SECURITY AGREEMENT
Exhibit
10.3
THIS
SECURITY AGREEMENT (the
“Agreement”), is
entered into and made
effective as of January 3, 2008, by and between IR BIOSCIENCES HOLDINGS,
INC.,
a Delaware corporation with its principal place of business located
at
0000 X. Xxx Xx Xxxxxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000 (the “Company”), and the
undersigned subsidiaries of the Company (each a “Guarantor,” and
collectively together with the Company, the “Grantors”), in favor
YA GLOBAL INVESTMENTS,
L.P. (the “Secured
Party”).
WHEREAS,
in
connection with
the Securities Purchase Agreement by and among the Company and the Secured
Party
of even date herewith (the “Securities
Purchase
Agreement”), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue to the Secured Party
(i) an aggregate original principal amount of up to $3,000,000 of senior secured
convertible debentures (the “Convertible
Debentures”), which shall be convertible into shares of the Company’s
Common Stock (the “Conversion Shares”);
and (ii) warrants (the “Warrants”) to be
exercisable to acquire additional shares of Common Stock (the “Warrants Shares”)
initially in that number of shares of Common Stock set forth in the Securities
Purchase Agreement;
WHEREAS,
each of the
Guarantors (other than the Company) has executed and delivered a Guaranty dated
the date hereof (the “Guaranty”) in favor
of the Secured Party, with respect to the Company’s obligations under the
Securities Purchase Agreement, the Convertible Debentures, and the Transaction
Documents (as defined below); and
WHEREAS,
each of the
Guarantors shall receive a direct benefit from the Secured Party entering into
the Securities Purchase Agreement, the Convertible Debentures, and the
Transaction; and
WHEREAS,
it
is a condition
precedent to the Secured Party purchasing the Convertible Debentures and
Warrants pursuant to the Securities Purchase Agreement that the Grantors shall
have executed and delivered to the Secured Party this Agreement providing for
the grant to the Secured Party of a security interest in all personal property
of each Grantor to secure all of the Company's obligations under the
“Transaction Documents” (as defined in the Securities Purchase Agreement) (the
“Transaction
Documents”) and the Guarantors’ obligations under the
Guaranty;
NOW,
THEREFORE, in
consideration of the promises and the mutual covenants herein contained, and
for
other good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE
1.
DEFINITIONS
AND
INTERPRETATIONS
Section
1.1.
Recitals. The
above recitals are true and correct and are incorporated herein, in their
entirety, by this reference.
Section
1.2.
Interpretations.
Nothing herein expressed or implied is intended or shall be construed to confer
upon any person other than the Secured Party any right, remedy or claim under
or
by reason hereof.
Section
1.3.
Definitions. Reference
is hereby made to the Securities Purchase Agreement and the Convertible
Debentures for a statement of the terms thereof. All capitalized terms used
in
this Agreement and the recitals hereto and not defined herein shall have the
meanings set forth in the Securities Purchase Agreement, the Convertible
Debentures, or in Articles 8 or 9 of the Uniform Commercial Code as in effect
from time to time in the State of New Jersey (the "Code").
Section
1.4.
Other
Definitions. As used in this Agreement, the following terms
shall have the respective meanings indicated below, such meanings to be
applicable equally to both the singular and plural forms of such
terms:
“Event
of Default”
shall be deemed to have occurred under this Agreement upon an Event
of Default
under and as defined in the Convertible Debentures.
ARTICLE
2.
PLEDGED
PROPERTY
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Section
2.1.
|
Grant
of Security
Interest.
|
(a)
As collateral security for all of the Obligations (as defined in Section 2.2 hereof),
each Grantor hereby pledges and assigns to the Secured Party, and grants to
the
Secured Party for its benefit, a continuing security interest in and to all
personal property of each Grantor, wherever located and whether now or
hereinafter existing and whether now owned or hereafter acquired, of every
kind
and description, tangible or intangible, including without limitation, all
Goods, Inventory, Equipment, Fixtures, Instruments (including promissory notes),
Documents, Accounts (including health-care-insurance receivables, and license
fees), Contracts, Contract Rights, Chattel Paper (whether tangible or
electronic), Deposit Accounts (and in and to any deposits or other sums at
any
time credited to each such Deposit Account), Money, Letters of Credit and
Letter-of-Credit Rights (whether or not the letter of credit is evidenced by
a
writing), Commercial Tort Claims, Securities and all other Investment Property,
General Intangibles (including payment intangibles and software), Farm Products,
all books and records relating to any of the foregoing, and all supporting
obligations, and any and all proceeds and products of any thereof, including
proceeds of insurance covering any or all of the foregoing, wherever located,
whether now owned, or now due, in which a Grantor has an interest or the power
to transfer rights, or hereafter acquired, arising, or to become due, or in
which a Grantor obtains an interest, or the power to transfer rights, and as
more particularly described on Exhibit A attached
hereto (collectively, the “Pledged
Property”).
(b)
Simultaneously with the execution and delivery of this Agreement, each Grantor
shall make, execute, acknowledge, file, record and deliver to the Secured Party
such documents, instruments, and agreements, including, without limitation,
financing statements, certificates, affidavits and forms as may, in the Secured
Party’s reasonable judgment, be necessary to effectuate, complete or perfect, or
to continue and preserve, the security interest of the Secured Party in the
Pledged Property.
