SECURITY AGREEMENT (in favor of YA II PN, Ltd.)
(in
favor of YA II PN, Ltd.)
THIS SECURITY AGREEMENT (the
“Agreement”) is entered
into as of November 20, 2017 by and among (i) Cantabio
Pharmaceuticals Inc., a Delaware corporation (the
“Issuer”), and (ii) any
subsidiary and affiliate of the Issuer listed on Schedule 1 attached hereto
either now or joined in the future (the “Subsidiaries”; and
jointly, severally, and collectively with the Issuer, the
“Grantors”) in favor of YA
II PN, Ltd., a Cayman Islands company (the “Secured
Party”).
WHEREAS, in connection with the
Securities Purchase Agreement dated January 25, 2017 among the
Secured Party and the Issuer (as amended, supplemented and restated
from time to time, the “January Purchase
Agreement”), the Issuer has issued to the Secured
Party convertible debentures in the aggregate principal amount of
$600,000 (collectively, as each may be amended, supplemented and
restated from time to time, the “January Convertible
Debentures”);
WHEREAS, in connection with the
Securities Purchase Agreement dated November 20, 2017 among the
Secured Party and the Issuer (as amended, supplemented and restated
from time to time, the “November Purchase
Agreement”), the Issuer has agreed, upon the terms and
subject to the conditions of the Purchase Agreement, to issue to
the Secured Party additional convertible debentures in the
principal amount of up to $300,000 as set forth in the November
Purchase Agreement (collectively, as each may be amended,
supplemented and restated from time to time, the
“November
Convertible Debentures,” and collectively with the
January Convertible Debentures, the “Convertible
Debetnures”);
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
1.1 Recitals.
The
above recitals are true and correct and are incorporated herein, in
their entirety, by this reference.
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.
1.3 Definitions.
(a) To the extent used
in this Agreement and not defined herein, terms defined in the UCC
shall have the meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined) ascribed
to such terms in the UCC. To the extent the definition of any
category or type of Collateral is expanded by any amendment,
modification or revision to the UCC, such expanded definition will
apply automatically as of the date of such amendment, modification
or revision.
(b) As used in this
Agreement, the following terms shall have the meanings indicated
below (such meanings to be equally applicable to both the singular
and plural forms of such terms):
“Collateral” has the
meaning set forth in Section 2.1.
“Event of Default” shall
mean a Grantor materially breaching any provision of, or defaulting
in any of its material obligations under (i) the Convertible
Debentures; (ii) the January Purchase Agreement or the November
Purchase Agreement; (iii) the Loan Instruments; and (iv) any
Transaction Document or any other agreement or document related to
any of the foregoing, in any case, following the expiration of any
applicable cure period.
“GAAP” shall mean
generally accepted accounting principles in the United States of
America.
“Intellectual Property”
shall mean all present and future trade secrets, know-how and other
proprietary information; trademarks, trademark applications,
internet domain names, service marks, trade dress, trade names,
business names, designs, logos, slogans (and all translations,
adaptations, derivations and combinations of the foregoing) indicia
and other source and/or business identifiers, and all registrations
or applications for registrations which have heretofore been or may
hereafter be issued thereon throughout the world; copyrights and
copyright applications; (including copyrights for computer
programs) and all tangible and intangible property embodying the
copyrights, unpatented inventions (whether or not patentable);
patents and patent applications; industrial design applications and
registered industrial designs; license agreements related to any of
the foregoing and income therefrom; books, records, writings,
computer tapes or disks, flow diagrams, specification sheets,
computer software, source codes, object codes, executable code,
data, databases and other physical manifestations, embodiments or
incorporations of any of the foregoing; all other intellectual
property; and all common law and other rights throughout the world
in and to all of the foregoing. Schedule 4 attached hereto sets
forth all Intellectual Property of the Grantors (as such Schedule may be amended, modified or
supplemented from time to time).
“Lien” has the meaning set
forth in Section 4.2.
“Loan Instruments” has the
meaning set forth in Section 6.1.
“Material Adverse Effect”
shall mean any material and adverse affect as determined by the
Secured Party in its reasonable discretion upon (a) the
Grantors’ assets, business, operations, properties or
condition, financial or otherwise, taken as a whole; (b) the
Grantors’ ability to make payment as and when due of all or
any part of the Obligations; or (c) the Collateral.
