SECURITY AGREEMENT -- SUBSIDIARY
Exhibit
4.4
SECURITY
AGREEMENT -- SUBSIDIARY
THIS SECURITY AGREEMENT (the
“Agreement”)
is made as of December 10, 2008 by and among ORGANIC GROWING SYSTEMS, INC.,
a Texas corporation, (the “Subsidiary”),
and the secured party hereto and its respective endorsees, transferees and
assigns (the “Secured
Party”).
WHEREAS, pursuant to a Note
Purchase Agreement, dated December 10, 2008, (the “Note Purchase
Agreement”), ADVANCED
GROWING SYSTEMS, INC., a Nevada corporation, (the “Company”)
issued to the Secured Party certain 18% Subordinated Secured Notes
(collectively, the “Notes”);
and
WHEREAS, pursuant to the Note
Purchase Agreement, the Subsidiary executed and delivered to the Secured Party a
Guaranty (the “Guaranty”),
guaranteeing the obligations of the Company to the Secured Party under the Note
Purchase Agreement and the Notes
NOW, THEREFORE, in
consideration of the agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
1. Certain
Definitions. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but
not otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as “general intangibles” and “proceeds”) shall have the respective
meanings given such terms in Article 9 of the UCC.
a. “Collateral”
means the collateral in which the Secured Party is granted a security interest
by this Agreement and which shall include the following, whether presently owned
or existing or hereafter acquired or coming into existence, and all additions
and accessions thereto and all substitutions and replacements thereof, and all
proceeds, products and accounts thereof, including, without limitation, all
proceeds from the sale or transfer of the Collateral and of insurance covering
the same and of any tort claims in connection therewith:
i. All
goods, including, without limitation, all machinery, equipment, computers, motor
vehicles, trucks, tanks, boats, ships, appliances, furniture, special and
general tools, fixtures, test and quality control devices and other equipment of
every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items, owned by the Subsidiary and used in connection
with the Subsidiary’s businesses and all improvements thereto; and
ii. All
inventory of the Subsidiary; and
iii. All of
the Subsidiary’s contract rights and general intangibles, including, without
limitation, all partnership interests, stock or other securities, licenses,
distribution and other agreements, computer software development rights,
employee non-compete, non-disclosure and assignment of rights agreements,
leases, franchises, customer lists, quality control procedures, grants and
rights, goodwill, deposit accounts, and income tax refunds; and
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iv. All
receivables of the Subsidiary including all insurance proceeds, and rights to
refunds or indemnification whatsoever owing, together with all instruments, all
documents of title representing any of the foregoing, all rights in any
merchandising, goods, equipment, motor vehicles and trucks which any of the same
may represent, and all right, title, security and guaranties with respect to
each receivable, including any right of stoppage in transit; and
v. All of
the Subsidiary’s Intellectual Property; and
vi. All of
Subsidiary’s equity interest in Organic Growing Systems, Inc., a Texas
corporation, and certificates evidencing such equity interest, and any shares of
stock (including, without limitation, a distribution in connection with any
reclassification, increase or reduction of capital or in connection with any
reorganization), or any option or right to acquire shares of stock, in
substitution of, or in exchange for, any of such equity interest, or any stock
dividend or split with respect to such equity interest, and any distributions,
whether dividend or liquidating or otherwise, of any cash or property with
respect to such equity interest; and
vii. All of
the Subsidiary’s documents, instruments and chattel paper, files, records, books
of account, business papers, computer programs and the products and proceeds of
all of the foregoing Collateral set forth in paragraphs (i) through (vi),
inclusive, above.
b. “Copyrights”
shall mean all of the following in which the Subsidiary now holds or hereafter
acquires any interest (i) all copyrights, whether registered or unregistered,
held pursuant to the laws of the United States, any State thereof or any other
country; (ii) registrations, applications and recordings in the United States
Copyright Office or in any similar office or agency of the United States, any
State thereof or any other country; (iii) any continuations, renewals or
extensions thereof; (iv) any registrations to be issued in any pending
applications; (v) prior versions of works covered by copyright and all works
based upon, derived from or incorporating such works; (vi) income, royalties,
damages, claims and payments now and hereafter due and/or payable with respect
to copyrights, including, without limitation, damages, claims and recoveries for
past, present or future infringement; (vii) rights to ▇▇▇ for past, present and
future infringements of any copyright; (viii) any rights in any material which
is copyrightable or which is protected by common law, United States copyright
laws or similar laws, or any law of any State, and (ix) any other rights
corresponding to any of the foregoing rights throughout the world.