Section
2.2
Security for
Obligations. The security interest created hereby in the
Pledged Property constitutes continuing collateral security for all of the
following obligations, whether now existing or hereinafter incurred
(collectively, the “Obligations”):
(a) (i)
the payment by the Company, as and when due and payable (by scheduled maturity,
acceleration, demand or otherwise), of all amounts from time to time owing
by it
in respect of the Convertible Debentures, the other Transaction Documents,
or
any other amounts owing by it to the Secured Party, whether or not now in
existence or hereinafter incurred, or (ii) in the case of any Guarantor, the
payment by such Guarantor, as and when due and payable of all “Guaranteed
Obligations” under (and as defined in) the Guaranty; and
(b) the
due performance and observance by the each Grantor of all of its other
obligations from time to time existing in respect of any of the Transaction
Documents, including without limitation, with respect to any conversion or
redemption rights of the Secured Party under the Convertible
Debentures.
ARTICLE
3.
ATTORNEY-IN-FACT;
PERFORMANCE
|
Section
3.1.
|
Secured
Party
Appointed Attorney-In-Fact.
|
The
Grantors hereby appoint the Secured Party as its attorney-in-fact, with full
authority in the place and stead of the Grantor and in the name of the Grantor
or otherwise, exercisable after and during the continuance of an Event of
Default, from time to time in the Secured Party’s discretion to take any action
and to execute any instrument which the Secured Party may reasonably deem
necessary to accomplish the purposes of this Agreement, including, without
limitation, to (a) receive and collect all instruments made payable to the
Grantor representing any payments in respect of the Pledged Property or any
part
thereof and to give full discharge for the same; (b) demand, collect, receipt
for, settle, compromise, adjust, xxx for, foreclose, or realize on the Pledged
Property as and when the Secured Party may determine, and (c) to facilitate
collection, the Secured Party may notify account debtors and obligors on any
Pledged Property to make payments directly to the Secured Party. The
foregoing power of attorney is a power coupled with an interest and shall be
irrevocable until all Obligations are paid and performed in full. The
Grantors agree that the powers conferred on the Secured Party hereunder are
solely to protect the Secured Party’s interests in the Pledged Property and
shall not impose any duty upon the Secured Party to exercise any such
powers.
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Section
3.2.
|
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 such Grantor under
Section 8.3.
ARTICLE
4.
REPRESENTATIONS
AND
WARRANTIES
|
Section
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.
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Section
4.2.
|
Ownership
of Pledged
Property.
|
Each
Grantor represents and warrants that it is the legal and beneficial owner of
the
Pledged Property free and clear of any lien, security interest, option or other
charge or encumbrance (each, a “Lien”) except for the security interest created
by this Agreement and other Permitted Liens. For purposes of this
Agreement, “Permitted Liens” means: (1) the security interest created by this
Agreement, (2) existing Liens which have been disclosed by the Company to the
Secured Party on Schedule 4.2 attached hereto; (3) inchoate Liens for taxes,
assessments or governmental charges or levies not yet due, as to which the
grace
period, if any, related thereto has not yet expired, or being contested in
good
faith and by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP; (4) Liens of carriers, materialmen,
warehousemen, mechanics and landlords and other similar Liens which secure
amounts which are not yet overdue or which are being contested in good faith
by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP; (5) licenses, sublicenses, leases or subleases granted
to
other Persons not materially interfering with the conduct of the business of
the
Company; (6) Liens securing capitalized lease obligations and purchase money
indebtedness incurred solely for the purpose of financing an acquisition or
lease; (7) easements, rights-of-way, restrictions, encroachments, municipal
zoning ordinances and other similar charges or encumbrances, and minor title
deficiencies, in each case not securing debt and not materially interfering
with
the conduct of the business of the Company and not materially detracting from
the value of the property subject thereto; (8) Liens arising out of the
existence of judgments or awards which judgments or awards do not constitute
an
Event of Default; (9) Liens incurred in the ordinary course of business in
connection with workers compensation claims, unemployment insurance, pension
liabilities and social security benefits and Liens securing the performance
of
bids, tenders, leases and contracts in the ordinary course of business,
statutory obligations, surety bonds, performance bonds and other obligations
of
a like nature (other than appeal bonds) incurred in the ordinary course of
business (exclusive of obligations in respect of the payment for borrowed
money); (10) Liens in favor of a banking institution arising by operation of
law
encumbering deposits (including the right of set-off) and contractual set-off
rights held by such banking institution and which are within the general
parameters customary in the banking industry and only burdening deposit accounts
or other funds maintained with a creditor depository institution; (11) usual
and
customary set-off rights in leases and other contracts; and (12) escrows in
connection with acquisitions and dispositions.
Section
4.3
Location of Pledged
Property.
The
Pledged Property is or will be kept at the address(es) of each Grantor set
forth
on the signature pages hereof, or such other locations as the Grantors have
given the Secured Party written notice prior to the date hereof, and, unless
otherwise provided herein, the Grantors will not remove any Pledged Property
from such locations without the prior written consent of the Secured Party
which
consent shall not be unreasonably withheld.
Section
4.4
Location, State
of
Incorporation and Name of Grantors.
Each
Grantor’s principal place of business, state of organization, organization
identification number, and exact legal name is as set forth on each such
Grantor’s signature page to this Agreement.
Section
4.5
Priority of Security
Interest.
The
security interest granted to the Secured Party hereunder shall be a first
priority security interest subject to no other Liens. Except for the
Permitted Liens, no financing statement covering any of the Pledged Property
or
any proceeds thereof is on file in any public office.
ARTICLE
5.
