EXHIBIT 10.9
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), is entered into and
made effective as of April 22, 2004, by and between MAXIMUM DYNAMICS
INC., (the "Company"), and CORNELL CAPITAL PARTNERS, LP, a Delaware
limited partnership (the "Secured Party").
WHEREAS, the Company shall issue and sell to the Secured Party,
as provided in the Securities Purchase Agreement dated the date hereof
between the Company and the Secured Party (the "Securities Purchase
Agreement"), and the Secured Party shall purchase up to Five Hundred
Thousand Dollars ($500,000) of five percent (5%) secured convertible
debentures (the "Convertible Debentures"), which shall be convertible
into shares of the Company's common stock, no par value (the "Common
Stock") (as converted, the "Conversion Shares"), for a total purchase
price of up to Five Hundred Thousand Dollars ($500,000), in the
respective amounts set forth opposite each Buyer(s) name on Schedule I
attached to the Securities Purchase Agreement;
WHEREAS, to induce the Secured Party to enter into the
transaction contemplated by the Securities Purchase Agreement, the
Secured Convertible Debenture, the Investor Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions, and the Escrow
Agreement (collectively referred to as the "Transaction Documents"),
the Company hereby grants to the Secured Party a security interest in
and to the pledged property identified on Exhibit "A" hereto
(collectively referred to as the "Pledged Property") until the
satisfaction of the Obligations, as defined herein below.
NOW, THEREFORE, in consideration of the premises 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. Obligations Secured.
The obligations secured hereby are any and all obligations of the
Company now existing or hereinafter incurred to the Secured Party,
whether oral or written and whether arising before, on or after the
date hereof including, without limitation, those obligations of the
Company to the Secured Party under the Securities Purchase Agreement,
the Secured Convertible Debenture, the Investor Registration Rights
Agreement and Irrevocable Transfer Agent Instructions, and any other
amounts now or hereafter owed to the Secured Party by the Company
thereunder or hereunder (collectively, the "Obligations").
ARTICLE 2.
PLEDGED COLLATERAL, ADMINISTRATION OF COLLATERAL AND TERMINATION OF
SECURITY INTEREST
Section 2.1. Pledged Property.
(a) Company hereby pledges to the Secured Party, and
creates in the Secured Party for its benefit, a security interest for
such time until the Obligations are paid in full, in and to all of
the property of the Company as set forth in Exhibit "A" attached
hereto (collectively, the "Pledged Property"):
The Pledged Property, as set forth in Exhibit "A" attached
hereto, and the products thereof and the proceeds of all such items
are hereinafter collectively referred to as the "Pledged Collateral."
(b) Simultaneously with the execution and delivery of this
Agreement, the Company shall make, execute, acknowledge, file, record
and deliver to the Secured Party any documents reasonably requested by
the Secured Party to perfect its security interest in the Pledged
Property. Simultaneously with the execution and delivery of this
Agreement, the Company shall make, execute, acknowledge and deliver to
the Secured Party such documents and instruments, 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, and
the Secured Party shall hold such documents and instruments as secured
party, subject to the terms and conditions contained herein.
Section 2.2. Rights; Interests; Etc.
(a) So long as no Event of Default (as hereinafter
defined) shall have occurred and be continuing:
(i) the Company shall be entitled to exercise any and
all rights pertaining to the Pledged Property or any part thereof for
any purpose not inconsistent with the terms hereof; and
(ii) the Company shall be entitled to receive and
retain any and all payments paid or made in respect of the Pledged
Property.
