SECURITY AGREEMENT
This
SECURITY AGREEMENT, dated as of September 26, 2007 (this “Agreement”),
is among
Duska
Therapeutics, Inc., a Nevada corporation (the
“Company”), all
of the subsidiaries of the Company
(such subsidiaries, the “Guarantors” and together with the Company, the
“Debtors”),
and
Platinum Long Term Growth VI, LLC (together with its successors and assigns,
the
“Secured
Party”),
as collateral agent for the investors identified in the Purchase Agreement
(the
“Lenders”),
which Lenders are the holders of the Company’s Senior Secured Convertible
Promissory Notes, issued on September 26, 2007 in the aggregate original
principal amount of $5,750,000 (the “Notes”).
WITNESSETH:
WHEREAS,
pursuant to the Notes, the Lenders have agreed to extend the loans to the
Company evidenced by the Notes;
WHEREAS,
pursuant to a certain Guaranty, dated as of the date hereof (the “Guaranty”),
the
Guarantors
have jointly and severally agreed to guarantee and act as surety for payment
of
such Notes; and
WHEREAS,
in order to induce the Secured Party to extend the loans evidenced by the Notes,
each Debtor has agreed to execute and deliver to the Secured Party this
Agreement and to grant the Secured Party a security interest, for the benefit
of
the Lenders, in certain property of such Debtor to secure the prompt payment,
performance and discharge in full of all of the Company’s obligations under the
Notes and the Guarantors’ obligations under the Guaranty.
NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Certain
Definitions.
As used in this Agreement, the following terms shall have the meanings set
forth
in this Section 1. Terms used but not otherwise defined in this Agreement that
are defined in Article 9 of the UCC (including the terms “account”, “chattel
paper”, “commercial tort claim”, “deposit account”, “document”, “equipment”,
“fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”,
“investment property”, “letter-of-credit rights”, “proceeds”, “securities” and
“supporting obligations”) shall have the respective meanings given such terms in
Article 9 of the UCC.
(a) “Collateral”
means the collateral in which the Secured Party is granted a security interest
by this Agreement and which shall include the following personal property of
the
Debtors, whether presently owned or existing or hereafter acquired or coming
into existence, wherever situated, and all additions and accessions thereto
and
all substitutions and replacements thereof, and all proceeds, products and
accounts thereof, including, without limitation, all proceeds from the sale
or
transfer of the Collateral and of insurance covering the same and of any tort
claims in connection therewith,
and all dividends, interest, cash, notes, securities, equity interest or other
property at any time and from time to time acquired, receivable or otherwise
distributed in respect of, or in exchange for, any or all of the Pledged
Securities (as defined below):
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(i) All
goods, including, without limitation, (A) all machinery, equipment, computers,
motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
and
general tools, fixtures, test and quality control devices and other equipment
of
every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with any Debtor’s
businesses and all improvements thereto; and (B) all inventory, including all
materials, work in process and finished goods;
(ii) All
contract rights and other general intangibles, including, without limitation,
all partnership interests, membership interests, stock or other securities,
rights
under any of the Organizational Documents, agreements related to the Pledged
Securities, licenses,
distribution and other agreements, computer software (whether “off-the-shelf”,
licensed from any third party or developed by any Debtor), computer software
development rights, leases, franchises, customer lists, quality control
procedures, grants and rights, goodwill, trademarks, service marks, trade
styles, trade names, patents, patent applications, copyrights, and income tax
refunds;
(iii) All
accounts, together with all instruments, all documents of title representing
any
of the foregoing, all rights in any merchandising, goods, equipment, motor
vehicles and trucks which any of the same may represent, and all right, title,
security and guaranties with respect to each account, including any right of
stoppage in transit;
(iv) All
documents, letter-of-credit rights, instruments and chattel paper;
(v) All
commercial tort claims;
(vi) All
deposit accounts and all cash (whether or not deposited in such deposit
accounts);
(vii) All
investment property;
(viii) All
supporting obligations;
(ix) All
files, records, books of account, business papers, and computer programs;
and
(x) the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(ix) above.
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Without
limiting the generality of the foregoing, the “Collateral”
shall include all investment property and general intangibles respecting
ownership and/or other equity interests in each Guarantor, including, without
limitation, the shares of capital stock and the other equity interests listed
on
Schedule
H
hereto (as the same may be modified from time to time pursuant to the terms
hereof), and any other shares of capital stock and/or other equity interests
of
any other direct or indirect subsidiary of any Debtor obtained in the future,
and, in each case, all certificates representing such shares and/or equity
interests and, in each case, all rights, options, warrants, stock, other
securities and/or equity interests that may hereafter be received, receivable
or
distributed in respect of, or exchanged for, any of the foregoing and all rights
arising under or in connection with the Pledged Securities, including, but
not
limited to, all dividends, interest and cash.
Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of
any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden
by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the extent permitted by applicable law, this
Agreement shall create a valid security interest in such asset and, to the
extent permitted by applicable law, this Agreement shall create a valid security
interest in the proceeds of such asset.
(b) “Intellectual
Property”
means
the collective reference to all rights, priorities and privileges relating
to
intellectual property, whether arising under United States, multinational or
foreign laws or otherwise, including, without limitation, (i) all copyrights
arising under the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether published
or
unpublished, all registrations and recordings thereof, and all applications
in
connection therewith, including, without limitation, all registrations,
recordings and applications in the United States Copyright Office, (ii) all
letters patent of the United States, any other country or any political
subdivision thereof, all reissues and extensions thereof, and all applications
for letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (iii) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade dress, service marks, logos, domain names and other source or
business identifiers, and all goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings thereof, and
all
applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, and all common law rights related thereto, (iv) all trade secrets
arising under the laws of the United States, any other country or any political
subdivision thereof, (v) all rights to obtain any reissues, renewals or
extensions of the foregoing, (vi) all licenses for any of the foregoing, and
(vii) all causes of action for infringement of the foregoing.
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(c) “Necessary
Endorsement”
means undated stock powers endorsed in blank or other proper instruments of
assignment duly executed and such other instruments or documents as the Secured
Party may reasonably request.
(d) “Obligations”
means all of the liabilities
and obligations (primary, secondary, direct, contingent, sole, joint or several)
due or to become due, or that are now or may be hereafter contracted or
acquired, or owing, of any Debtor to the Secured Party
under this Agreement, the Notes, the Purchase Agreement, the Guaranty and any
other instruments, agreements or other documents executed and/or delivered
in
connection herewith or therewith, in each case, whether now or hereafter
existing, voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and whether
or not from time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or liabilities that
are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from the Secured Party as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time. Without limiting the
generality of the foregoing, the term “Obligations” shall include, without
limitation: (i) principal of, and interest on, the Notes and the loans extended
pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations
and liabilities of the Debtors from time to time under or in connection with
this Agreement, the Notes, the Purchase Agreement, the Guaranty and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith; and (iii) all amounts (including but not
limited to post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Debtor.
