SECURITY AGREEMENT
Exhibit 10.3
THIS SECURITY AGREEMENT (the
“Agreement”), is entered into and made
effective as of August 8, 2008, by and between IR BIOSCIENCES HOLDINGS, INC.,
a Delaware corporation with its principal place of business located at
0000 X. Xxx Xx Xxxxxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000 (the “Company”), and the
undersigned subsidiaries of the Company (each a “Guarantor,” and
collectively together with the Company, the “Grantors”), in favor
of Brencourt Advisors, LLC as agent (the “Secured Party”) for
the holders of the Convertible Debentures referred to in the following paragraph
(the “Holders”). The
Secured Party shall have the rights and authority described in Annex A
hereto.
WHEREAS, in connection with
the Securities Purchase Agreement by and among the Company and the Holders of
even date herewith (the “Securities Purchase
Agreement”), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue to the Holders (i) an
aggregate original principal amount of up to $5,000,000 of senior secured
convertible debentures (the “Convertible
Debentures”), which shall be convertible into shares of the Company’s
Common Stock (the “Conversion Shares”);
and (ii) warrants (the “Warrants”) to be
exercisable to acquire additional shares of Common Stock (the “Warrants Shares”)
initially in that number of shares of Common Stock set forth in the Securities
Purchase Agreement;
WHEREAS, each of the
Guarantors (other than the Company) has executed and delivered a Guaranty dated
the date hereof (the “Guaranty”) in favor
of the Secured Party, with respect to the Company’s obligations under the
Securities Purchase Agreement, the Convertible Debentures, and the Transaction
Documents (as defined below); and
WHEREAS, each of the
Guarantors shall receive a direct benefit from the Holders entering into the
Securities Purchase Agreement, the Convertible Debentures, and the Transaction;
and
WHEREAS, it is a condition
precedent to each Holder’s purchasing the Convertible Debentures and Warrants
pursuant to the Securities Purchase Agreement that the Grantors shall have
executed and delivered to the Secured Party this Agreement providing for the
grant to the Secured Party of a security interest in all personal property of
each Grantor to secure all of the Company's obligations under the “Transaction
Documents” (as defined in the Securities Purchase Agreement) (the “Transaction
Documents”) and the Guarantors’ obligations under the
Guaranty;
NOW, THEREFORE, in
consideration of the promises 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. Definitions. Reference
is hereby made to the Securities Purchase Agreement and the Convertible
Debentures for a statement of the terms thereof. All capitalized
terms used in this Agreement and the recitals hereto and not defined herein
shall have the meanings set forth in the Securities Purchase Agreement, the
Convertible Debentures, or in Articles 8 or 9 of the Uniform Commercial Code as
in effect from time to time in the State of New Jersey (the "Code").
Section
1.4. Other
Definitions. As used in this Agreement, the following terms
shall have the respective meanings indicated below, such meanings to be
applicable equally to both the singular and plural forms of such
terms:
“Event of Default”
shall be deemed to have occurred under this Agreement upon an Event of Default
under and as defined in the Convertible Debentures.
ARTICLE
2.
PLEDGED
PROPERTY
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Section
2.1.
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Grant of Security
Interest.
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(a) As
collateral security for all of the Obligations (as defined in Section 2.2 hereof),
each Grantor hereby pledges and assigns to the Secured Party, and grants to the
Secured Party for its benefit, a continuing security interest in and to all
personal property of each Grantor, wherever located and whether now or
hereinafter existing and whether now owned or hereafter acquired, of every kind
and description, tangible or intangible, including without limitation, all
Goods, Inventory, Equipment, Fixtures, Instruments (including promissory notes),
Documents, Accounts (including health-care-insurance receivables, and license
fees), Contracts, Contract Rights, Chattel Paper (whether tangible or
electronic), Deposit Accounts (and in and to any deposits or other sums at any
time credited to each such Deposit Account), Money, Letters of Credit and
Letter-of-Credit Rights (whether or not the letter of credit is evidenced by a
writing), Commercial Tort Claims, Securities and all other Investment Property,
General Intangibles (including payment intangibles and software), Farm Products,
all books and records relating to any of the foregoing, and all supporting
obligations, and any and all proceeds and products of any thereof, including
proceeds of insurance covering any or all of the foregoing, wherever located,
whether now owned, or now due, in which a Grantor has an interest or the power
to transfer rights, or hereafter acquired, arising, or to become due, or in
which a Grantor obtains an interest, or the power to transfer rights, and as
more particularly described on Exhibit A attached
hereto (collectively, the “Pledged
Property”).
(b) Simultaneously
with the execution and delivery of this Agreement, each Grantor shall make,
execute, acknowledge, file, record and deliver to the Secured Party such
documents, instruments, and agreements, 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.
Section
2.2 Security for
Obligations. The security interest created hereby in the
Pledged Property constitutes continuing collateral security for all of the
following obligations, whether now existing or hereinafter incurred
(collectively, the “Obligations”):
(a) (i)
the payment by the Company, as and when due and payable (by scheduled maturity,
acceleration, demand or otherwise), of all amounts from time to time owing by it
in respect of the Convertible Debentures, the other Transaction Documents, or
any other amounts owing by it to the Secured Party, whether or not now in
existence or hereinafter incurred, or (ii) in the case of any Guarantor, the
payment by such Guarantor, as and when due and payable of all “Guaranteed
Obligations” under (and as defined in) the Guaranty; and
(b) the
due performance and observance by the each Grantor of all of its other
obligations from time to time existing in respect of any of the Transaction
Documents, including without limitation, with respect to any conversion or
redemption rights of the Secured Party under the Convertible
Debentures.
ARTICLE
3.
