SUBSIDIARY SECURITY AGREEMENT
THIS SUBSIDIARY SECURITY AGREEMENT is made effective as of January 14,
2005, by and between VITROCO INCORPORATED, a Nevada corporation (the "DEBTOR"),
and VITROBIRTH LLC, a Delaware limited liability company (the "SECURED PARTY"),
with reference to the following recitals:
A. The Secured Party and Vitrotech Corporation, a Nevada corporation (the
"BORROWER") have entered into a Note and Warrant Purchase Agreement, dated as of
the date hereof (the "PURCHASE AGREEMENT"), pursuant to which the Secured Party
has agreed to loan up to $3,000,000 to the Borrower on the terms and subject to
the conditions of the Purchase Agreement ("LOAN"). On the terms and subject to
the conditions of the Purchase Agreement, the Loan advances will be evidenced by
one or more secured, convertible promissory notes made by the Borrower in favor
of the Secured Party (the "NOTES") as more fully set forth in the Purchase
Agreement.
B. The Borrower owns 100% of the issued and outstanding capital stock of
the Debtor and substantially all of the Loan proceeds will be contributed to, or
otherwise used for the sole and exclusive benefit of the Debtor.
C. It is a condition precedent to the Secured Party's making any Loan (or
otherwise extending credit) to the Borrower that the Debtor execute and deliver
to the Secured Party (i) a guaranty of the obligations of the Borrower under the
Purchase Agreement and related Notes (the "GUARANTY") and (ii) a security
agreement in substantially the form hereof.
D. The Debtor wishes to grant a security interest in favor of the Secured
Party as herein provided and the Debtor and agrees that the Loan (or any part
thereof) made by the Secured Party to the Debtor constitutes reasonably
equivalent value to the Debtor in consideration for the execution of the
Guaranty and this security agreement in light thereof.
NOW, THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. All capitalized terms used herein without definitions
shall have the respective meanings provided therefor in the Purchase Agreement.
The term "STATE," as used herein, means the State of California. All terms
defined in the Uniform Commercial Code of the State and not otherwise defined
herein shall have the same definitions herein as specified therein. The term
"OBLIGATIONS," as used herein, means all of the indebtedness, obligations and
liabilities of the Debtor to the Secured Party, individually or collectively,
whether direct or indirect, joint or several, absolute or contingent, due or to
become due, now existing or hereafter arising under or in respect of the
Guaranty or this Agreement, and the term "EVENT OF DEFAULT," as used herein,
means the failure of the Debtor to pay or perform any of the Obligations as and
when due to be paid or performed under the terms of the Guaranty.
2. Grant of Security Interest. The Debtor hereby grants to the Secured
Party, to secure the payment and performance in full of all of the Obligations,
a security interest in and so pledges and assigns to the Secured Party all the
properties, assets and rights of the Debtor, tangible and
intangible, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof (all of the same being
hereinafter called the "COLLATERAL"): 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),
contracts, documents, accounts (including health-care-insurance or life
insurance receivables), 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).
3. Authorization to File Financing Statements. The Debtor hereby
irrevocably authorizes the Secured Party at any time and from time to time to
file in any filing office in any Uniform Commercial Code jurisdiction any
initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as all assets of the Debtor or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the State, or
(ii) as being of an equal or lesser scope or with greater detail, and (b)
provide any other information required by part 5 of Article 9 of the Uniform
Commercial Code of the State, or such other jurisdiction, for the sufficiency or
filing office acceptance of any financing statement or amendment, including (i)
whether the Debtor is an organization, the type of organization and any
organizational identification number issued to the Debtor and, (ii) in the case
of a financing statement filed as a fixture filing or indicating Collateral as
as-extracted collateral or timber to be cut, a sufficient description of real
property to which the Collateral relates. The Debtor agrees to furnish any such
information to the Secured Party promptly upon the Secured Party's request. The
Debtor also ratifies its authorization for the Secured Party to have filed in
any Uniform Commercial Code jurisdiction any like initial financing statements
or amendments thereto if filed prior to the date hereof.
4. Other Actions. To further the attachment, perfection and first priority
of, and the ability of the Secured Party to enforce, the Secured Party's
security interest in the Collateral, and without limitation on the Debtor's
other obligations in this Agreement, the Debtor agrees, in each case at the
Debtor's expense, to take the following actions with respect to the following
Collateral:
4.1 Promissory Notes and Tangible Chattel Paper. If the Debtor shall at
any time hold or acquire any promissory notes or tangible chattel paper, the
Debtor shall forthwith endorse, assign and deliver the same to the Secured
Party, accompanied by such instruments of transfer or assignment duly executed
in blank as the Secured Party may from time to time specify.