(e) “Organizational
Documents”
means, with respect to any Debtor, the documents by which such Debtor was
organized (such as a certificate of incorporation, certificate of limited
partnership or articles of organization, and including, without limitation,
any
certificates of designation for preferred stock or other forms of preferred
equity) and which relate to the internal governance of such Debtor (such as
bylaws, a partnership agreement or an operating, limited liability or members
agreement).
(f) “Pledged
Securities”
shall have the meaning ascribed to such term in Section 4(i).
(g) “Purchase
Agreement”
means the Note and Warrant Purchase Agreement, dated as of the date hereof,
between the Company and the Lenders.
(h) “UCC”
means the Uniform Commercial Code of the State of New York and/or any other
applicable law of any state or states which have jurisdiction with respect
to
all, or any portion of, the Collateral or this Agreement, from time to time.
It
is the intent of the parties that defined terms in the UCC should be construed
in their broadest sense so that the term “Collateral” will be construed in its
broadest sense. Accordingly if there are, from time to time, changes to defined
terms in the UCC that broaden the definitions, they are incorporated herein,
and
if existing definitions in the UCC are broader than the amended definitions,
the
existing ones shall be controlling.
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2. Grant
of Security Interest in Collateral.
As an inducement for the Lenders to extend the loans as evidenced by the Notes
and to secure the complete and timely payment, performance and discharge in
full, as the case may be, of all of the Obligations, each Debtor hereby
unconditionally and irrevocably pledges, grants and hypothecates to the Secured
Party a security interest in and to, a lien upon, and a right of set-off
against, all of its respective right, title and interest of whatsoever kind
and
nature in and to the Collateral (a “Security
Interest”
and collectively, the “Security
Interests”).
To the extent there is at any time more than one Secured Party hereunder, the
Collateral will secure the Obligations to the Secured Party on a pari passu
basis, based on the then outstanding amount of such Obligations.
3. Delivery
of Certain Collateral.
Contemporaneously with or prior to the execution of this Agreement, each Debtor
shall deliver or cause to be delivered to the Secured Party (a) any and all
certificates and other instruments representing or evidencing the Pledged
Securities, and (b) any and all certificates and other instruments or documents
representing any of the other Collateral, in each case, together with all
Necessary Endorsements. The Debtors are, contemporaneously with the execution
hereof, delivering to the Secured Party, or have previously delivered to the
Secured Party, a true and correct copy of each Organizational Document governing
any of the Pledged Securities.
Throughout the term of this Agreement, so long as no Event of Default is uncured
and continuing, the Debtor shall have the right to vote the Pledged Securities
in all matters presented to the stockholders of the Pledge Securities for vote
thereon, except in a manner inconsistent with the terms of this Agreement or
detrimental to the interests of the Lenders. The Secured Party shall hold the
Pledged Securities in the form in which the same are delivered herewith, unless
there shall occur an Event of Default. To the extent that the Secured Party
(or
the Lenders) shall not previously have taken, acquired, sold, transferred,
disposed of or otherwise realized value on the Pledged Securities in accordance
with this Agreement, on the date on which the Obligations have been indefeasibly
discharged (by payment of the Notes or conversion of Notes to common stock,
as
applicable), any remaining security interest in the Pledged Securities shall
automatically terminate, cease to exist and be released, and the Secured Party
shall forthwith return any remaining Pledged Securities and irrevocably release
such shares from collateral.
4. Representations,
Warranties, Covenants and Agreements of the Debtors.
Except as set forth under the corresponding section of the disclosure schedules
delivered to the Secured Party concurrently herewith (the “Disclosure
Schedules”),
which Disclosure Schedules shall be deemed a part hereof, each Debtor represents
and warrants to, and covenants and agrees with, the Secured Party as
follows:
(a) Each
Debtor has the requisite corporate, partnership, limited liability company
or
other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder. The execution, delivery and performance by each
Debtor of this Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no further
action is required by such Debtor. This Agreement has been duly executed by
each
Debtor. This Agreement constitutes the legal, valid and binding obligation
of
each Debtor, enforceable against each Debtor in accordance with its terms except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors and by general principles of
equity.
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(b) The
Debtors have no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of their
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule
A
attached hereto. The Debtors own of record, subject only to Permitted Liens
(as
defined in the Notes), the real property where such Collateral is located,
as
identified on Schedule
A.
Except as disclosed on Schedule
A,
none of such Collateral is in the possession of any consignee, bailee,
warehouseman, agent or processor.
(c) Except
for Permitted Liens and except as set forth on Schedule
B
attached hereto, the Debtors are the sole owners of the Collateral, free and
clear of any liens, security interests, encumbrances, rights or claims, and
are
fully authorized to grant the Security Interests. Except with respect to
Permitted Liens and except as set forth on Schedule
B
attached hereto, there is not on file in any governmental or regulatory
authority, agency or recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the foregoing (other
than
those that will be filed in favor of the Secured Party pursuant to this
Agreement) covering or affecting any of the Collateral. Except with respect
to
Permitted Liens, except as set forth on Schedule
B
attached hereto and except pursuant to this Agreement, as long as this Agreement
shall be in effect, the Debtors shall not execute and shall not knowingly permit
to be on file in any such office or agency any other financing statement or
other similar document or instrument (except to the extent filed or recorded
in
favor of the Secured Party pursuant to the terms of this
Agreement).
(d) No
written claim has been received by any Debtor that any Collateral or Debtor's
use of any Collateral violates the rights of any third party. There has been
no
adverse decision to any Debtor's claim of ownership rights in or exclusive
rights to use the Collateral in any jurisdiction or to any Debtor's right to
keep and maintain such Collateral in full force and effect, and there is no
proceeding involving said rights pending or, to the best knowledge of any
Debtor, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.
(e) Each
Debtor shall at all times maintain its books of account and records relating
to
the Collateral at its principal place of business (except when temporarily
kept
at the offices of its attorneys or accountants) and its Collateral at the
locations set forth on Schedule
A
attached hereto and may not relocate such books of account and records or
tangible Collateral unless it delivers to the Secured Party at least 30 days
prior to such relocation (i) written notice of such relocation and the new
location thereof (which must be within the United States) and (ii) evidence
that
appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to perfect the
Security Interests to create in favor of the Secured Party, subject to Permitted
Liens, a valid, perfected and continuing perfected first priority lien in the
Collateral.
