SECURITY INTEREST AGREEMENT
Exhibit
10.3
SECURITY
INTEREST AGREEMENT
("Security Interest Agreement"), dated as of November 30, 2007, by and between
HARBORVIEW MASTER FUND LP (the “Secured Party”), with headquarters c/o Navigator
Management Ltd., Harbour House, 2d Floor, Road Town, Tortola, BVI and MILLENNIUM
BIOTECHNOLOGIES, INC., a Delaware corporation with headquarters located at
▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the “Company” or the
“Debtor”).
RECITALS
A. The
Company is a majority-owned subsidiary of Millennium Biotechnologies Group,
Inc.
(the “Parent”).
B. Reference
is made to (i) that certain Loan Agreement of the even date herewith (the “Loan
Agreement”) to which the Parent and the Secured Party are parties, and (ii) the
Transaction Agreements (as defined in the Loan Agreement), including, without
limitation, the Note. Capitalized terms not otherwise defined herein shall
have
the meanings ascribed to them in the relevant Transaction
Agreements.
C. Pursuant
to the Transaction Agreements, the Parent has certain obligations to the Secured
Party and pursuant to the terms of any other obligations the Parent may now
have
and/or in the future may have other obligations to the Secured Party (all such
obligations, the “Parent Obligations”).
D. The
Company has guaranteed the Parent Obligations pursuant to a Personal Guaranty
of
Guarantor (the “Guaranty”) given the Secured Party (all of the Company’s
obligations under the Guaranty, the “Guaranty Obligations” and, together with
the Parent Obligations, the “Obligations”).
E. The
Company has determined that it shall benefit from the execution of the
Transaction Agreements and the transactions contemplated thereby. In furtherance
thereof, and not in limitation thereof, the Board of Directors of the Company
has deemed that the execution and delivery of the Guaranty and of this Security
Interest Agreement to which it is a party, and the Company’s performance of its
obligations under each of them, to be necessary and convenient to the conduct,
promotion or attainment of the business of the Company by reason of the benefits
to the Parent, which owns all of the outstanding stock of the Company, from
the
Loan Agreement or otherwise.
F. In
order
to induce the Secured Party to execute and deliver the Transaction Agreements
and to make the payments to the Parent contemplated thereby, and as contemplated
by the Loan Agreement and the Note, the Debtor has agreed to grant to the
Secured Party a security interest in the Collateral (as defined below) to secure
the due and punctual fulfillment of the Obligations. The Secured Party is
willing to enter into the Loan Agreement and the other Transaction Agreements
only upon receiving the Debtor’s execution of this Security Interest
Agreement.
NOW,
THEREFORE, in consideration of the premises, the mutual covenants and conditions
contained herein, and for other good and valuable consideration, the receipt
and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as
follows:
1. Grant
of Security Interest.
(a) In
order
to secure the due and punctual fulfillment of the Obligations, the Debtor hereby
grants, conveys, transfers and assigns to the Secured Party a continuing
security interest in the Collateral.
(b) For
purposes of this Agreement, the following terms shall have the meanings
indicated:
“COLLATERAL”
is all right, title and interest of Debtor in and to all of the following,
whether now owned or hereafter arising or acquired and wherever located: All
assets of the Debtor, including, but not limited to: all personal and fixture
property of every kind and nature, including without limitation all goods
(including inventory, equipment and any accessions thereto), instruments
(including promissory notes), documents, accounts (including accounts
receivable), chattel paper (whether tangible or electronic), deposit accounts,
letter-of-credit rights (whether or not the letter of credit is evidenced by
a
writing), commercial tort claims, Securities and all other investment property,
supporting obligations, any other contract rights or rights to the payment
of
money, insurance claims and proceeds, and all general intangibles (including
all
payment intangibles); all Equipment; all Intellectual Property; and any and
all
claims, rights and interests in any of the above, and all guaranties and
security for any of the above, and all substitutions and replacements for,
additions, accessions, attachments, accessories, and improvements to, and
proceeds (including proceeds of any insurance policies, proceeds of proceeds
and
claims against third parties) of, any and all of the above, and all Debtor’s
books relating to any and all of the above and includes, without limiting the
generality of the above, the Securities and Equipment (and related Intellectual
Property), if any, listed in Exhibit B and the Intellectual Property listed
in
the relevant Exhibits.
“CODE”
is
the Uniform Commercial Code, in effect in the State of Delaware as in effect
from time to time.