ATTORNEY-IN-FACT;
PERFORMANCE
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Section
3.1.
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Secured Party
Appointed Attorney-In-Fact.
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Subject
only to prior rights previously granted to YA Global Investments, L.P., the
Grantors hereby appoint the Secured Party as its attorney-in-fact, with full
authority in the place and stead of the Grantor and in the name of the Grantor
or otherwise, exercisable after and during the continuance of an Event of
Default, 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 (a) receive and collect all instruments made payable to the
Grantor representing any payments in respect of the Pledged Property or any part
thereof and to give full discharge for the same; (b) demand, collect, receipt
for, settle, compromise, adjust, xxx for, foreclose, or realize on the Pledged
Property as and when the Secured Party may determine, and (c) to facilitate
collection, the Secured Party may notify account debtors and obligors on any
Pledged Property to make payments directly to the Secured Party. The
foregoing power of attorney is a power coupled with an interest and shall be
irrevocable until all Obligations are paid and performed in full. The
Grantors agree that the powers conferred on the Secured Party hereunder are
solely to protect the Secured Party’s interests in the Pledged Property and
shall not impose any duty upon the Secured Party to exercise any such
powers.
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Section
3.2.
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Secured Party May
Perform.
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If a
Grantor 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 such Grantor under
Section 8.3.
ARTICLE
4.
REPRESENTATIONS AND
WARRANTIES
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Section
4.1.
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Authorization;
Enforceability.
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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.
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Section
4.2.
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Ownership of Pledged
Property.
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Each
Grantor represents and warrants 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 (each, a “Lien”) except for the security interest created
by this Agreement and other Permitted Liens. For purposes of this
Agreement, “Permitted Liens” means: (1) the security interest created by this
Agreement, (2) existing Liens which have been disclosed by the Company to the
Secured Party on Schedule 4.2 attached hereto, including, without limitation,
the lien on all Pledged Property granted to YA Global Investments, L.P.; (3)
inchoate Liens for taxes, assessments or governmental charges or levies not yet
due, as to which the grace period, if any, related thereto has not yet expired,
or being contested in good faith and by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP; (4) Liens of
carriers, materialmen, warehousemen, mechanics and landlords and other similar
Liens which secure amounts which are not yet overdue or which are being
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP; (5) licenses, sublicenses, leases
or subleases granted to other Persons not materially interfering with the
conduct of the business of the Company; (6) Liens securing capitalized lease
obligations and purchase money indebtedness incurred solely for the purpose of
financing an acquisition or lease; (7) easements, rights-of-way, restrictions,
encroachments, municipal zoning ordinances and other similar charges or
encumbrances, and minor title deficiencies, in each case not securing debt and
not materially interfering with the conduct of the business of the Company and
not materially detracting from the value of the property subject thereto; (8)
Liens arising out of the existence of judgments or awards which judgments or
awards do not constitute an Event of Default; (9) Liens incurred in the ordinary
course of business in connection with workers compensation claims, unemployment
insurance, pension liabilities and social security benefits and Liens securing
the performance of bids, tenders, leases and contracts in the ordinary course of
business, statutory obligations, surety bonds, performance bonds and other
obligations of a like nature (other than appeal bonds) incurred in the ordinary
course of business (exclusive of obligations in respect of the payment for
borrowed money); (10) Liens in favor of a banking institution arising by
operation of law encumbering deposits (including the right of set-off) and
contractual set-off rights held by such banking institution and which are within
the general parameters customary in the banking industry and only burdening
deposit accounts or other funds maintained with a creditor depository
institution; (11) usual and customary set-off rights in leases and other
contracts; and (12) escrows in connection with acquisitions and
dispositions.
Section
4.3 Location of Pledged
Property.
The
Pledged Property is or will be kept at the address(es) of each Grantor set forth
on the signature pages hereof, or such other locations as the Grantors have
given the Secured Party written notice prior to the date hereof, and, unless
otherwise provided herein, the Grantors will not remove any Pledged Property
from such locations without the prior written consent of the Secured Party which
consent shall not be unreasonably withheld.
Section
4.4 Location, State of
Incorporation and Name of Grantors.
Each
Grantor’s principal place of business, state of organization, organization
identification number, and exact legal name is as set forth on each such
Grantor’s signature page to this Agreement.
Section
4.5 Priority of Security
Interest.
The
security interest granted to the Secured Party hereunder shall be a second
priority security interest subject to no other Liens other than the prior lien
of YA Global Investments, L.P. Except for the Permitted Liens, no
financing statement covering any of the Pledged Property or any proceeds thereof
is on file in any public office.
ARTICLE
5.
DEFAULT;
REMEDIES
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Section
5.1
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Method of Realizing
Upon the Pledged Property: Other
Remedies.