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(f) This
Agreement creates in favor of the Secured Party a valid, security interest
in
the Collateral, subject only to Permitted Liens (as defined in the Notes),
securing the payment and performance of the Obligations. Upon making the filings
described in the immediately following paragraph, all security interests created
hereunder in any Collateral which may be perfected by filing UCC financing
statements shall have been duly perfected. Except for the filing of the UCC
financing statements referred to in the immediately following paragraph, the
recordation of the Intellectual Property Security Agreement (as defined below)
with respect to copyrights and copyright applications in the United States
Copyright Office referred to in paragraph (p), and
the delivery of the certificates and other instruments provided in Section
3,
no action is necessary to create, perfect or protect the security interests
created hereunder. Without limiting the generality of the foregoing, except
for
the filing of said financing statements and the recordation of said Intellectual
Property Security Agreement, no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with,
any
governmental authority or regulatory body is required for (i) the execution,
delivery and performance of this Agreement, (ii) the creation or perfection
of
the Security Interests created hereunder in the Collateral or (iii) the
enforcement of the rights of the Secured Party hereunder.
(g) Each
Debtor hereby authorizes the Secured Party to file one or more financing
statements under the UCC with respect to the Security Interests with the proper
filing and recording agencies in any jurisdiction deemed proper by it, which
UCC
financing statement may describe the collateral as “All assets”.
(h) The
execution, delivery and performance of this Agreement by the Debtors do not
(i)
violate any of the provisions of any Organizational Documents of any Debtor
or
any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to any Debtor
or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other
instrument (evidencing any Debtor's debt or otherwise) or other understanding
to
which any Debtor is a party or by which any property or asset of any Debtor
is
bound or affected. If any, all required consents (including, without limitation,
from stockholders or creditors of any Debtor) necessary for any Debtor to enter
into and perform its obligations hereunder have been obtained.
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(i) The
capital stock and other equity interests listed on Schedule
H
hereto (the “Pledged
Securities”)
represent all of the capital stock and other equity interests in and to the
Guarantors and the other subsidiaries of the Company, and represent all capital
stock and other equity interests owned, directly or indirectly, by the Company.
All of the Pledged Securities are validly issued, fully paid and nonassessable,
and the Company is the legal and beneficial owner of the Pledged Securities,
free and clear of any lien, security interest or other encumbrance except for
the security interests created by this Agreement and other Permitted
Liens.
Each Debtor shall cause the pledge and security interest of the Secured Party
to
be duly noted in its corporate books and records.
(j) The
ownership and other equity interests in partnerships and limited liability
companies (if any)
included in the Collateral
(the “Pledged
Interests”)
by their express terms do not provide that they are securities governed by
Article 8 of the UCC and are not held in a securities account or by any
financial intermediary.
(k) Except
for Permitted Liens (as defined in the Notes), each Debtor shall at all times
maintain the liens and Security Interests provided for hereunder as valid and
perfected first priority liens and security interests in the Collateral in
favor
of the Secured Party until this Agreement and the Security Interests hereunder
shall be terminated pursuant to Section 14 hereof. Each Debtor hereby agrees
to
use commercially reasonable efforts to defend the same against the claims of
any
and all persons and entities and to safeguard and protect all Collateral for
the
account of the Secured Party. At the reasonable request of the Secured Party,
each Debtor will sign and deliver to the Secured Party at any time or from
time
to time one or more financing statements pursuant to the UCC in form reasonably
satisfactory to the Secured Party and will pay the cost of filing the same
in
all public offices wherever filing is necessary to effect the rights and
obligations provided for herein. Without limiting the generality of the
foregoing, each Debtor shall pay all fees, taxes and other amounts necessary
to
maintain the Collateral and the Security Interests hereunder, and each Debtor
shall obtain and furnish to the Secured Party from time to time, upon demand,
such releases and/or subordinations of claims and liens which may be required
to
maintain in accordance with this Agreement the priority of the Security
Interests hereunder.
(l) Except
for Permitted Liens (as defined in the Notes), no Debtor will transfer, pledge,
hypothecate, encumber, license, sell or otherwise dispose of any of the
Collateral (except for non-exclusive licenses granted by a Debtor in its
ordinary course of business and sales of inventory by a Debtor in its ordinary
course of business) without the prior written consent of the
Secured Party.
(m) Each
Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.
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(n) Each
Debtor shall maintain with financially sound and reputable insurers, insurance
with respect to the Collateral, including Collateral hereafter acquired, against
loss or damage of the kinds and in the amounts customarily insured against
by
entities of established reputation having similar properties similarly situated
and in such amounts as are customarily carried under similar circumstances
by
other such entities and otherwise as is prudent for entities engaged in similar
businesses but in any event sufficient to cover the full replacement cost
thereof. Each Debtor shall cause each insurance policy issued in connection
herewith to provide, and the insurer issuing such policy to certify to the
Secured
Party
that (a) the Secured
Party
will be named as lender loss payee and additional insured under each such
insurance policy; (b) if such insurance be proposed to be cancelled or
materially changed for any reason whatsoever, such insurer will promptly notify
the Secured
Party
and such cancellation or change shall not be effective as to the Secured
Party
for at least thirty (30) days after receipt by the Secured
Party
of such notice, unless the effect of such change is to extend or increase
coverage under the policy; and (c) the Secured
Party
will have the right (but no obligation) at its election to remedy any default
in
the payment of premiums within thirty (30) days of notice from the insurer
of
such default. If no Event of Default (as defined in the Notes) exists and if
the
proceeds arising out of any claim or series of related claims do not exceed
$100,000, loss payments in each instance will be applied by the applicable
Debtor to the repair and/or replacement of property with respect to which the
loss was incurred to the extent reasonably feasible, and any loss payments
or
the balance thereof remaining, to the extent not so applied, shall be payable
to
the applicable Debtor, provided, however, that payments received by any Debtor
after an Event of Default occurs and is continuing or in excess of $100,000
for
any occurrence or series of related occurrences shall be paid to the
Secured
Party
and, if received by such Debtor, shall be held in trust for the Secured Party
and promptly paid over to the Secured
Party
unless otherwise directed in writing by the Secured
Party.
Copies of such policies or the related certificates, in each case, naming the
Secured
Party
as lender loss payee and additional insured shall be delivered to the
Secured
Party
at least annually and at the time any new policy of insurance is
issued.
(o) Each
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Party promptly, in sufficient detail, of any material adverse change
in
the Collateral, and of the occurrence of any event which would have a material
adverse effect on the value of the Collateral or on the Secured Party’s security
interest therein.
