Exhibit 10.19
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement?) is made as of May
21, 2003 by and between HEALTH SCIENCES GROUP, INC. ("HSG"), a Colorado
corporation having its chief executive office located at 0000 Xxxxxx Xxxxx, 0xx
Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, XCEL HEALTHCARE, INC. ("XCEL"), a
California corporation having its chief executive office located at 0000 Xxxxxx
Xxxxx, 0xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 and BIOSELECT INNOVATIONS, INC.
("Bioselect"), a Nevada corporation having its chief executive office located at
0000 Xxxxxx Xxxxx, 0xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, and QUALITY
BOTANICAL INGREDIENTS, INC. ("QBI"), having its chief executive office at 0000
Xxxxxx Xxxxx, 0xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 (HSG, XCEL, Bioselect and
QBI are collectively referred to as the "Debtor"), and CASTLERIGG MASTER
INVESTMENTS, LTD., a corporation organized under the laws of the British Virgin
Islands with headquarters at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000
(the "Secured Party"), who is a holder of a Debenture (as defined herein issued
pursuant to the Securities Purchase Agreement by and between, among others, HSG
and the Secured Party) and any subsequent holders of the Debenture assigned in
accordance with the Securities Purchase Agreement.
WITNESSETH:
WHEREAS, on May 21, 2003, HSG and the Secured Party entered
into a Securities Purchase Agreement, which agreement is incorporated herein by
reference, and which provides for the loan by the Secured Party of $500,000 in
the aggregate (the "Loan") to be evidenced by the issuance by HSG of 12% Senior
Secured Debentures due 21,2004 (the "Debenture") to the Secured Party in the
principal amount of $500,000 (the "Securities Purchase Agreement"); and
WHEREAS, concurrently with the execution and delivery hereof,
HSG issued the Debenture to the Secured Party; and
WHEREAS, in order to induce the Secured Party to make the Loan
evidenced by the Debentures, the Debtor has agreed to grant to the Secured Party
a lien and security interest, subject to all prior liens and security interests
in existence on the date of this Agreement of record and all purchase money
security interests, whether or not of record (the "Prior Liens"), in all of the
Debtors accounts, pursuant to the terms and conditions of the Securities
Purchase Agreement and this Agreement; and
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Debtor and the
Secured Party hereby agree as follows:
1. DEFINITIONS.
(a) All terms used herein which are defined in Article 1 or
Article 9 of the Uniform Commercial Code (the "Code") shall have the meanings
given therein unless otherwise defined in this Agreement. All references to the
plural herein shall also mean the singular and to the singular shall also mean
the plural. All references to the Secured Party and the Debtor pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns. The words "hereof," "herein,"
"hereunder," "this Agreement" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented. extended, renewed, restated or replaced.
(b) In addition to those capitalized terms defined elsewhere
in this Agreement, the following terms shall have the following respective
meanings wherever used in this Agreement:
"Accounts" shall have such meaning as such term is defined in
Article 9 of the UCC, shall include, without limitation, each of the following,
whether now owned or hereafter acquired by the Debtor: (a) all present and
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future rights of the Debtor to payment for goods sold or leased or services
rendered, whether or not earned by performance, (b) all accounts receivable,
contract rights, book debts, debentures, drafts and other obligations or
indebtedness owing the Debtor, including that arising from the sale, lease or
exchange of goods or property by it and/or the performance of services by it
(including, without limitation, any such obligation that might be characterized
as an account, contract right, or general intangible under the UCC in effect in
any jurisdiction) and all of the Debtor?s rights in, to, and under all purchase
orders for goods, services, or other property, and all of the Debtor?s rights to
any goods, services, or other property represented by any of the foregoing and
all monies due to or to become due to the Debtor under all contracts for the
sale, lease, or exchange of goods or other property and/or the performance of
services by it (whether or not earned by performance on the part of the Debtor),
in each case whether now in existence or hereafter arising or acquired,
including, without limitation, the right to receive the proceeds of these
purchase orders and contracts of the Debtor, (c) all rights of the Debtor to
receive any payment of money or other form of consideration, (d) all security
pledged, assigned or granted to or held by the Debtor to secure any of the
foregoing, (e) all guaranties of. or indemnifications with respect to, any of
the foregoing, and (f) all rights of the Debtor as an unpaid seller of goods or
services, including, but not limited to, all rights of stoppage in transit,
replevin, recession, reclamation and resale.
"Collateral" shall have the meaning set forth in Section 2
below.
"Event of Default" shall mean any failure to pay, perform or
observe any covenant, provision, term or agreement of the Securities Purchase
Agreement or this Agreement.