c. “Copyright
License” shall mean any agreement, written or oral, in which the
Subsidiary now holds or hereafter acquires any interest, granting any right in
or to any Copyright or Copyright registration (whether the Subsidiary is the
licensee or the licensor thereunder) including, without limitation, licenses
pursuant to which the Subsidiary has obtained the exclusive right to use a
copyright owned by a third party.
d. “Intellectual
Property” shall mean, collectively, the Software Intellectual Property,
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark
Licenses and Trade Secrets.
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e. “Obligations”
means all of the Subsidiary’s obligations under this Agreement and the Guaranty,
in each case, whether now or hereafter existing, voluntary or involuntary,
direct or indirect, absolute or contingent, liquidated or unliquidated, whether
or not jointly owed with others, and whether or not from time to time decreased
or extinguished and later decreased, created or incurred, and all or any portion
of such obligations or liabilities that are paid, to the extent all or any part
of such payment is avoided or recovered directly or indirectly from the Secured
Party as a preference, fraudulent transfer or otherwise as such obligations may
be amended, supplemented, converted, extended or modified from time to
time.
f. “Patents”
shall mean all of the following in which the Subsidiary now holds or hereafter
acquires any interest: (i) all patents of the United States or any other
country, all registrations and recordings thereof and all applications for
patents of the United States or any other country, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country; (ii) all reissues, divisions,
continuations, renewals, continuations in part or extensions thereof; (iii) all
patents to issue in any such applications; (iv) income, royalties, damages,
claims and payments now and hereafter due and/or payable with respect to
patents, including, without limitation, damages, claims and recoveries for past,
present or future infringement; and (v) rights to ▇▇▇ for past, present and
future infringements of any patent.
g. “Patent
License” shall mean any agreement, whether written or oral, in which the
Subsidiary now holds or hereafter acquires any interest, granting any right with
respect to any Patent (whether the Subsidiary is the licensee or the licensor
thereunder).
h. “Software
Intellectual Property” shall mean (i) all software programs (including
all source code, object code and all related applications and data files),
whether now owned, upgraded, enhanced, licensed or leased or hereafter acquired
by the Subsidiary; (ii) all computers and electronic data processing hardware
and firmware associated therewith; (iii) all documentation (including flow
charts, logic diagrams, manuals, guides and specifications) with respect to such
software, hardware and firmware described in the preceding subclauses (i) and
(ii); and (iv) all rights with respect to all of the foregoing, including,
without limitation, any and all upgrades, modifications, copyrights, licenses,
options, warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights and
indemnifications and substitutions, replacements, additions, or model
conversions of any of the foregoing.
i. “Trademarks”
shall mean any of the following in which the Subsidiary now holds or hereafter
acquires any interest: (i) any trademarks, tradenames, corporate names, company
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature, now existing
or hereafter adopted or acquired, all registrations and recordings thereof and
any applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country (collectively, the “Marks”);
(ii) any reissues, extensions or renewals thereof, (iii) the goodwill of the
business symbolized by or associated with the Marks, (iv) income, royalties,
damages, claims and payments now and hereafter due and/or payable with respect
to the Marks, including, without limitation, damages, claims and recoveries for
past, present or future infringement and (v) rights to ▇▇▇ for past, present and
future infringements of the Marks.
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j. “Trademark
License” shall mean any agreement, written or oral, in which the
Subsidiary now holds or hereafter acquires any interest, granting any right in
and to any Trademark or Trademark registration (whether the Subsidiary is the
licensee or the licensor thereunder).
k. “Trade
Secrets” shall mean common law and statutory trade secrets and all other
confidential or proprietary or useful information and all know-how obtained by
or used in or contemplated at any time for use in the business of the Subsidiary
(all of the foregoing being collectively called a “Trade
Secret”), whether or not such Trade Secret has been reduced to a writing
or other tangible form, including all documents and things embodying,
incorporating or referring in any way to such Trade Secret, all Trade Secret
Licenses, and including the right to ▇▇▇ for and to enjoin and to collect
damages for the actual or threatened misappropriation of any Trade Secret and
for the breach or enforcement of any such Trade Secret license.
l. “UCC” means
the Uniform Commercial Code, as the same may, from time to time, be in effect in
the State of New York; provided, however, in the event that,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the Secured Party’s security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term “UCC” shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection of
priority and for purposes of definitions related to such
provisions.