“Obligations” shall mean
and include any and all debts, liabilities, obligations, covenants
and duties owing by any Grantor to the Secured Party, now existing
or hereafter arising of every nature, type, and description,
whether liquidated, unliquidated, primary, secondary, secured,
unsecured, direct, indirect, absolute, or contingent, and whether
or not evidenced by a note, guaranty or other instrument, and any
amendments, extensions, renewals or increases thereof, including,
without limitation, all those under (i) the Transaction Documents;
(ii) any agreement or document related to the Transaction
Documents; (iii) the Global Guaranty Agrement of even date
herewith, or (iv) any other or related documents, and including any
interest accruing thereon after insolvency, reorganization or like
proceeding relating to the Grantors, whether or not a claim for
post-petition interest is allowed in such proceeding, and all costs
and expenses of the Secured Party incurred in the enforcement,
collection or otherwise in connection with any of the foregoing,
including, but not limited to, reasonable attorneys’ fees and
expenses and all obligations of the Grantors to the Secured Party
to perform acts or refrain from taking any action.
“Other Loan Documents”
shall mean any credit agreement or other facility, warrant,
mortgage, other debenture agreements or instruments, by and among
the Secured Party and the Grantors, under which there may be
issued, or by which there may be secured or evidenced any
indebtedness for borrowed money, including, without limitation, the
Convertible Debentures.
“Permitted Indebtedness”
shall mean: (i) indebtedness evidenced by the Convertible
Debentures; (ii) indebtedness described on Schedule 7.3 attached hereto;
(iii) indebtedness incurred solely for the purpose of financing the
acquisition or lease of any equipment by the Grantors, 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 Obligations 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
Debenture then outstanding; and (C) which is not secured by any
assets of the Grantors; (v) indebtedness solely between a Grantor
and/or one of its domestic subsidiaries, on the one hand, and a
Grantor and/or one of its domestic subsidiaries, on the other which
indebtedness is not secured by any assets of such 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 a Grantor,
such domestic subsidiary is controlled by a 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 such Grantor or its
subsidiary, as applicable, as collateral pursuant to a Collateral
Assignment Agreement in form and substance satisfactory to Secured
Party in its sole discretion; (vi) reimbursement obligations in
respect of letters of credit issued for the account of a Grantor or
any of its subsidiaries for the purpose of securing performance
obligations of such 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 $200,000 at any one
time; (vii) renewals, extensions and refinancing of any
indebtedness described in clause (i) or (iii) of this subsection;
and (viii) indebtedness associated with acquiring new intellectual
property assets and licenses, so long as the proceeds are going to
the party(ies) from which the Grantor is acquiring the assets,
licenses, and other properties.
“Permitted Liens” shall
mean (1) the security interest created by this Agreement, (2) any
prior security interest granted to the Secured Party, (3) existing
Liens disclosed by each Grantor on Schedule 4.2; (4) 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; (5) Liens of carriers,
materialmen, warehousemen, mechanics and landlords and other
similar Liens which secure amounts which are not yet overdue by
more than 60 days or which are being contested in good faith by
appropriate proceedings for which adequate reserves have been
established in accordance with GAAP; (6) licenses, sublicenses,
leases or subleases granted to other persons not materially
interfering with the conduct of the business of the Grantors; (7)
Liens securing capitalized lease obligations and purchase money
indebtedness incurred solely for the purpose of financing an
acquisition or lease; (8) 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 Grantors and not materially detracting from
the value of the property subject thereto; (9) Liens arising out of
the existence of judgments or awards which judgments or awards do
not constitute an Event of Default; (10) 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); (11) 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; (12) usual and customary set-off
rights in leases and other contracts; and (13) escrows in
connection with acquisitions and dispositions.
“Real Estate” means all
leases and all land, together with the buildings, structures,
parking areas, and other improvements thereon, now or hereafter
owned by any Grantor, including all easements, rights-of-way, and
similar rights relating thereto and all leases, tenancies, and
occupancies thereof. Schedule 5 attached hereto sets
forth all Real Estate of the Grantors (as such Schedule may be amended, modified or
supplemented from time to time).