"Loan Documents" shall mean that certain Securities Purchase
Agreement, the Debenture, this Agreement, together with any and all documents
related thereto, including Financing Statements.
"Person" or "person" shall have the meaning ascribed thereto
in the Securities Purchase Agreement.
"Security Interests" shall have the meaning set forth in
Section 2 below.
"Secured Obligations" shall mean the collective reference to
all obligations of the Debtor to the Secured Party, whether currently existing
or hereafter incurred or created, including without limitation (I) due and
punctual payment and performance of the Debentures, the Securities Purchase
Agreement, this Agreement and any other of the Loan Documents including all
principal, interest, collection costs, expenses and other amounts owing or
payable from time to time under any such Loan Documents, (2) any additional or
further amounts which, pursuant to the Loan Documents, may be deemed part of
and/or added to the Secured Obligations, (3) any other Indebtedness not
contemplated by clauses (1) or (2) above which may hereafter be owed by the
Debtor to the Secured Party; and (4) the reimbursement of all reasonable costs
incurred by the Secured Party to maintain, preserve and enforce the Loan
Documents, collect these Secured Obligations and maintain and preserve the
Collateral, including without limitation, the Secured Party'?s reasonable
attorneys fees, disbursements and legal expenses, and all expenditures by
Secured Party for taxes, insurance and repairs to and maintenance of the
Collateral, in each case, whether arising before or after the commencement of
any case with respect to the Debtor under the United States Bankruptcy Code or
any similar statute (including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case). The above shall be equally applicable to any renewals, reinstatements,
restatements, modifications, amendments or extensions of any of the foregoing.
"UCC" means the Uniform Commercial Code as in effect in the
State of Colorado; PROVIDED, HOWEVER, that if by mandatory provisions of law,
the perfection or effect of perfection or non-perfection of the security
interest in any Collateral to which this Financing Statement relates is governed
by the Uniform Commercial Code as in effect on or after the date hereof in any
other jurisdiction, UCC means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such
perfection or the effect of perfection or non-perfection.
2. THE SECURITY INTEREST. In order to secure the due and
punctual payment and performance of all Secured Obligations owing to the Secured
Party from time to time, the Debtor hereby grants hypothecates, assigns,
pledges, transfers and delivers to the Secured Party, subject to the Prior
Liens, a continuing lien and security interest in, and hereby assigns to the
Secured Party, subject to the Prior Liens, as collateral security, including
that acquired with the proceeds of the Loan and the following described property
and interests of the Debtor, whether now owned or hereafter acquired or
existing, and all proceeds thereof and all substitutes, replacements and
accessions thereto, wherever located: all Accounts of the Debtor (the
"Collateral").
The Pledge of the Collateral shall be referred to herein as
the "Security Interest."
3. FILING: FURTHER ASSURANCES. The Debtor shall, at its
expense, execute, file, record and deliver to Secured Party (in such manner and
form as the Secured Party shall require) any financing statements and any other
documents, necessary or appropriate to preserve, perfect, validate or protect
the security interest granted to Secured Party hereunder against the rights and
interests of third parties. and shall cooperate with the Secured Party to cause
the same to be duly filed in all places necessary to perfect the security
interest of Secured Party in the Collateral. This shall include (a) all
financing statements, (b) all carbon, photographic or other reproductions of
financing statements or this Agreement (which shall be sufficient as a financing
statement hereunder), (c) all endorsements to title to any vehicles or other
Collateral as may be required in order to perfect the Security Interest therein,
and (d) all specific assignments or other papers that may be necessary or
desirable, or that the Secured Party may request, in order to create, preserve,
perfect or validate any Security Interest or to enable the Secured Party to
exercise and enforce its rights hereunder with respect to any of the Collateral.
In the event that any recording or refiling thereof (or filing of any statements
of continuation or assignment of any financing statement) is required to protect
and preserve such security interest, the Debtor, at its own cost and expense,
shall cause the same to be re-recorded and/or re-filed at the time and in the
manner requested by the Secured Party. The Debtor hereby authorizes the Secured
Party to file or re-file any financing statements, continuation statements,
and/or amended statements with respect to the Security Interest granted pursuant
to this Agreement which at anytime may be required or appropriate, although the
same may have been executed only by Secured Party, and to execute such financing
statement on behalf of the Debtor. The Debtor hereby irrevocably designates
Xxxxx Jalldad, its agents, representatives and designees, as agent and
attorney-in-fact for the Debtor for the aforesaid purposes. In addition, in the
event and to the extent that any of Collateral consists of or is represented by
instruments or other evidences of ownership such as would require physical
possession of same in order to perfect the Security Interest therein, the Debtor
will promptly, at its expense, deliver same to the Secured Party, with any
necessary endorsements thereon.