DEFAULT;
REMEDIES
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Section
5.1
|
Method
of Realizing
Upon the Pledged Property: Other Remedies.
|
If
any
Event of Default shall have occurred and be continuing:
(a)
The Secured Party may exercise in respect of the Pledged Property, in addition
to any other rights and remedies provided for herein or otherwise available
to
it, all of the rights and remedies of a secured party upon default under the
Code (whether or not the Code applies to the affected Pledged Property), and
also may (i) take absolute control of the Pledged Property, including, without
limitation, transfer into the Secured Party's name or into the name of its
nominee or nominees (to the extent the Secured Party has not theretofore done
so) and thereafter receive, for the benefit of the Secured Party, all payments
made thereon, give all consents, waivers and ratifications in respect thereof
and otherwise act with respect thereto as though it were the outright owner
thereof, (ii) require each Grantor to assemble all or part of the Pledged
Property as directed by the Secured Party and make it available to the Secured
Party at a place or places to be designated by the Secured Party that is
reasonably convenient to both parties, and the Secured Party may enter into
and
occupy any premises owned or leased by a Grantor where the Pledged Property
or
any part thereof is located or assembled for a reasonable period in order to
effectuate the Secured Party's rights and remedies hereunder or under law,
without obligation to the Grantor in respect of such occupation, and
(iii) without notice except as specified below and without any obligation
to prepare or process the Pledged Property for sale, (A) sell the Pledged
Property or any part thereof in one or more parcels at public or private sale,
at any of the Secured Party's offices or elsewhere, for cash, on credit or
for
future delivery, and at such price or prices and upon such other terms as the
Secured Party may deem commercially reasonable and/or (B) lease, license or
dispose of the Pledged Property or any part thereof upon such terms as the
Secured Party may deem commercially reasonable. Each Grantor agrees
that, to the extent notice of sale or any other disposition of the Pledged
Property shall be required by law, at least ten (10) days' notice to the Grantor
of the time and place of any public sale or the time after which any private
sale or other disposition of the Pledged Property is to be made shall constitute
reasonable notification. The Secured Party shall not be obligated to
make any sale or other disposition of any Pledged Property regardless of notice
of sale having been given. The Secured Party may adjourn any public
or private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Each Grantor hereby waives any
claims against the Secured Party arising by reason of the fact that the price
at
which the Pledged Property may have been sold at a private sale was less than
the price which might have been obtained at a public sale or was less than
the
aggregate amount of the Obligations, even if the Secured Party accepts the
first
offer received and does not offer such Pledged Property to more than one
offeree, and waives all rights that the Grantor may have to require that all
or
any part of such Pledged Property be marshaled upon any sale (public or private)
thereof. Each Grantor hereby acknowledges that (i) any such sale
of the Pledged Property by the Secured Party may be made without warranty,
(ii) the Secured Party may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth
in clauses (i) and (ii) above shall not adversely affect the commercial
reasonableness of any such sale of Pledged Property.
(b)
Any cash held by the Secured Party as Pledged Property and all cash proceeds
received by the Secured Party in respect of any sale of or collection from,
or
other realization upon, all or any part of the Pledged Property shall be applied
(after payment of any amounts payable to the Secured Party pursuant to Section
8.3 hereof) by the Secured Party against, all or any part of the Obligations
in
such order as the Secured Party shall elect, consistent with the provisions
of
the Securities Purchase Agreement. Any surplus of such cash or cash proceeds
held by the Secured Party and remaining after the indefeasible payment in full
in cash of all of the Obligations shall be paid over to whomsoever shall be
lawfully entitled to receive the same or as a court of competent jurisdiction
shall direct.
(c)
In the event that the proceeds of any such sale, collection or realization
are
insufficient to pay all amounts to which the Secured Party is legally entitled,
each Grantor shall be liable for the deficiency, together with interest thereon
at the rate specified in the Convertible Debentures for interest on overdue
principal thereof or such other rate as shall be fixed by applicable law,
together with the costs of collection and the reasonable fees, costs, expenses
and other client charges of any attorneys employed by the Secured Party to
collect such deficiency.
(d)
Each Grantor hereby acknowledges that if the Secured Party complies with any
applicable state, provincial, or federal law requirements in connection with
a
disposition of the Pledged Property, such compliance will not adversely affect
the commercial reasonableness of any sale or other disposition of the Pledged
Property.
(e)
The Secured Party shall not be required to marshal any present or future
collateral security (including, but not limited to, this Agreement and the
Pledged Property) for, or other assurances of payment of, the Obligations or
any
of them or to resort to such collateral security or other assurances of payment
in any particular order, and all of the Secured Party's rights hereunder and
in
respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or arising.
To
the extent that the Grantor lawfully may, each Grantor hereby agrees that it
will not invoke any law relating to the marshaling of collateral which might
cause delay in or impede the enforcement of the Secured Party's rights under
this Agreement or under any other instrument creating or evidencing any of
the
Obligations or under which any of the Obligations is outstanding or by which
any
of the Obligations is secured or payment thereof is otherwise assured, and,
to
the extent that it lawfully may, the Company hereby irrevocably waives the
benefits of all such laws.
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Section
5.2
|
Duties
Regarding
Pledged Property.
|
The
Secured Party shall have no duty as to the collection or protection of the
Pledged Property or any income thereon or as to the preservation of any rights
pertaining thereto, beyond the safe custody and reasonable care of any of the
Pledged Property actually in the Secured Party’s possession.
ARTICLE
6.
