have the right to enforce any one or more of the remedies
available to Laurus, successively, alternately or concurrently. The Assignor agrees to join with
Laurus in executing financing statements or other instruments to the extent required by the Uniform
Commercial Code in form satisfactory to Laurus and in executing such other documents or instruments
as may be required or deemed necessary by Laurus for purposes of affecting or continuing Laurus’
security interest in the Collateral.
9. This Security Agreement shall be governed by and construed in accordance with the laws of
the State of New York and cannot be terminated orally. All of the rights, remedies, options,
privileges and elections given to Laurus hereunder shall inure to the benefit of Laurus’ successors
and assigns. The term “Laurus” as herein used shall include Laurus, any parent of Laurus, any of
Laurus’ subsidiaries and any co-subsidiaries of Laurus’ parent, whether now existing or hereafter
created or acquired, and all of the terms, conditions, promises, covenants, provisions and
warranties of this Security Agreement shall inure to the benefit of each of the foregoing, and
shall bind the representatives, successors and assigns of the Assignor. Each of Laurus and the
Assignor hereby (a) waives any and all right to trial by jury in litigation relating to this
Security Agreement and the transactions contemplated hereby and the Assignor hereby agrees not to
assert any counterclaim in such litigation, (b) submit to the nonexclusive
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jurisdiction of any New
York State court sitting in the borough of Manhattan, the city of New York and (c) waive any
objection the Assignor or Laurus may have as to the bringing or maintaining of such action with any
such court.
10. All notices from Laurus to the Assignor shall be sufficiently given if mailed or delivered
to the Assignor at its address set forth in the Securities Purchase Agreement and the Security
Agreement, as applicable.
Very truly yours, | ||||||
Icoria, Inc. | ||||||
By: | /s/ Xxxxxx X. Xxxxxx
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Name: | Xxxxxx X. Xxxxxx | |||||
Title | Vice President, Finance, and CFO
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ACKNOWLEDGED: | ||||
Laurus Master Fund, Ltd. | ||||
By:
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/s/ Xxxxxx Grin
|
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Name:
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Xxxxxx Grin
|
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Title:
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Director
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Schedule 1.A
See attached list
Schedule B
See attached list
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