(b) Upon the occurrence and during the continuance of an
Event of Default:
(i) All rights of the Company to exercise the rights
which it would otherwise be entitled to exercise pursuant to
Section 2.2(a)(i) hereof and to receive payments which it would
otherwise be authorized to receive and retain pursuant to
Section 2.2(a)(ii) hereof shall be suspended, and all such rights
shall thereupon become vested in the Secured Party who shall thereupon
have the sole right to exercise such rights and to receive and hold as
Pledged Collateral such payments; provided, however, that if the
Secured Party shall become entitled and shall elect to exercise its
right to realize on the Pledged Collateral pursuant to Article 5
hereof, then all cash sums received by the Secured Party, or held by
Company for the benefit of the Secured Party and paid over pursuant to
Section 2.2(b)(ii) hereof, shall be applied against any outstanding
Obligations; and
(ii) All interest, dividends, income and other
payments and distributions which are received by the Company contrary
to the provisions of Section 2.2(b)(i) hereof shall be received in
trust for the benefit of the Secured Party, shall be segregated from
other property of the Company and shall be forthwith paid over to the
Secured Party; or
(iii) The Secured Party in its sole discretion shall be
authorized to sell any or all of the Pledged Property at public or
private sale in order to recoup all of the outstanding principal plus
accrued interest owed pursuant to the Convertible Debenture as
described herein
(c) Each of the following events shall constitute a
default under this Agreement (each an "Event of Default"):
(i) any default, whether in whole or in part, shall
occur in the payment to the Secured Party of principal, interest or
other item comprising the Obligations as and when due or with respect
to any other debt or obligation of the Company to a party other than
the Secured Party;
(ii) any default, whether in whole or in part, shall
occur in the due observance or performance of any obligations or other
covenants, terms or provisions to be performed under this Agreement or
the Transaction Documents;
(iii) the Company shall: (1) make a general assignment
for the benefit of its creditors; (2) apply for or consent to the
appointment of a receiver, trustee, assignee, custodian, sequestrator,
liquidator or similar official for itself or any of its assets and
properties; (3) commence a voluntary case for relief as a debtor under
the United States Bankruptcy Code; (4) file with or otherwise submit
to any governmental authority any petition, answer or other document
seeking: (A) reorganization, (B) an arrangement with creditors or
(C) to take advantage of any other present or future applicable law
respecting bankruptcy, reorganization, insolvency, readjustment of
debts, relief of debtors, dissolution or liquidation; (5) file or
otherwise submit any answer or other document admitting or failing to
contest the material allegations of a petition or other document filed
or otherwise submitted against it in any proceeding under any such
applicable law, or (6) be adjudicated a bankrupt or insolvent by a
court of competent jurisdiction; or
(iv) any case, proceeding or other action shall be
commenced against the Company for the purpose of effecting, or an
order, judgment or decree shall be entered by any court of competent
jurisdiction approving (in whole or in part) anything specified in
Section 2.2(c)(iii) hereof, or any receiver, trustee, assignee,
custodian, sequestrator, liquidator or other official shall be
appointed with respect to the Company, or shall be appointed to take
or shall otherwise acquire possession or control of all or a
substantial part of the assets and properties of the Company, and any
of the foregoing shall continue unstayed and in effect for any period
of thirty (30) days.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
Section 3.1. Secured Party Appointed Attorney-In-Fact.
Upon the occurrence of an Event of Default, the Company hereby
appoints the Secured Party as its attorney-in-fact, with full
authority in the place and stead of the Company and in the name of the
Company or otherwise, from time to time in the Secured Party's
discretion to take any action and to execute any instrument which the
Secured Party may reasonably deem necessary to accomplish the purposes
of this Agreement, including, without limitation, to receive and
collect all instruments made payable to the Company representing any
payments in respect of the Pledged Collateral or any part thereof and
to give full discharge for the same. The Secured Party may demand,
collect, receipt for, settle, compromise, adjust, xxx for, foreclose,
or realize on the Pledged Property as and when the Secured Party may
determine. To facilitate collection, the Secured Party may notify
account debtors and obligors on any Pledged Property or Pledged
Collateral to make payments directly to the Secured Party.
Section 3.2. Secured Party May Perform.
If the Company fails to perform any agreement contained herein,
the Secured Party, at its option, may itself perform, or cause
performance of, such agreement, and the expenses of the Secured Party
incurred in connection therewith shall be included in the Obligations
secured hereby and payable by the Company 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.
Section 4.2. Ownership of Pledged Property.
The Company warrants and represents 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 except for
the security interest created by this Agreement.
ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
Section 5.1. Default and Remedies.
(a) If an Event of Default described in
Section 2.2(c)(i) and (ii) occurs, then in each such case the Secured
Party may declare the Obligations to be due and payable immediately,
by a notice in writing to the Company, and upon any such declaration,
the Obligations shall become immediately due and payable. If an Event
of Default described in Sections 2.2(c)(iii) or (iv) occurs and is
continuing for the period set forth therein, then the Obligations
shall automatically become immediately due and payable without
declaration or other act on the part of the Secured Party.