(p) Each
Debtor shall promptly execute and deliver to the Secured Party such further
deeds, mortgages, assignments, security agreements, financing statements or
other instruments, documents, certificates and assurances and take such further
action as the Secured Party may from time to time request as necessary to
perfect, protect or enforce the Secured Party’s security interest in the
Collateral (including, without limitation, the execution and delivery of a
separate security agreement with respect to each Debtor’s Intellectual Property
(“Intellectual
Property Security Agreement”)
to be delivered on the date hereof) in which the Secured Party has been granted
a security interest hereunder, substantially in a form reasonably acceptable
to
the Secured Party.
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(q) Each
Debtor shall permit the Secured Party and its representatives and agents
reasonable access to inspect the Collateral during normal business hours, upon
reasonable prior notice and without undue interference with such Debtor’s
business operations, and to make copies of records pertaining to the Collateral
as may be reasonably requested by the Secured Party from time to
time.
(r) Each
Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.
(s) Each
Debtor shall promptly notify the Secured Party in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by such
Debtor that would have a material adverse effect on the value of the Collateral,
the Security Interest or the rights and remedies of the Secured Party
hereunder.
(t) All
information heretofore, herein or hereafter supplied to the Secured Party by
or
on behalf of any Debtor with respect to the Collateral is accurate and complete
in all material respects as of the date furnished.
(u) The
Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises
material to their respective businesses.
(v) No
Debtor will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at
least 30 days’ prior written notice to the Secured Party of such change and, at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this Agreement.
(w) Except
in the ordinary course of business and except for Permitted Liens (as defined
in
the Notes), no Debtor may consign any of its Inventory or sell any of its
Inventory on xxxx and hold, sale or return, sale on approval, or other
conditional terms of sale without the consent of the
Secured Party, which shall not be unreasonably withheld.
(x) No
Debtor may relocate its chief executive office to a new location without
providing 30 days’ prior written notification thereof to the Secured Party and
so long as, at the time of such written notification, such Debtor provides
any
financing statements or fixture filings necessary to perfect and continue the
perfection of the Security Interests granted and evidenced by this
Agreement.
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(y) Each
Debtor was organized and remains organized solely under the laws of the state
set forth next to such Debtor’s name in Schedule
D
attached hereto, which Schedule
D
sets forth each Debtor’s organizational identification number or, if any Debtor
does not have one, states that one does not exist
(z) (i)
The actual name of each Debtor is the name set forth in Schedule
D
attached hereto; (ii) no Debtor has any trade names except as set forth on
Schedule
E
attached hereto; (iii) no Debtor has used any name other than that stated in
the
preamble hereto or as set forth on Schedule
E
for the preceding five years; and (iv) no entity has merged into any Debtor
or
been acquired by any Debtor within the past five years except as set forth
on
Schedule
E.
(aa) At
any
time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by
the
secured party to perfect the security interest created hereby, the applicable
Debtor shall deliver such Collateral to the Secured Party.
(bb) Each
Debtor, in its capacity as issuer, hereby agrees to comply with any and all
reasonable orders and instructions of Secured
Party
regarding the Pledged Interests consistent with the terms of this Agreement
without the further consent of any Debtor as contemplated by Section 8-106
(or
any successor section) of the UCC. Further, each Debtor agrees that it shall
not
enter into a similar agreement (or one that would confer “control” within the
meaning of Article 8 of the UCC) with any other person or entity.
(cc) Each
Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Secured Party, or, if such delivery is not possible, then
to
cause such tangible chattel paper to contain a legend noting that it is subject
to the security interest created by this Agreement. To the extent that any
Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).
(dd) If
there is any investment property or deposit account included as Collateral
that
can be perfected by “control” through an account control agreement, the
applicable Debtor shall cause such an account control agreement, in form and
substance in each case reasonably satisfactory to the Secured Party, to be
entered into and delivered to the Secured Party.
(ee) To
the extent that any Collateral consists of letter-of-credit rights, the
applicable Debtor shall cause the issuer of each underlying letter of credit
to
consent to an assignment of the proceeds thereof to the Secured
Party.
(ff) To
the extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Secured Party in notifying such third
party of the Secured Party’s security interest in such Collateral and shall
endeavor to obtain an acknowledgement and agreement from such third party with
respect to the Collateral, in form and substance reasonably satisfactory to
the
Secured Party.
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(gg) If
any Debtor shall at any time hold or acquire a commercial tort claim, such
Debtor shall promptly notify the Secured Party in a writing signed by such
Debtor of the particulars thereof and grant to the Secured Party in such writing
a security interest therein and in the proceeds thereof, all upon the terms
of
this Agreement, with such writing to be in form and substance reasonably
satisfactory to the Secured Party.
(hh) Each
Debtor shall promptly provide written notice to the Secured Party of any and
all
accounts which arise out of contracts with any governmental authority and,
to
the extent necessary to perfect or continue the perfected status of the Security
Interests in such accounts and proceeds thereof, shall execute and deliver
to
the Secured Party an assignment of claims for such accounts and cooperate with
the Secured Party in taking any other steps required under the Federal
Assignment of Claims Act or any similar federal, state or local statute or
rule
to perfect or continue the perfected status of the Security Interests in such
accounts and proceeds thereof.
(ii) Each
Debtor shall cause each subsidiary
of such Debtor with operations or material operations (which, if in doubt,
shall
be in the sole determination of the Secured Party) to immediately become a
party
hereto (an “Additional
Debtor”),
by executing and delivering an Additional Debtor Joinder in substantially the
form of Annex
A
attached hereto and comply with the provisions hereof applicable to the Debtors.
As of the date hereof, the each Debtor represents and warrants that none of
its
subsidiaries have any operations or material assets (other than the Guarantors).
Concurrent therewith, the Additional Debtor shall deliver replacement schedules
for, or supplements to all other Schedules to (or referred to in) this
Agreement, as applicable, which replacement schedules shall supersede, or
supplements shall modify, the Schedules then in effect. The Additional Debtor
shall also deliver such opinions of counsel, authorizing resolutions, good
standing certificates, incumbency certificates, organizational documents,
financing statements and other information and documentation as the Secured
Party may reasonably request. Upon delivery of the foregoing to the Secured
Party, the Additional Debtor shall be and become a party to this Agreement
with
the same rights and obligations as the Debtors, for all purposes hereof as
fully
and to the same extent as if it were an original signatory hereto and shall
be
deemed to have made the representations, warranties and covenants set forth
herein as of the date of execution and delivery of such Additional Debtor
Joinder, and all references herein to the “Debtors” shall be deemed to include
each Additional Debtor.
(jj) Each
Debtor shall vote the Pledged Securities to comply with the covenants and
agreements set forth herein and in the Notes and the other Transaction Documents
(as defined in the Purchase Agreement).