4.2 Deposit Accounts. For each deposit account that the Debtor at any time
opens or maintains, the Debtor shall, at the Secured Party's request and option,
pursuant to an agreement in form and substance satisfactory to the Secured
Party, either (a) cause the depositary bank to comply at any time with
instructions from the Secured Party to such depositary bank directing the
disposition of funds from time to time credited to such deposit account, without
further consent of the Debtor, or (b) arrange for the Secured Party to become
the customer of the depositary bank with respect to the deposit account, with
the Debtor being permitted, only with the consent of the Secured Party, to
exercise rights to withdraw funds from such deposit account. The provisions of
this paragraph shall not apply to (i) any deposit account for which the Debtor,
the depositary bank and the Secured Party have entered into a cash collateral
agreement specially negotiated among the Debtor, the depositary bank
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and the Secured Party for the specific purpose set forth therein, (ii) a deposit
account for which the Secured Party is the depositary bank and is in automatic
control, and (iii) deposit accounts specially and exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the benefit
of the Debtor's salaried employees.
4.3 Investment Property. If the Debtor shall at any time hold or acquire
any certificated securities, the Debtor shall forthwith endorse, assign and
deliver the same to the Secured Party, accompanied by such instruments of
transfer or assignment duly executed in blank as the Secured Party may from time
to time specify. If any securities now or hereafter acquired by the Debtor are
uncertificated and are issued to the Debtor or its nominee directly by the
issuer thereof, the Debtor shall immediately notify the Secured Party thereof
and, at the Secured Party's request and option, pursuant to an agreement in form
and substance satisfactory to the Secured Party, either (a) cause the issuer to
agree to comply with instructions from the Secured Party as to such securities,
without further consent of the Debtor or such nominee, or (b) arrange for the
Secured Party to become the registered owner of the securities. If any
securities, whether certificated or uncertificated, or other investment property
now or hereafter acquired by the Debtor are held by the Debtor or its nominee
through a securities intermediary or commodity intermediary, the Debtor shall
immediately notify the Secured Party thereof and, at the Secured Party's request
and option, pursuant to an agreement in form and substance satisfactory to the
Secured Party, either (i) cause such securities intermediary or (as the case may
be) commodity intermediary to agree to comply with entitlement orders or other
instructions from the Secured Party to such securities intermediary as to such
securities or other investment property, or (as the case may be) to apply any
value distributed on account of any commodity contract as directed by the
Secured Party to such commodity intermediary, in each case without further
consent of the Debtor or such nominee, or (ii) in the case of financial assets
or other investment property held through a securities intermediary, arrange for
the Secured Party to become the entitlement holder with respect to such
investment property, with the Debtor being permitted, only with the consent of
the Secured Party, to exercise rights to withdraw or otherwise deal with such
investment property. The provisions of this paragraph shall not apply to any
financial assets credited to a securities account for which the Secured Party is
the securities intermediary.
4.4 Collateral in the Possession of a Bailee. If any Collateral is at any
time in the possession of a bailee, the Debtor shall promptly notify the Secured
Party thereof and, at the Secured Party's request and option, shall promptly
obtain an acknowledgement from the bailee, in form and substance satisfactory to
the Secured Party, that the bailee holds such Collateral for the benefit of the
Secured Party, and that such bailee agrees to comply, without further consent of
the Debtor, with instructions from the Secured Party as to such Collateral.
4.5 Electronic Chattel Paper and Transferable Records. If the Debtor at
any time holds or acquires an interest in any electronic chattel paper or any
"transferable record," as that term is defined in Section 201 of the federal
Electronic Signatures in Global and National Commerce Act, or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction, the Debtor shall promptly notify the Secured Party thereof and, at
the request and option of the Secured Party, shall take such action as the
Secured Party may reasonably request to vest in the Secured Party control, under
Section 9-105 of the Uniform Commercial Code, of such electronic chattel paper
or control under Section 201 of the federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, Section 16 of the Uniform
Electronic Transactions Act, as so in effect in such jurisdiction, of such
transferable record.