“COPYRIGHTS”
are all copyrights, copyright rights, applications or registrations and like
protections in each work or authorship or derivative work, whether published
or
not (whether or not it is a trade secret) now or later existing, created,
acquired or held.
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“EQUIPMENT”
has the meaning set forth in the Code and includes all present and future
machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools,
parts and attachments in which Debtor has any interest.
“INTELLECTUAL
PROPERTY” is all present and future (a) Copyrights, (b) trade secret rights,
including all rights to unpatented inventions and know-how, and confidential
information; (c) mask work or similar rights available for the protection of
semiconductor chips; (d) Patents; (e) Trademarks; (f) computer software and
computer software products; (g) designs and design rights; (h) technology;
(i)
all claims for damages by way of past, present and future infringement of any
of
the rights included above; (j) all licenses or other rights to use any property
or rights of a type described above; a schedule of Intellectual Property is
provided in Exhibit C and a schedule of Intellectual Property applications
is
provided in Exhibit D, but such listing shall not limit the Secured Party’s
interest in any other Intellectual Property or Intellectual Property
applications.
“PATENTS”
are patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
“SECURITIES”
has the meaning ascribed to it in the Securities Act of 1933, as amended, and
includes, but is not necessarily limited to, common stock, preferred stock,
warrants, rights and other options, promissory notes or other instruments
reflecting obligations of other entities; in furtherance of the foregoing,
but
not in limitation thereof, the term “Securities” specifically includes the
securities listed in Exhibit B.
“TRADEMARKS”
are trademarks, servicemarks, trade styles, and trade names, whether or not
any
of the foregoing are registered, and all applications to register and
registrations of the same and like protections, and the entire goodwill of
the
business of Debtor connected with and symbolized by any such
trademarks.
(c) The
security interests granted pursuant to this Section (the "Security Interests")
are granted as security only and shall not subject the Secured Party to, or
transfer or in any way affect or modify, any obligation or liability of the
Debtor under any of the Collateral or any transaction which gave rise
thereto.
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Section
2. Filing;
Further Assurances.
The
Debtor will, at its expense, cause to be searched the public records with
respect to the Collateral and will execute, deliver, file and record (in such
manner and form as each of the Secured Party may require), or permit the Secured
Party to file and record, as its attorney in fact, any financing statement,
any
carbon, photographic or other reproduction of a financing statement or this
Security Agreement (which shall be sufficient as a financing statement
hereunder), any specific assignments or other paper that may be reasonably
necessary or desirable, or that the Secured Party may request, in order to
create, preserve, perfect or validate any Security Interest or to enable the
Secured Party to enforce its rights hereunder with respect to any of the
Collateral. The Debtor hereby appoints the Secured Party as Debtor's
attorney-in-fact to execute in the name and behalf of Debtor such additional
financing statements as such Secured Party may request.
Section
3. Representations
and Warranties of Debtor.
The
Debtor hereby represents and warrants to the Secured Party (a) that, except
as
set forth in Exhibit A attached hereto, the Debtor is, or to the extent that
certain of the Collateral is to be acquired after the date hereof, will be,
the
owner of the Collateral free from any adverse lien, security interest or
encumbrance; (b) that, except for such financing statements as may be described
on Exhibit A attached hereto and made a part hereof, no financing statement
covering the Collateral is on file in any public office, other than the
financing statements filed pursuant to this Security Agreement; (c) that all
additional information, representations and warranties contained in Exhibit
B
attached hereto and made a part hereof are true, accurate and complete on the
date hereof, and (d) that the statements made in the Recitals of this Security
Interest Agreement, which are deemed incorporated herein by reference, are
true,
accurate and complete.
Section
4. Covenants
of Debtor.