AFFIRMATIVE
COVENANTS
So
long
as any of the Obligations shall remain outstanding, unless the Secured Party
shall otherwise consent in writing:
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Section
6.1.
|
Existence,
Properties,
Etc.
|
(a)
Each Grantor shall do, or cause to be done, all things, or proceed with due
diligence with any actions or courses of action, that may be reasonably
necessary (i) to maintain Grantor’s due organization, valid existence and
good standing under the laws of its state of incorporation, and (ii) to
preserve and keep in full force and effect all qualifications, licenses and
registrations in those jurisdictions in which the failure to do so could have
a
Material Adverse Effect (as defined below); and (b) each Grantor shall not
do, or cause to be done, any act impairing the Grantor’s corporate power or
authority (i) to carry on the Grantor’s business as now conducted, and
(ii) to execute or deliver this Agreement or any other document delivered
in connection herewith, including, without limitation, any UCC-1 Financing
Statements required by the Secured Party (which other loan instruments
collectively shall be referred to as the “Loan
Instruments”) to which it is or will be a party, or perform any of
its obligations hereunder or thereunder. For purpose of this
Agreement, the term “Material Adverse
Effect” shall mean any material and adverse affect as determined by
Secured Party in its reasonable discretion, whether individually or in the
aggregate, upon (a) the Grantor’s assets, business, operations, properties
or condition, financial or otherwise; (b) the Grantor’s ability to make
payment as and when due of all or any part of the Obligations; or (c) the
Pledged Property.
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Section
6.2.
|
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.
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Section
6.3.
|
Accounts
and
Reports.
|
Each
Grantor shall maintain a standard system of accounting in accordance with
generally accepted accounting principles consistently applied (“GAAP”) and
provide, at its sole expense, to the Secured Party as soon as available, a
copy
of any notice or other communication alleging any nonpayment or other material
breach or default, or any foreclosure or other action respecting any material
portion of its assets and properties, received respecting any of the
indebtedness of the Grantor in excess of $500,000 (other than the
Obligations)
.
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Section
6.4.
|
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).
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Section
6.5.
|
Maintenance
and
Insurance.
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(a)
Each Grantor shall maintain or cause to be maintained, at its own expense,
all
of its material assets and properties in good working order and condition,
ordinary wear and tear excepted, making all necessary repairs thereto and
renewals and replacements thereof.
(b)
Each Grantor shall maintain or cause to be maintained, at its own expense,
insurance in form, substance and amounts (including deductibles), which the
Grantor deems reasonably necessary to the Company’s business, (i) adequate
to insure all assets and properties of the Grantor of a character usually
insured by persons engaged in the same or similar business against loss or
damage resulting from fire or other risks included in an extended coverage
policy; (ii) against public liability and other tort claims that may be
incurred by the Grantor; (iii) as may be required by the Transaction
Documents and/or applicable law and (iv) as may be reasonably requested by
Secured Party, all with financially sound and reputable insurers.
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Section
6.6.
|
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 Pledged
Property to which the Grantor is now or hereafter will be party on a timely
basis and in the manner therein required, including, without limitation, this
Agreement, except to the extent the failure to so perform such obligations
would
not reasonably be expected to have a Material Adverse Effect.
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Section
6.7.
|
Defense
of Collateral,
Etc.
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Each
Grantor shall defend and enforce its right, title and interest in and to any
part of: (a) the Pledged Property; and (b) if not included
within the Pledged Property, those assets and properties whose loss would
reasonably be expected to have a Material Adverse Effect, each against all
manner of claims and demands on a timely basis to the full extent permitted
by
applicable law (other than any such claims and demands by holders of Permitted
Liens).
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Section
6.8.
|
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 the Grantor, upon its income and profits or
upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all material taxes, assessments and governmental
charges or levies that, if unpaid, might become a lien or charge upon any of
its
properties; provided,
however, that the Grantor in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses
(b)
and (c) so long as appropriate reserves are maintained with respect thereto
if
and to the extent required by GAAP.
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Section
6.9.
|
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 the Grantor is a party
or by which the Grantor or any of its properties is bound, except where the
failure to so comply would not reasonably be expected to have a Material Adverse
Effect.
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Section
6.10.
|
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
Pledged Property and the amount or an estimate of the amount of such loss or
diminution. The Grantors shall promptly notify the Secured Party of any
condition or event which constitutes, or would constitute with the passage
of
time or giving of notice or both, an Event of Default, and promptly inform
the
Secured Party of any events or changes in the financial condition of any Grantor
occurring since the date of the last financial statement of such Grantor
delivered to the Secured Party, which individually or cumulatively when viewed
in light of prior financial statements, which might reasonably be expected
to
have a Material Adverse Effect on the business operations or financial condition
of the Grantor.
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Section
6.11.
|
Notice
of
Litigation.
|
Each
Grantor shall give notice, in writing, to the Secured Party of (a) any
actions, suits or proceedings wherein the amount at issue is in excess of
$250,000, instituted by any persons against the Grantor, or affecting any of
the
assets of the Company, and (b) any dispute, not resolved within fifteen
(15) days of the commencement thereof, between the Grantor on the one hand
and
any governmental or regulatory body on the other hand, which might reasonably
be
expected to have a Material Adverse Effect on the business operations or
financial condition of the Grantor.
Section
6.13.
Future
Subsidiaries.
