THIS AMENDMENT IS DATED JANUARY 9, 2006 TO THE ORIGINAL AGREEMENT DATED AUGUST 12, 2005, BELOW. SECURITY AGREEMENT
EXHIBIT
10.2
THIS
AMENDMENT IS DATED JANUARY 9, 2006 TO THE ORIGINAL AGREEMENT DATED AUGUST 12,
2005, BELOW.
THIS
SECURITY AGREEMENT (the "Agreement"), is entered into and made effective as
of
August 12, 2005, by and between Hyperdynamics Corp., a Delaware corporation
with
its principal place of business located at 0000 Xxxxxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxx 00000 and it's subsidiaries (the "Company"), and the Dutchess Private
Equities Fund, II, LP (the "Secured Party").
WHEREAS,
the Company shall issue and sell to the Secured Party, as provided in the
Subscription Agreement of even date herewith between the Company and the Secured
Party (the "Subscription Agreement"), and the Secured Party shall purchase
up to
One Million Five Hundred Thousand Dollars ($1,500,000) of secured convertible
debentures (the "Convertible Debentures"), which shall be convertible into
shares of the Company's common stock, par value $0.001 (the "Common Stock")
(as
converted, the "Conversion Shares") in the respective amounts set forth in
the
Subscription Agreement ("Holder");
WHEREAS,
to induce the Secured Party to enter into the transaction contemplated by the
Subscription Agreement, the Debenture Agreement, Warrant Agreement, the
Debenture Registration Rights Agreement of even date herewith between the
Company and the Secured Party (the "Debenture Registration Rights Agreement"),
and the Irrevocable Transfer Agent Instructions among the Company, the Secured
Party, Transfer Agent, and Dutchess Capital Management, LLC (the "Irrevocable
Transfer Agent 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 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. 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 this
Agreement, the Transaction Documents, 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)
An
Event of Default hereunder shall be deemed to occur upon an Event of Default
under Article 6 of the Convertible Debentures, or any material violation of
the
Transaction Documents.
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 for the property and assets made by Trendsetter Production
Company, a wholly-owned subsidiary of the Company..
ARTICLE
5. DEFAULT;
REMEDIES; SUBSTITUTE COLLATERAL
Section
5.1. Default and Remedies
(a)
If an
Event of Default 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 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
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, if so 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 within a reasonable time such
financial data as the Secured Party may reasonably request, including, without
limitation, the following:
(a)
The
balance sheet of the Company as of the close of each 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 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)
A
balance sheet of the Company as of the close of each 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)
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 Loan Instruments.
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 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.
Section
6.5. Maintenance and Insurance.
(a)
The
Company shall maintain or cause to be maintained, at its own expense, all of
its
assets and properties in good working order and condition, making all necessary
repairs thereto and renewals and replacements thereof.
(b)
The
Company shall maintain or cause to be maintained, at its own expense, insurance
in form, substance and amounts (including deductibles), which the Company deems
reasonably necessary to the Company's business, (i) adequate to insure all
assets and properties of the Company, which assets and properties are 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 Company; (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 adequate, financially sound and reputable insurers.
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 material 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 Loan Instrument or any other agreement of 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 $10,000,
instituted by any persons against the Company, or materially 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. 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
7.2. Certificate of Incorporation, By-Laws, Mergers, Consolidations,
Acquisitions and Sales.
Without
the prior express written consent of the Secured Party, which shall not be
unreasonably withheld, the Company shall not:
(a)
Amend
its Certificate of Incorporation or By-Laws;
(b)
issue
any new Common Stock including those on Form S8, or issue any Common Stock
from
the currently filed X0 ("X0 Shares"), unless the:
i)
recipient(s) of the S8 Shares is issued an amount equal to less than two hundred
and fifty thousand (250,0000) shares per ninety (90) day period
ii)
recipient(s) of the S8 Shares execute(s) a leak-out agreement stating that
the
collective recipient(s) of the S8 Shares shall restrict selling to a maximum
of
ten percent (10%) of the total volume each day; or,
iii)
Company's stock price is above one dollar and fifty cents ($1.50) per share;
iv)
Company issues restricted 144 common stock issued for purchase of operating
assets, oil companies, or oil leases for HYD Resources Corporation or if such
issuance of stock, stock option, bond, or note or other corporate securities,
or
obligations is required by existing agreements the company already has
outstanding prior to closing.
(c)
sell,
transfer, convey, grant a security additional interest in or lease all or any
substantial part of its assets, nor
(d)
create any subsidiaries nor convey any of its assets to any subsidiary.
Section
7.3. Management, Ownership.
The
Company acknowledges that 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
7.4. 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
7.5. 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
7.6. Intentionally Omitted.
Section
7.7. 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
7.8. Places of Business.
Without
prior written consent of the Secured Party, 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.
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:
Xxxxxxx
Xxxxxxxx
Dutchess
Private Equities Fund, II, LP
000
Xxxxxx Xx, Xxxxx Xxxxx
Xxxxxx,
XX 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
And
if to
the Company:
Xxxx
Xxxxx
0000
Xxxxxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
With
a
copy to:
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 or (iii) the failure by
the
Company 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 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 Commonwealth of Massachusetts without regard to the principles of conflict
of laws. The parties further agree that any action between them shall be heard
in Suffolk County, Massachusetts.
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.
DISPUTES
SUBJECT TO ARBITRATION GOVERNED BY MASSACHUSETTS LAW
All
disputes arising under this agreement shall be governed by and interpreted
in
accordance with the laws of the Commonwealth of Massachusetts, without regard
to
principles of conflict of laws. The parties to this agreement will submit all
disputes arising under this agreement to arbitration in Boston, Massachusetts
before a single arbitrator of the American Arbitration Association (“AAA”). The
arbitrator shall be selected by application of the rules of the AAA, or by
mutual agreement of the parties, except that such arbitrator shall be an
attorney admitted to practice law in the Commonwealth of Massachusetts. No
party
to this agreement will challenge the jurisdiction or venue provisions as
provided in this section.
Section
8.9. 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.
*
*
*
IN
WITNESS WHEREOF, the parties hereto have executed this Security Agreement as
of
the date first above written.
COMPANY:
Hypderdynamics,
Inc.
________________________
Xxxx
Xxxxx, CEO
SECURED
PARTY:
Dutchess
Private Equities Fund, II, LP
_________________________
Xxxxxxx
X. Xxxxxxxx, Managing Member
Dutchess
Capital Management, LLC;
General
Partner to:
Dutchess
Private Equities Fund, II, LP
EXHIBIT
A DEFINITION
OF PLEDGED PROPERTY
(INCLUDED
IN SECURITY AGREEMENT DATED AUGUST 12, 2005 BETWEEN THE COMPANY AND THE
INVESTOR)