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If any
Event of Default shall have occurred and be continuing:
(a) The
Secured Party may exercise in respect of the Pledged Property, in addition to
any other rights and remedies provided for herein or otherwise available to it,
all of the rights and remedies of a secured party upon default under the Code
(whether or not the Code applies to the affected Pledged Property), and also may
(i) take absolute control of the Pledged Property, including, without
limitation, transfer into the Secured Party's name or into the name of its
nominee or nominees (to the extent the Secured Party has not theretofore done
so) and thereafter receive, for the benefit of the Secured Party, all payments
made thereon, give all consents, waivers and ratifications in respect thereof
and otherwise act with respect thereto as though it were the outright owner
thereof, (ii) require each Grantor to assemble all or part of the Pledged
Property as directed by the Secured Party and make it available to the Secured
Party at a place or places to be designated by the Secured Party that is
reasonably convenient to both parties, and the Secured Party may enter into and
occupy any premises owned or leased by a Grantor where the Pledged Property or
any part thereof is located or assembled for a reasonable period in order to
effectuate the Secured Party's rights and remedies hereunder or under law,
without obligation to the Grantor in respect of such occupation, and
(iii) without notice except as specified below and without any obligation
to prepare or process the Pledged Property for sale, (A) sell the Pledged
Property or any part thereof in one or more parcels at public or private sale,
at any of the Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, and at such price or prices and upon such other terms as the
Secured Party may deem commercially reasonable and/or (B) lease, license or
dispose of the Pledged Property or any part thereof upon such terms as the
Secured Party may deem commercially reasonable. Each Grantor agrees
that, to the extent notice of sale or any other disposition of the Pledged
Property shall be required by law, at least ten (10) days' notice to the Grantor
of the time and place of any public sale or the time after which any private
sale or other disposition of the Pledged Property is to be made shall constitute
reasonable notification. The Secured Party shall not be obligated to
make any sale or other disposition of any Pledged Property regardless of notice
of sale having been given. The 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 may, without further notice, be made at the time and
place to which it was so adjourned. Each Grantor hereby waives any
claims against the Secured Party arising by reason of the fact that the price at
which the Pledged Property may have been sold at a private sale was less than
the price which might have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Secured Party accepts the first
offer received and does not offer such Pledged Property to more than one
offeree, and waives all rights that the Grantor may have to require that all or
any part of such Pledged Property be marshaled upon any sale (public or private)
thereof. Each Grantor hereby acknowledges that (i) any such sale
of the Pledged Property by the Secured Party may be made without warranty,
(ii) the Secured Party may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth
in clauses (i) and (ii) above shall not adversely affect the commercial
reasonableness of any such sale of Pledged Property.
(b) Any
cash held by the Secured Party as Pledged Property and all cash proceeds
received by the Secured Party in respect of any sale of or collection from, or
other realization upon, all or any part of the Pledged Property shall be applied
(after payment of any amounts payable to the Secured Party pursuant to Section
8.3 hereof) by the Secured Party against, all or any part of the Obligations in
such order as the Secured Party shall elect, consistent with the provisions of
the Securities Purchase Agreement and the Debentures. Any surplus of
such cash or cash proceeds held by the Secured Party and remaining after the
indefeasible payment in full in cash of all of the Obligations shall be paid
over to whomsoever shall be lawfully entitled to receive the same or as a court
of competent jurisdiction shall direct.
(c) In
the event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Secured Party is legally entitled,
each Grantor shall be liable for the deficiency, together with interest thereon
at the rate specified in the Convertible Debentures for interest on overdue
principal thereof or such other rate as shall be fixed by applicable law,
together with the costs of collection and the reasonable fees, costs, expenses
and other client charges of any attorneys employed by the Secured Party to
collect such deficiency.
(d) Each
Grantor hereby acknowledges that if the Secured Party complies with any
applicable state, provincial, or federal law requirements in connection with a
disposition of the Pledged Property, such compliance will not adversely affect
the commercial reasonableness of any sale or other disposition of the Pledged
Property.
(e) The
Secured Party shall not be required to marshal any present or future collateral
security (including, but not limited to, this Agreement and the Pledged
Property) for, or other assurances of payment of, the Obligations or any of them
or to resort to such collateral security or other assurances of payment in any
particular order, and all of the Secured Party's rights hereunder and in respect
of such collateral security and other assurances of payment shall be cumulative
and in addition to all other rights, however existing or arising. To
the extent that the Grantor lawfully may, each Grantor hereby agrees that it
will not invoke any law relating to the marshaling of collateral which might
cause delay in or impede the enforcement of the Secured Party's rights under
this Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that it lawfully may, the Company hereby irrevocably waives the
benefits of all such laws.
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Section
5.2
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Duties Regarding
Pledged Property.
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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
So long
as any of the Obligations shall remain outstanding, unless the Secured Party
shall otherwise consent in writing:
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Section
6.1.
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Existence, Properties,
Etc.
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(a) Each
Grantor 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 Grantor’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) each Grantor shall not do, or
cause to be done, any act impairing the Grantor’s corporate power or authority
(i) to carry on the Grantor’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 (which other loan instruments collectively shall be
referred to as the “Loan
Instruments”) 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 reasonable discretion, whether individually or in the
aggregate, upon (a) the Grantor’s assets, business, operations, properties
or condition, financial or otherwise; (b) the Grantor’s ability to make
payment as and when due of all or any part of the Obligations; or (c) the
Pledged Property.
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Section
6.2.
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Financial Statements
and Reports.
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Each
Grantor shall furnish to the Secured Party within a reasonable time such
financial data as the Secured Party may reasonably request.
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Section
6.3.
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Accounts and
Reports.
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Each
Grantor shall maintain a standard system of accounting in accordance with
generally accepted accounting principles consistently applied (“GAAP”) and
provide, at its sole expense, to the Secured Party 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 Grantor in excess of $500,000 (other than the
Obligations)
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Section
6.4.
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Maintenance of Books
and Records; Inspection.
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Each
Grantor shall maintain its books, accounts and records in accordance with GAAP,
and permit the Secured Party, its officers and employees and any professionals
designated by the Secured Party in writing, at any time during normal business
hours and upon reasonable notice 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 (it being agreed that, unless an Event of
Default shall have occurred and be continuing, there shall be no more than two
(2) such visits and inspections in any Fiscal Year).
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Section
6.5.
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Maintenance and
Insurance.
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(a) Each
Grantor shall maintain or cause to be maintained, at its own expense, all of its
material assets and properties in good working order and condition, ordinary
wear and tear excepted, making all necessary repairs thereto and renewals and
replacements thereof.