“Transaction Documents”
shall mean (i) the Convertible Debentures, (ii) the January
Purchase Agreement, (iii) the November Purchase Agreement, (iv) the
Mortgages, (v) the Loan Instruments, (vi) the Other Loan Documents,
and (vii) any other or related documents.
“UCC” or
“Uniform Commercial
Code” means the Uniform
Commercial Code as in effect from time to time in the State of New
York; provided,
however,
that if a term is defined in Article 9 of the Uniform Commercial
Code differently than in another Article thereof, the term shall
have the meaning set forth in Article 9 of the UCC;
provided further
that, if by reason of mandatory
provisions of law, perfection, or the effect of perfection or
non-perfection, of a security interest in any Collateral or the
availability of any remedy hereunder is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York,
“Uniform Commercial Code” means the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of
perfection or non-perfection or availability of such remedy, as the
case may be.
ARTICLE 2.
SECURITY INTEREST
2.1 Grant
of Security Interest.
(a) As security for the
payment or performance in full of the Obligations, each Grantor
hereby pledges to the Secured Party, its successors and assigns,
and hereby grants to the Secured Party, its successors and assigns,
a security interest in and to all assets and 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 Real Estate, Goods, Inventory, Equipment, Fixtures,
Instruments, Documents, Accounts, Contracts and Contract Rights,
Chattel Paper, Deposit Accounts, Money, Letters of Credit and
Letter-of-Credit Rights, Commercial Tort Claims, Securities and all
other Investment Property, General Intangibles, Farm Products, all
books and records and information relating to any of the foregoing,
all Supporting Obligations, and any and all Proceeds and products
of any and all of the foregoing, and as more particularly described
on Exhibit A
attached hereto (collectively, the “Collateral”).
(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, mortgages, 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 Collateral.
2.2 No
Assumption of Liability.
The
security interest in the Collateral is granted as security only and
shall not subject the Secured Party to, or in any way alter or
modify any obligation or liability of any Grantor with respect to
or arising out of the Collateral.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
3.1 Secured
Party Appointed Attorney-In-Fact.
Except
as set forth in Section 3.1(a) below, upon the occurrence and
during the continuance of an Event of Default, each Grantor hereby
appoints the Secured Party as its attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of
each Grantor or otherwise, 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 or for the purpose of
perfecting, confirming, continuing, enforcing or protecting the
security interest in the Collateral, including, without limitation,
to (a) file one or more financing statements, continuing
statements, filings with the United States Patent and Trademark
Office or United States Copyright Office (or any successor office)
or other documents; (b) receive and collect all instruments made
payable to a Grantor representing any payments in respect of the
Collateral or any part thereof and to give full discharge for the
same; and (c) demand, collect, receipt for, settle, compromise,
adjust, xxx for, foreclose, or realize on the Collateral as and
when the Secured Party may determine. To facilitate collection, the
Secured Party may notify account debtors and obligors on any
Collateral 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 Collateral and shall not impose any
duty upon the Secured Party to exercise any such
powers.
3.2 Secured Party May
Perform.
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 the Grantors under
Section 8.4.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
4.1 Authorization:
Enforceability.
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.
4.2 Ownership of Collateral; Priority of
Security Interest.
Each
Grantor represents and warrants that it is the legal and beneficial
owner of the Collateral free and clear of any lien, security
interest, option or other charge or encumbrance (each, a
“Lien”)
except for the Permitted Liens. Except for the Permitted Liens, (i)
the security interest granted to the Secured Party hereunder shall
be a first priority security interest subject to no other Liens,
and (ii) no financing statement covering any of the Collateral or
any proceeds thereof is on file in any public office.
4.3 Location of
Collateral.
The
Collateral is or will be kept at the address(es) of each Grantor
set forth on Schedule
4.3 attached hereto. Unless otherwise provided herein, the
Grantors will not remove any Collateral from such locations without
the prior written consent of the Secured Party.
4.4 Location, State of Incorporation and
Name of Grantors.
Each
Grantor’s principal place of business; state of
incorporation, organization or formation; organization id; and
exact legal name is set forth on Schedule 4.4 attached
hereto.
ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
5.1 Method
of Realizing Upon the Collateral: Other
Remedies.
If any
Event of Default shall have occurred and be
continuing:
(a) The Secured Party
may exercise in respect of the Collateral, 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 UCC (whether or not the UCC applies to the affected
Collateral), and also may (i) take absolute control of the
Collateral, 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 Collateral 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
Collateral 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
such Grantor in respect of such occupation, and (iii) without
notice except as specified below and without any obligation to
prepare or process the Collateral for sale, (A) sell the Collateral
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
Collateral 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 Collateral
shall be required by law, at least ten (10) days’ notice to
such Grantor of the time and place of any public sale or the time
after which any private sale or other disposition of the Collateral
is to be made shall constitute reasonable notification. The Secured
Party shall not be obligated to make any sale or other disposition
of any Collateral 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 Collateral 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 Collateral to more than one
offeree, and waives all rights that such Grantor may have to
require that all or any part of such Collateral be marshaled upon
any sale (public or private) thereof. Each Grantor hereby
acknowledges that (x) any such sale of the Collateral by the
Secured Party may be made without warranty, (y) the Secured Party
may specifically disclaim any warranties of title, possession,
quiet enjoyment or the like, and (z) such actions set forth in
clauses (x) and (y) above shall not adversely affect the commercial
reasonableness of any such sale of Collateral.
(b) Any cash held by
the Secured Party as Collateral 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 Collateral 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 Convertible
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, the Grantors 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 Collateral, such compliance will not adversely
affect the commercial reasonableness of any sale or other
disposition of the Collateral.
(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
Collateral) 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 permitted by applicable law, 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 permitted
by applicable law, each Grantor hereby irrevocably waives the
benefits of all such laws.
5.2 Duties Regarding
Collateral.
The
Secured Party shall have no duty as to the collection or protection
of the Collateral 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 Collateral 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:
6.1 Existence, Properties,
Etc.
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 such 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; and (b) a Grantor shall not do, or cause
to be done, any act impairing the Grantor’s corporate power
or authority (i) to carry on such Grantor’s business as now
conducted, and (ii) to execute or deliver this Agreement or any
other agreement or document delivered in connection herewith,
including, without limitation any mortgages, pledges, or other
collateral documents, and any UCC-1 Financing Statement required by
the Secured Party (which documents, instruments, and agreements
shall be collectively referred to as the “Loan Instruments”) to
which it is or will be a party, or perform any of its obligations
hereunder or thereunder.
6.2 Financial Statements and
Reports.
Each
Grantor shall furnish to the Secured Party within a reasonable time
such financial data as the Secured Party may reasonably
request.
6.3 Maintenance of Books and Records:
Inspection.
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).
6.4 Maintenance and
Insurance.
(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) The Grantors shall
maintain or cause to be maintained, at their own expense, insurance
in form, substance and amounts (including deductibles), which the
Grantors deem reasonably necessary to the Grantors’ business,
(i) adequate to insure all assets and properties of the Grantors 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
Grantors; (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.
6.5 Contracts and Other
Collateral.
Each
Grantor shall perform all of its obligations under or with respect
to each instrument, receivable, contract and other intangible
included in the Collateral to which such 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.
6.6 Defense of Collateral,
Etc.
Each
Grantor shall defend and enforce (a) its right, title and interest
in and to any part of the Collateral; and (b) if not included
within the Collateral, 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).
6.7 Taxes and
Assessments.
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 a 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
Grantors 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.
6.8 Compliance with Law and Other
Agreements.
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 a Grantor is a party
or by which such 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.
6.9 Notice of Default.
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 Collateral 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 Grantors.
6.10 Future
Subsidiaries.
Schedule 6.10 attached hereto
lists all currently existing subsidiaries of the Grantors. 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 other documents, in
form and substance reasonably acceptable to the Secured Party, as
the Secured Party shall reasonably request with respect thereto,
including, without limitation, a mortgage to the extent such
subsidiary owns any Real Estate.
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
Schedule 4.4
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.
6.12 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
Collateral (i) as all assets of the Grantors or words of similar
effect, regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9 of the UCC 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 UCC 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
Collateral relates. The Grantors agree to furnish any such
information to the Secured Party promptly upon request. The
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 shall
have possession of the Collateral, 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.