4. REPRESENTATIONS AND WARRANTIES OF THE DEBTOR. The Debtor
hereby represents and warrants as follows:
(a) The Debtor is not in default under any indenture,
mortgage, deed of trust, agreement or other instrument to which it is a party or
by which it may be bound. Neither the execution nor the delivery of this
Agreement, nor the consummation of the transactions herein contemplated, nor
compliance with the provisions hereof; will violate any law or regulation, or
any order or decree of any court or governmental authority, or will conflict
with, or result in the breach of; or constitute a default under, any indenture,
mortgage, deed of trust, agreement or other instrument to which the Debtor is a
party or by which the Debtor may be bound, or result in the creation or
imposition of any lien, claim or encumbrance upon any property of Debtor.
(b) The Debtor has the power to execute, deliver and
perform the provisions of this agreement and all instruments and documents
delivered or to be delivered pursuant hereto, and has taken or caused to be
taken all necessary or appropriate actions to authorize the execution, delivery
and performance of this Agreement and all such instruments and documents.
(c) The Debtor is the legal and equitable owner of
the Collateral, subject to the interest therein granted to the holders of the
Prior Liens and the Secured Party. The ownership by the Debtor of the Collateral
is free and clear of all security interests, liens, claims and encumbrances of
every kind and nature, except as otherwise disclosed herein and in the schedule
to the Securities Purchase Agreement of even date herewith. The Debtor has taken
all actions necessary under the UCC to perfect its interest in any accounts
purchased by it or in which it otherwise has an interest, as against its
assignors or creditors or its assigns.
(d) No default exists, and no event which with notice
or the passage of time or both, would constitute a default under the Collateral
by any part thereto, and there are no offsets, claims or defenses against the
obligations evidenced by the Collateral.
(e) The Security Interest constitutes a valid and,
upon delivery of documents necessary to perfect the Secured Party?s security
interest in the Collateral, a perfected security interest in the Collateral for
payment and performance of the Secured Obligations, in each case prior to all
other liens and rights of others, with the exception of the Prior Liens and the
rights of the holders of the Prior Liens.
(f) That no financing statement covering the
Collateral is on file in any public office, other than (i) financing statements
in respect of any indebtedness which is being repaid out of the proceeds of the
Loan (which financing statements are being terminated and released
simultaneously with the funding of the Loan to the Debtor), (ii) financing
statements filed by the holders of the Prior Liens, and (iii) financing
statements filed pursuant to this Agreement.
All representations and warranties of the Debtor contained
herein shall survive the closing of this Agreement until termination of this
Agreement under Section 14.
5. COVENANTS OF THE DEBTOR. The Debtor hereby covenants and
agrees as follows:
(a) Protection of the Collateral. The Debtor shall
defend the title to the Collateral against all claims and demands whatsoever.
The Debtor shall keep the respective Collateral free and clear of all liens and
security interests (except for the Prior Liens and the lien created herein),
charges, encumbrances, taxes and assessments, and shall pay all taxes,
assessments and fees relating to the Collateral. Upon request by Secured Party,
Debtor, at the Debtor?s expense, shall furnish further assurances of title,
execute any further instruments and documents, and do any other acts, that
Secured Party may reasonably request, necessary to effectuate the purposes and
provisions of this Agreement, including, in order to perfect and protect the
Security Interest granted or purported to be granted hereby or to enable the
Secured Party to exercise and enforce the rights and remedies hereunder with
respect to any Collateral.
Debtor shall not further sell, exchange, assign, transfer or
otherwise dispose of the Collateral. and shall not further encumber,
hypothecate, mortgage, create a lien on or security interest in the Collateral,
without the prior written consent of Secured Party in each instance except as
otherwise permitted under the Securities Purchase Agreement. The risk of loss of
the Collateral at all times shall be borne by the Debtor.
(b) The Debtor?s Obligation to Pay. The Debtor shall
pay and perform all of the Secured Obligations and any and all obligations set
forth in the Loan Documents as the same may become due according to their terms.
The Debtor shall be liable for, and shall reimburse to Secured Party, all
expenses, including reasonable attorneys? fees, incurred or paid in connection
with establishing, perfecting, maintaining, protecting or enforcing any of
Secured Party?s rights and remedies hereunder, including in, retaking, holding,
preparing for sale or lease, or selling and leasing, and the like, the
Collateral.