(b) Upon the occurrence of an Event of Default, the
Secured Party shall,: (i) be entitled to receive all distributions
with respect to the Pledged Collateral, (ii) to cause the Pledged
Property to be transferred into the name of the Secured Party or its
nominee, (iii) to dispose of the Pledged Property, and (iv) to realize
upon any and all rights in the Pledged Property then held by the
Secured Party.
Section 5.2. Method of Realizing Upon the Pledged Property: Other Remedies.
Upon the occurrence of an Event of Default, in addition to any
rights and remedies available at law or in equity, the following
provisions shall govern the Secured Party's right to realize upon the
Pledged Property:
(a) Any item of the Pledged Property may be sold for cash
or other value in any number of lots at brokers board, public auction
or private sale and may be sold without demand, advertisement or
notice (except that the Secured Party shall give the Company
ten (10) days' prior written notice of the time and place or of the
time after which a private sale may be made (the "Sale Notice")),
which notice period shall in any event is hereby agreed to be
commercially reasonable. At any sale or sales of the Pledged
Property, the Company may bid for and purchase the whole or any part
of the Pledged Property and, upon compliance with the terms of such
sale, may hold, exploit and dispose of the same without further
accountability to the Secured Party. The Company will execute and
deliver, or cause to be executed and delivered, such instruments,
documents, assignments, waivers, certificates, and affidavits and
supply or cause to be supplied such further information and take such
further action as the Secured Party reasonably shall require in
connection with any such sale.
(b) Any cash being held by the Secured Party as Pledged
Collateral and all cash proceeds received by the Secured Party in
respect of, sale of, collection from, or other realization upon all or
any part of the Pledged Collateral shall be applied as follows:
(i) to the payment of all amounts due the Secured
Party for the expenses reimbursable to it hereunder or owed to it
pursuant to Section 8.3 hereof;
(ii) to the payment of the Obligations then due and
unpaid.
(iii) the balance, if any, to the person or persons
entitled thereto, including, without limitation, the Company.
(c) In addition to all of the rights and remedies which
the Secured Party may have pursuant to this Agreement, the Secured
Party shall have all of the rights and remedies provided by law,
including, without limitation, those under the Uniform Commercial
Code.
(i) If the Company fails to pay such amounts due upon
the occurrence of an Event of Default which is continuing, then the
Secured Party may institute a judicial proceeding for the collection
of the sums so due and unpaid, may prosecute such proceeding to
judgment or final decree and may enforce the same against the Company
and collect the monies adjudged or decreed to be payable in the manner
provided by law out of the property of Company, wherever situated.
(ii) The Company agrees that it shall be liable for
any reasonable fees, expenses and costs incurred by the Secured Party
in connection with enforcement, collection and preservation of the
Transaction Documents, including, without limitation, reasonable legal
fees and expenses, and such amounts shall be deemed included as
Obligations secured hereby and payable as set forth in Section 8.3
hereof.
Section 5.3. Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relating to the Company or
the property of the Company or of such other obligor or its creditors,
the Secured Party (irrespective of whether the Obligations shall then
be due and payable as therein expressed or by declaration or otherwise
and irrespective of whether the Secured Party shall have made any
demand on the Company for the payment of the Obligations), subject to
the rights of Previous Security Holders, shall be entitled and
empowered, by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of
the Obligations and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Secured
Party (including any claim for the reasonable legal fees and expenses
and other expenses paid or incurred by the Secured Party permitted
hereunder and of the Secured Party allowed in such judicial
proceeding), and
(ii) to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute
the same; and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding
is hereby authorized by the Secured Party to make such payments to the
Secured Party and, in the event that the Secured Party shall consent
to the making of such payments directed to the Secured Party, to pay
to the Secured Party any amounts for expenses due it hereunder.
Section 5.4. Duties Regarding Pledged Collateral.
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
The Company covenants and agrees that, from the date hereof and
until the Obligations have been fully paid and satisfied, unless the
Secured Party shall consent otherwise in writing (as provided in
Section 8.4 hereof):
Section 6.1. Existence, Properties, Etc.
(a) The Company 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 Company'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) the Company shall not do,
or cause to be done, any act impairing the Company's corporate power
or authority (i) to carry on the Company'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 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 sole discretion, whether individually or in the
aggregate, upon (a) the Company's assets, business, operations,
properties or condition, financial or otherwise; (b) the Company's to
make payment as and when due of all or any part of the Obligations; or
(c) the Pledged Property.
Section 6.2. Financial Statements and Reports.
The Company shall furnish to the Secured Party such financial
data as the Secured Party may reasonably request. Without limiting
the foregoing, the Company shall furnish to the Secured Party (or
cause to be furnished to the Secured Party) the following:
(a) as soon as practicable and in any event within ninety
(90) days after the end of each fiscal year of the Company, the
balance sheet of the Company as of the close of such fiscal year, the
statement of earnings and retained earnings of the Company as of the
close of such fiscal year, and statement of cash flows for the Company
for such fiscal year, all in reasonable detail, prepared in accordance
with generally accepted accounting principles consistently applied,
certified by the chief executive and chief financial officers of the
Company as being true and correct and accompanied by a certificate of
the chief executive and chief financial officers of the Company,
stating that the Company has kept, observed, performed and fulfilled
each covenant, term and condition of this Agreement and the
Transaction Documents during such fiscal year and that no Event of
Default hereunder has occurred and is continuing, or if an Event of
Default has occurred and is continuing, specifying the nature of same,
the period of existence of same and the action the Company proposes to
take in connection therewith;
(b) within thirty (30) days of the end of each calendar
month, a balance sheet of the Company as of the close of such month,
and statement of earnings and retained earnings of the Company as of
the close of such month, all in reasonable detail, and prepared
substantially in accordance with generally accepted accounting
principles consistently applied, certified by the chief executive and
chief financial officers of the Company as being true and correct; and
(c) promptly upon receipt thereof, copies of all
accountants' reports and accompanying financial reports submitted to
the Company by independent accountants in connection with each annual
examination of the Company.
Section 6.3. Accounts and Reports.
The Company shall maintain a standard system of accounting in
accordance with generally accepted accounting principles consistently
applied and provide, at its sole expense, to the Secured Party the
following:
(a) 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 Company in excess of $15,000 (other than the
Obligations), or any demand or other request for payment under any
guaranty, assumption, purchase agreement or similar agreement or
arrangement respecting the indebtedness or obligations of others in
excess of $15,000, including any received from any person acting on
behalf of the Secured Party or beneficiary thereof; and
(b) within fifteen (15) days after the making of each
submission or filing, a copy of any report, financial statement,
notice or other document, whether periodic or otherwise, submitted to
the shareholders of the Company, or submitted to or filed by the
Company with any governmental authority involving or affecting (i) the
Company that could have a Material Adverse Effect; (ii) the
Obligations; (iii) any part of the Pledged Collateral; or (iv) any of
the transactions contemplated in this Agreement or the Transaction
Documents.
Section 6.4. Maintenance of Books and Records; Inspection.
The Company shall maintain its books, accounts and records in
accordance with generally accepted accounting principles consistently
applied, and permit the Secured Party, its officers and employees and
any professionals designated by the Secured Party in writing, at any
time to visit and inspect any of its properties (including but not
limited to the collateral security described in the Transaction
Documents), corporate books and financial records, and to discuss its
accounts, affairs and finances with any employee, officer or director
thereof.
Section 6.5. Intentionally Not Used.
Section 6.6. Contracts and Other Collateral.
The Company 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 Company is now or
hereafter will be party on a timely basis and in the manner therein
required, including, without limitation, this Agreement.
Section 6.7. Defense of Collateral, Etc.
The Company 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 could have a Material Adverse Effect, the Company shall
defend the Secured Party's right, title and interest in and to each
and every part of the Pledged Property, each against all manner of
claims and demands on a timely basis to the full extent permitted by
applicable law.
Section 6.8. Payment of Debts, Taxes, Etc.
The Company shall pay, or cause to be paid, all of its
indebtedness and other liabilities and perform, or cause to be
performed, all of its obligations in accordance with the respective
terms thereof, and pay and discharge, or cause to be paid or
discharged, all taxes, assessments and other governmental charges and
levies imposed upon it, upon any of its assets and properties on or
before the last day on which the same may be paid without penalty, as
well as pay all other lawful claims (whether for services, labor,
materials, supplies or otherwise) as and when due
Section 6.9. Taxes and Assessments; Tax Indemnity.
The Company shall (a) file all tax returns and appropriate
schedules thereto that are required to be filed under applicable law,
prior to the date of delinquency, (b) pay and discharge all taxes,
assessments and governmental charges or levies imposed upon the
Company, 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 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 Company 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.
Section 6.10. Compliance with Law and Other Agreements.
The Company 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 Company is a party or by which the Company or
any of its properties is bound. Without limiting the foregoing, the
Company shall pay all of its indebtedness promptly in accordance with
the terms thereof.
Section 6.11. Notice of Default.
The Company shall give written notice to the Secured Party of the
occurrence of any default or Event of Default under this Agreement,
the Transaction Documents or any other agreement of the Company for
the payment of money, promptly upon the occurrence thereof.
Section 6.12. Notice of Litigation.
The Company 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 $50,000, instituted by any persons against the
Company, 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 Company 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 Company.
ARTICLE 7.
NEGATIVE COVENANTS
The Company covenants and agrees that, from the date hereof until
the Obligations have been fully paid and satisfied, the Company shall
not, unless the Secured Party shall consent otherwise in writing:
Section 7.1. Indebtedness.
The Company shall not directly or indirectly permit, create,
incur, assume, permit to exist, increase, renew or extend on or after
the date hereof any indebtedness on its part, including commitments,
contingencies and credit availabilities, or apply for or offer or
agree to do any of the foregoing.
Section 7.2. Liens and Encumbrances.
The Company shall not directly or indirectly make, create, incur,
assume or permit to exist any assignment, transfer, pledge, mortgage,
security interest or other lien or encumbrance of any nature in, to or
against any part of the Pledged Property or of the Company's capital
stock, or offer or agree to do so, or own or acquire or agree to
acquire any asset or property of any character subject to any of the
foregoing encumbrances (including any conditional sale contract or
other title retention agreement), or assign, pledge or in any way
transfer or encumber its right to receive any income or other
distribution or proceeds from any part of the Pledged Property or the
Company's capital stock; or enter into any sale-leaseback financing
respecting any part of the Pledged Property as lessee, or cause or
assist the inception or continuation of any of the foregoing.
Section 7.3. Articles, By-Laws, Mergers, Consolidations,
Acquisitions and Sales.
Without the prior express written consent of the Secured Party,
the Company shall not: (a) Amend its Articles of Incorporation or By-
Laws; (b) issue or sell its stock, stock options, bonds, notes or
other corporate securities or obligations; except pursuant to the
Standby Equity Distribution Agreement between the Company and the
Secured Party; (c) be a party to any merger, consolidation or
corporate reorganization, (d) purchase or otherwise acquire all or
substantially all of the assets or stock of, or any partnership or
joint venture interest in, any other person, firm or entity, (e) sell,
transfer, convey, grant a security interest in or lease all or any
substantial part of its assets, nor (f) create any subsidiaries nor
convey any of its assets to any subsidiary.
Section 7.4. Management, Ownership.
The Company shall not change its ownership, executive staff or
management without the prior written consent of the Secured Party.
The ownership, executive staff and management of the Company are
material factors in the Secured Party's willingness to institute and
maintain a lending relationship with the Company.
Section 7.5. Dividends, Etc.
The Company shall not declare or pay any dividend of any kind, in
cash or in property, on any class of its capital stock, nor purchase,
redeem, retire or otherwise acquire for value any shares of such
stock, nor make any distribution of any kind in respect thereof, nor
make any return of capital to shareholders, nor make any payments in
respect of any pension, profit sharing, retirement, stock option,
stock bonus, incentive compensation or similar plan (except as
required or permitted hereunder), without the prior written consent of
the Secured Party.
Section 7.6. Guaranties; Loans.
The Company shall not guarantee nor be liable in any manner,
whether directly or indirectly, or become contingently liable after
the date of this Agreement in connection with the obligations or
indebtedness of any person or persons, except for (i) the indebtedness
currently secured by the liens identified on the Pledged Property
identified on Exhibit A hereto and (ii) the endorsement of negotiable
instruments payable to the Company for deposit or collection in the
ordinary course of business. The Company shall not make any loan,
advance or extension of credit to any person other than in the normal
course of its business.
Section 7.7. Debt.
The Company shall not create, incur, assume or suffer to exist
any additional indebtedness of any description whatsoever in an
aggregate amount in excess of $25,000 (excluding any indebtedness of
the Company to the Secured Party, trade accounts payable and accrued
expenses incurred in the ordinary course of business and the
endorsement of negotiable instruments payable to the Company,
respectively for deposit or collection in the ordinary course of
business).
Section 7.8. Conduct of Business.
The Company will continue to engage, in an efficient and
economical manner, in a business of the same general type as conducted
by it on the date of this Agreement.
Section 7.9. Places of Business.
The location of the Company's chief place of business is 0 X.
Xxxxxxx Xxxxxx - Xxxxx 0000 Xxxxxxxx Xxxxxxx, XX 00000. The Company
shall not change the location of its chief place of business, chief
executive office or any place of business disclosed to the Secured
Party or move any of the Pledged Property from its current location
without thirty (30) days' prior written notice to the Secured Party in
each instance.
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, 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:
Cornell Capital Partners, LP
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:
Xxxxxx Xxxxxxxx LLP
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
And if to the Company:
Maximum Dynamics Inc.
0 X. Xxxxxxx Xxxxxx - Xxxxx 0000
Xxxxxxxx Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Secretary and Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx-Xxxxx 0000
Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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 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; (iii) the failure by the
Company to perform or observe any of the provisions hereof; or (iv)
the collection or enforcement of any judgment.
Section 8.4. Waivers, Amendments, Etc.
The Secured Party's delay or failure at any time or times
hereafter to require strict performance by Company of any
undertakings, agreements or covenants shall not waiver, 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 Company 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.
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 until
payment in full of the Obligations; and (ii) be binding upon the
Company and its successors and heirs 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, the Company 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.
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 Colorado 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.
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. Entire Agreement.
This Agreement, the Securities Purchase Agreement, the Escrow
Agreement, the Secured Convertible Debenture, and the Investor's
Registration Rights 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
Agreement as of the date first above written.
COMPANY:
MAXIMUM DYNAMICS INC.
By:
Name: Xxxxxx Xxxxxxx
Title: Secretary and Chief
Financial Officer
SECURED PARTY:
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By:
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 Company of all of the Obligations, the Company
unconditionally and irrevocably hereby grants to the Secured Party a
continuing security interest in and to, and lien upon, the following
Pledged Property of the Company:
(a) all goods of the Company, including, without
limitation, machinery, equipment, furniture, furnishings, fixtures,
signs, lights, tools, parts, supplies and motor vehicles of every kind
and description, now or hereafter owned by the Company or in which the
Company may have or may hereafter acquire any interest, and all
replacements, additions, accessions, substitutions and proceeds
thereof, arising from the sale or disposition thereof, and where
applicable, the proceeds of insurance and of any tort claims involving
any of the foregoing;
(b) all inventory of the Company, including, but not
limited to, all goods, wares, merchandise, parts, supplies, finished
products, other tangible personal property, including such inventory
as is temporarily out of Company's custody or possession and including
any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the
foregoing;
(c) all contract rights and general intangibles of the
Company, including, without limitation, goodwill, trademarks, trade
styles, trade names, leasehold interests, partnership or joint venture
interests, patents and patent applications, copyrights, deposit
accounts whether now owned or hereafter created;
(d) all documents, warehouse receipts, instruments and
chattel paper of the Company whether now owned or hereafter created;
(e) all accounts and other receivables, instruments or
other forms of obligations and rights to payment of the Company
(herein collectively referred to as "Accounts"), together with the
proceeds thereof, all goods represented by such Accounts and all such
goods that may be returned by the Company's customers, and all
proceeds of any insurance thereon, and all guarantees, securities and
liens which the Company may hold for the payment of any such Accounts
including, without limitation, all rights of stoppage in transit,
replevin and reclamation and as an unpaid vendor and/or lienor, all of
which the Company represents and warrants will be bona fide and
existing obligations of its respective customers, arising out of the
sale of goods by the Company in the ordinary course of business;
(f) to the extent assignable, all of the Company's rights
under all present and future authorizations, permits, licenses and
franchises issued or granted in connection with the operations of any
of its facilities;
(g) all products and proceeds (including, without
limitation, insurance proceeds) from the above-described Pledged
Property.