12
(kk) Each
Debtor shall register the pledge of the applicable Pledged Securities on the
books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities
to register the pledge of the applicable Pledged Securities in the name of
the
Secured Party on the books of such issuer. Further, except with respect to
certificated securities delivered to the Secured
Party,
the applicable Debtor shall endeavor to deliver to the Secured
Party
an acknowledgement of pledge (which, where appropriate, shall comply with the
requirements of the relevant UCC with respect to perfection by registration)
signed by the issuer of the applicable Pledged Securities, which acknowledgement
shall confirm that: (a) it has registered the pledge on its books and records;
and (b) at any time directed by the Secured
Party
during the continuation of an Event of Default, such issuer will transfer the
record ownership of such Pledged Securities into the name of any designee of
the
Secured
Party,
will take such steps as may be necessary to effect the transfer, and will comply
with all other reasonable instructions of the Secured
Party
regarding such Pledged Securities without the further consent of the applicable
Debtor.
(ll) In
the event that, upon an occurrence of an Event of Default, the Secured
Party
shall sell all or any of the Pledged Securities to another party or parties
(herein called the “Transferee”)
or shall purchase or retain all or any of the Pledged Securities, each Debtor
shall, to the extent applicable: (i) deliver to the Secured
Party
or the Transferee, as the case may be, the articles of incorporation, bylaws,
minute books, stock certificate books, corporate seals, deeds, leases,
indentures, agreements, evidences of indebtedness, books of account, financial
records and all other Organizational Documents and records of such Debtor and
its direct and indirect subsidiaries; (ii) use its best efforts to obtain
resignations of the persons then serving as officers and directors of such
Debtor and its direct and indirect subsidiaries, if so requested; and (iii)
use
its best efforts to obtain any approvals that are required by any governmental
or regulatory body in order to permit the sale of the Pledged Securities to
the
Transferee or the purchase or retention of the Pledged Securities by the
Secured
Party
and allow the Transferee or Secured
Party
to continue the business of such Debtor and its direct and indirect
subsidiaries.
(mm) Without
limiting the generality of the other obligations of the Debtors hereunder,
each
Debtor shall promptly (i) cause to be registered at the United States Copyright
Office all of its material copyrights, (ii) cause the security interest
contemplated hereby with respect to all Intellectual Property registered at
the
United States Copyright Office or United States Patent and Trademark Office
to
be duly recorded at the applicable office, and (iii) give the Secured Party
notice whenever it acquires (whether absolutely or by license) or creates any
additional material Intellectual Property.
(nn) Each
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents, and
take all such further action as may be necessary or desirable, or as the Secured
Party may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder and with respect
to any Collateral or to otherwise carry out the purposes of this
Agreement.
13
(oo) Schedule
F
attached hereto lists all of the patents, patent applications, trademarks,
trademark applications, registered copyrights, and domain names owned by any
of
the Debtors as of the date hereof. Schedule
F
lists all material licenses in favor of any Debtor for the use of any patents,
trademarks, copyrights and domain names as of the date hereof. All material
patents and trademarks of the Debtors have been duly recorded at the United
States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright Office.
(pp) Except
as set forth on Schedule
G
attached hereto, none of the account debtors or other persons or entities
obligated on any of the Collateral is a governmental authority covered by the
Federal Assignment of Claims Act or any similar federal, state or local statute
or rule in respect of such Collateral.
5. Effect
of Pledge on Certain Rights. If
any of the Collateral subject to this Agreement consists of nonvoting equity
or
ownership interests (regardless of class, designation, preference or rights)
that may be converted into voting equity or ownership interests upon the
occurrence of certain events (including, without limitation, upon the transfer
of all or any of the other stock or assets of the issuer), it is agreed that
the
pledge of such equity or ownership interests pursuant to this Agreement or
the
enforcement of any of the Secured
Party’s
rights hereunder shall not be deemed to be the type of event which would trigger
such conversion rights notwithstanding any provisions in the Organizational
Documents or agreements to which any Debtor is subject or to which any Debtor
is
party.
6. Defaults.
The following events shall be “Events
of Default”:
(a) The
occurrence of an Event of Default under the Notes;
(b) Any
representation or warranty of any Debtor in this Agreement shall prove to have
been incorrect in any material respect when made; or
(c) The
failure by any Debtor to observe or perform any of its obligations hereunder
for
five (5) days after delivery to such Debtor of notice of such failure by or
on
behalf of the
Secured
Party unless such default is capable of cure but cannot be cured within such
time frame and such Debtor is using best efforts to cure same in a timely
fashion.
7. Duty
To Hold In Trust.
(a) Upon
the occurrence and during the continuance of any Event of Default and at any
time thereafter, each Debtor shall, upon receipt of any revenue,
income,
dividend, interest
or other sums subject to the Security Interests, whether payable pursuant to
the
Notes or otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the same in trust
for the Secured Party and shall forthwith endorse and transfer any such sums
or
instruments, or both, to the Secured Party.
14
(b) If
any Debtor shall become entitled to receive or shall receive any securities
or
other property (including, without limitation, shares of Pledged Securities
or
instruments representing Pledged Securities acquired after the date hereof,
or
any options, warrants, rights or other similar property or certificates
representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as
an
addition to, in substitution of, or in exchange for, such Pledged Securities
or
otherwise), such Debtor agrees to (i) accept the same as the agent of the
Secured Party; (ii) hold the same in trust on behalf of and for the benefit
of
the Secured Party; and (iii) deliver any and all certificates or instruments
evidencing the same to the Secured
Party
on or before the close of business on the fifth business day following the
receipt thereof by such Debtor, in the exact form received together with the
Necessary Endorsements, to be held by the Secured
Party
subject to the terms of this Agreement as Collateral.
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8.
|
Rights
and Remedies Upon Default.
|
(a) Upon
the occurrence of any Event of Default and at any time thereafter, the Secured
Party shall have the right to exercise all of the remedies conferred hereunder
and under the Notes, and the Secured Party shall have all the rights and
remedies of a secured party under the UCC. Without limitation, the Secured
Party
shall have the following rights and powers:
(i) The
Secured Party shall have the right to take possession of the Collateral and,
for
that purpose, enter by reasonable means, with the aid and assistance of any
person, any premises where the Collateral, or any part thereof, is or may be
placed and remove the same, and each Debtor shall assemble the Collateral and
make it available to the Secured Party at places which the Secured Party shall
reasonably select, whether at such Debtor's premises or elsewhere, and make
reasonably available to the Secured Party, without rent, all of such Debtor’s
respective premises and facilities for the purpose of the Secured Party taking
possession of, removing or putting the Collateral in saleable or disposable
form.