(c) Place of Business. The Debtor will not, without
giving the Secured Party 60 days prior written notice, change (i) the locations
of its places of business and its chief executive office, or (ii) the locations
where it keeps or holds any Collateral or records relating thereto, or (iii) its
name, identity, or corporate structure in any manner. If any such change occurs,
the Debtor shall, at its cost and expense. cooperate with the Secured Party and
cause to be filed or recorded additional financing statements, amendments, or
supplements to existing financing statements, continuation statements. or other
documents required to be recorded or filed in order to perfect and protect the
Security Interests.
(d) Additional Documents. The Debtor will, from time
to time, at its expense, execute, deliver, file, and record any statement,
assignment, instrument, document, agreement, or other paper and take any other
action (including, without limitation, any filings of financing or continuation
statements under the UCC) that the Secured Party may from time to time
reasonably determine to be necessary or desirable in order to create, preserve,
upgrade in rank (to the extent required hereby), perfect, confirm, or validate
the Security Interests or to enable the Secured Party to obtain the full
benefits of this Agreement, or to enable the Secured Party to exercise and
enforce any of its rights, powers, and remedies hereunder with respect to any of
the Collateral. To the extent permitted by law, the Debtor hereby authorizes the
Secured Party to execute and file financing statements or continuation
statements without the Debtor?s signature appearing thereon. The Debtor agrees
that a carbon, photographic, or other reproduction of this Security Agreement or
of a financing statement is sufficient as a financing statement. The Debtor
shall pay the costs of, or incidental to, any recording or filing of any
financing or continuation statements concerning the Collateral.
(e) Books/Records. The Debtor shall keep complete and
accurate books and records relating to the Collateral, and stamp or otherwise
xxxx such books and records in such manner as the Secured Party may reasonably
request in order to reflect the Security Interests.
(f) Maintain Accounts. The Debtor shall use its best
efforts to cause to be collected from its account debtors, as and when due, any
and all amounts owing under or on account of each Account (including, without
limitation, delinquent Accounts, such Accounts to be collected in accordance
with lawful collection procedures and the Debtor?s standard procedures) and
apply forthwith upon receipt thereof all such amounts as are so collected to the
outstanding balance of such Account, except that, unless an Event of Default has
occurred and is continuing and the Secured Party is exercising its rights
hereunder to collect Accounts, the Debtor may allow in the ordinary course of
business as adjustments to amounts owing under its Accounts (i) an extension or
renewal of the time or times of payment, or settlement for less than the total
unpaid balance, which the Debtor finds appropriate in accordance with prudent
business judgment and (ii) a refund or credit due as a result of returned or
damaged merchandise, all in accordance with the Debtor?s ordinary course of
business consistent with its historical collection practices. The costs and
expenses (including, without limitation, attorney?s fees) of collection, whether
incurred by the Debtor or the Secured Party, shall be borne by the Debtor.
(g) Notice of Default. Upon the occurrence and during
the continuance of any Event of Default, upon the request of the Secured Party,
the Debtor will promptly notify (and the Debtor hereby authorizes the Secured
Party so to notify) each account debtor in respect of any Account or Instrument
that such Collateral has been assigned to the Secured Party hereunder, and that
any payments due or to become due in respect of such Collateral are to be made
directly to the Secured Party or any designee specified by the Secured Party.
(h) Additional Information. The Debtor will, promptly
upon request, provide to the Secured Party all information and evidence it may
reasonably request concerning the Collateral, and in particular the Accounts, to
enable the Secured Party to enforce the provisions of this Security Agreement.
(i) Taxes and Assessments. That the Debtor will
promptly pay any and all taxes, assessments and governmental charges upon the
Collateral prior to the date that penalties may attach thereto or same become a
lien on any of the Collateral, except to the extent that such taxes, assessments
and charges shall be contested by the Debtor in good faith and through
appropriate proceedings.
(j) Material Loss. That the Debtor will immediately
notify the Secured Party of any event causing a material loss or diminution in
the value of the Collateral, and the amount (or the Debtor?s best estimate of
the amount) of such loss or diminution.
(k) Applicable Law. That the Debtor will not use any
of the Collateral in violation of any applicable law.
(l) Impairment of Collateral. The Debtor shall not
cause any reduction in the value of the Collateral or take any action which
imperils the prospect of the full performance or satisfaction of the Secured
Obligations.
6. RECORDS RELATING TO COLLATERAL. The Debtor will keep and
maintain complete and accurate records concerning the Collateral, including the
Accounts and all chattel paper included in the Accounts, at its principal
executive office or at such other place(s) of business as the Secured Party may
approve in writing. The Debtor will (a) faithfully hold and preserve such
records and chattel paper, (b) permit representatives of the Secured Party, at
any time during normal business hours, upon reasonable notice, and without undue
material disruption of the Debtor?s business, to examine and inspect the
Collateral and to make copies and abstracts of such records and chattel paper,
and (c) furnish to the Secured Party such information and reports regarding the
Collateral as the Secured Party may from time to time reasonably request.