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4.6 Letter-of-Credit Rights. If the Debtor is at any time a beneficiary
under a letter of credit, the Debtor shall promptly notify the Secured Party
thereof and, at the request and option of the Secured Party, the Debtor shall,
pursuant to an agreement in form and substance satisfactory to the Secured
Party, either (i) arrange for the issuer and any confirmer or other nominated
person of such letter of credit to consent to an assignment to the Secured Party
of the proceeds of the letter of credit, or (ii) arrange for the Secured Party
to become the transferee beneficiary of the letter of credit.
4.7 Commercial Tort Claims. If the Debtor shall at any time hold or
acquire a commercial tort claim, the Debtor shall immediately notify the Secured
Party in a writing signed by the Debtor of the particulars thereof and grant to
the Secured Party in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance satisfactory to the Secured Party.
4.8 Other Actions as to Any and All Collateral. The Debtor further agrees,
at the request and option of the Secured Party, to take any and all other
actions the Secured Party may determine to be necessary or useful for the
attachment, perfection and first priority of, and the ability of the Secured
Party to enforce, the Secured Party's security interest in any and all of the
Collateral, including, without limitation, (a) executing, delivering and, where
appropriate, filing financing statements and amendments relating thereto under
the Uniform Commercial Code, to the extent, if any, that the Debtor's signature
thereon is required therefor, (b) causing the Secured Party's name to be noted
as secured party on any certificate of title for a titled good if such notation
is a condition to attachment, perfection or priority of, or ability of the
Secured Party to enforce, the Secured Party's security interest in such
Collateral, (c) complying with any provision of any statute, regulation or
treaty of the United States as to any Collateral if compliance with such
provision is a condition to attachment, perfection or priority of, or ability of
the Secured Party to enforce, the Secured Party's security interest in such
Collateral, (d) obtaining governmental and other third party waivers, consents
and approvals in form and substance satisfactory to Secured Party, including,
without limitation, any consent of any licensor, lessor or other person
obligated on Collateral, (e) obtaining waivers from mortgagees and landlords in
form and substance satisfactory to the Secured Party and (f) taking all actions
under any earlier versions of the Uniform Commercial Code or under any other
law, as reasonably determined by the Secured Party to be applicable in any
relevant Uniform Commercial Code or other jurisdiction, including any foreign
jurisdiction.
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5. Relation to Other Security Documents. The provisions of this Agreement
supplement the provisions of any real estate mortgage or deed of trust now or
hereinafter granted by the Debtor to the Secured Party which secures the payment
or performance of any of the Obligations. Nothing contained in any such real
estate mortgage or deed of trust shall derogate from any of the rights or
remedies of the Secured Party hereunder. In addition to the provisions of this
Agreement being so read and construed with any such mortgage or deed of trust,
the provisions of this Agreement shall be read and construed with the other
Security Documents referred to below in the manner so indicated.
5.1 Patent, Trademark, Copyright Security Agreements. Concurrently
herewith the Debtor is also executing and delivering to the Secured Party the
Patent, Trademark and Copyright Security Agreements pursuant to which the Debtor
is granting to the Secured Party security interests in certain Collateral
consisting of patents and patent rights, trademarks, service marks and trademark
and service ▇▇▇▇ rights, together with the goodwill appurtenant thereto,
copyrights, and copyright registrations. The provisions of the Patent, Trademark
and Copyright Security Agreements are supplemental to the provisions of this
Agreement, and nothing contained in the Patent, Trademark or Copyright Security
Agreements shall derogate from any of the rights or remedies of the Secured
Party hereunder. Neither the delivery of, nor anything contained in, the Patent,
Trademark or Copyright Security Agreements shall be deemed to prevent or
postpone the time of attachment or perfection of any security interest in such
Collateral created hereby.
6. Representations and Warranties Concerning Debtor's Legal Status. The
Debtor has previously delivered to the Secured Party a certificate signed by the
Debtor and entitled "Perfection Certificate" (the "PERFECTION CERTIFICATE"). The
Debtor represents and warrants to the Secured Party as follows: (a) the Debtor's
exact legal name is that indicated on the Perfection Certificate and on the
signature page hereof, (b) the Debtor is an organization of the type, and is
organized in the jurisdiction set forth in the Perfection Certificate, (c) the
Perfection Certificate accurately sets forth the Debtor's organizational
identification number or accurately states that the Debtor has none, (d) the
Perfection Certificate accurately sets forth the Debtor's place of business or,
if more than one, its chief executive office, as well as the Debtor's mailing
address, if different, (e) all other information set forth on the Perfection
Certificate pertaining to the Debtor is accurate and complete, and (f) that
there has been no change in any information provided in the Perfection
Certificate since the date on which it was executed by the Debtor.