If
any
Grantor shall hereafter create or acquire any subsidiary, simultaneously with
the creation or acquisition of such subsidiary, such Grantor shall cause such
subsidiary to become a party to this Agreement as an additional "Grantor"
hereunder, and to duly execute and deliver a guaranty of the Obligations in
favor of the Secured Party in form and substance reasonably acceptable to the
Secured Party, and to duly execute and/or deliver such opinions of counsel
and
other documents, in form and substance reasonably acceptable to the Secured
Party, as the Secured Party shall reasonably request with respect
thereto.
Section
6.14.
Changes to
Identity.
Each
Grantor will (a) give the Secured Party at least 30 days' prior written notice
of any change in such Grantor's name, identity or organizational structure,
(b)
maintain its jurisdiction of incorporation, organization or formation as set
forth on its respective signature page attached hereto, (C) immediately notify
the Secured Party upon obtaining an organizational identification number, if
on
the date hereof such Grantor did not have such identification
number.
Section
6.15.
Establishment of
Deposit Account, Dominion AccountAgreements;
Control.
Within
ten (10) days of the date hereof, each Grantor, the Secured Party, and each
applicable bank or other depository institution shall enter into a deposit
account agreement (“Deposit Account
Agreement”) in the form of Exhibit B with respect to each of the
Grantor’s Deposit Accounts, including, without limitation, all savings,
passbook, money market or other depository accounts, and all certificates of
deposit, maintained by each Company with any bank, savings and loan association,
credit union or other depository institution maintained or used by each Grantor
providing dominion and control over such accounts to the Secured Party such
that
upon notice by the Secured Party to such bank or other depository institution
of
the occurrence of an Event of Default all actions under such account shall
be
taken solely at the Secured Party’s direction. Each Grantor’s current
Deposit Accounts are set forth on Schedule 6.14 attached hereto.
Each
Grantor shall cause all cash, all collections and proceeds from accounts
receivable, all receipts from credit card payments, and all proceeds from the
sale of any Pledged Property to be deposited only into its Deposit Accounts
in
the ordinary course of business and consistent with past practices.
Each
Grantor shall have valid and effective Deposit Account Agreements in place
at
all times with respect to all of its Deposit Accounts. No Deposit
Account shall be established, used or maintained by the Company unless it first
enters into a Deposit Account Agreement.
With
respect to each Deposit Account, from an after the occurrence of an Event of
Default, the Secured Party shall have the right, at any time and from time
to
time, to exercise its rights under such Deposit Account Agreement, including,
for the avoidance of any doubt, the exclusive right to give instructions to
the
financial institution at which such Deposit Account is maintained as to the
disposition of funds or other property on deposit therein or credited
thereto. The Secured Party hereby covenants and agrees that it will
not send any such notice to a financial institution at which any such Deposit
Account is maintained directing the disposition of funds or other property
therein unless and until the occurrence of an Event of Default.
In
connection with the foregoing, each Grantor hereby authorizes and directs each
bank or other depository institution which maintains any Deposit Account to
pay
or deliver to the Secured Party upon the Secured Party’s written demand thereof
made at any time after the occurrence of an Event of Default has occurred all
balances in each Deposit Account with such depository for application to the
Obligations then outstanding.
Section
6.16
Perfection of Security
Interests.
(a)
Financing
Statements. The Grantors hereby irrevocably authorize
the Secured Party, at the sole cost and expense of the Grantors, at any time
and
from time to time to file in any filing office in any jurisdiction any initial
financing statements and amendments thereto that (a) indicate the Pledged
Property (i) as all assets of Grantors or words of similar effect, regardless
of
whether any particular asset comprised in the Pledged Property falls within
the
scope of Article 9 of the Code of such jurisdiction, or (ii) as being of an
equal or lesser scope or with greater detail, and (b) contain any other
information required by Part 5 of Article 9 of the Code for the sufficiency
or
filing office acceptance of any financing statement or amendment, including
(i)
whether such Grantor is an organization, the type of organization and any
organization identification number issued to such Grantor, and (ii) in the
case
of a financing statement filed as a fixture filing, a sufficient description
of
real property to which the Pledged Property relates. Grantors agree
to furnish any such information to the Secured Party promptly upon
request. Grantors also ratify their authorization for the Secured
Party to have filed in any jurisdiction any initial financing statements or
amendments thereto if filed prior to the date hereof. The Grantors acknowledge
that they are not authorized to file any financing statement or amendment or
termination statement with respect to any financing statement without the prior
written consent of the Secured Party and agree that they will not do so without
the prior written consent of the Secured Party. The Grantors
acknowledge and agree that this Agreement constitutes an authenticated
record.
(b)
Possession. The
Grantors (i) shall have possession of the Pledged Property, except where
expressly otherwise provided in this Agreement or where the Secured Party
chooses to perfect its security interest by possession in addition to the filing
of a financing statement; and (ii) will, where Pledged Property is in the
possession of a third party, join with the Secured Party in notifying the third
party of the Secured Party’s security interest and obtaining an acknowledgment
from the third party that it is holding the Pledged Property for the benefit
of
the Secured Party.
(c)
Control. In
addition to the provisions set forth in Section 6.15 above, the Grantors will
cooperate with the Secured Party in obtaining control with respect to the
Pledged Property consisting of (i) Investment Property, (ii) Letters of Credit
and Letter-of-Credit Rights and (iii) electronic Chattel Paper.
(d)
Chattel
Paper. Marking of Chattel Paper. The Grantors will not create any
Chattel Paper without placing a legend on the Chattel Paper acceptable to the
Secured Party indicating that the Secured Party has a security interest in
the
Chattel Paper.