(ii) Upon
written notice to the Debtors by the Secured
Party,
all rights of each Debtor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise and all rights of each Debtor
to receive the dividends and interest which it would otherwise be authorized
to
receive and retain, shall cease. Upon such notice, the Secured
Party
shall have the right to receive any interest, cash dividends or other payments
on the Collateral and, at the option of the Secured
Party,
to exercise in the Secured
Party’s
discretion all voting rights pertaining thereto. Without limiting the generality
of the foregoing, the Secured
Party
shall have the right (but not the obligation) to exercise all rights with
respect to the Collateral as if it were the sole and absolute owner thereof,
including, without limitation, to vote and/or to exchange, at its sole
discretion, any or all of the Collateral in connection with a merger,
reorganization, consolidation, recapitalization or other readjustment concerning
or involving the Collateral or any Debtor or any of its direct or indirect
subsidiaries.
15
(iii) The
Secured Party shall have the right to assign, sell, lease or otherwise dispose
of and deliver all or any part of the Collateral, at public or private sale
or
otherwise, either with or without special conditions or stipulations, for cash
or on credit or for future delivery, in such parcel or parcels and at such
time
or times and at such place or places, and upon commercially reasonable terms
and
conditions. Upon each such sale, lease, assignment or other transfer of
Collateral, the Secured Party, may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Collateral being sold, free
from and discharged of all trusts, claims, right of redemption and equities
of
any Debtor, which are hereby waived and released.
(iv) The
Secured Party shall have the right (but not the obligation) to notify any
account debtors and any obligors under instruments or accounts to make payments
directly to the Secured Party, and to enforce the Debtors’ rights against such
account debtors and obligors.
(v) The
Secured Party, may (but is not obligated to) direct any financial intermediary
or any other person or entity holding any investment property to transfer the
same to the Secured Party, or its designee.
(vi) The
Secured Party may (but is not obligated to) transfer any or all Intellectual
Property registered in the name of any Debtor at the United States Patent and
Trademark Office and/or Copyright Office into the name of the Secured Party
or
any designee or any purchaser of any Collateral.
(b) The
Secured Party shall comply with any applicable law in connection with a
disposition of Collateral and such compliance will not be considered adversely
to affect the commercial reasonableness of any sale of the Collateral. The
Secured Party may sell the Collateral without giving any warranties and may
specifically disclaim such warranties. In addition, each Debtor waives any
and
all rights that it may have to a judicial hearing in advance of the enforcement
of any of the Secured Party’s rights and remedies hereunder, including, without
limitation, its right following an Event of Default to take immediate possession
of the Collateral and to exercise its rights and remedies with respect
thereto.
16
(c) For
the purpose of enabling the Secured Party to further exercise rights and
remedies under this Section 8 or elsewhere provided by agreement or applicable
law, each Debtor hereby grants to the Secured Party, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to such Debtor) to use, license or sublicense following an Event
of
Default, any Intellectual Property now owned or hereafter acquired by such
Debtor, and wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof.
9. Applications
of Proceeds.
The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy insuring
any
portion of the Collateral shall be applied first, to the reasonable and actually
incurred expenses of retaking, holding, storing, processing and preparing for
sale, selling, and the like (including, without limitation, any taxes, fees
and
other costs reasonably incurred in connection therewith) of the Collateral,
to
the reasonable attorneys’ fees and expenses incurred by the Secured Party in
enforcing the Secured Party’s rights hereunder and in connection with
collecting, storing and disposing of the Collateral, and then to satisfaction
of
the Obligations, and to the payment of any other amounts required by applicable
law, after which the Secured Party shall pay to the applicable Debtor any
surplus proceeds. If, upon the sale, license or other disposition of the
Collateral, the proceeds thereof are insufficient to pay all amounts to which
the Secured Party is legally entitled, the Debtors will be liable for the
deficiency, together with interest thereon, at the rate of 24.99% per annum
or
the lesser amount permitted by applicable law (the “Default
Rate”),
and
the reasonable fees of any attorneys employed by the Secured Party to collect
such deficiency. To the extent permitted by applicable law, each Debtor waives
all claims, damages and demands against the Secured Party arising out of the
repossession, removal, retention or sale of the Collateral, unless due solely
to
the gross negligence or willful misconduct of the Secured Party as determined
by
a final judgment (not subject to further appeal) of a court of competent
jurisdiction.
10. Securities
Law Provision.
Each Debtor recognizes that the Secured Party may be limited in its ability
to
effect a sale to the public of all or part of the Pledged Securities by reason
of certain prohibitions in the Securities Act of 1933, as amended, or other
federal or state securities laws (collectively, the “Securities
Laws”),
and may be compelled to resort to one or more sales to a restricted group of
purchasers who may be required to agree to acquire the Pledged Securities for
their own account, for investment and not with a view to the distribution or
resale thereof. Each Debtor agrees that sales so made may be at prices and
on
terms less favorable than if the Pledged Securities were sold to the public,
and
that the Secured Party has no obligation to delay the sale of any Pledged
Securities for the period of time necessary to register the Pledged Securities
for sale to the public under the Securities Laws. Each Debtor shall cooperate
with the Secured Party in its reasonable attempt to satisfy any requirements
under the Securities Laws (including, without limitation, registration
thereunder if reasonably requested by the Secured Party) applicable to the
sale
of the Pledged Securities by the Secured Party.
17
11. Costs
and Expenses.
Each Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
incurred in connection with any filing required hereunder, including without
limitation, any financing statements pursuant to the UCC, continuation
statements, partial releases and/or termination statements related thereto
or
any expenses of any searches reasonably required by the Secured Party. The
Debtors shall also pay all other claims and charges which would be reasonably
likely to prejudice, imperil or otherwise affect the Collateral or the Security
Interests therein. The Debtors will also, upon demand, pay to the Secured Party
the amount of any and all reasonable expenses, including the reasonable fees
and
expenses of its counsel and of any experts and agents, which the Secured Party,
may incur in connection with (i) the enforcement of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, or (iii) the exercise or enforcement
of
any of the rights of the Secured Party under the Notes and the other Transaction
Documents. Until so paid, any fees payable hereunder shall be added to the
principal amount of the Notes and shall bear interest at the Default
Rate.
12. Responsibility
for Collateral.
The Debtors assume all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or
its
unavailability for any reason. Without limiting the generality of the foregoing,
(a) in no event shall the Secured Party (i) have any duty (either before or
after an Event of Default) to collect any amounts in respect of the Collateral
or to preserve any rights relating to the Collateral, or (ii) have any
obligation to clean-up or otherwise prepare the Collateral for sale, and (b)
each Debtor shall remain obligated and liable under each contract or agreement
included in the Collateral to be observed or performed by such Debtor
thereunder. The Secured Party shall not have any obligation or liability under
any such contract or agreement by reason of or arising out of this Agreement
or
the receipt by the Secured Party of any payment relating to any of the
Collateral, nor shall the Secured Party be obligated in any manner to perform
any of the obligations of any Debtor under or pursuant to any such contract
or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Secured Party in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Secured Party or to which the Secured Party may be entitled
at
any time or times.