7. RELEASE OF COLLATERAL. The Debtor shall not sell or
otherwise dispose of the Collateral, or any part thereof or any interest therein
except as otherwise provided in the Securities Purchase Agreement. If the
Collateral, or any part thereof; is sold or otherwise disposed of in violation
of these provisions, the Security Interest of the Secured Party shall continue
in such Collateral or any part thereof notwithstanding such sale or other
disposition, and Debtor will deliver any proceeds thereof to the Secured Party
to be, at the option of the Secured Party, held as Collateral hereunder, and/or
be applied to the obligations of the Debtor.
8. GENERAL AUTHORITY.
(a) In the event that the Secured Party shall at any
time be required to take action to defend the Security Interests, or the Debtor
shall fail to satisfy its obligations under this Agreement. then the Secured
Party shall have the right, but shall not be obligated, to take such steps and
make such payments as may be required in order to effect compliance, and the
Secured Party shall have the right either to demand and receive immediate
reimbursement from the Debtor for all costs and expenses incurred by the Secured
Party in connection therewith, and/or to add such costs and expenses to the
Secured Obligations.
(b) The Debtor hereby irrevocably appoints Xxxxx
Xxxxxx the true and lawful attorney for the Debtor, with full power of
substitution, in the name of the Debtor, the Secured Party or otherwise, for the
sole use and benefit of the Secured Party, but at the Debtor?s expense, to the
extent permitted by law to exercise, at any time and from time to time during
the continuance of an Event of Default, any or all of the following powers with
respect to any or all of the Collateral (which powers shall be in addition and
supplemental to any powers, rights and remedies of the Secured Party described
herein):
(i) to demand, xxx for, collect, receive and
give acquittance for any and all monies due or to become due upon or by virtue
thereof; and
(ii) to receive, take, endorse, assign and
deliver any and all checks, debentures, drafts, documents and other negotiable
and non-negotiable instruments and chattel paper taken or received by the
Secured Party in connection therewith; and
(iii) to settle, compromise, discharge,
extend, compound, prosecute or defend any action or proceeding with respect
thereto; and
(iv) to sell, transfer, assign or otherwise
deal in or with same, or the proceeds or avails thereof, or the related goods
securing the Accounts, as fully and effectually as if the Secured Party were the
absolute owner thereof; and
(v) to extend the time of payment of any or
all thereof and to make any allowance and other adjustments with reference
thereto; and
(vi) to discharge any taxes, liens, security
interests or other encumbrances at any time placed thereon.
Anything hereinabove contained to the contrary notwithstanding, the Secured
Party shall give the Debtor not less than ten (10) days? prior written notice of
the time and place of any sale or other intended disposition of any of the
Collateral, except any Collateral which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market. The
Secured Party and the Debtor hereby agree that such notice constitutes
"reasonable notification" within the meaning of Section 9-610 of the Code.
9. REMEDIES UPON EVENT OF DEFAULT.
(a) If any Event of Default shall have occurred and
be continuing, the Secured Party may exercise all of the rights and remedies of
a secured party under the Code (whether or not the Code is in effect in the
jurisdiction where such rights and remedies are exercised) and, in addition, the
Secured Party may, without being required to give any notice, except as herein
provided or as may be required by mandatory provisions of law, (a) apply the
cash, if any, then held by it as Collateral in the manner specified in Section
11 hereof, and (b) if there shall be no such cash or if such cash shall be
insufficient to pay all of the Secured Obligations in full, sell the Collateral,
or any part thereof, at public or private sale or at any broker?s board or on
any securities exchange, for cash, upon credit or for future delivery, and at
such price or prices as the Secured Party may deem satisfactory. The Secured
Party may require the Debtor to assemble all or any part of the Collateral and
make it available to the Secured Party at a place to be designated by the
Secured Party. Any holder of a Secured Obligation may be the purchaser of any or
all of the Collateral so sold at any public sale (or, if the Collateral is of a
type customarily sold on a recognized market or is of a type which is the
subject of widely distributed standard price quotations, at any private sale)
and thereafter hold same, absolutely free from any right or claim of whatsoever
kind. The Secured Party is authorized, at any such sale, if it reasonably deems
same to be advisable, to restrict the prospective bidders or Secured Parties of
any of the Collateral which could be subject to federal or state securities laws
to persons who will represent and agree that they are purchasing for their own
account for investment and not with a view to the distribution or sale of any of
such Collateral; and the Debtor hereby acknowledges that such restriction may
result in a lower price being obtained for the subject Collateral, and the
Debtor hereby waives any claim arising therefrom. Upon any such sale, the
Secured Party shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold.