Section
6.17 Notice of Commercial
Tort
Claims. If any Grantor shall at any time acquire a Commercial Tort Claim,
such Grantor shall immediately notify the Secured Party in a writing signed
by
such Grantor which shall (a) provide brief details of said claim and (b) grant
to the Secured Party a security interest in said claim and in the proceeds
thereof, all upon the terms of this Agreement, in such form and substance
satisfactory to the Secured Party.
ARTICLE
7.
NEGATIVE
COVENANTS
So
long
as any of the Obligations shall remain outstanding, unless the Secured Party
shall otherwise consent in writing each Grantor covenants and agrees that it
shall not:
Section
7.1.
Transfers, Liens
and
Encumbrances.
(a)
Sell, assign (by operation of law or otherwise), lease, license, exchange or
otherwise transfer or dispose of any of the Pledged Property, except Grantor
may
(i) sell or dispose of Inventory in the ordinary course of business, and (ii)
sell or dispose of assets the Grantor has determined, in good faith, not to
be
useful in the conduct of its business, and (iii) sell or dispose of accounts
in
the course of collection in the ordinary course of business consistent with
past
practice.
(b)
Directly or indirectly make, create, incur, assume or permit to exist any Lien
in, to or against any part of the Pledged Property other than Permitted
Liens.
Section
7.2.
Restriction on
Redemption and Cash Dividends
Directly
or indirectly, redeem, repurchase or declare or pay any cash dividend or
distribution on its capital stock without the prior express written consent
of
the Secured Party.
Section
7.3.
Incurrence of
Indebtedness.
Directly
or indirectly, incur or guarantee, assume or suffer to exist any indebtedness,
other than the indebtedness evidenced by the Convertible Debentures and other
Permitted Indebtedness. “Permitted
Indebtedness” means: (i) indebtedness evidenced by Convertible
Debentures; (ii) indebtedness described on the Disclosure Schedule to the
Securities Purchase Agreement; (iii) indebtedness incurred solely for the
purpose of financing the acquisition or lease of any equipment by the Company,
including capital lease obligations with no recourse other than to such
equipment; (iv) indebtedness (A) the repayment of which has been subordinated
to
the payment of the Convertible Debentures on terms and conditions acceptable
to
the Secured Party, including with regard to interest payments and repayment
of
principal, (B) which does not mature or otherwise require or permit redemption
or repayment prior to or on the 91st
day
after the maturity date of any Convertible Debentures then outstanding; and
(C)
which is not secured by any assets of the Company; (v) indebtedness solely
between the Grantor and/or one of its domestic subsidiaries, on the one hand,
and the Grantor and/or one of its domestic subsidiaries, on the other which
indebtedness is not secured by any assets of the Grantor or any of its
subsidiaries, provided that (x) in each case a majority of the equity of any
such domestic subsidiary is directly or indirectly owned by the Grantor, such
domestic subsidiary is controlled by the Grantor and such domestic subsidiary
has executed a security agreement in the form of this Agreement and (y) any
such
loan shall be evidenced by an intercompany note that is pledged by the Grantor
or its subsidiary, as applicable, as collateral pursuant to this Agreement;
(vi)
reimbursement obligations in respect of letters of credit issued for the account
of the Grantor or any of its subsidiaries for the purpose of securing
performance obligations of the Grantor or its subsidiaries incurred in the
ordinary course of business so long as the aggregate face amount of all such
letters of credit does not exceed $500,000 at any one time; (vii) provided
there
is not an Event of Default when incurred, additional indebtedness incurred
that
at any one time does not exceed $1,500,000 individually or in the aggregate;
and
(viii) renewals, extensions and refinancing of any indebtedness described in
clauses (i) or (iii) of this subsection.
Section
7.4.
Places of
Business.
Change
the location of its chief place of business, chief executive office or any
place
of business disclosed to the Secured Party, unless such change in location
is to
a different location within the United States and the Grantor provides notice
to
the Secured Party of new location within 10 days’ of such change in
location.
ARTICLE
8.
MISCELLANEOUS
|
Section
8.1.
|
Notices.
|
All
notices or other communications required or permitted to be given pursuant
to
this Agreement shall be in writing and shall be considered as duly given
on: (a) the date of delivery, if delivered in person or by
nationally recognized overnight delivery service or
(b) five (5) days after mailing if mailed from within the
continental United States by certified mail, return receipt requested to the
party entitled to receive the same:
|
If
to the Secured Party:
|
YA
Global Investments, L.P.
|
|
000
Xxxxxx Xxxxxx-Xxxxx 0000
|
|
|
Xxxxxx
Xxxx, Xxx Xxxxxx 00000
|
|
|
Attention:
Xxxx Xxxxxx
|
|
|
Portfolio
Manager
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
With
a copy to:
|
Xxxx
Xxxxx, Esq.
|
|
000
Xxxxxx Xxxxxx, Xxxxx 0000
|
|
|
Xxxxxx
Xxxx, XX 00000
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
If
to the Company:
|
IR
Biosciences Holdings, Inc.
|
|
0000
X. Xxx Xx Xxxxxxx, Xxxxx 000
|
|
|
Xxxxxxxxxx,
XX 00000
|
|
|
Attention: Chief
Executive Officer
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
With
a copy to:
|
Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxx Xxxxx Xxxxx, LLP
|
|
00000
Xxxxx Xxxxxx Xxxx., 0xx
Xxxxx
|
|
|
Xxx
Xxxxxxx, XX 00000
|
|
|
Attention: Xxxxxx
X. Xxxxxxx
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
If
to any other Grantor
|
To
the address listed on the respective signature pages attached
hereto
|
Any
party
may change its address by giving notice to the other party stating its new
address. Commencing on the tenth (10th) day
after the giving of such notice, such newly designated address shall be such
party’s address for the purpose of all notices or other communications required
or permitted to be given pursuant to this Agreement.