7. Covenants Concerning Debtor's Legal Status. The Debtor covenants with
the Secured Party as follows: (a) without providing at least 30 days prior
written notice to the Secured Party, the Debtor will not change its name, its
place of business or, if more than one, chief executive office, or its mailing
address or organizational identification number if it has one, (b) if the Debtor
does not have an organizational identification number and later obtains one, the
Debtor shall forthwith notify the Secured Party of such organizational
identification number, and (c) without the Secured Party's prior written
consent, the Debtor will not change its type of organization, jurisdiction of
organization or other legal structure.
8. Representations and Warranties Concerning Collateral, etc. The Debtor
further represents and warrants to the Secured Party as follows: (a) the Debtor
is the owner of or has other rights in or power to transfer the Collateral, free
from any right or claim or any person or any adverse lien, security interest or
other encumbrance, except for the security interest created by this
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Agreement, (b) none of the Collateral constitutes, or is the proceeds of, "farm
products" as defined in Section 9-102(a)(34) of the Uniform Commercial Code of
the State, (c) none of the account Debtors or other persons obligated on any of
the Collateral is a governmental authority covered by the Federal Assignment of
Claims Act or like federal, state or local statute or rule in respect of such
Collateral, (d) the Debtor holds no commercial tort claim except as indicated on
the Perfection Certificate, (e) the Debtor has at all times operated its
business in compliance with all applicable provisions of the federal Fair Labor
Standards Act, as amended, and with all applicable provisions of federal, state
and local statutes and ordinances dealing with the control, shipment, storage or
disposal of hazardous materials or substances, (f) all other information set
forth on the Perfection Certificate pertaining to the Collateral is accurate and
complete, and (g) that there has been no change in any information provided in
the Perfection Certificate since the date on which it was executed by the
Debtor.
9. Covenants Concerning Collateral, etc. The Debtor further covenants with
the Secured Party as follows: (a) the Collateral, to the extent not delivered to
the Secured Party pursuant to Section 4, will be kept at the Debtor's principal
place of business and the Debtor will not remove the Collateral from such
locations, without providing at least thirty days prior written notice to the
Secured Party, (b) except for the security interest herein granted, the Debtor
shall be the owner of or have other rights in the Collateral free from any right
or claim of any other person, lien, security interest or other encumbrance, and
the Debtor shall defend the same against all claims and demands of all persons
at any time claiming the same or any interests therein adverse to the Secured
Party, (c) the Debtor shall not pledge, mortgage or create, or suffer to exist
any right of any person in or claim by any person to the Collateral, or any
security interest, lien or encumbrance in the Collateral in favor of any person,
other than the Secured Party, (d) the Debtor will keep the Collateral in good
order and repair and will not use the same in violation of law or any policy of
insurance thereon, (e) the Debtor will permit the Secured Party, or its
designee, to inspect the Collateral at any reasonable time, wherever located,
(f) the Debtor will pay promptly when due all taxes, assessments, governmental
charges and levies upon the Collateral or incurred in connection with the use or
operation of such Collateral or incurred in connection with this Agreement, (g)
the Debtor will continue to operate, its business in compliance with all
applicable provisions of the federal Fair Labor Standards Act, as amended, and
with all applicable provisions of federal, state and local statutes and
ordinances dealing with the control, shipment, storage or disposal of hazardous
materials or substances, and (h) the Debtor will not sell or otherwise dispose,
or offer to sell or otherwise dispose, of the Collateral or any interest
therein, except for (i) sales of inventory in the ordinary course of business.
10. Insurance.
10.1 Maintenance of Insurance. The Debtor will maintain with
financially sound and reputable insurers insurance with respect to its
properties and business against such casualties and contingencies as shall be in
accordance with general practices of businesses engaged in similar activities in
similar geographic areas. Such insurance shall be in such minimum amounts that
the Debtor will not be deemed a co-insurer under applicable insurance laws,
regulations and policies and otherwise shall be in such amounts, contain such
terms, be in such forms and be for such periods as may be reasonably
satisfactory to the Secured Party. In addition, all such insurance shall be
payable to the Secured Party as loss payee under a "standard" loss payee clause.
Without limiting the foregoing, the Debtor will (i) keep all of its physical
property insured with casualty or physical hazard insurance on an "all risks"
basis, with electronic data processing coverage, with a full replacement cost
endorsement and an "agreed amount" clause in an amount equal to 100% of the full
replacement cost of such property, (ii) maintain all such workers' compensation
or similar insurance as may be required by law, and (iii) maintain, in amounts
and with deductibles equal to those generally maintained by businesses engaged
in similar activities in similar geographic areas, general public liability
insurance against claims of bodily injury, death or property damage occurring,
on, in or about the properties of the Debtor; business interruption insurance;
and product liability insurance.