(b) Each purchaser at any such sale shall hold the
Collateral so sold absolutely, free from any claim or right of whatsoever kind
(except for the rights of the holders of the Prior Liens), including any equity
or right of redemption of the Debtor. To the extent permitted by law, the Debtor
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any rule of law or statute now existing or hereafter
adopted. and waives any requirement for the marshaling of any Collateral. The
Secured Party shall give the Debtor not less than ten (10) days? prior written
notice of its intention to make any such public or private sale or sales at a
broker?s board or on a securities exchange. Such notice, in case of a public
sale, shall state the time and place fixed for such sale, and in case of sale at
a broker?s board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or the
portion thereof being sold, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Secured Party may fix
in the notice of such sale. At any such sale, the Collateral may be sold in one
lot as an entirety or in separate parcels, as the Secured Party may determine.
The Secured Party shall not be obligated to make such sale pursuant to any such
notice. The Secured Party may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale. and such sale may be made
at any time or place to which the same may be adjourned. In case of any? sale of
all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Secured Party until the selling price
is paid by the purchaser thereof; but the Secured Party shall not incur any
liability in the case of the failure of such purchaser to take up and pay for
the Collateral so sold and, in case of any such failure, such Collateral may
again be sold upon like notice.
(c) The Secured Party, instead of exercising the
power of sale herein conferred upon it, may proceed by a suit or suits at law or
in equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof; under a judgment or decree of a court or courts of competent
jurisdiction.
10. RIGHT OF SECURED PARTY TO USE AND OPERATE COLLATERAL. Upon
the occurrence and during the continuance of any Event of Default, to the extent
permitted by law, the Secured Party shall have the right and power, with or
without legal process, to enter upon any or all of the Debtor?s premises. to
take possession of all or any part of the Collateral, and to exclude the Debtor
and all persons claiming under the Debtor wholly or partly therefrom, and
thereafter to sell same in accordance herewith and/or hold, store, and/or use,
operate, manage and control the same. Upon any such taking of possession, the
Secured Party may, from time to time, at the expense of the Debtor, make all
such repairs, replacements, alterations, additions and improvements to the
Collateral as the Secured Party may deem proper. In such case, the Secured Party
shall have the right to manage and control the Collateral and to carry on the
business and to exercise all rights and powers of the Debtor in respect thereof
as the Secured Party shall deem proper, including the right to enter into any
and all such agreements with respect to the leasing and/or operation of the
Collateral or any part thereof as the Secured Party may see fit; and the Secured
Party shall be entitled to collect and receive all profits, fees, revenues and
other income of the same and every part thereof. Such profits, fees, revenues
and other income shall be applied to pay the expenses of holding the Collateral
and of conducting the business thereof, and of all alterations, additions and
improvements, and to make all payments which the Secured Party may be required
or may elect to make, if any, for taxes, assessments, insurance and other
charges upon the Collateral or any part thereof; and all other payments which
the Secured Party may be required or authorized to make under any provision of
this Agreement (including legal costs and reasonable attorneys? fees). The
remainder of such profits. fees, revenues and other income shall be applied in
accordance with Section 11 below, and, unless otherwise provided or required by
law or by a court of competent jurisdiction, any surplus shall be paid over to
the Debtor.
11. APPLICATION OF COLLATERAL AND PROCEEDS. The proceeds of
any sale of; or other realization upon, all or any part of the Collateral shall
be applied in the order of priorities as provided in the Securities Purchase
Agreement.
12. EXPENSES; SECURED PARTY?S LIEN. The Debtor will, forthwith
upon
(a) the amount of any taxes or other charges which
the Secured Party may have been required to pay by reason of the Security
Interests (including any applicable transfer taxes) or to free any of the
Collateral from any lien thereon; and
(b) the amount of any and all reasonable
out-of-pocket expenses, including the reasonable fees and disbursements of its
counsel and of any agents not regularly in its employ, which the Secured Party
may incur in connection with (i) the collection, sale or other disposition of
any of the Collateral, (ii) the exercise by the Secured Party of any of the
powers conferred upon it hereunder, and/or (iii) any default on the Debtor?s
part hereunder.
13. SECURITY INTEREST ABSOLUTE. All rights of the Secured
Party hereunder, the interest, and all obligations of Debtor hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the
Loan Documents or the Secured Obligations or any other agreement or instrument
relating to the Loan Documents or the Secured Obligations;
(b) any change in the time, manner or place of
payment of. or in any other term of; the Loan Documents or the Secured
Obligations, or any renewal, modification, reinstatement, restatement or
extension of the Loan Documents or the Secured Obligations or any other
amendment or waiver of or any consent to any departure from this Agreement or
any other agreement or instrument;
(c) any sale, exchange, release or non-perfection of
any of the Collateral; or
(d) any other circumstance that might otherwise
constitute a defense available to, or a discharge of. Debtor in respect of any
Loan Documents or the Secured Obligations.
14. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL.
Upon the indefeasible payment in full of all Secured Obligations, the Security
Interests shall terminate and all rights in the Collateral shall revert to the
Debtor. Upon any such termination of the Security Interests or release of
Collateral, the Secured Party will, at the Debtor?s expense, execute and deliver
to the Debtor such documents as the Debtor shall reasonably request to evidence
the termination of the Security Interests or the release of such Collateral, as
the case may be.
15. RIGHT OF SET-OFF. In furtherance and not in
limitation of any provisions herein contained, the Debtor hereby agrees that any
and all deposits or other sums at any time due from the Secured Party to the
Debtor shall at all times constitute security for the Secured Obligations, and
the Secured Party may exercise any right of set-off against such deposits or
other sums as may accrue or exist hereunder and/or under applicable law.
16. RIGHTS AMONG SECURED PARTIES.
(a) The parties hereto acknowledge that the
Debentures shall rank pari passu with respect to the application of proceeds of
Collateral to satisfy the same and, in accordance therewith, agree that the
proceeds of Collateral, after payment of all expenses, shall be applied ratably
to the Debentures in accordance with the respective amounts thereof outstanding
as of the date of any application of proceeds of Collateral for such purpose.
17. NOTICES. All notices, demands and other communications
hereunder shall be given or made to the Debtor and the Secured Party at their
addresses and/or telecopier numbers as set forth in below or at such other
address and/or telecopier number as the addressee may hereafter specify for the
purpose by means of written notice to the other parties hereto. Such notices and
other communications will be effectively given only if and when given in writing
and personally delivered, when sent by facsimile transmission to a party?s
designated facsimile number, one (1) day after being sent by Federal Express or
other recognized overnight courier service with all charges prepaid or billed to
the account of the sender, or three (3) days after being mailed by first class
mail with all postage prepaid.
Debtor: Health Sciences Group, Inc.
0000 Xxxxxx Xxxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
With a copy to:
Xxxx Xxxxxxxx, Esq.
Xxxxxxxxxxx & Xxxxxxxx, LLP
00000 Xxxxx Xxxxxx Xxxx.
Xxx Xxxxxxx, XX 00000
Telecopier: (000) 000-0000
Secured Party: Castlerigg Master Investments,Ltd.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X'Xxxxx
With a copy to:
Xxxxxx X. Xxxxxxxx, Esq.
XxXxxxxxxx & Xxxxx, LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier No. (000) 000-0000
18. AMENDMENTS AND WAIVERS. The Loan Documents represent the
final agreement agreed to by the parties. No amendment or waiver of any
provision of the Loan Documents, and no consent by Secured Party to any breach
thereof by Debtor shall in any event be effective unless the same shall be in
writing and signed by the Secured Party, Debtor and, if appropriate, any
guarantor of any Secured Obligation, and then such waiver or consent shall be
effective only for the specific purpose for which given. No course of dealing
between Debtor, any guarantor of any Secured Obligation and Secured Party in
exercising any rights or remedies in the Loan Documents shall operate as a
waiver or preclude the exercise of any other rights or remedies in the Loan
Documents. All such rights and remedies shall continue unimpaired,
notwithstanding any delay, extension of time. renewal, compromise or other
indulgence granted with respect to any of the Secured Obligations. Debtor hereby
waives all notice of any such delay, extension of time, renewal, compromise or
indulgence, and consents to be bound thereby as fully and effectually as if
Debtor expressly had agreed thereto in advance. The aforesaid Note may be
negotiated by Secured Party, without releasing Debtor or the Collateral. The
remedies in this Agreement are cumulative and are not exclusive of any other
remedies provided by law, in equity or otherwise.
19. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL.
(a) This Agreement shall (irrespective of where it is
executed, delivered and/or performed) be governed by and construed in accordance
with the laws of the State of Colorado (without giving effect to principles of
conflicts of law), except as otherwise required by mandatory provisions of law
and except to the extent that remedies provided by the laws of any State other
than Colorado are governed by the laws of said State.