6.13 Notice
of Commercial Tort Claims. Attached as Schedule 6.13 is a list of all
Commercial Tort Claims of the Grantors (as such Schedule may be amended, modified or
supplemented from time to time). 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:
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 Collateral, except the
Grantors may (i) sell or dispose of Inventory or Real Estate or
assets related thereto in the ordinary course of business, and (ii)
sell or dispose of other assets the Grantors have 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 Collateral, other than Permitted
Liens.
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.
7.3 Incurrence of
Indebtedness.
Other
than with respect to the Secured Party, or any of their Affiliates,
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.
7.4 Places of
Business.
Change
its state of organization or its principal place of business
without the prior written consent of the Secured Party, as more
specifically set forth in Section 4.4
hereof.
ARTICLE 8.
MISCELLANEOUS
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 as set out in the the January Purchase
Agreement or the November Purchase Agreement. Any party may change
its address by giving notice to the other party stating its new
address and e-mail address for communications. 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. The address and e-mail address for
communications with respect to any Grantor whom is not a party to
the the January Purchase Agreement or the November Purchase
Agreement shall be the address and e-mail address set out on
Schedule
1.
8.2 Security Interest Absolute. All
rights of the Secured Party hereunder, the security interest in the
Collateral and all obligations of the Grantors hereunder shall be
absolute and unconditional irrespective of (a) any lack of validity
or enforceability of the Convertible Debentures, the Loan
Instruments, any agreement with respect to any of the Obligations
or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment
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 Convertible Debentures, the Loan Instruments or any other
agreement or instrument, (c) any exchange, release or
non-perfection of any Lien on other collateral, or any release or
amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations,
or (d) the existence of any claim,
set-off or other right which any Grantor may have at any time
against any other Grantor or the Secured Party, whether in
connection herewith or any unrelated
transaction.
8.3 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.
8.4 Expenses.
In the
event of an Event of Default, the Grantors 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 Collateral; (ii) the exercise or enforcement of
any of the rights of the Secured Party hereunder or (iii) the
failure by a Grantor to perform or observe any of the provisions
hereof.
8.5 Waivers, Amendments,
Etc.
The
Secured Party’s delay or failure at any time or times
hereafter to require strict performance by a 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 a 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 Grantors in the case of any
such amendment, change or modification.
8.6 Continuing Security Interest.
This Agreement shall create a continuing security interest in the
Collateral and shall: (i) remain in full force and effect until the
satisfaction in full of the Obligations; (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 indefeasible 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
Collateral as shall not have been sold in accordance with this
Agreement or otherwise applied pursuant to the terms hereof and the
Secured Party shall deliver to the Grantors such documents as the
Grantors shall reasonably request to evidence such
termination.
8.7 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.
8.8 Indemnification. The
Grantors shall indemnify, defend, and hold the Secured Party, or
any agent, employee, officer, attorney, or representative of the
Secured Party, harmless of and from any claim arising in connection
with this Agreement brought or threatened against the Secured Party
or any such person so indemnified by: any Grantor, any other
obligor or endorser of the Obligations or any other person (as well
as from reasonable attorneys' fees and expenses in connection
therewith) on account of the Secured Party's relationship with the
Grantors, or any other obligor or endorser of the Obligations (each
of which may be defended, compromised, settled, or pursued by the
Secured Party with counsel of the Secured Party's selection, but at
the expense of the undersigned).
8.9 Applicable Law:
Jurisdiction.
This
Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York without regard to the principles
of conflict of laws. The parties further agree that any action
between them shall be heard in New York County, New York, and
expressly consent to the jurisdiction and venue in the state and
federal courts sitting in the City of New York 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 Collateral and/or the Grantors in
any other jurisdiction in which the Collateral and/or the Grantors
may be located.
8.10 Waiver
of Jury Trial.
AS A
FURTHER INDUCEMENT FOR THE SECURED PARTY TO MAKE FINANCIAL
ACCOMMODATIONS TO THE ISSUER OR ANY GRANTOR, EACH GRANTOR HEREBY
WAIVES, TO THE FULLEST PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE 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.