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10.2 Insurance Proceeds. The proceeds of any casualty insurance in
respect of any casualty loss of any of the Collateral shall, subject to the
rights, if any, of other parties with an interest having priority in the
property covered thereby, (i) so long as no Default or Event of Default has
occurred and is continuing and to the extent that the amount of such proceeds is
less than $10,000, be disbursed to the Debtor for direct application by the
Debtor solely to the repair or replacement of the Debtor's property so damaged
or destroyed, and (ii) in all other circumstances, be held by the Secured Party
as cash collateral for the Obligations. The Secured Party may, at its sole
option, disburse from time to time all or any part of such proceeds so held as
cash collateral, upon such terms and conditions as the Secured Party may
reasonably prescribe, for direct application by the Debtor solely to the repair
or replacement of the Debtor's property so damaged or destroyed, or the Secured
Party may apply all or any part of such proceeds to the Obligations.
10.3 Continuation of Insurance. All policies of insurance shall
provide for at least 30 days prior written cancellation notice to the Secured
Party. In the event of failure by the Debtor to provide and maintain insurance
as herein provided, the Secured Party may, at its option, provide such insurance
and charge the amount thereof to the Debtor. The Debtor shall furnish the
Secured Party with certificates of insurance and policies evidencing compliance
with the foregoing insurance provision.
11. Collateral Protection Expenses; Preservation of Collateral.
11.1 Expenses Incurred by Secured Party. In the Secured Party's
discretion, if the Debtor fails to do so, the Secured Party may discharge taxes
and other encumbrances at any time levied or placed on any of the Collateral,
maintain any of the Collateral, make repairs thereto and pay any necessary
filing fees or insurance premiums. The Debtor agrees to reimburse the Secured
Party on demand for all expenditures so made. The Secured Party shall have no
obligation to the Debtor to make any such expenditures, nor shall the making
thereof be construed as the waiver or cure of any Default or Event of Default.
11.2 Secured Party's Obligations and Duties. Anything herein to the
contrary notwithstanding, the Debtor shall remain obligated and liable under
each contract or agreement comprised in the Collateral to be observed or
performed by the Debtor thereunder. The Secured Party shall not have any
obligation or liability under any such contract or agreement by reason of or
arising out of this Agreement or the receipt by the Secured Party of any payment
relating to any of the Collateral, nor shall the Secured Party be obligated in
any manner to perform any of the obligations of the Debtor under or pursuant to
any such contract or agreement, to make inquiry as to the nature or sufficiency
of any payment received by the Secured Party in respect of the Collateral or as
to the sufficiency of any performance by any party under any such contract or
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agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Secured Party or to which the Secured Party may be entitled at
any time or times. The Secured Party's sole duty with respect to the custody,
safe keeping and physical preservation of the Collateral in its possession,
under Section 9-207 of the Uniform Commercial Code of the State or otherwise,
shall be to deal with such Collateral in the same manner as the Secured Party
deals with similar property for its own account.
12. Securities and Deposits. The Secured Party may at any time, at its
option, transfer to itself or any nominee any securities constituting
Collateral, receive any income thereon and hold such income as additional
Collateral or apply it to the Obligations. Whether or not any Obligations are
due, the Secured Party may demand, ▇▇▇ for, collect, or make any settlement or
compromise which it deems desirable with respect to the Collateral. Regardless
of the adequacy of Collateral or any other security for the Obligations, any
deposits or other sums at any time credited by or due from the Secured Party to
the Debtor may at any time be applied to or set off against any of the
Obligations.
13. Notification to Account Debtors and Other Persons Obligated on
Collateral. The Debtor shall, at the request and option of the Secured Party,
notify account Debtors and other persons obligated on any of the Collateral of
the security interest of the Secured Party in any account, chattel paper,
general intangible, instrument or other Collateral and that payment thereof is
to be made directly to the Secured Party or to any financial institution
designated by the Secured Party as the Secured Party's agent therefor, and the
Secured Party may itself, without notice to or demand upon the Debtor, so notify
account Debtors and other persons obligated on Collateral. After the making of
such a request or the giving of any such notification, the Debtor shall hold any
proceeds of collection of accounts, chattel paper, general intangibles,
instruments and other Collateral received by the Debtor as trustee for the
Secured Party without commingling the same with other funds of the Debtor and
shall turn the same over to the Secured Party in the identical form received,
together with any necessary endorsements or assignments. The Secured Party shall
apply the proceeds of collection of accounts, chattel paper, general
intangibles, instruments and other Collateral received by the Secured Party to
the Obligations, such proceeds to be immediately credited after final payment in
cash or other immediately available funds of the items giving rise to them.