The
Debtor hereby covenants and agrees with the Secured Party that (a) the Debtor
will, at the Debtor's sole cost and expense, defend the Collateral against
all
claims and demands of all persons at any time claiming any interest therein
junior to the Secured Party's interest; (b) the Debtor will provide the Secured
Party with prompt written notice of (i) any change in the chief executive
officer of the Debtor or the office where the Debtor maintains its books and
records pertaining to the Collateral; (ii) the movement or location of all
or a
material part of the Collateral to or at any address other than the address
of
Debtor set forth at the head of this Agreement or as set forth in said Exhibit
B; and (iii) any facts which constitute a Debtor Event of Default (as such
term
is defined below), or which, with the giving of notice and/or the passage of
time, could or would constitute a Debtor Event of Default, pursuant to the
Section titled “Debtor Events of Default” below; (c) the Debtor will promptly
pay any and all taxes, assessments and governmental charges upon the Collateral
prior to the date penalties are attached thereto, except to the extent that
such
taxes, assessments and charges shall be contested in good faith by the Debtor;
(d) the Debtor will immediately notify the Secured Party of any event causing
a
substantial loss or diminution in the value of all or any material part of
the
Collateral and the amount or an estimate of the amount of such loss or
diminution; (e) the Debtor will have and maintain adequate insurance at all
times with respect to the Collateral, for such other risks as are customary
in
the Debtor’s industry for the respective items included in the Collateral, such
insurance to be payable to the Secured Party and the Debtor as their respective
interests may appear, and shall provide for a minimum of ten (10) days’ prior
written notice of cancellation to the Secured Party, and Debtor shall furnish
the Secured Party with certificates or other evidence satisfactory to the
Secured Party of compliance with the foregoing insurance provisions; (f) the
Debtor will not sell or offer to sell or otherwise assign, transfer or dispose
of the Collateral or any interest therein, without the prior written consent
of
the Secured Party, except in the ordinary course of business; (g) the Debtor
will keep the Collateral free from any adverse lien, security interest or
encumbrance (except for encumbrances specified in Exhibit A attached hereto)
and
in good order and repair, reasonable wear and tear excepted, and will not waste
or destroy the Collateral or any part thereof; and (h) the Debtor will not
use
the Collateral in material violation of any statute or ordinance the violation
of which could materially and adversely affect the Debtor's
business.
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Section
5. Records
Relating To Collateral.
The
Debtor will keep its records concerning the Collateral at its offices designated
in the caption of this Security Interest Agreement or at such other place or
places of business of which the Secured Party shall have been notified in
writing no less than ten (10) days prior thereto. The Debtor will hold and
preserve such records and chattel paper and will permit representatives of
the
Secured Party at any time during normal business hours upon reasonable notice
to
examine and inspect the Collateral and to make abstracts from such records
and
chattel paper, and will furnish to the Secured Party such information and
reports regarding the Collateral as the Secured Party may from time to time
reasonably request.
Section
6. General
Authority.
From
and during the term of any Debtor Event of Default, the Debtor hereby appoints
the Secured Party the Debtor's lawful attorney, with full power of substitution,
in the name of the Debtor, for the sole use and benefit of the Secured Party,
but at the Debtor's expense, to exercise, all or any of the following powers
with respect to all or any of the Collateral:
(a)
to
demand, ▇▇▇ for, collect, receive and give acquittance for any and all monies
due or to become due;
(b) to
receive, take, endorse, assign and deliver all checks, notes, drafts, documents
and other negotiable and non- negotiable instruments and chattel paper taken
or
received by the Secured Party;
(c) to
settle, compromise, prosecute or defend any action or proceeding with respect
thereto;
(d) to
sell,
transfer, assign or otherwise deal in or with the same or the proceeds thereof
or the related goods securing the Collateral, as fully and effectually as if
the
Secured Party were the sole and absolute owner thereof;
(e) to
extend
the time of payment of any or all thereof and to make any allowance and other
adjustments with reference thereto; and
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(f) to
discharge any taxes, liens, security interests or other encumbrances at any
time
placed thereon;
provided
that the Secured Party shall give the Debtor not less than ten (10) business
days’ prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral.
The
exercise by the Secured Party of or failure to so exercise any authority granted
herein shall in no manner affect Debtor's liability to the Secured Party, and
provided, further, that the Secured Party shall be under no obligation or duty
to exercise any of the powers hereby conferred upon it and it shall be without
liability for any act or failure to act in connection with the collection of,
or
the preservation of, any rights under any of the Collateral and Secured Party
shall not be required to proceed against any other person or entity who or
which
has guaranteed the performance of the Obligations or provided any security
therefor before proceeding against Debtor or the Collateral.
Section
7. Debtor
Events of Default.
(a) The
Debtor shall be in default under this Security Agreement upon the occurrence
of
any of the following (each, a "Debtor Event of Default"):
(i)
an
Event of Default (as defined in the Note or other agreement or instrument
reflecting an Obligation);
(ii)
any
representation or warranty made by the Debtor in the Guaranty or in this
Security Interest Agreement shall be false or misleading in any material
respect; or
(iii)
Debtor shall breach any covenant of Debtor in the Guaranty, in this Security
Interest Agreement or in any other document or instrument executed by Debtor
in
favor of or for the benefit of the Secured Parties as contemplated by any of
the
Transaction Agreements.