|
Section
8.2.
|
Severability.
|
If
any
provision of this Agreement shall be held invalid or unenforceable, such
invalidity or unenforceability shall attach only to such provision and shall
not
in any manner affect or render invalid or unenforceable any other severable
provision of this Agreement, and this Agreement shall be carried out as if
any
such invalid or unenforceable provision were not contained herein.
|
Section
8.3.
|
Expenses.
|
In
the
event of an Event of Default, the Company will pay to the Secured Party the
amount of any and all reasonable out-of-pocket expenses, including the
reasonable fees and expenses of its counsel, which the Secured Party may incur
in connection with: (i) the custody or preservation of, or the
sale, collection from, or other realization upon, any of the Pledged Property;
(ii) the exercise or enforcement of any of the rights of the Secured Party
hereunder or (iii) the failure by the Grantor to perform or observe any of
the provisions hereof.
|
Section
8.4.
|
Waivers,
Amendments,
Etc.
|
The
Secured Party’s delay or failure at any time or times hereafter to require
strict performance by Grantor of any undertakings, agreements or covenants
shall
not waive, affect, or diminish any right of the Secured Party under this
Agreement to demand strict compliance and performance herewith. Any
waiver by the Secured Party of any Event of Default shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type. None of the
undertakings, agreements and covenants of the Grantor contained in this
Agreement, and no Event of Default, shall be deemed to have been waived by
the
Secured Party, nor may this Agreement be amended, changed or modified, unless
such waiver, amendment, change or modification is evidenced by an instrument
in
writing specifying such waiver, amendment, change or modification and signed
by
the Secured Party in the case of any such waiver, and signed by the Secured
Party and the Grantor in the case of any such amendment, change or
modification. Further, no such document, instrument, and/or agreement
purported to be executed on behalf of the Secured Party shall be binding upon
the Secured Party unless executed by a duly authorized representative of the
Secured Party.
|
Section
8.5.
|
Continuing
Security
Interest.
|
This
Agreement shall create a continuing security interest in the Pledged Property
and shall: (i) remain in full force and effect so long as any of the
Obligations shall remain outstanding; (ii) be binding upon each Grantor and
its successors and assigns; and (iii) inure to the benefit of the Secured
Party and its successors and assigns. Upon the payment or
satisfaction in full of the Obligations, this Agreement and the security
interest created hereby shall terminate, and, in connection therewith, each
Grantor shall be entitled to the return, at its expense, of such of the Pledged
Property as shall not have been sold in accordance with Section 5.2 hereof
or otherwise applied pursuant to the terms hereof and the Secured Party shall
deliver to the Grantor such documents as the Grantor shall reasonably request
to
evidence such termination.
|
Section
8.6.
|
Independent
Representation.
|
Each
party hereto acknowledges and agrees that it has received or has had the
opportunity to receive independent legal counsel of its own choice and that
it
has been sufficiently apprised of its rights and responsibilities with regard
to
the substance of this Agreement.
|
Section
8.7.
|
Applicable
Law: Jurisdiction.
|
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New Jersey without regard to the principles of conflict of
laws. The parties further agree that any action between them shall be
heard in Xxxxxx County, New Jersey, and expressly consent to the jurisdiction
and venue of the Superior Court of New Jersey, sitting in Xxxxxx County and
the
United States District Court for the District of New Jersey sitting in Newark,
New Jersey for the adjudication of any civil action asserted pursuant to this
Paragraph, provided, however,
that nothing
herein shall prevent the Secured Party from enforcing its rights and remedies
(including, without limitation, by filing a civil action) with respect to the
Pledged Property and/or the Grantors in any other jurisdiction in which the
Pledged Property and/or the Grantors may be located.
|
Section
8.8.
|
Waiver
of Jury
Trial.
|
AS
A
FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT AND TO
MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY WAIVES
ANY
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS
AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS
TRANSACTION.
Section
8.9
Right of Set
Off.
The
Grantors each hereby grant to the Secured Party, a lien, security interest
and
right of setoff as security for all liabilities and obligations to the Secured
Party, whether now existing or hereafter arising, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of the Secured Party or any of its affiliates, or any
entity under the control of the Secured Party, or in transit to any of them.
At
any time, without demand or notice, the Secured Party may set off the same
or
any part thereof and apply the same to any liability or obligation of the
Grantors even though unmatured and regardless of the adequacy of any other
collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE
THE SECURED PARTY TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE GRANTORS,
ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
|
Section
8.10
|
Entire
Agreement.
|
This
Agreement constitutes the entire agreement among the parties and supersedes
any
prior agreement or understanding among them with respect to the subject matter
hereof.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.
|
COMPANY:
|
|
|
IR
BIOSCIENCES HOLDINGS, INC.
|
|
|
By: /s/
Xxxxxxx
Xxxxxxx
|
|
|
Name:
Xxxxxxx Xxxxxxx
|
|
|
Title:
President and Chief Executive Officer
|
|
|
Jurisdiction
of Incorporation, Organization or Formation:
|
|
|
Organizational
ID:
|
IN
WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
GUARANTOR:
|
|
|
ImmuneRegen
BioSciences, Inc.