14. Power of Attorney.
14.1 Appointment and Powers of Secured Party. The Debtor hereby
irrevocably constitutes and appoints the Secured Party and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorneys-in-fact with full irrevocable power and authority in the place and
stead of the Debtor or in the Secured Party's own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments that may be necessary or
useful to accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives said attorneys the power and right, on
behalf of the Debtor, without notice to or assent by the Debtor, to do the
following:
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(a) upon the occurrence and during the continuance of an Event of
Default, generally to sell, transfer, pledge, make any agreement with respect to
or otherwise dispose of or deal with any of the Collateral in such manner as is
consistent with the Uniform Commercial Code of the State and as fully and
completely as though the Secured Party were the absolute owner thereof for all
purposes, and to do, at the Debtor's expense, at any time, or from time to time,
all acts and things which the Secured Party deems necessary or useful to
protect, preserve or realize upon the Collateral and the Secured Party's
security interest therein, in order to effect the intent of this Agreement, all
at least as fully and effectively as the Debtor might do, including, without
limitation, (i) the filing and prosecuting of registration and transfer
applications with the appropriate federal, state, local or other agencies or
authorities with respect to trademarks, copyrights and patentable inventions and
processes, (ii) upon written notice to the Debtor, the exercise of voting rights
with respect to voting securities, which rights may be exercised, if the Secured
Party so elects, with a view to causing the liquidation of assets of the issuer
of any such securities, and (iii) the execution, delivery and recording, in
connection with any sale or other disposition of any Collateral, of the
endorsements, assignments or other instruments of conveyance or transfer with
respect to such Collateral; and
(b) to the extent that the Debtor's authorization given in Section 3
is not sufficient, to file such financing statements with respect hereto, with
or without the Debtor's signature, or a photocopy of this Agreement in
substitution for a financing statement, as the Secured Party may deem
appropriate and to execute in the Debtor's name such financing statements and
amendments thereto and continuation statements which may require the Debtor's
signature.
14.2 Ratification by Debtor. To the extent permitted by law, the
Debtor hereby ratifies all that said attorneys shall lawfully do or cause to be
done by virtue hereof. This power of attorney is a power coupled with an
interest and is irrevocable.
14.3 No Duty on Secured Party. The powers conferred on the Secured
Party hereunder are solely to protect its interests in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Secured Party shall
be accountable only for the amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Debtor for any act or failure to
act, except for the Secured Party's own gross negligence or willful misconduct.
15. Rights and Remedies. If an Event of Default shall have occurred and be
continuing, the Secured Party, without any other notice to or demand upon the
Debtor have in any jurisdiction in which enforcement hereof is sought, in
addition to all other rights and remedies, the rights and remedies of a secured
party under the Uniform Commercial Code of the State and any additional rights
and remedies which may be provided to a secured party in any jurisdiction in
which Collateral is located, including, without limitation, the right to take
possession of the Collateral, and for that purpose the Secured Party may, so far
as the Debtor can give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom. The Secured Party may
in its discretion require the Debtor to assemble all or any part of the
Collateral at such location or locations within the jurisdiction(s) of the
Debtor's principal office(s) or at such other locations as the Secured Party may
reasonably designate. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, the Secured Party shall give to the Debtor at least five Business Days
prior written notice of the time
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and place of any public sale of Collateral or of the time after which any
private sale or any other intended disposition is to be made. The Debtor hereby
acknowledges that five Business Days prior written notice of such sale or sales
shall be reasonable notice. In addition, the Debtor waives any and all rights
that it may have to a judicial hearing in advance of the enforcement of any of
the Secured Party's rights and remedies hereunder, including, without
limitation, its right following an Event of Default to take immediate possession
of the Collateral and to exercise its rights and remedies with respect thereto.