(b) The
Debtor hereby irrevocably agrees that, upon the occurrence of a Debtor Event
of
Default, the Debtor shall be deemed to have consented to an immediate conveyance
and transfer to the Secured Party of the copyrights and all other rights the
Debtor may have in the software included in the Collateral, including, but
not
necessarily limited to, the software identified in Exhibit B attached hereto.
In
furtherance of the foregoing, and not in limitation thereof, the Debtor will,
upon the occurrence of a Debtor Event of Default, deliver to the Secured Party
copies of the source code of the relevant software, with accompanying written
assignment of the software to the Secured Party. Without limiting the foregoing,
such source code and assignment shall be in form sufficient to enable the
Secured Party to register the software in Secured Party’s name with the
Copyright Register. The Debtor hereby agrees to take all steps necessary or
appropriate, as requested by the Secured Party, to effectuate and reflect such
conveyance and transfer or assignment to Secured Party. In all events, such
conveyance, transfer or assignment shall be deemed to vest title in such
software in the Secured Party.
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(c)
In
furtherance of the foregoing and not in limitation thereof, the Debtor
acknowledges and agrees that the Secured Party may, upon the occurrence of
a
Debtor Event of Default, seek the immediate entry of a preliminary injunction
prohibiting the Debtor’s use of such software in any shape, way or manner,
including, but not necessarily limited to, through the sale of products that
use
any of such software, and the Debtor hereby irrevocably agrees that it will
not
contest an application seeking entry of a preliminary injunction and that it
will accept the entry of such injunction.
Section
8. Remedies
Upon Debtor Event of Default.
If any
Debtor Event of Default shall have occurred, then in addition to the provisions
of Section 7 hereof, the Secured Party may exercise all the rights and remedies
of a secured party under the Code. The Secured Party may require the Debtor
to
assemble all or any part of the Collateral and make it available to the Secured
Party at a place to be designated by the Secured Party which is reasonably
convenient. The Secured Party shall give the Debtor ten (10) business days’
prior written notice of the Secured Party's intention to make any public or
private sale or sale at a broker's board or on a securities exchange of the
Collateral. At any such sale the Collateral may be sold in one lot as an
entirety or in separate parcels, as the Secured Party, in its sole discretion,
may determine. The Secured Party shall not be obligated to make any such sale
pursuant to any such notice. The Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
the
sale, and such sale may be made at any time or place to which the same may
be
adjourned. The Secured Party, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
Section
9. Application
of Collateral and Proceeds.
The
proceeds of any sale of, or other realization upon, all or any part of the
Collateral shall be applied in the following order of priorities: (a) first,
to
pay the reasonable expenses of such sale or other realization, including,
without limitation, reasonable attorneys' fees, and all expenses, liabilities
and advances reasonably incurred or made by the Secured Party in connection
therewith, and any other unreimbursed expenses for which the Secured Party
is to
be reimbursed pursuant to the Section titled “Expenses; Secured Party's Lien”
below; (b) second, to the payment of the Obligations in such order of priority
as the Secured Party, in its sole discretion, shall determine; and (c) finally,
to pay to the Debtor, or its successors or assigns, or as a court of competent
jurisdiction may direct, any surplus then remaining from such
proceeds.
Section
10. Expenses;
Secured Party's Lien.
If any
Debtor Event of Default shall have occurred, the Debtor will forthwith upon
demand pay to the Secured Party: (a) the amount which the Secured Party may
have
been required to pay to free any of the Collateral from any lien thereon; and
(b) the amount of any and all reasonable out-of-pocket expenses, including,
without limitation, the reasonable fees and disbursements of its counsel, and
of
any agents not regularly in its employ, which the Secured Party may incur in
connection with the collection, sale or other disposition of any of the
Collateral.
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Section
11. Termination
of Security Interests; Release of Collateral.
Upon
the payment or other satisfaction in full of the Obligations owed by Debtor
to
the Secured Party, the Security Interests shall terminate and all rights to
the
Collateral shall revert to the Debtor. Upon any such termination of the Security
Interests or release of Collateral, the Secured Party will, at the Debtor's
expense, to the extent permitted by law, execute and deliver to the Debtor
such
documents as the Debtor shall reasonably request to evidence the termination
of
the Security Interests or the release of such Collateral, as the case may be.
Section
12. Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (a) personally served, (b) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (c)
delivered by reputable air courier service with charges prepaid, or (d)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice given in accordance herewith. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address
or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be for (i) the Debtor as
provided in the Loan Agreement for notices to the Parent, and (ii) for the
Secured Party as provided in the Loan Agreement for notices to the Buyer. Any
party hereto may from time to time change its address or facsimile number for
notices under this Section in the manner contemplated by the Loan
Agreement.
Section
13. [Reserved].
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Section
14. Miscellaneous.
(a) No
failure on the part of the Secured Party to exercise, and no delay in
exercising, and no course of dealing with respect to, any right, power or remedy
under this Security Interest Agreement shall operate as a waiver thereof; nor
shall any single or partial exercise by the Secured Party of any right, power
or
remedy under this Security Interest Agreement preclude the exercise, in whole
or
in part, of any other right, power or remedy. The remedies in this Security
Interest Agreement are cumulative and are not exclusive of any other remedies
provided by law. Neither this Security Interest Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally but only by
a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
(b) The
execution and delivery by Debtor of this Security Interest Agreement and all
documents delivered in connection herewith have been duly and validly authorized
by all necessary corporate action of Debtor and this Agreement and all documents
delivered in connection herewith have been duly and validly executed and
delivered by Debtor. The execution and delivery by Debtor of this Security
Interest Agreement and all documents delivered in connection herewith will
not
result in a breach or default of or under the Certificate of Incorporation,
By-laws or any agreement, contract or indenture of Debtor. This Security
Interest Agreement and all documents delivered in connection therewith are
legal, valid and binding obligations of Debtor enforceable against Debtor in
accordance with their terms.
(c) In
the
event that any action is taken by Debtor or Secured Party in connection with
the
this Security Interest Agreement, or any related document or matter, the losing
party in such legal action, in addition to such other damages as he or it may
be
required to pay, shall pay reasonable attorneys’ fees to the prevailing
party.
Section
15. Separability.
If any
provision hereof shall prove invalid or unenforceable in any jurisdiction whose
laws shall be deemed applicable, the other provisions hereof shall remain in
full force and effect in such jurisdiction and shall be liberally construed
in
favor of the Secured Party.
Section
16. Governing
Law.
(a) This
Security Interest Agreement shall be governed by and construed in accordance
with the laws of the State of New York for contracts to be wholly performed
in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the exclusive jurisdiction
of
the federal courts whose districts encompass any part of the County of New
York
or (except with respect to issues relating to the copyright in and to the
software, as contemplated by Section 7 hereof, which shall exclusively be in
the
aforesaid federal courts) or of the state courts of the State of New York
sitting in the County of New York in connection with any dispute arising under
this Security Interest Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum
non coveniens,
to the
bringing of any such proceeding in such jurisdictions or to any claim that
such
venue of the suit, action or proceeding is improper. To the extent determined
by
such court, the Debtor shall reimburse the Secured Party for any reasonable
legal fees and disbursements incurred by the Secured Party in enforcement of
or
protection of any of its rights under this Security Interest Agreement. Nothing
in this Section shall affect or limit any right to serve process in any other
manner permitted by law.
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(b)
The
Debtor and the Secured Party acknowledge and agree that irreparable damage
would
occur in the event that any of the provisions of this Security Interest
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions
of
this Security Interest Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which any
of
them may be entitled by law or equity.
Section
17. Jury
Trial Waiver.
The
Debtor and the Secured Party hereby waive a trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against
the
other in respect of any matter arising out of or in connection with the Note
or
this Security Interest Agreement.
Section
18. Assignment.
Only in
connection with the transfer of all of the rights under the Transaction
Agreements in accordance with their terms, a Secured Party may assign or
transfer the whole of its security interest granted hereunder. Any transferee
of
the Collateral shall be vested with all of the rights and powers of the
assigning Secured Party hereunder with respect to the Collateral.
Section
19. Waiver.
The
Debtor waives any right that it may have to require Secured Party to proceed
against any other person, or proceed against or exhaust any other security,
or
pursue any other remedy Secured Party may have.
[Balance
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IN
WITNESS WHEREOF, the Parties have executed this Security Interest Agreement
as
of the day, month and year first above written.
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SECURED
PARTY:
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HARBORVIEW
MASTER FUND LP
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By:
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s/
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DEBTOR:
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MILLENNIUM
BIOTECHNOLOGIES, INC.
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By:
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/s/
▇▇▇▇▇ ▇▇▇▇▇▇▇
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CFO
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