(b) The Debtor hereby consents to the jurisdiction of
all courts sitting in the State of New York, and of all courts from which an
appeal therefrom may be taken, with respect to any action or proceeding relating
to this Agreement or any related transactions. THE DEBTOR HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING, AND CONSENTS THAT THE
SECURED PARTY MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE DEBTOR WITH RESPECT TO JURISDICTION AND THE
WAIVER OF THE RIGHT TO
20. TIME IS OF THE ESSENCE; NO WAIVER: CUMULATIVE REMEDIES.
Time and exactitude of each of the terms, obligations, covenants and conditions
of this Agreement are hereby declared to be of the essence. No failure on the
part of the Secured Party to exercise, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy by the Secured
Party preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
21. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns. The Secured Party
may assign this Agreement, and if assigned, the assignee shall be entitled, upon
notifying Debtor. to the payment and performance of all of the Secured
Obligations and agreements of Debtor hereunder and to all of the rights and
remedies of Secured Party hereunder. The gender and number used in this
Agreement are used for reference term only and shall apply with the same effect
whether the parties are masculine, feminine, neuter, singular or plural.
22. CONTINUING SECURITY INTEREST; ASSIGNMENTS. This Agreement
shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until termination as provided in herein. (ii) be
binding upon Debtor, the Secured Party and their respective successors and
assigns. and (iii) inure, together with the rights, powers and remedies of
Debtor and the Secured Party hereunder, to the benefit of Debtor, the Secured
Party and their respective successors, transferees and permitted assigns, as the
case may be.
23. USURY. All agreements between Debtor and the Secured
Party, whether now existing or hereafter arising and whether written or oral;
are hereby limited so that in no contingency, whether by reason of demand or
acceleration of the final maturity date, as that term is defined in the Note, or
otherwise, shall the interest contracted for, charged, received, paid or agreed
to be paid to the Secured Party exceed the maximum amount permissible under the
laws of the State of Colorado (hereinafter the "Applicable Law?). If, from any
circumstance whatsoever, interest would otherwise be payable to the Secured
Party in excess of the maximum amount permissible under the Applicable Law, the
interest payable to the Secured Party shall be reduced to the maximum amount
permissible under the Applicable Law, and if from any circumstance the Secured
Party shall ever receive anything of value deemed interest by the Applicable Law
in excess of the maximum amount permissible under the Applicable Law, an amount
equal to the excessive interest shall be applied to the reduction of the
principal hereof and not to the payment of interest, or if such excessive amount
of interest exceeds the unpaid balance of principal hereof; such excess shall be
refunded to the party making such payment. All interest paid or agreed to be
paid to the Secured Party shall, to the extent permitted by the Applicable Law,
be amortized, prorated, allocated and spread throughout the full period
(including any renewal or extension) until payment in full of the principal so
that the interest hereon for such full period shall not exceed the maximum
amount permissible under the Applicable Law. The Secured Party expressly
disavows any intent to contract for, charge or receive interest in an amount
which exceeds the maximum amount permissible under the Applicable Law. This
paragraph shall control all agreements between Debtor and the Secured Party.
24. MULTIPLE COUNTERPARTS. This Agreement may be executed in
separate or multiple counterparts by the parties. and all of such counterparts
shall be considered as one and the same instrument notwithstanding the fact that
various counterparts are signed by only one or more of the parties, and all of
such Agreements shall be deemed but one and the same Agreement.
25. SEVERABILITY. If any provision hereof is held invalid or
unenforceable in any jurisdiction, such provision shall (for purposes of
enforcement in such jurisdiction only) be reduced in scope and effect to the
extent necessary to render same enforceable, and the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Secured Party.
26. HEADINGS. The captions and Section headings in this
Agreement are for convenience of reference only, and shall not limit or
otherwise affect the meaning or interpretation of any provision hereof.
27. ASSIGNMENT. This Agreement may not be assigned by the
Debtor without the Secured Party?s prior written consent, but shall otherwise be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, personal representatives, successors and
assigns.
28. CONTROLLING INSTRUMENT. In the event any provision of this
Agreement conflicts with any provision of the Securities Purchase Agreement, the
provision of the Securities Purchase Agreement shall be controlling.
[Signatures on following page]
IN WITNESS WHEREOF, this Security Agreement has been executed
by the parties hereto as of the date first set forth above.
SECURED PARTY:
CASTLERIGG MASTER INVESTMENTS, LTD.
By:________________________
Name:______________________
Title:_______________________
DEBTOR:
HEALTH SCIENCES GROUP, INC.
By:___________________________
Name:_________________________
Title:__________________________
BIOSELECT INNOVATIONS, INC.
By:___________________________
Name:_________________________
Title:__________________________
XCEL HEALTHCARE, INC.
BY:___________________________
Name:_________________________
Title:__________________________
QUALITY BOTANICAL INGREDIENTS, INC.
BY:___________________________
Name:_________________________
Title:__________________________