|
|
|
By: /s/
Xxxxxxx
Xxxxxxx
|
|
|
Name:
Xxxxxxx Xxxxxxx
|
|
|
Title: President
and Chief Executive Officer
|
|
|
Address
For Notices:
Address:
8767 East Xxx Xx Xxxxxxx Xxxxx
000
Xxxxxxxxxx,
Xxxxxxx 00000
Jurisdiction
of Incorporation, Organization or Formation:
|
|
|
Organizational
ID:
|
|
IN
WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
SECURED
PARTY:
|
|
|
YA
GLOBAL INVESTMENTS, L.P.
|
|
|
By:
Yorkville Advisors, LLC
|
|
|
Its:
Investment Manager
|
|
|
By: /s/
Xxxx
Xxxxxx
|
|
|
Name:
Xxxx Xxxxxx
|
|
|
Title:
Portfolio Manager
|
|
EXHIBIT
A
DEFINITION
OF PLEDGED
PROPERTY
For
the
purpose of securing prompt and complete payment and performance by the Grantor
of all of the Obligations, the Grantors each unconditionally and irrevocably
hereby grant to the Secured Party a continuing security interest in and to,
and
lien upon, the following Pledged Property of each Grantor (all capitalized
terms
used herein shall have the respective meanings ascribed thereto in the
Code):
All
personal property of each Grantor, wherever located and whether now or
hereinafter existing and whether now owned or hereafter acquired, of every
kind
and description, tangible or intangible, including without limitation,
all:
1.
Goods;
2.
Inventory, including, without limitation, all goods, merchandise and other
personal property now owned or hereafter acquired by the Grantor which are
held
for sale or lease, or are furnished or to be furnished under any contract of
service or are raw materials, work-in-process, supplies or materials used or
consumed in the Grantor’s business, and all products thereof, and all
substitutions. replacements, additions or accessions therefor and thereto;
and
any cash or non-cash Proceeds of all of the foregoing;
3.
Equipment, including, without limitation, all machinery, equipment, furniture,
parts, tools and dies, of every kind and description, of the Grantor (including
automotive equipment and motor vehicles), now owned or hereafter acquired by
the
Grantor, and used or acquired for use in the business of the Grantor, together
with all accessions thereto and all substitutions and replacements thereof
and
parts therefor and all cash or non-cash Proceeds of the foregoing;
4.
Fixtures, including, without limitation, all goods which are so related to
particular real estate that an interest in them arises under real estate law
and
all accessions thereto, replacements thereof and substitutions therefor,
including, but not limited to, plumbing, heating and lighting apparatus,
mantels, floor coverings, furniture, furnishings, draperies, screens, storm
windows and doors, awnings, shrubbery, plants, boilers, tanks, machinery,
stoves, gas and electric ranges, wall cabinets, appliances, furnaces, dynamos,
motors, elevators and elevator machinery, radiators, blinds and all laundry,
refrigerating, gas, electric, ventilating, air-refrigerating, air-conditioning,
incinerating and sprinkling and other fire prevention or extinguishing equipment
of whatsoever kind and nature and any replacements, accessions and additions
thereto, Proceeds thereof and substitutions therefor;
5.
Instruments (including promissory notes);
6.
Documents;
7.
Accounts, including, without limitation, all Contract Rights and accounts
receivable, health-care-insurance receivables, and license fees; any other
obligations or indebtedness owed to the Grantor from whatever source arising;
all rights of Grantor to receive any payments in money or kind; all guarantees
of Accounts and security therefor; all cash or non-cash Proceeds of all of
the
foregoing; all of the right, title and interest of Grantor in and with respect
to the goods, services or other property which gave rise to or which secure
any
of the accounts and insurance policies and proceeds relating thereto, and all
of
the rights of the Grantor as an unpaid seller of goods or services, including,
without limitation the rights of stoppage in transit, replevin, reclamation
and
resale and all of the foregoing, whether now existing or hereafter created
or
acquired;
8.
Contracts and Contract Rights, including, to the extent not included in the
definition of Accounts, all rights to payment or performance under a contract
not yet earned by performance and not evidenced by an Instrument or Chattel
Paper;
9.
Chattel Paper (whether tangible or electronic);
10.
Deposit Accounts (and in and to any deposits or other sums at any time credited
to each such Deposit Account);
11.
Money, cash and cash equivalents;
12.
Letters of Credit and Letter-of-Credit Rights (whether or not the Letter of
Credit is evidenced by a writing);
13.
Commercial Tort Claims;
14.
Securities Accounts, Security Entitlements, Securities, Financial Assets and
all
other Investment Property, including, without limitation, all ownership or
membership interests in any subsidiaries or affiliates (whether or not
controlled by the Grantor);
15.
General Intangibles, including, without limitation, all payment intangibles,
tax
refunds and other claims of the Grantor against any governmental authority,
and
all choses in action, insurance proceeds, goodwill, patents, copyrights,
trademarks, tradenames, customer lists, formulae, trade secrets, licenses,
permits, franchises, designs, computer software, research and literary rights
now owned or hereafter acquired;
16.
Farm Products;
17.
All books and records (including all ledger sheets, files, computer programs,
tapes and related data processing software) evidencing an interest in or
relating to any of the foregoing;
18.
To the extent not already included above, all supporting obligations, and any
and all cash and non-cash Proceeds, products, accessions, and/or replacements
of
any of the foregoing, including proceeds of insurance covering any or all of
the
foregoing.