18
13. Security
Interests Absolute.
All rights and all obligations of the parties hereunder, shall be absolute
and
unconditional, irrespective of: (a) any lack of validity or enforceability
of
this Agreement, the Notes or any agreement entered into in connection with
the
foregoing, or any portion hereof or thereof; (b) any change in the time, manner
or place of payment or performance of, or in any other term of, all or any
of
the Obligations, or any other amendment or waiver of or any consent to any
departure from the Notes or any other agreement entered into in connection
with
the foregoing; (c) any exchange, release or nonperfection of any of the
Collateral, or any release or amendment or waiver of or consent to departure
from any other collateral for, or any guarantee, or any other security, for
all
or any of the Obligations; (d) any action by the Secured Party to obtain,
adjust, settle and cancel in its reasonable discretion any insurance claims
or
matters made or arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or equitable defense
available to a Debtor, or a discharge of all or any part of the Security
Interests granted hereby. Until the Obligations shall have been paid and
performed in full, the rights of the Secured Party shall continue even if the
Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy. Each Debtor expressly
waives presentment, protest, notice of protest, demand, notice of nonpayment
and
demand for performance. In the event that at any time any transfer of any
Collateral or any payment received by the Secured Party hereunder shall be
deemed by final order of a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under the bankruptcy or insolvency
laws of the United States, or shall be deemed to be otherwise due to any party
other than the Secured Party, then, in any such event and to the extent thereof,
each Debtor’s obligations hereunder shall survive cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or cancellation of this Agreement, but shall remain a valid and binding
obligation enforceable in accordance with the terms and provisions hereof.
Each
Debtor waives all right to require the Secured Party to proceed against any
other person or entity
or to
apply any Collateral which the Secured Party may hold at any time, or to marshal
assets, or to pursue any other remedy.
14. Term
of Agreement.
This Agreement and the Security Interests shall terminate on the date on which
all payments under the Notes have been indefeasibly paid or otherwise satisfied
in full (including by way of conversion of the Notes) and all other Obligations
have been paid or discharged (other than contingent indemnification
obligations).
15. Power
of Attorney; Further Assurances.
(a) Each
Debtor authorizes the Secured Party, and does hereby make, constitute and
appoint the Secured Party and its officers, agents, successors or assigns with
full power of substitution, as such Debtor’s true and lawful attorney-in-fact,
with power, in the name of the Secured Party or such Debtor, to, after the
occurrence and during the continuance of an Event of Default, (i) endorse any
note, checks, drafts, money orders or other instruments of payment (including
payments payable under or in respect of any policy of insurance) in respect
of
the Collateral that may come into possession of the Secured Party; (ii) to
sign
and endorse any financing statement pursuant to the UCC or any invoice, freight
or express xxxx, xxxx of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with accounts,
and
other documents relating to the Collateral; (iii) to pay or discharge taxes,
liens, security interests or other encumbrances at any time levied or placed
on
or threatened against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and xxx for monies due in respect of the Collateral; (v)
to
transfer any Intellectual Property or provide licenses respecting any
Intellectual Property; and (vi) generally, at the option of the Secured Party,
and at the expense of the Debtors, at any time, or from time to time, to execute
and deliver any and all documents and instruments and to do all acts and things
which the Secured Party deems necessary to protect, preserve and realize upon
the Collateral and the Security Interests granted therein in order to effect
the
intent of this Agreement and the Notes all as fully and effectually as the
Debtors might or could do; and each Debtor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. This power
of
attorney is coupled with an interest and shall be irrevocable for the term
of
this Agreement and thereafter as long as any of the Obligations shall be
outstanding. The
designation set forth herein shall be deemed to amend and supersede any
inconsistent provision in the Organizational Documents or other documents or
agreements to which any Debtor is subject or to which any Debtor is a party.
Without
limiting the generality of the foregoing, after the occurrence and during the
continuance of an Event of Default, the Secured Party is specifically authorized
to execute and file any applications for or instruments of transfer and
assignment of any patents, trademarks, copyrights or other Intellectual Property
with the United States Patent and Trademark Office and the United States
Copyright Office.
19
(b) On
a continuing basis, each Debtor will make, execute, acknowledge, deliver, file
and record, as the case may be, with the proper filing and recording agencies
in
any jurisdiction, including, without limitation, the jurisdictions indicated
on
Schedule
C
attached hereto, all such instruments, and take all such action as may
reasonably be deemed necessary or advisable, or as reasonably requested by
the
Secured Party, to perfect the Security Interests granted hereunder and otherwise
to carry out the intent and purposes of this Agreement, or for assuring and
confirming to the Secured Party the grant or perfection of a perfected security
interest in all the Collateral under the UCC.
(c) Each
Debtor hereby irrevocably appoints the Secured Party as such Debtor’s
attorney-in-fact, with full authority in the place and instead of such Debtor
and in the name of such Debtor, from time to time in the Secured Party’s
discretion, to take any action and to execute any instrument which the Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including the filing, in its sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to any
of
the Collateral without the signature of such Debtor where permitted by law,
which financing statements may (but need not) describe the Collateral as “all
assets” or “all personal property” or words of like import, and ratifies all
such actions taken by the Secured Party. This power of attorney is coupled
with
an interest and shall be irrevocable for the term of this Agreement and
thereafter as long as any of the Obligations shall be outstanding.
16. Notices.
Any
demand upon or notice to the Debtors hereunder shall be effective when delivered
by hand or when properly deposited in the mails postage prepaid, or sent by
telex, answerback received, or electronic facsimile transmission, receipt
acknowledged, or delivered to a telegraph company or overnight courier, in
each
case addressed to the Debtor at the address shown below or such other address
as
the Debtors may advise the Secured Party in writing. Any notice by the Debtors
to the Secured Party shall be given as aforesaid, addressed to the Secured
Party
at the address shown below or such other address as the Secured Party may advise
the Debtors in writing.
| Secured Party: |
Platinum
Long Term Growth VI, LLC
000
Xxxx 00xx
Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, XX 00000
|
| With a copy to: |
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
00
Xxxxxxxx
Xxx
Xxxx, XX 00000
Fax
No.: (000) 000-0000
|
17. Other
Security.
To the extent that the Obligations are now or hereafter secured by property
other than the Collateral or by the guarantee, endorsement or property of any
other person, firm, corporation or other entity, then the Secured Party shall
have the right, in its sole discretion, to pursue, relinquish, subordinate,
modify or take any other action with respect thereto, without in any way
modifying or affecting any of the Secured Party’s rights and remedies
hereunder.