8.11 Right
of Set Off.
The
Grantors 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.
8.12 Liability
of Grantors. Notwithstanding any provision herein or in any
other Loan Instrument, the Grantors, and each of them, are and
shall be jointly and severally liable for any and all Obligations
(whether any such Obligation is specified as an obligation of the
Grantors or of any of them).
8.13 Counterparts;
Facsimile Signatures. This Agreement may be executed and
delivered by exchange of facsimile signatures of the Secured Party
and the Grantors, and those signatures need not be affixed to the
same copy. This Agreement may be executed in any number of
counterparts.
8.14 Entire
Agreement.
This
Agreement and the other documents or agreements delivered in
connection herewith contain the entire understanding among the
parties and supersede 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.
GRANTORS:
By_______________________________
Name:
Title:
GARDEDAM
THERAPEUTICS INC.
By_______________________________
Name:
Title:
IN WITNESS WHEREOF, the parties hereto
have executed this Security Agreement as of the date first above
written.
|
|
SECURED PARTY:
YA II PN, LTD.
By: Yorkville
Advisors Global, LP
Its: Investment
Manager
By: Yorkville
Advisors Global II, LLC
Its: General
Partner
By: _____________________________
Name:
Title:
|
|
|
|
EXHIBIT A
DEFINITION
OF COLLATERAL
For the
purpose of securing prompt and complete payment and performance by
the Grantors of all of the Obligations, each Grantor
unconditionally and irrevocably hereby grants to the Secured Party
a continuing security interest in and to, and lien upon, the
following “Collateral” of the
Grantors (all capitalized terms used herein and not defined in the
Agreement shall have the respective meanings ascribed thereto in
the UCC):
A. All
Real Estate owned by any Grantor, wherever located and whether now
or hereinafter existing and whether now owned or hereafter
acquired.
B. 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 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 any 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 (including
automotive equipment and motor vehicles), now owned or hereafter
acquired by any Grantor, and used or acquired for use in the
business of any 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 any Grantor from
whatever source arising; all rights of any 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 any 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 any 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 any Grantor);
15. General
Intangibles, including, without limitation, all Payment Intangibles
and Intellectual Property, tax refunds and other claims of any
Grantor against any governmental authority, and all choses in
action, insurance proceeds, goodwill customer lists, formulae,
permits, research and literary rights, and franchises.
16. Farm
Products;
17. All
books and records and information (including all ledger sheets,
files, computer programs, tapes and related data processing
software) evidencing an interest in or relating to any of the
foregoing and/or to the operation of any Grantor’s business,
and all rights of access to such books and records, and
information, and all property in which such books and records, and
information are stored, recorded and maintained.
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.
SCHEDULE 1
(Subsidiaries
and Affiliates)
Gardedam
Therapeutics, Inc, a Delaware corporation
0000
Xxxxxxx Xxxx
Xxxxxxxxx,
XX 00000
Attention:
Xxx Xxxxxx
E-Mail:
xxxxxxxxx@xxxxxxxx.xxx
SCHEDULE 4
(Intellectual
Property)
|
Application No.
|
Title
|
Filing Date
|
Status
|
|
|
|
|
|
SCHEDULE 4.2
(Permitted
Liens)
SCHEDULE 4.3
(Addresses)
0000
Xxxxxxx Xxxx
Xxxxxxxxx,
XX 9408
Gardedam
Therapeutics, Inc, a Delaware corporation
0000
Xxxxxxx Xxxx
Xxxxxxxxx,
XX 9408
SCHEDULE 4.4
(Location,
State of Incorporation, Name)
Legal
Name:
State of
Inc.
Delaware
Organization
ID:
00-0000000
Legal
Name:
Gardedam
Therapeutics, Inc.
State of
Inc.
Delaware
Organization
ID:
00-0000000
SCHEDULE 5
(Real
Estate)
SCHEDULE 6.10
(Current
Subsidiaries)
Cantabio
Pharmaceuticals Inc. is a Delaware corporation.
The
following are Cantabio Pharmaceuticals Inc.’s wholly-owned
subsidiaries:
SCHEDULE 6.13
(Commercial
Tort Claims)
SCHEDULE 7.3
(Permitted
Indebtedness)