16. Standards for Exercising Rights and Remedies. To the extent that
applicable law imposes duties on the Secured Party to exercise remedies in a
commercially reasonable manner, the Debtor acknowledges and agrees that it is
not commercially unreasonable for the Secured Party (a) to fail to incur
expenses reasonably deemed significant by the Secured Party to prepare
Collateral for disposition or otherwise to fail to complete raw material or work
in process into finished goods or other finished products for disposition, (b)
to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against account Debtors or other persons obligated on Collateral or to
fail to remove liens or encumbrances on or any adverse claims against
Collateral, (d) to exercise collection remedies against account Debtors and
other persons obligated on Collateral directly or through the use of collection
agencies and other collection specialists, (e) to advertise dispositions of
Collateral through publications or media of general circulation, whether or not
the Collateral is of a specialized nature, (f) to contact other persons, whether
or not in the same business as the Debtor, for expressions of interest in
acquiring all or any portion of the Collateral, (g) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (h) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (i) to dispose of assets in
wholesale rather than retail markets, (j) to disclaim disposition warranties,
(k) to purchase insurance or credit enhancements to insure the Secured Party
against risks of loss, collection or disposition of Collateral or to provide to
the Secured Party a guaranteed return from the collection or disposition of
Collateral, or (l) to the extent deemed appropriate by the Secured Party, to
obtain the services of other brokers, investment bankers, consultants and other
professionals to assist the Secured Party in the collection or disposition of
any of the Collateral. The Debtor acknowledges that the purpose of this Section
16 is to provide non-exhaustive indications of what actions or omissions by the
Secured Party would fulfill the Secured Party's duties under the Uniform
Commercial Code or other law of the State or any other relevant jurisdiction in
the Secured Party's exercise of remedies against the Collateral and that other
actions or omissions by the Secured Party shall not be deemed to fail to fulfill
such duties solely on account of not being indicated in this Section 16. Without
limitation upon the foregoing, nothing contained in this Section 16 shall be
construed to grant any rights to the Debtor or to impose any duties on the
Secured Party that would not have been granted or imposed by this Agreement or
by applicable law in the absence of this Section 16.
17. Notices. All notices required or permitted by this Agreement shall be
in writing or by telex or facsimile transmission and shall be deemed to have
been duly given (i) on the date of service if delivered in person or by telex or
facsimile transmission (with the telex or facsimile confirmation of transmission
receipt acting as confirmation of service when sent and provided
10
telexed or telecopied notices are also mailed by first class, certified or
registered mail, postage prepaid); or (ii) seventy-two (72) hours after mailing
by first class, registered or certified mail, postage prepaid, and properly
addressed to the addresses specified below or at such other address as the party
affected may designate in a written notice to such other party in compliance
with this Section 17.
Debtor: VitroCo Incorporated
c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, CEO
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Secured Party: Vitrobirth, LLC
c/o ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
18. No Waiver by Secured Party, etc. The Secured Party shall not be deemed
to have waived any of its rights or remedies in respect of the Obligations or
the Collateral unless such waiver shall be in writing and signed by the Secured
Party. No delay or omission on the part of the Secured Party in exercising any
right or remedy shall operate as a waiver of such right or remedy or any other
right or remedy. A waiver on any one occasion shall not be construed as a bar to
or waiver of any right or remedy on any future occasion. All rights and remedies
of the Secured Party with respect to the Obligations or the Collateral, whether
evidenced hereby or by any other instrument or papers, shall be cumulative and
may be exercised singularly, alternatively, successively or concurrently at such
time or at such times as the Secured Party deems expedient.
19. Suretyship Waivers by Debtor. The Debtor waives demand, notice,
protest, notice of acceptance of this Agreement, notice of loans made, credit
extended, Collateral received or delivered or other action taken in reliance
hereon and all other demands and notices of any description. With respect to
both the Obligations and the Collateral, the Debtor assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of or failure to perfect any security interest
in any Collateral, to the addition or release of any party or person primarily
or secondarily liable, to the acceptance of partial payment thereon and the
settlement, compromising or adjusting of any thereof, all in such manner and at
such time or times as the Secured Party may deem advisable. The Secured Party
shall have no duty as to the collection or protection of the Collateral or any
income therefrom, the preservation of rights against prior parties, or the
preservation of any rights pertaining thereto beyond the safe custody thereof as
set forth in Section 11.2. The Debtor further waives any and all other
suretyship defenses.