18. Miscellaneous.
(a) No
course of dealing between the Debtors and the Secured Party, nor any failure
to
exercise, nor any delay in exercising, on the part of the Secured Party, any
right, power or privilege hereunder or under the Notes shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
(b) All
of the rights and remedies of the Secured Party with respect to the Collateral,
whether established hereby or by the Notes, the Transaction Documents or by
any
other agreements, instruments or documents or by law shall be cumulative and
may
be exercised singly or concurrently.
(c) This
Agreement,
together with the exhibits and schedules hereto, the Notes and the related
agreements contemplated hereby and thereby contain the entire understanding
of
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into this Agreement and the
exhibits and schedules hereto.
No
provision of this Agreement may be waived, modified, supplemented or amended
except in a written instrument signed, in the case of an amendment, by the
Debtors and the Secured Party or, in the case of a waiver, by the party against
whom enforcement of any such waived provision is sought.
(d) If
any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
21
(e) No
waiver
of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise
any
right hereunder in any manner impair the exercise of any such
right.
(f) This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company and the Guarantors may
not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Secured Party (other than by merger). The Secured Party
may assign any or all of its rights under this Agreement to any Person to whom
the Secured Party assigns or transfers any Securities, provided such transferee
agrees in writing to be bound, with respect to the transferred Securities,
by
the provisions of this Agreement that apply to the “Secured Party.”
(g) Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
(h) All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each Debtor agrees that all proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement, the Transaction Documents and the Notes (whether
brought against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of
New
York, Borough of Manhattan. Each Debtor hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City
of
New York, Borough of Manhattan for the adjudication of any dispute hereunder
or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the jurisdiction
of
any such court or that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees
that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
and
all right to trial by jury in any legal proceeding arising out of or relating
to
this Agreement or the transactions contemplated hereby. If any party shall
commence a proceeding to enforce any provisions of this Agreement, then the
prevailing party in such proceeding shall be reimbursed by the other party
for
its reasonable attorney’s fees and other reasonable costs and expenses incurred
with the investigation, preparation and prosecution of such
proceeding.
22
(i) This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and all of which taken together
shall
constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(j) All
Debtors shall jointly and severally be liable for the obligations of each Debtor
to the Secured Party hereunder.
(k) Each
Debtor shall indemnify, reimburse and hold harmless the Secured Party and each
Lender, and each of their respective partners, members, shareholders, officers,
directors, employees and agents (and any other persons with other titles that
have similar functions) (collectively, “Indemnitees”) from and against any and
all losses, claims, liabilities, damages, penalties, suits, costs and expenses,
of any kind or nature, (including fees relating to the cost of investigating
and
defending any of the foregoing) imposed on, incurred by or asserted against
such
Indemnitee in any way related to or arising from or alleged to arise from this
Agreement or the Collateral, except any such losses, claims, liabilities,
damages, penalties, suits, costs and expenses which result from the gross
negligence or willful misconduct of the Indemnitee as determined by a final,
nonappealable decision of a court of competent jurisdiction. This
indemnification provision is in addition to, and not in limitation of, any
other
indemnification provision in the Notes, the Transaction Documents or any other
agreement, instrument or other document executed or delivered in connection
herewith or therewith.
(l) Nothing
in this Agreement shall be construed to subject the Secured Party to liability
as a partner in any Debtor or any of its direct or indirect subsidiaries that
is
a partnership or as a member in any Debtor or any of its direct or indirect
subsidiaries that is a limited liability company, nor shall the Secured Party
be
deemed to have assumed any obligations under any partnership agreement or
limited liability company agreement, as applicable, of any such Debtor or any
of
its direct or indirect subsidiaries or otherwise, unless and until the Secured
Party exercises its right to be substituted for such Debtor as a partner or
member, as applicable, pursuant hereto.
23
(m) To
the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of
any
partner or member, as applicable, of any Debtor or any direct or indirect
subsidiary of any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby grant such consent and approval
and
waive any such noncompliance with the terms of said documents.
(n) The
Lenders have, pursuant to the Purchase Agreement appointed the Agent, as their
agent for purposes of exercising any and all rights and remedies of the secured
parties hereunder. Such appointment shall continue until revoked in writing
(with a copy delivered to the Debtors) in accordance with the Purchase
Agreement.
[SIGNATURE
PAGES FOLLOW]
24
IN
WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above
written.
DEBTORS:
|
By:
/s/
Xxxx
Xxxxxx
Name:
Xxxx Xxxxxx
Title:
President
|
|
DUSKA
SCIENTIFIC CO.
|
|
By:
/s/ Xxxx
Xxxxxx
Name:
Xxxx Xxxxxx
Title:
President
|
|
SECURED
PARTY:
PLATINUM
LONG TERM GROWTH VI, LLC
|
|
By:
/s/
Xxxx
Xxxxxxxxx
Name:
Xxxx Xxxxxxxxx
Title:
Managing Member
|
25
SCHEDULE
A
Principal
Place of Business of Debtors:
Rented
Locations Where Collateral is Located or Stored:
Locations
Owned:
None.
26
SCHEDULE
B
Other
Owners or Collateral or Lienholders
None.
27
SCHEDULE
C
28
SCHEDULE
D
Legal
Names and Organizational Identification Numbers
|
NAME
|
STAE
OF ORGANIZATION
|
ID
#
|
||
29
SCHEDULE
E
Names;
Mergers and Acquisitions
30
SCHEDULE
F
Intellectual
Property
31
SCHEDULE
G
Account
Debtors
32
SCHEDULE
H
Pledged
Securities
|
Name
Of Issuer/Guarantor
|
Type
of Securities
|
No.
of shares
owned
|
Percentage
of Issuer owned
|
Stock
Certificate
No.
|
|
Duska
Scientific Co.
|
Common
|
100%
|
||
33
ANNEX
A
to
SECURITY
AGREEMENT
FORM
OF ADDITIONAL DEBTOR JOINDER
Security
Agreement dated as of September ________, 2007 made by Duska
Therapeutics, Inc., and its subsidiaries party thereto from time to time, as
Debtors to
and in favor of the
Secured Party identified therein (the “Security
Agreement”)
Reference
is made to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in, or by reference in, the Security Agreement.
The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
to the Secured Party referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the
same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein as of the
date
of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
SECURED PARTY A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
IN
THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL
PROVISIONS SET FORTH THEREIN.
Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement,
as applicable.
An
executed copy of this Joinder shall be delivered to the Secured Party, and
the
Secured Party may rely on the matters set forth herein on or after the date
hereof. This Joinder shall not be modified, amended or terminated without the
prior written consent of the Secured Party.
IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the
name and on behalf of the undersigned.
|
[Name
of Additional Debtor]
By:
Name:
Title:
Address:
|
Dated:
