Exhibit 10.4
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "AGREEMENT" dated as of
August 6, 2004, by and among Aquatic Cellulose International Corp., a Nevada
corporation (the "COMPANY"), and the secured parties signatory hereto and their
respective endorsees, transferees and assigns (collectively, the "SECURED
PARTY").
W I T N E S S E T H :
WHEREAS, pursuant to a Securities Purchase Agreement, dated the date
hereof, between Company and the Secured Party (the "PURCHASE AGREEMENT"),
Company has agreed to issue to the Secured Party and the Secured Party has
agreed to purchase from Company certain of Company's 10% Secured Convertible
Debentures, due two years from the date of issue (the "DEBENTURES"), which are
convertible into shares of Company's Common Stock, par value $.001 per share
(the "COMMON STOCK"). In connection therewith, Company shall issue the Secured
Party certain Common Stock purchase warrants dated as of the date hereof to
purchase the number of shares of Common Stock indicated below each Secured
Party's name on the Purchase Agreement (the "WARRANTS"); and
WHEREAS, in order to induce the Secured Party to purchase the
Debentures, Company has agreed to execute and deliver to the Secured Party this
Agreement for the benefit of the Secured Party and to grant to it a first
priority security interest in certain Intellectual Property (defined below) of
Company to secure the prompt payment, performance and discharge in full of all
of Company's obligations under the Debentures and exercise and discharge in full
of Company's obligations under the Warrants; and
NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms
which are defined in the Purchase Agreement and used herein are so used as so
defined; and the following terms shall have the following meanings:
"COMPANY" shall mean, collectively, Company and all of the
present and future subsidiaries of Company, a list of which is contained
in SCHEDULE A, attached hereto.
"SOFTWARE INTELLECTUAL PROPERTY" shall mean:
(a) all software programs (including all source
code, object code and all related applications and data files), whether now
owned, upgraded, enhanced, licensed or leased or hereafter acquired by the
Company, above;
(b) all computers and electronic data processing
hardware and firmware associated therewith;
(c) all documentation (including flow charts, logic
diagrams, manuals, guides and specifications) with respect to such software,
hardware and firmware described in the preceding clauses (a) and (b); and
(d) all rights with respect to all of the foregoing,
including, without limitation, any and all upgrades, modifications, copyrights,
licenses, options, warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights and
indemnifications and substitutions, replacements, additions, or model
conversions of any of the foregoing.
"COPYRIGHTS" shall mean (a) all copyrights, registrations and
applications for registration, ISSUED or filed, including any reissues,
extensions or renewals thereof, by or with the United States Copyright
Office or any similar office or agency of the United States, any state
thereof, or any other country or political subdivision thereof, or
otherwise, including, all rights in and to the material constituting the
subject matter thereof, including, without limitation, any referred to
in SCHEDULE B hereto, and (b) any rights in any material which is
copyrightable or which is protected by common law, United States
copyright laws or similar laws or any law of any State, including,
without limitation, any thereof referred to in SCHEDULE B hereto.
"COPYRIGHT LICENSE" shall mean any agreement, written or oral,
providing for a grant by the Company of any right in any Copyright,
including, without limitation, any thereof referred to in SCHEDULE B
hereto.
"INTELLECTUAL PROPERTY" shall means, collectively, the Software
Intellectual Property, Copyrights, Copyright Licenses, Patents, Patent
Licenses, Trademarks, Trademark Licenses and Trade Secrets.
"OBLIGATIONS" means all of the Company's obligations under this
Agreement and the Debentures, in each case, whether now or hereafter
existing, voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with
others, and whether or not from time to time decreased or extinguished
and later decreased, created or incurred, and all or any portion of such
obligations or liabilities that are paid, to the extent all or any part
of such payment is avoided or recovered directly or indirectly from the
Secured Party as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or
modified from time to time.
"PATENTS" shall mean (a) all letters patent of the United States
or any other country or any political subdivision thereof, and all
reissues and extensions thereof, including, without limitation, any
thereof referred to in SCHEDULE B hereto, and (b) all applications for
letters patent of the United States and all divisions, continuations and
continuations-in-part thereof or any other country or any political
subdivision, including, without limitation, any thereof referred to in
SCHEDULE B hereto.
"PATENT LICENSE" shall mean all agreements, whether written or
oral, providing for the grant by the Company of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in SCHEDULE B hereto.
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"SECURITY AGREEMENT" shall mean the a Security Agreement, dated
the date hereof between Company and the Secured Party.
"TRADEMARKS" shall mean (a) all trademarks, trade names,
corporate names, company \names, business names, fictitious business
names, trade styles, service marks, logos and other source or business
identifiers, and the goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings thereof,
and all applications in connection therewith, whether in the United
States Patent and Trademark Office or in any similar office or agency of
the United States, any state thereof or any other country or any
political subdivision thereof, or otherwise, including, without
limitation, any thereof referred to in SCHEDULE B hereto, and (b) all
reissues, extensions or renewals thereof.
"TRADEMARK LICENSE" shall mean any agreement, written or oral,
providing for the grant by the Company of any right to use any
Trademark, including, without limitation, any thereof referred to in
SCHEDULE B hereto.
"TRADE SECRETS" shall mean common law and statutory trade
secrets and all other confidential or proprietary or useful information
and all know-how obtained by or used in or contemplated at any time for
use in the business of the Company (all of the foregoing being
collectively called a "TRADE SECRET"), whether or not such Trade Secret
has been reduced to a writing or other tangible form, including all
documents and things embodying, incorporating or referring in any way to
such Trade Secret, all Trade Secret licenses, including each Trade
Secret license referred to in SCHEDULE B hereto, and including the right
to xxx for and to enjoin and to collect damages for the actual or
threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
2. GRANT OF SECURITY INTEREST. In accordance with Section
3(m) of the Security Agreement, to secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of the
Obligations, the Company hereby, unconditionally and irrevocably, pledges,
grants and hypothecates to the Secured Party, a continuing security interest in,
a continuing first lien upon, an unqualified right to possession and disposition
of and a right of set-off against, in each case to the fullest extent permitted
by law, all of the Company's right, title and interest of whatsoever kind and
nature in and to the Intellectual Property (the "SECURITY INTEREST").
3. REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants, and covenants and agrees with, the Secured Party as
follows:
(a) The Company has the requisite corporate power
and authority to enter into this Agreement and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by the Company
of this Agreement and the filings contemplated therein have been duly authorized
by all necessary action on the part of the Company and no further action is
required by the Company. This Agreement constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditor's rights
generally.
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(b) The Company represents and warrants that it has
no place of business or offices where its respective books of account and
records are kept (other than temporarily at the offices of its attorneys or
accountants) or places where the Intellectual Property is stored or located,
except as set forth on SCHEDULE A attached hereto;
(c) The Company is the sole owner of the
Intellectual Property (except for non-exclusive licenses granted by the Company
in the ordinary course of business), free and clear of any liens, security
interests, encumbrances, rights or claims, and is fully authorized to grant the
Security Interest in and to pledge the Intellectual Property. There is not on
file in any governmental or regulatory authority, agency or recording office an
effective financing statement, security agreement, license or transfer or any
notice of any of the foregoing (other than those that have been filed in favor
of the Secured Party pursuant to this Agreement) covering or affecting any of
the Intellectual Property. So long as this Agreement shall be in effect, the
Company shall not execute and shall not knowingly permit to be on file in any
such office or agency any such financing statement or other document or
instrument (except to the extent filed or recorded in favor of the Secured Party
pursuant to the terms of this Agreement), except for a financing statement
covering assets acquired by the Company after the date hereof, provided that the
value of the Intellectual Property covered by this Agreement along with the
Collateral (as defined in the Security Agreement) is equal to at least 150% of
the Obligations.
(d) The Company shall at all times maintain its
books of account and records relating to the Intellectual Property at its
principal place of business and its Intellectual Property at the locations set
forth on SCHEDULE A attached hereto and may not relocate such books of account
and records unless it delivers to the Secured Party at least 30 days prior to
such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that the
necessary documents have been filed and recorded and other steps have been taken
to perfect the Security Interest to create in favor of the Secured Party valid,
perfected and continuing first priority liens in the Intellectual Property to
the extent they can be perfected through such filings.
(e) This Agreement creates in favor of the Secured
Party a valid security interest in the Intellectual Property securing the
payment and performance of the Obligations and, upon making the filings required
hereunder, a perfected first priority security interest in such Intellectual
Property to the extent that it can be perfected through such filings.
(f) Upon request of the Secured Party, the Company
shall execute and deliver any and all agreements, instruments, documents, and
papers as the Secured Party may request to evidence the Secured Party's security
interest in the Intellectual Property and the goodwill and general intangibles
of the Company relating thereto or represented thereby, and the Company hereby
appoints the Secured Party its attorney-in-fact to execute and file all such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power being coupled with an interest is irrevocable
until the Obligations have been fully satisfied and are paid in full.
(g) The execution, delivery and performance of this
Agreement does not conflict with or cause a breach or default, or an event that
with or without the passage of time
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or notice, shall constitute a breach or default, under any agreement to which
the Company is a party or by which the Company is bound. No consent (including,
without limitation, from stock holders or creditors of the Company) is required
for the Company to enter into and perform its obligations hereunder.
(h) The Company shall at all times maintain the
liens and Security Interest provided for hereunder as valid and perfected first
priority liens and security interests in the Intellectual Property to the extent
they can be perfected by filing in favor of the Secured Party until this
Agreement and the Security Interest hereunder shall terminate pursuant to
Section 11. The Company hereby agrees to defend the same against any and all
persons. The Company shall safeguard and protect all Intellectual Property for
the account of the Secured Party. Without limiting the generality of the
foregoing, the Company shall pay all fees, taxes and other amounts necessary to
maintain the Intellectual Property and the Security Interest hereunder, and the
Company shall obtain and furnish to the Secured Party from time to time, upon
demand, such releases and/or subordinations of claims and liens which may be
required to maintain the priority of the Security Interest hereunder.
(i) The Company will not transfer, pledge,
hypothecate, encumber, license (except for non-exclusive licenses granted by the
Company in the ordinary course of business), sell or otherwise dispose of any of
the Intellectual Property without the prior written consent of the Secured
Party.
(j) The Company shall, within ten (10) days of
obtaining knowledge thereof, advise the Secured Party promptly, in sufficient
detail, of any substantial change in the Intellectual Property, and of the
occurrence of any event which would have a material adverse effect on the value
of the Intellectual Property or on the Secured Party's security interest
therein.
(k) The Company shall permit the Secured Party and
its representatives and agents to inspect the Intellectual Property at any time,
and to make copies of records pertaining to the Intellectual Property as may be
requested by the Secured Party from time to time.
(l) The Company will take all steps reasonably
necessary to diligently pursue and seek to preserve, enforce and collect any
rights, claims, causes of action and accounts receivable in respect of the
Intellectual Property.
(m) The Company shall promptly notify the Secured
Party in sufficient detail upon becoming aware of any attachment, garnishment,
execution or other legal process levied against any Intellectual Property and of
any other information received by the Company that may materially affect the
value of the Intellectual Property, the Security Interest or the rights and
remedies of the Secured Party hereunder.
(n) All information heretofore, herein or hereafter
supplied to the Secured Party by or on behalf of the Company with respect to the
Intellectual Property is accurate and complete in all material respects as of
the date furnished.
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(o) SCHEDULE A attached hereto contains a list of
all of the subsidiaries of Company.
(p) SCHEDULE B attached hereto includes all
Licenses, and all Patents and Patent Licenses, if any, owned by the Company in
its own name as of the date hereof. SCHEDULE B hereto includes all Trademarks
and Trademark Licenses, if any, owned by the Company in its own name as of the
date hereof. SCHEDULE B hereto includes all Copyrights and Copyright Licenses,
if any, owned by the Company in its own name as of the date hereof. SCHEDULE B
hereto includes all Trade Secrets and Trade Secret Licenses, if any, owned by
the Company as of the date hereof. To the best of the Company's knowledge, each
License, Patent, Trademark, Copyright and Trade Secret is valid, subsisting,
unexpired, enforceable and has not been abandoned. Except as set forth in
SCHEDULE B, none of such Licenses, Patents, Trademarks, Copyrights and Trade
Secrets is the subject of any licensing or franchise agreement. To the best of
the Company's knowledge, no holding, decision or judgment has been rendered by
any Governmental Body which would limit, cancel or question the validity of any
License, Patent, Trademark, Copyright and Trade Secrets . No action or
proceeding is pending (i) seeking to limit, cancel or question the validity of
any License, Patent, Trademark, Copyright or Trade Secret, or (ii) which, if
adversely determined, would have a material adverse effect on the value of any
License, Patent, Trademark, Copyright or Trade Secret. The Company has used and
will continue to use for the duration of this Agreement, proper statutory notice
in connection with its use of the Patents, Trademarks and Copyrights and
consistent standards of quality in products leased or sold under the Patents,
Trademarks and Copyrights.
(q) With respect to any Intellectual Property:
(i) such Intellectual Property is subsisting
and has not been adjudged invalid or unenforceable, in whole or
in part;
(ii) such Intellectual Property is valid and
enforceable;
(iii) the Company has made all necessary
filings and recordations to protect its interest in such
Intellectual Property, including, without limitation,
recordations of all of its interests in the Patents, Patent
Licenses, Trademarks and Trademark Licenses in the United States
Patent and Trademark Office and in corresponding offices
throughout the world and its claims to the Copyrights and
Copyright Licenses in the United States Copyright Office and in
corresponding offices throughout the world;
(iv) other than as set forth in SCHEDULE B,
the Company is the exclusive owner of the entire and
unencumbered right, title and interest in and to such
Intellectual Property and no claim has been made that the use of
such Intellectual Property infringes on the asserted rights of
any third party; and
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(v) the Company has performed and will
continue to perform all acts and has paid all required fees and
taxes to maintain each and every item of Intellectual Property
in full force and effect throughout the world, as applicable.
(r) Except with respect to any Trademark or
Copyright that the Company shall reasonably determine is of negligible economic
value to the Company, the Company shall
(i) maintain each Trademark and Copyright in
full force free from any claim of abandonment for non-use,
maintain as in the past the quality of products and services
offered under such Trademark or Copyright; employ such Trademark
or Copyright with the appropriate notice of registration; not
adopt or use any xxxx which is confusingly similar or a
colorable imitation of such Trademark or Copyright unless the
Secured Party shall obtain a perfected security interest in such
xxxx pursuant to this Agreement; and not (and not permit any
licensee or sublicensee thereof to) do any act or knowingly omit
to do any act whereby any Trademark or Copyright may become
invalidated;
(ii) not, except with respect to any Patent
that it shall reasonably determine is of negligible economic
value to it, do any act, or omit to do any act, whereby any
Patent may become abandoned or dedicated; and
(iii) notify the Secured Party immediately if
it knows, or has reason to know, that any application or
registration relating to any Patent, Trademark or Copyright may
become abandoned or dedicated, or of any adverse determination
or development (including, without limitation, the institution
of, or any such determination or development in, any proceeding
in the United States Patent and Trademark Office, United States
Copyright Office or any court or tribunal in any country)
regarding its ownership of any Patent, Trademark or Copyright or
its right to register the same or to keep and maintain the same.
(s) Whenever the Company, either by itself or
through any agent, employee, licensee or designee, shall file an application for
the registration of any Patent, Trademark or Copyright with the United States
Patent and Trademark Office, United States Copyright Office or any similar
office or agency in any other country or any political subdivision thereof or
acquire rights to any new Patent, Trademark or Copyright whether or not
registered, report such filing to the Secured Party within five business days
after the last day of the fiscal quarter in which such filing occurs.
(t) The Company shall take all reasonable and
necessary steps, including, without limitation, in any proceeding before the
United States Patent and Trademark Office, United States Copyright Office or any
similar office or agency in any other country or any political subdivision
thereof, to maintain and pursue each application (and to obtain the relevant
registration) and to maintain each registration of the Patents, Trademarks and
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Copyrights, including, without limitation, filing of applications for renewal,
affidavits of use and affidavits of incontestability.
(u) In the event that any Patent, Trademark or
Copyright included in the Intellectual Property is infringed, misappropriated or
diluted by a third party, promptly notify the Secured Party after it learns
thereof and shall, unless it shall reasonably determine that such Patent,
Trademark or Copyright is of negligible economic value to it, which
determination it shall promptly report to the Secured Party, promptly xxx for
infringement, misappropriation or dilution, to seek injunctive relief where
appropriate and to recover any and all damages for such infringement,
misappropriation or dilution, or take such other actions as it shall reasonably
deem appropriate under the circumstances to protect such Patent, Trademark or
Copyright. If the Company lacks the financial resources to comply with this
Section 3(t), the Company shall so notify the Secured Party and shall cooperate
fully with any enforcement action undertaken by the Secured Party on behalf of
the Company.
4. DEFAULTS. The following events shall be "EVENTS OF
DEFAULT":
(a) The occurrence of an Event of Default (as
defined in the Debentures) under the Debentures;
(b) Any representation or warranty of the Company in
this Agreement or in the Security Agreement shall prove to have been incorrect
in any material respect when made;
(c) The failure by the Company to observe or perform
any of its obligations hereunder or in the Security Agreement for ten (10) days
after receipt by the Company of notice of such failure from the Secured Party;
and
(d) Any breach of, or default under, the Warrants.
5. DUTY TO HOLD IN TRUST. Upon the occurrence of any Event
of Default and at any time thereafter, the Company shall, upon receipt by it of
any revenue, income or other sums subject to the Security Interest, whether
payable pursuant to the Debentures or otherwise, or of any check, draft, note,
trade acceptance or other instrument evidencing an obligation to pay any such
sum, hold the same in trust for the Secured Party and shall forthwith endorse
and transfer any such sums or instruments, or both, to the Secured Party for
application to the satisfaction of the Obligations.
6. RIGHTS AND REMEDIES UPON DEFAULT. Upon occurrence of any
Event of Default and at any time thereafter, the Secured Party shall have the
right to exercise all of the remedies conferred hereunder and under the
Debentures, and the Secured Party shall have all the rights and remedies of a
secured party under the UCC and/or any other applicable law (including the
Uniform Commercial Code of any jurisdiction in which any Intellectual Property
is then located). Without limitation, the Secured Party shall have the following
rights and powers:
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(a) The Secured Party shall have the right to take
possession of the Intellectual Property and, for that purpose, enter, with the
aid and assistance of any person, any premises where the Intellectual Property,
or any part thereof, is or may be placed and remove the same, and the Company
shall assemble the Intellectual Property and make it available to the Secured
Party at places which the Secured Party shall reasonably select, whether at the
Company's premises or elsewhere, and make available to the Secured Party,
without rent, all of the Company's respective premises and facilities for the
purpose of the Secured Party taking possession of, removing or putting the
Intellectual Property in saleable or disposable form.
(b) The Secured Party shall have the right to
operate the business of the Company using the Intellectual Property and shall
have the right to assign, sell, lease or otherwise dispose of and deliver all or
any part of the Intellectual Property, at public or private sale or otherwise,
either with or without special conditions or stipulations, for cash or on credit
or for future delivery, in such parcel or parcels and at such time or times and
at such place or places, and upon such terms and conditions as the Secured Party
may deem commercially reasonable, all without (except as shall be required by
applicable statute and cannot be waived) advertisement or demand upon or notice
to the Company or right of redemption of the Company, which are hereby expressly
waived. Upon each such sale, lease, assignment or other transfer of Intellectual
Property, the Secured Party may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Intellectual Property being
sold, free from and discharged of all trusts, claims, right of redemption and
equities of the Company, which are hereby waived and released.
7. APPLICATIONS OF PROCEEDS. The proceeds of any such sale,
lease or other disposition of the Intellectual Property hereunder shall be
applied first, to the expenses of retaking, holding, storing, processing and
preparing for sale, selling, and the like (including, without limitation, any
taxes, fees and other costs incurred in connection therewith) of the
Intellectual Property, to the reasonable attorneys' fees and expenses incurred
by the Secured Party in enforcing its rights hereunder and in connection with
collecting, storing and disposing of the Intellectual Property, and then to
satisfaction of the Obligations, and to the payment of any other amounts
required by applicable law, after which the Secured Party shall pay to the
Company any surplus proceeds. If, upon the sale, license or other disposition of
the Intellectual Property, the proceeds thereof are insufficient to pay all
amounts to which the Secured Party is legally entitled, the Company will be
liable for the deficiency, together with interest thereon, at the rate of 15%
per annum (the "DEFAULT RATE"), and the reasonable fees of any attorneys
employed by the Secured Party to collect such deficiency. To the extent
permitted by applicable law, the Company waives all claims, damages and demands
against the Secured Party arising out of the repossession, removal, retention or
sale of the Intellectual Property, unless due to the gross negligence or willful
misconduct of the Secured Party.
8. COSTS AND EXPENSES. The Company agrees to pay all
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements,
continuation statements, partial releases and/or termination statements related
thereto or any expenses of any searches reasonably required by the Secured
Party. The Company shall also pay all other claims and charges which in the
reasonable opinion of the Secured Party might prejudice, imperil or otherwise
affect the Intellectual Property or the
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Security Interest therein. The Company will also, upon demand, pay to the
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
the Secured Party may incur in connection with (i) the enforcement of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Intellectual Property, or (iii) the
exercise or enforcement of any of the rights of the Secured Party under the
Debentures. Until so paid, any fees payable hereunder shall be added to the
principal amount of the Debentures and shall bear interest at the Default Rate.
9. RESPONSIBILITY FOR INTELLECTUAL PROPERTY. The Company
assumes all liabilities and responsibility in connection with all Intellectual
Property, and the obligations of the Company hereunder or under the Debentures
and the Warrants shall in no way be affected or diminished by reason of the
loss, destruction, damage or theft of any of the Intellectual Property or its
unavailability for any reason.
10. SECURITY INTEREST ABSOLUTE. All rights of the Secured
Party and all Obligations of the Company hereunder, shall be absolute and
unconditional, irrespective of: (a) any lack of validity or enforceability of
this Agreement, the Debentures, the Warrants or any agreement entered into in
connection with the foregoing, or any portion hereof or thereof; (b) any change
in the time, manner or place of payment or performance of, or in any other term
of, all or any of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Debentures, the Warrants or any other
agreement entered into in connection with the foregoing; (c) any exchange,
release or nonperfection of any of the Intellectual Property, or any release or
amendment or waiver of or consent to departure from any other Intellectual
Property for, or any guaranty, or any other security, for all or any of the
Obligations; (d) any action by the Secured Party to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in
connection with the Intellectual Property; or (e) any other circumstance which
might otherwise constitute any legal or equitable defense available to the
Company, or a discharge of all or any part of the Security Interest granted
hereby. Until the Obligations shall have been paid and performed in full, the
rights of the Secured Party shall continue even if the Obligations are barred
for any reason, including, without limitation, the running of the statute of
limitations or bankruptcy. The Company expressly waives presentment, protest,
notice of protest, demand, notice of nonpayment and demand for performance. In
the event that at any time any transfer of any Intellectual Property or any
payment received by the Secured Party hereunder shall be deemed by final order
of a court of competent jurisdiction to have been a voidable preference or
fraudulent conveyance under the bankruptcy or insolvency laws of the United
States, or shall be deemed to be otherwise due to any party other than the
Secured Party, then, in any such event, the Company's obligations hereunder
shall survive cancellation of this Agreement, and shall not be discharged or
satisfied by any prior payment thereof and/or cancellation of this Agreement,
but shall remain a valid and binding obligation enforceable in accordance with
the terms and provisions hereof. The Company waives all right to require the
Secured Party to proceed against any other person or to apply any Intellectual
Property which the Secured Party may hold at any time, or to marshal assets, or
to pursue any other remedy. The Company waives any defense arising by reason of
the application of the statute of limitations to any obligation secured hereby.
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11. TERM OF AGREEMENT. This Agreement and the Security
Interest shall terminate on the date on which all payments under the Debentures
have been made in full and all other Obligations have been paid or discharged.
Upon such termination, the Secured Party, at the request and at the expense of
the Company, will join in executing any termination statement with respect to
any financing statement executed and filed pursuant to this Agreement.
12. POWER OF ATTORNEY; FURTHER ASSURANCES.
(a) The Company authorizes the Secured Party, and
does hereby make, constitute and appoint it, and its respective officers,
agents, successors or assigns with full power of substitution, as the Company's
true and lawful attorney-in-fact, with power, in its own name or in the name of
the Company, to, after the occurrence and during the continuance of an Event of
Default, (i) endorse any notes, checks, drafts, money orders, or other
instruments of payment (including payments payable under or in respect of any
policy of insurance) in respect of the Intellectual Property that may come into
possession of the Secured Party; (ii) to sign and endorse any UCC financing
statement or any invoice, freight or express xxxx, xxxx of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications and
notices in connection with accounts, and other documents relating to the
Intellectual Property; (iii) to pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened
against the Intellectual Property; (iv) to demand, collect, receipt for,
compromise, settle and xxx for monies due in respect of the Intellectual
Property; and (v) generally, to do, at the option of the Secured Party, and at
the Company's expense, at any time, or from time to time, all acts and things
which the Secured Party deems necessary to protect, preserve and realize upon
the Intellectual Property and the Security Interest granted therein in order to
effect the intent of this Agreement, the Debentures and the Warrants, all as
fully and effectually as the Company might or could do; and the Company hereby
ratifies all that said attorney shall lawfully do or cause to be done by virtue
hereof. This power of attorney is coupled with an interest and shall be
irrevocable for the term of this Agreement and thereafter as long as any of the
Obligations shall be outstanding.
(b) On a continuing basis, the Company will make,
execute, acknowledge, deliver, file and record, as the case may be, in the
proper filing and recording places in any jurisdiction, including, without
limitation, the jurisdictions indicated on SCHEDULE C, attached hereto, all such
instruments, and take all such action as may reasonably be deemed necessary or
advisable, or as reasonably requested by the Secured Party, to perfect the
Security Interest granted hereunder and otherwise to carry out the intent and
purposes of this Agreement, or for assuring and confirming to the Secured Party
the grant or perfection of a security interest in all the Intellectual Property.
(c) The Company hereby irrevocably appoints the
Secured Party as the Company's attorney-in-fact, with full authority in the
place and stead of the Company and in the name of the Company, from time to time
in the Secured Party's discretion, to take any action and to execute any
instrument which the Secured Party may deem necessary or advisable to accomplish
the purposes of this Agreement, including the filing, in its sole discretion, of
one or more financing or continuation statements and amendments thereto,
relative to any of the Intellectual Property without the signature of the
Company where permitted by law.
11
13. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing, with copies to all the other
parties hereto, and shall be deemed to have been duly given when (i) if
delivered by hand, upon receipt, (ii) if sent by facsimile, upon receipt of
proof of sending thereof, (iii) if sent by nationally recognized overnight
delivery service (receipt requested), the next business day or (iv) if mailed by
first-class registered or certified mail, return receipt requested, postage
prepaid, four days after posting in the U.S. mails, in each case if delivered to
the following addresses:
If to the Company: Aquatic Cellulose International Corp.
0000 00xx Xxxxxx
Xxxxx 0
Xxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx VIT 6L1
Attention: President and Chief Executive Officer
Telephone: 000-000-0000
Facsimile: 000-000-0000
With copies to: Xxxxxxxxx & Associates
0000 Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Secured Party: AJW Partners, LLC
AJW Offshore, Ltd.
AJW Qualified Partners, LLC
New Millennium Capital Partners II, LLC
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxx
Facsimile: 000-000-0000
With copies to: Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esquire
Facsimile: 000-000-0000
14. OTHER SECURITY. To the extent that the Obligations are
now or hereafter secured by property other than the Intellectual Property or by
the guarantee, endorsement or property of any other person, firm, corporation or
other entity, then the Secured Party shall have the right, in its sole
discretion, to pursue, relinquish, subordinate, modify or take any other action
12
with respect thereto, without in any way modifying or affecting any of the
Secured Party's rights and remedies hereunder.
15. MISCELLANEOUS.
(a) No course of dealing between the Company and the
Secured Party, nor any failure to exercise, nor any delay in exercising, on the
part of the Secured Party, any right, power or privilege hereunder or under the
Debentures shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.
(b) All of the rights and remedies of the Secured
Party with respect to the Intellectual Property, whether established hereby or
by the Debentures or by any other agreements, instruments or documents or by law
shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement and the Security Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and is intended to supersede all prior negotiations,
understandings and agreements with respect thereto. Except as specifically set
forth in this Agreement, no provision of this Agreement may be modified or
amended except by a written agreement specifically referring to this Agreement
and signed by the parties hereto.
(d) In the event that any provision of this
Agreement is held to be invalid, prohibited or unenforceable in any jurisdiction
for any reason, unless such provision is narrowed by judicial construction, this
Agreement shall, as to such jurisdiction, be construed as if such invalid,
prohibited or unenforceable provision had been more narrowly drawn so as not to
be invalid, prohibited or unenforceable. If, notwithstanding the foregoing, any
provision of this Agreement is held to be invalid, prohibited or unenforceable
in any jurisdiction, such provision, as to such jurisdiction, shall be
ineffective to the extent of such invalidity, prohibition or unenforceability
without invalidating the remaining portion of such provision or the other
provisions of this Agreement and without affecting the validity or
enforceability of such provision or the other provisions of this Agreement in
any other jurisdiction.
(e) No waiver of any breach or default or any right
under this Agreement shall be considered valid unless in writing and signed by
the party giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default or right, whether of the same or similar nature or
otherwise.
(f) This Agreement shall be binding upon and inure
to the benefit of each party hereto and its successors and assigns.
(g) Each party shall take such further action and
execute and deliver such further documents as may be necessary or appropriate in
order to carry out the provisions and purposes of this Agreement.
13
(h) This Agreement shall be construed in accordance
with the laws of the State of New York, except to the extent the validity,
perfection or enforcement of a security interest hereunder in respect of any
particular Intellectual Property which are governed by a jurisdiction other than
the State of New York in which case such law shall govern. Each of the parties
hereto irrevocably submit to the exclusive jurisdiction of any New York State or
United States Federal court sitting in Manhattan county over any action or
proceeding arising out of or relating to this Agreement, and the parties hereto
hereby irrevocably agree that all claims in respect of such action or proceeding
may be heard and determined in such New York State or Federal court. The parties
hereto agree that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. The parties hereto further waive any
objection to venue in the State of New York and any objection to an action or
proceeding in the State of New York on the basis of forum non conveniens.
(i) EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRAIL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL
ENCOMPASSING OF ANY DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO
THE SUBJECT MATER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT FOR EACH PARTY TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY
HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH
PARTY WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS.
EACH PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH
ITS LEGAL COUNSEL, AND THAT SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVES ITS
RIGHTS TO A JURY TRIAL FOLLOWING SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE,
MEANING THAT, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT. IN THE EVENT OF A LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
(j) This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
AQUATIC CELLULOSE INTERNATIONAL CORP.
By:/s/ Sheridan Westgarde
-------------------------------------
Sheridan B. Westgarde
President and Chief Executive Officer
AJW PARTNERS, LLC
By: SMS Group, LLC
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Xxxxx X. Xxxxxxxx
Manager
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Xxxxx X. Xxxxxxxx
Manager
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Xxxxx X. Xxxxxxxx
Manager
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Xxxxx X. Xxxxxxxx
Manager
15
SCHEDULE A
----------
Principal Place Of Business of the Company:
-------------------------------------------
Locations Where Intellectual Property is Located or Stored:
-----------------------------------------------------------
List of Subsidiaries of the Company:
------------------------------------
A-1
SCHEDULE B
----------
A. Licenses, Patents and Patent Licenses
-------------------------------------
Registration or
Patent Application or Registration No. Country Filing Date
------ ------------------------------- ------- -----------
B. Trademarks and Trademark Licenses
---------------------------------
Registration or
Patent Application or Registration No. Country Filing Date
------ ------------------------------- ------- -----------
C. Copyrights and Copyright Licenses
---------------------------------
Registration or
Patent Application or Registration No. Country Filing Date
------ ------------------------------- ------- -----------
D. Trade Secrets and Trade Secret Licenses
---------------------------------------
Registration or
Patent Application Or Registration No. Country Filing Date
------ ------------------------------- ------- -----------
B-1
SCHEDULE C
Jurisdictions:
--------------
C-1