20. Marshalling. The Secured Party shall not be required to marshal any
present or future collateral security (including but not limited to the
Collateral) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other
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assurances of payment in any particular order, and all of its rights and
remedies hereunder and in respect of such collateral security and other
assurances of payment shall be cumulative and in addition to all other rights
and remedies, however existing or arising. To the extent that it lawfully may,
the Debtor hereby agrees that it will not invoke any law relating to the
marshalling of collateral which might cause delay in or impede the enforcement
of the Secured Party's rights and remedies under this Agreement or under any
other instrument creating or evidencing any of the Obligations or under which
any of the Obligations is outstanding or by which any of the Obligations is
secured or payment thereof is otherwise assured, and, to the extent that it
lawfully may, the Debtor hereby irrevocably waives the benefits of all such
laws.
21. Proceeds of Dispositions; Expenses. The Debtor shall pay to the
Secured Party on demand any and all expenses, including reasonable attorneys'
fees and disbursements, incurred or paid by the Secured Party in protecting,
preserving or enforcing the Secured Party's rights and remedies under or in
respect of any of the Obligations or any of the Collateral. After deducting all
of said expenses, the residue of any proceeds of collection or sale or other
disposition of the Collateral shall, to the extent actually received in cash, be
applied to the payment of the Obligations in such order or preference as the
Secured Party may determine, proper allowance and provision being made for any
Obligations not then due. Upon the final payment and satisfaction in full of all
of the Obligations and after making any payments required by Sections
9608(a)(1)(C) or 9615(a)(3) of the Uniform Commercial Code of the State, any
excess shall be returned to the Debtor. In the absence of final payment and
satisfaction in full of all of the Obligations, the Debtor shall remain liable
for any deficiency.
22. Overdue Amounts. Until paid, all amounts due and payable by the Debtor
hereunder shall be a debt secured by the Collateral and shall bear, whether
before or after judgment, interest at the rate of interest for overdue principal
set forth in the Initial Note (as that term is defined in the Purchase
Agreement) .
23. Governing Law; Consent to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA. The Debtor agrees that any action or claim arising out of, or any
dispute in connection with, this Agreement, any rights, remedies, obligations,
or duties hereunder, or the performance or enforcement hereof or thereof, may be
brought in the courts of the State or any federal court sitting therein and
consents to the non-exclusive jurisdiction of such court and to service of
process in any such suit being made upon the Debtor by mail at the address
specified in Section 17 of this Agreement. The Debtor hereby waives any
objection that it may now or hereafter have to the venue of any such suit or any
such court or that such suit is brought in an inconvenient court.
24. Waiver of Jury Trial. THE DEBTOR WAIVES ITS RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, ANY RIGHTS, REMEDIES, OBLIGATIONS, OR DUTIES HEREUNDER, OR THE
PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF. Except as prohibited by law, the
Debtor waives any right which it may have to claim or recover in any litigation
referred to in the preceding sentence any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages. The Debtor (i) certifies that neither the Secured Party nor any
representative, agent or attorney of the Secured
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Party has represented, expressly or otherwise, that the Secured Party would not,
in the event of litigation, seek to enforce the foregoing waivers or other
waivers contained in this Agreement, and (ii) acknowledges that, in entering the
Purchase Agreement and the other Transaction Documents (as that term is defined
in the Purchase Agreement) to which the Secured Party is a party, the Secured
Party is relying upon, among other things, the waivers and certifications
contained in this Section 24.
25. Miscellaneous. The headings of each section of this Agreement are for
convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon the
Debtor and its respective successors and assigns, and shall inure to the benefit
of the Secured Party and its successors and assigns. If any term of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity of
all other terms hereof shall in no way be affected thereby, and this Agreement
shall be construed and be enforceable as if such invalid, illegal or
unenforceable term had not been included herein. The Debtor acknowledges receipt
of a copy of this Agreement.
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IN WITNESS WHEREOF, intending to be legally bound, the Debtor has caused
this Agreement to be duly executed as of the date first above written.
VitroCo Incorporated,
a Nevada corporation
By:
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, CEO
Accepted:
Vitrobirth, LLC,
A Delaware limited liability company
By:
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇, Manager
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ACKNOWLEDGEMENT
STATE OF CALIFORNIA )
)ss
COUNTY OF ORANGE )
On January 12, 2005, before me, _______________________________,
personally appeared ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledge to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person or
the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
------------------------------------
Signature
(This area for official notarial seal)
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ACKNOWLEDGEMENT
STATE OF CALIFORNIA )
)ss
COUNTY OF ORANGE )
On January 12, 2005, before me, _______________________________,
personally appeared ▇▇▇▇ ▇▇▇▇▇▇, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledge to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person or
the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
------------------------------------
Signature
(This area for official notarial seal)
16