(b) Each
Grantor shall maintain or cause to be maintained, at its own expense, insurance
in form, substance and amounts (including deductibles), which the Grantor deems
reasonably necessary to the Company’s business, (i) adequate to insure all
assets and properties of the Grantor 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 Grantor;
(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 financially
sound and reputable insurers.
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Section
6.6.
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Contracts and Other
Collateral.
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Each
Grantor 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 Grantor is now or hereafter will be party on a timely
basis and in the manner therein required, including, without limitation, this
Agreement, except to the extent the failure to so perform such obligations would
not reasonably be expected to have a Material Adverse Effect.
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Section
6.7.
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Defense of Collateral,
Etc.
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Each
Grantor 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 would
reasonably be expected to have a Material Adverse Effect, each against all
manner of claims and demands on a timely basis to the full extent permitted by
applicable law (other than any such claims and demands by holders of Permitted
Liens).
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Section
6.8.
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Taxes and
Assessments.
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Each
Grantor shall (a) file all material tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency (taking into account any extensions of the original due date),
(b) pay and discharge all material taxes, assessments and governmental
charges or levies imposed upon the Grantor, 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 material 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 Grantor 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 if
and to the extent required by GAAP.
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Section
6.9.
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Compliance with Law
and Other Agreements.
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Each
Grantor 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 Grantor is a party
or by which the Grantor or any of its properties is bound, except where the
failure to so comply would not reasonably be expected to have a Material Adverse
Effect.
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Section
6.10.
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Notice of
Default.
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The
Grantors will immediately notify the Secured Party of any event causing a
substantial loss or diminution in the value of all or any material part of the
Pledged Property and the amount or an estimate of the amount of such loss or
diminution. The Grantors shall promptly notify the Secured Party of any
condition or event which constitutes, or would constitute with the passage of
time or giving of notice or both, an Event of Default, and promptly inform the
Secured Party of any events or changes in the financial condition of any Grantor
occurring since the date of the last financial statement of such Grantor
delivered to the Secured Party, which individually or cumulatively when viewed
in light of prior financial statements, which might reasonably be expected to
have a Material Adverse Effect on the business operations or financial condition
of the Grantor.
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Section
6.11.
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Notice of
Litigation.
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Each
Grantor 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
$250,000, instituted by any persons against the Grantor, 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 Grantor 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 Grantor.
Section
6.13. Future
Subsidiaries.
If any
Grantor shall hereafter create or acquire any subsidiary, simultaneously with
the creation or acquisition of such subsidiary, such Grantor shall cause such
subsidiary to become a party to this Agreement as an additional "Grantor"
hereunder, and to duly execute and deliver a guaranty of the Obligations in
favor of the Secured Party in form and substance reasonably acceptable to the
Secured Party, and to duly execute and/or deliver such opinions of counsel and
other documents, in form and substance reasonably acceptable to the Secured
Party, as the Secured Party shall reasonably request with respect
thereto.
Section
6.14. Changes to
Identity.
Each
Grantor will (a) give the Secured Party at least 30 days' prior written notice
of any change in such Grantor's name, identity or organizational structure, (b)
maintain its jurisdiction of incorporation, organization or formation as set
forth on its respective signature page attached hereto, (C) immediately notify
the Secured Party upon obtaining an organizational identification number, if on
the date hereof such Grantor did not have such identification
number.
Section
6.15. Establishment of Deposit
Account, Dominion Account Agreements;
Control.
Within
ten (10) days of request therefor by the Secured Party, each Grantor, the
Secured Party, and each applicable bank or other depository institution shall
enter into a deposit account agreement (“Deposit Account
Agreement”) in the form of Exhibit B with respect to each of the
Grantor’s Deposit Accounts, including, without limitation, all savings,
passbook, money market or other depository accounts, and all certificates of
deposit, maintained by each Company with any bank, savings and loan association,
credit union or other depository institution maintained or used by each Grantor
providing dominion and control over such accounts to the Secured Party such that
upon notice by the Secured Party to such bank or other depository institution of
the occurrence of an Event of Default all actions under such account shall be
taken solely at the Secured Party’s direction. Each Grantor’s current
Deposit Accounts are set forth on Schedule 6.14 attached hereto.
Each
Grantor shall cause all cash, all collections and proceeds from accounts
receivable, all receipts from credit card payments, and all proceeds from the
sale of any Pledged Property to be deposited only into its Deposit Accounts in
the ordinary course of business and consistent with past practices.
Each
Grantor shall have valid and effective Deposit Account Agreements in place at
all times with respect to all of its Deposit Accounts. No Deposit
Account shall be established, used or maintained by the Company unless it first
enters into a Deposit Account Agreement.
With
respect to each Deposit Account, from an after the occurrence of an Event of
Default, the Secured Party shall have the right, at any time and from time to
time, to exercise its rights under such Deposit Account Agreement, including,
for the avoidance of any doubt, the exclusive right to give instructions to the
financial institution at which such Deposit Account is maintained as to the
disposition of funds or other property on deposit therein or credited
thereto. The Secured Party hereby covenants and agrees that it will
not send any such notice to a financial institution at which any such Deposit
Account is maintained directing the disposition of funds or other property
therein unless and until the occurrence of an Event of Default.
In
connection with the foregoing, each Grantor hereby authorizes and directs each
bank or other depository institution which maintains any Deposit Account to pay
or deliver to the Secured Party upon the Secured Party’s written demand thereof
made at any time after the occurrence of an Event of Default has occurred all
balances in each Deposit Account with such depository for application to the
Obligations then outstanding.
Section
6.16 Perfection of Security
Interests.
(a) Financing
Statements. The Grantors hereby irrevocably authorize
the Secured Party, at the sole cost and expense of the Grantors, at any time and
from time to time to file in any filing office in any jurisdiction any initial
financing statements and amendments thereto that (a) indicate the Pledged
Property (i) as all assets of Grantors or words of similar effect, regardless of
whether any particular asset comprised in the Pledged Property falls within the
scope of Article 9 of the Code of such jurisdiction, or (ii) as being of an
equal or lesser scope or with greater detail, and (b) contain any other
information required by Part 5 of Article 9 of the Code for the sufficiency or
filing office acceptance of any financing statement or amendment, including (i)
whether such Grantor is an organization, the type of organization and any
organization identification number issued to such Grantor, and (ii) in the case
of a financing statement filed as a fixture filing, a sufficient description of
real property to which the Pledged Property relates. Grantors agree
to furnish any such information to the Secured Party promptly upon
request. Grantors also ratify their authorization for the Secured
Party to have filed in any jurisdiction any initial financing statements or
amendments thereto if filed prior to the date hereof. The Grantors acknowledge
that they are not authorized to file any financing statement or amendment or
termination statement with respect to any financing statement without the prior
written consent of the Secured Party and agree that they will not do so without
the prior written consent of the Secured Party. The Grantors
acknowledge and agree that this Agreement constitutes an authenticated
record.
(b) Possession. The
Grantors (i) shall have possession of the Pledged Property, except where
expressly otherwise provided in this Agreement or where the Secured Party
chooses to perfect its security interest by possession in addition to the filing
of a financing statement; and (ii) will, where Pledged Property is in the
possession of a third party, join with the Secured Party in notifying the third
party of the Secured Party’s security interest and obtaining an acknowledgment
from the third party that it is holding the Pledged Property for the benefit of
the Secured Party.
(c) Control. In
addition to the provisions set forth in Section 6.15 above, the Grantors will
cooperate with the Secured Party in obtaining control with respect to the
Pledged Property consisting of (i) Investment Property, (ii) Letters of Credit
and Letter-of-Credit Rights and (iii) electronic Chattel Paper.
(d) Chattel
Paper. Marking of Chattel Paper. The Grantors will not create
any Chattel Paper without placing a legend on the Chattel Paper acceptable to
the Secured Party indicating that the Secured Party has a security interest in
the Chattel Paper.
Section
6.17 Notice of Commercial Tort
Claims. If any Grantor shall at any time acquire a Commercial Tort Claim,
such Grantor shall immediately notify the Secured Party in a writing signed by
such Grantor which shall (a) provide brief details of said claim and (b) grant
to the Secured Party a security interest in said claim and in the proceeds
thereof, all upon the terms of this Agreement, in such form and substance
satisfactory to the Secured Party.
ARTICLE
7.
NEGATIVE
COVENANTS
So long
as any of the Obligations shall remain outstanding, unless the Secured Party
shall otherwise consent in writing each Grantor covenants and agrees that it
shall not:
Section
7.1. Transfers, Liens and
Encumbrances.
(a) Sell,
assign (by operation of law or otherwise), lease, license, exchange or otherwise
transfer or dispose of any of the Pledged Property, except Grantor may (i) sell
or dispose of Inventory in the ordinary course of business, and (ii) sell or
dispose of assets the Grantor has determined, in good faith, not to
be useful in the conduct of its business, and (iii) sell or dispose of accounts
in the course of collection in the ordinary course of business consistent with
past practice.
(b) Directly
or indirectly make, create, incur, assume or permit to exist any Lien in, to or
against any part of the Pledged Property other than Permitted
Liens.
Section
7.2. Restriction on Redemption
and Cash Dividends
Directly
or indirectly, redeem, repurchase or declare or pay any cash dividend or
distribution on its capital stock without the prior express written consent of
the Secured Party.
Section
7.3. Incurrence of
Indebtedness.
Directly
or indirectly, incur or guarantee, assume or suffer to exist any indebtedness,
other than the indebtedness evidenced by the Convertible Debentures and other
Permitted Indebtedness. “Permitted
Indebtedness” means: (i) indebtedness evidenced by Convertible
Debentures; (ii) indebtedness described on the Disclosure Schedule to the
Securities Purchase Agreement; (iii) indebtedness incurred solely for the
purpose of financing the acquisition or lease of any equipment by the Company,
including capital lease obligations with no recourse other than to such
equipment; (iv) indebtedness (A) the repayment of which has been subordinated to
the payment of the Convertible Debentures on terms and conditions acceptable to
the Secured Party, including with regard to interest payments and repayment of
principal, (B) which does not mature or otherwise require or permit redemption
or repayment prior to or on the 91st day
after the maturity date of any Convertible Debentures then outstanding; and (C)
which is not secured by any assets of the Company; (v) indebtedness solely
between the Grantor and/or one of its domestic subsidiaries, on the one hand,
and the Grantor and/or one of its domestic subsidiaries, on the other which
indebtedness is not secured by any assets of the Grantor or any of its
subsidiaries, provided that (x) in each case a majority of the equity of any
such domestic subsidiary is directly or indirectly owned by the Grantor, such
domestic subsidiary is controlled by the Grantor and such domestic subsidiary
has executed a security agreement in the form of this Agreement and (y) any such
loan shall be evidenced by an intercompany note that is pledged by the Grantor
or its subsidiary, as applicable, as collateral pursuant to this Agreement; (vi)
reimbursement obligations in respect of letters of credit issued for the account
of the Grantor or any of its subsidiaries for the purpose of securing
performance obligations of the Grantor or its subsidiaries incurred in the
ordinary course of business so long as the aggregate face amount of all such
letters of credit does not exceed $500,000 at any one time; (vii) provided there
is not an Event of Default when incurred, additional indebtedness incurred that
at any one time does not exceed $1,500,000 individually or in the aggregate; and
(viii) renewals, extensions and refinancing of any indebtedness described in
clauses (i) or (iii) of this subsection.
Section
7.4. Places of
Business.
Change
the location of its chief place of business, chief executive office or any place
of business disclosed to the Secured Party, unless such change in location is to
a different location within the United States and the Grantor provides notice to
the Secured Party of new location within 10 days’ of such change in
location.
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 or 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:
|
Brencourt
Advisors, LLC
|
|
000
Xxxxxxxxx Xxxxxx, 0xx
Xxxxx
|
|
|
Xxx
Xxxx, XX 00000
|
|
|
Attention:
Xxxxxxx Xxxxxx
|
|
|
Senior Vice
President
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (212)
313-
|
|
|
If
to the Company:
|
IR
Biosciences Holdings, Inc.
|
|
0000
X. Xxx Xx Xxxxxxx, Xxxxx 000
|
|
|
Xxxxxxxxxx,
XX 00000
|
|
|
Attention:
Chief Executive Officer
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
With
a copy to:
|
K&L
Gates LLP
|
|
00000
Xxxxx Xxxxxx Xxxx., 0xx
Xxxxx
|
|
|
Xxx
Xxxxxxx, XX 00000
|
|
|
Attention: Xxxxxx
X. Xxxxxxx
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
If
to any other Grantor
|
To
the address listed on the respective signature pages attached
hereto
|
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 out-of-pocket 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 Grantor 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 Grantor of any undertakings, agreements or covenants shall
not waive, 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 Grantor 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 in the case of any such waiver, and signed by the Secured
Party and the Grantor in the case of any such amendment, change or
modification. Further, no such document, instrument, and/or agreement
purported to be executed on behalf of the Secured Party shall be binding upon
the Secured Party unless executed by a duly authorized representative of 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 so long as any of the
Obligations shall remain outstanding; (ii) be binding upon each Grantor and
its successors and assigns; 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, this Agreement and the security
interest created hereby shall terminate, and, in connection therewith, each
Grantor 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 and the Secured Party shall
deliver to the Grantor such documents as the Grantor shall reasonably request to
evidence such termination.
|
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 New Jersey 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, provided, however, that nothing
herein shall prevent the Secured Party from enforcing its rights and remedies
(including, without limitation, by filing a civil action) with respect to the
Pledged Property and/or the Grantors in any other jurisdiction in which the
Pledged Property and/or the Grantors may be located.
|
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 Right of Set
Off.
The
Grantors each hereby grant to the Secured Party, a lien, security interest and
right of setoff as security for all liabilities and obligations to the Secured
Party, whether now existing or hereafter arising, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of the Secured Party or any of its affiliates, or any
entity under the control of the Secured Party, or in transit to any of them. At
any time, without demand or notice, the Secured Party may set off the same or
any part thereof and apply the same to any liability or obligation of the
Grantors even though unmatured and regardless of the adequacy of any other
collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE
THE SECURED PARTY TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE GRANTORS,
ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
|
Section
8.10
|
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 Security Agreement as of the date first above
written.
|
COMPANY:
|
|
|
IR
BIOSCIENCES HOLDINGS, INC.
|
|
|
By: /s/ Xxxxxxx
Xxxxxxx
|
|
|
Name: Xxxxxxx
Xxxxxxx
|
|
|
Title: CEO
|
|
|
Jurisdiction
of Incorporation, Organization or Formation:
|
|
|
Organizational
ID:
|
IN WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
GUARANTOR:
|
|
|
ImmuneRegen
BioSciences, Inc.
|
|
|
By: /s/ Xxxxxxx
Xxxxxxx
|
|
|
Name: Xxxxxxx
Xxxxxxx
|
|
|
Title: CEO
|
|
|
Address
For Notices:
0000
X. Xxx xx Xxxxxxx
Xxxxx
000
Xxxxxxxxxx,
XX 00000
Jurisdiction
of Incorporation, Organization or Formation:
|
|
|
Organizational
ID:
|
IN WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
SECURED
PARTY:
|
|
|
Brencourt
Multi-Strategy Master Ltd.
|
|
|
By: Brencourt
Advisors ,LLC
|
|
|
By:
/s/ Xxxxxxx
Xxxxxx
|
|
|
Name: Xxxxxxx
Xxxxxx
|
|
|
Title: Chief
Financial Officer
|
IN WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
SECURED
PARTY:
|
|
|
Man
Mac Schreckhorn 14B Limited
|
|
|
By: Brencourt
Advisors ,LLC
|
|
|
By:
/s/ Xxxxxxx
Xxxxxx
|
|
|
Name: Xxxxxxx
Xxxxxx
|
|
|
Title: Chief
Financial Officer
|
|
IN WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
SECURED
PARTY:
|
|
|
Brencourt
Multi-Strategy Enhanced Dedicated Fund, L.P.
|
|
|
By: Brencourt
Advisors ,LLC
|
|
|
By:
/s/ Xxxxxxx
Xxxxxx
|
|
|
Name:
Xxxxxxx Xxxxxx
|
|
|
Title:
Chief Financial Officer
|
|
EXHIBIT
A
DEFINITION OF PLEDGED
PROPERTY
For the
purpose of securing prompt and complete payment and performance by the Grantor
of all of the Obligations, the Grantors each unconditionally and irrevocably
hereby grant to the Secured Party a continuing security interest in and to, and
lien upon, the following Pledged Property of each Grantor (all capitalized terms
used herein shall have the respective meanings ascribed thereto in the
Code):
All
personal property of each Grantor, wherever located and whether now or
hereinafter existing and whether now owned or hereafter acquired, of every kind
and description, tangible or intangible, including without limitation,
all:
1. Goods;
2. Inventory,
including, without limitation, all goods, merchandise and other personal
property now owned or hereafter acquired by the Grantor which are held for sale
or lease, or are furnished or to be furnished under any contract of service or
are raw materials, work-in-process, supplies or materials used or consumed in
the Grantor’s business, and all products thereof, and all substitutions.
replacements, additions or accessions therefor and thereto; and any cash or
non-cash Proceeds of all of the foregoing;
3. Equipment,
including, without limitation, all machinery, equipment, furniture, parts, tools
and dies, of every kind and description, of the Grantor (including automotive
equipment and motor vehicles), now owned or hereafter acquired by the Grantor,
and used or acquired for use in the business of the Grantor, together with all
accessions thereto and all substitutions and replacements thereof and parts
therefor and all cash or non-cash Proceeds of the foregoing;
4. Fixtures,
including, without limitation, all goods which are so related to particular real
estate that an interest in them arises under real estate law and all accessions
thereto, replacements thereof and substitutions therefor, including, but not
limited to, plumbing, heating and lighting apparatus, mantels, floor coverings,
furniture, furnishings, draperies, screens, storm windows and doors, awnings,
shrubbery, plants, boilers, tanks, machinery, stoves, gas and electric ranges,
wall cabinets, appliances, furnaces, dynamos, motors, elevators and elevator
machinery, radiators, blinds and all laundry, refrigerating, gas, electric,
ventilating, air-refrigerating, air-conditioning, incinerating and sprinkling
and other fire prevention or extinguishing equipment of whatsoever kind and
nature and any replacements, accessions and additions thereto, Proceeds thereof
and substitutions therefor;
5. Instruments
(including promissory notes);
6. Documents;
7. Accounts,
including, without limitation, all Contract Rights and accounts receivable,
health-care-insurance receivables, and license fees; any other obligations or
indebtedness owed to the Grantor from whatever source arising; all rights of
Grantor to receive any payments in money or kind; all guarantees of Accounts and
security therefor; all cash or non-cash Proceeds of all of the foregoing; all of
the right, title and interest of Grantor in and with respect to the goods,
services or other property which gave rise to or which secure any of the
accounts and insurance policies and proceeds relating thereto, and all of the
rights of the Grantor as an unpaid seller of goods or services, including,
without limitation the rights of stoppage in transit, replevin, reclamation and
resale and all of the foregoing, whether now existing or hereafter created or
acquired;
8. Contracts
and Contract Rights, including, to the extent not included in the definition of
Accounts, all rights to payment or performance under a contract not yet earned
by performance and not evidenced by an Instrument or Chattel Paper;
9. Chattel
Paper (whether tangible or electronic);
10. Deposit
Accounts (and in and to any deposits or other sums at any time credited to each
such Deposit Account);
11. Money,
cash and cash equivalents;
12. Letters
of Credit and Letter-of-Credit Rights (whether or not the Letter of Credit is
evidenced by a writing);
13. Commercial
Tort Claims;
14. Securities
Accounts, Security Entitlements, Securities, Financial Assets and all other
Investment Property, including, without limitation, all ownership or membership
interests in any subsidiaries or affiliates (whether or not controlled by the
Grantor);
15. General
Intangibles, including, without limitation, all payment intangibles, tax refunds
and other claims of the Grantor against any governmental authority, and all
choses in action, insurance proceeds, goodwill, patents, copyrights, trademarks,
tradenames, customer lists, formulae, trade secrets, licenses, permits,
franchises, designs, computer software, research and literary rights now owned
or hereafter acquired;
16. Farm
Products;
17. All
books and records (including all ledger sheets, files, computer programs, tapes
and related data processing software) evidencing an interest in or relating to
any of the foregoing;
18. To
the extent not already included above, all supporting obligations, and any and
all cash and non-cash Proceeds, products, accessions, and/or replacements of any
of the foregoing, including proceeds of insurance covering any or all of the
foregoing.
ANNEX A
to
SECURITY
AGREEMENT
THE
SECURED PARTY
1. Appointment. Each holder of
Convertible Debentures shall be deemed irrevocably to authorize the Secured
Party, as its agent, to take such action on its behalf under the provisions
of the Agreement and any other Transaction Document (as such term is defined in
the Purchase Agreement) and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Secured Party by the terms hereof and thereof and such other powers as are
reasonably incidental thereto. The Secured Party may perform any of
its duties hereunder by or through its agents or employees.
2.
Nature of Duties. The Secured
Party shall have no duties or responsibilities except those expressly set forth
in the Agreement. Neither the Secured Party nor any of its partners,
members, shareholders, officers, directors, employees or agents shall be liable
for any action taken or omitted by it as such under the Agreement or hereunder
or in connection herewith or therewith, be responsible for the consequence of
any oversight or error of judgment or answerable for any loss, unless caused
solely by its or their gross negligence or willful misconduct as determined
by a final judgment (not subject to further appeal) of a court of competent
jurisdiction. The duties of the Secured Party shall be mechanical and
administrative in nature; the Secured Party shall not have by reason of the
Agreement or any other Transaction Document a fiduciary relationship in respect
of any Debtor or any holder; and nothing in the Agreement or any other
Transaction Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Secured Party any obligations in respect of the
Agreement or any other Transaction Document except as expressly set forth herein
and therein.
3.
Lack of Reliance on the
Secured
Party. Independently and without reliance upon the Secured
Party, each holder, to the extent it deems appropriate, has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of the Company and its subsidiaries in connection with
such holder’s investment in the Debtors, the creation and continuance of the
Obligations, the transactions contemplated by the Transaction Documents, and the
taking or not taking of any action in connection therewith, and (ii) its own
appraisal of the creditworthiness of the Company and its subsidiaries, and of
the value of the Collateral from time to time, and the Secured Party shall have
no duty or responsibility, either initially or on a continuing basis, to provide
any holder with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at any
time or times thereafter. The Secured Party shall not be responsible
to the Debtors or any holder for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith, or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority or
sufficiency of the Agreement or any other Transaction Document, or for the
financial condition of the Debtors or the value of any of the Collateral, or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of the Agreement or any other
Transaction Document, or the financial condition of the Debtors, or the value of
any of the Collateral, or the existence or possible existence of any default or
Event of Default under the Agreement, the Debentures or any of the other
Transaction Documents.
4.
Certain Rights of the
Secured
Party. The Secured Party shall have the right to take any
action with respect to the Collateral, on behalf of all of the
holders. To the extent practical, the Secured Party shall request
instructions from the holders with respect to any material act or action
(including failure to act) in connection with the Agreement or any other
Transaction Document, and shall be entitled to act or refrain from acting in
accordance with the instructions of a majority in interest of the holders (based
on then outstanding principal amounts of Convertible Debentures); if such
instructions are not provided despite the Secured Party’s request therefor, the
Secured Party shall be entitled to refrain from such act or taking such action,
and if such action is taken, shall be entitled to appropriate indemnification
from the holders in respect of actions to be taken by the Secured Party; and the
Secured Party shall not incur liability to any person or entity by reason of so
refraining. Without limiting the foregoing, (a) no holder shall have
any right of action whatsoever against the Secured Party as a result of the
Secured Party acting or refraining from acting hereunder in accordance with the
terms of the Agreement or any other Transaction Document, and the Debtors shall
have no right to question or challenge the authority of, or the instructions
given to, the Secured Party pursuant to the foregoing and (b) the Secured Party
shall not be required to take any action which the Secured Party believes (i)
could reasonably be expected to expose it to personal liability or (ii) is
contrary to this Agreement, the Transaction Documents or applicable
law.
5. Reliance. The
Secured Party shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, statement, certificate, or
telecopier message, order or other document or telephone message signed, sent or
made by the proper person or entity, and, with respect to all legal matters
pertaining to the Agreement and the other Transaction Documents and its duties
thereunder, upon advice of counsel selected by it and upon all other matters
pertaining to this Agreement and the other Transaction Documents and its duties
thereunder, upon advice of other experts selected by it. Anything to the
contrary notwithstanding, the Secured Party shall have no obligation whatsoever
to any holder to assure that the Collateral exists or is owned by the Debtors or
is cared for, protected or insured or that the liens granted pursuant to the
Agreement have been properly or sufficiently or lawfully created, perfected, or
enforced or are entitled to any particular priority.
6. Indemnification. To the extent
that the Secured Party is not reimbursed and indemnified by the Debtors,
the holders will jointly and severally reimburse and indemnify the Secured
Party, in proportion to their initially purchased respective principal amounts
of Convertible Debentures, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Secured Party in performing its duties
hereunder or under the Agreement or any other Transaction Document, or in any
way relating to or arising out of the Agreement or any other Transaction
Document except for those determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction to have resulted solely from the
Secured Party's own gross negligence or willful misconduct. Prior to
taking any action hereunder as Secured Party, the Secured Party may require each
holder to deposit with it sufficient sums as it determines in good faith is
necessary to protect the Secured Party for costs and expenses associated with
taking such action.
7. Resignation by the Secured Party.
(a) The
Secured Party may resign from the performance of all its functions and duties
under the Agreement and the other Transaction Documents at any time by giving 30
days' prior written notice (as provided in the Agreement) to the Debtors and the
holders. Such resignation shall take effect upon the appointment of a
successor Secured Party pursuant to clauses (b) and (c) below.
(b) Upon
any such notice of resignation, the holders, acting by a majority in interest,
shall appoint a successor Secured Party hereunder.
(c) If a
successor Secured Party shall not have been so appointed within said 30-day
period, the Secured Party shall then appoint a successor Secured Party who shall
serve as Secured Party until such time, if any, as the holders appoint a
successor Secured Party as provided above. If a successor Secured
Party has not been appointed within such 30-day period, the Secured Party may
petition any court of competent jurisdiction or may interplead the Debtors and
the holders in a proceeding for the appointment of a successor Secured Party,
and all fees, including, but not limited to, extraordinary fees associated with
the filing of interpleader and expenses associated therewith, shall be payable
by the Debtors on demand.
8. Rights with respect to
Collateral. Each holders
agrees with all other holders and the Secured Party (i) that it shall not, and
shall not attempt to, exercise any rights with respect to its security interest
in the Collateral, whether pursuant to any other agreement or otherwise (other
than pursuant to this Agreement), or take or institute any action against the
Secured Party or any of the other holders in respect of the Collateral or its
rights hereunder (other than any such action arising from the breach of this
Agreement) and (ii) that such holder has no other rights with respect to the
Collateral other than as set forth in this Agreement and the other Transaction
Documents. Upon the acceptance of any appointment as Secured Party
hereunder by a successor Secured Party, such successor Secured Party shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Secured Party and the retiring Secured Party
shall be discharged from its duties and obligations under the Agreement.
After any retiring Secured Party’s resignation or removal hereunder as Secured
Party, the provisions of the Agreement including this Annex A shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Secured Party.