2. Grant of
Security Interest. As an inducement for the Secured Party to
purchase the Notes and to secure the complete and timely payment, performance
and discharge in full, as the case may be, of all of the Obligations, the
Subsidiary hereby, unconditionally and irrevocably, pledges, grants and
hypothecates to the Secured Party, a continuing senior security interest in, a
continuing first lien upon, an unqualified right to possession and disposition
of, and a right of set-off against, in each case to the fullest extent permitted
by law, all of the Subsidiary’s right, title and interest of whatsoever kind and
nature in and to the Collateral (the “Security
Interest”).
3. Representations,
Warranties, Covenants and Agreements of the Subsidiary. Except
as set forth on Schedule
A attached hereto, the Subsidiary represents and warrants to, and
covenants and agrees with, the Secured Party as follows:
a. The
Subsidiary has the requisite corporate power and authority to enter into this
Agreement and otherwise carry out its obligations thereunder. The
execution, delivery and performance by the Subsidiary of this Agreement and the
filings contemplated therein have been duly authorized by all necessary action
on the part of the Subsidiary and no further action is required by the
Subsidiary. This Agreement constitutes a legal, valid and binding
obligation of the Subsidiary enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditor’s rights
generally.
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b. The
Subsidiary represents and warrants that it has no place of business or offices
where its respective books of account and records are kept (other than
temporarily at the offices of its attorneys or accountants) or places where the
Collateral is stored or located;
c. The
Subsidiary is the sole owner of the Collateral (except for non-exclusive
licenses granted by the Subsidiary in the ordinary course of business), free and
clear of any liens, security interests, encumbrances, rights or claims, and is
fully authorized to grant the Security Interest in and to pledge the
Collateral. There is not on file in any governmental or regulatory
authority, agency or recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the foregoing (other than
those that have been filed in favor of the Secured Party pursuant to this
Agreement) covering or affecting any of the Collateral. So long as
this Agreement shall be in effect, without the prior consent of the Secured
Party, which consent shall not be unreasonably withheld, the Subsidiary shall
not execute and shall not knowingly permit to be on file in any such office or
agency any such financing statement or other document or instrument (except to
the extent filed or recorded in favor of the Secured Party pursuant to the terms
of this Agreement).
d. No part
of the Collateral or rights in connection therewith has been judged, by any
governmental body with proper jurisdiction, to be invalid or
unenforceable. No written claim has been received alleging the
Subsidiary’s use of any Collateral violates the rights of any third party. There
has been no adverse decision to the Subsidiary’s claim of ownership rights in or
exclusive rights to use the Collateral in any jurisdiction or to the
Subsidiary’s right to keep and maintain such Collateral in full force and
effect, and there is no proceeding involving said rights pending or threatened
before any court, judicial body, administrative or regulatory agency, arbitrator
or other governmental authority.
e. The
Subsidiary shall at all times maintain its books of account and records relating
to the Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule
A attached hereto and may not relocate such books of account and records
or tangible Collateral unless it delivers to the Secured Party at least thirty
(30) days prior to such relocation (i) written notice of such relocation and the
new location thereof (which must be within the United States) and
(ii) evidence that appropriate financing statements and other necessary
documents have been filed and recorded and other steps have been taken to
perfect the Security Interest to create in favor of the Secured Party valid,
perfected and continuing first priority liens in the Collateral.
f. This
Agreement creates in favor of the Secured Party a valid security interest in the
Collateral securing the payment and performance of the Obligations and, upon
making the filings described in the immediately following sentence, a perfected
first priority security interest in such Collateral and, to the extent that it
can be perfected through such filings, the Intellectual
Property. Except for the filing of financing statements on Form-1
under the UCC with the jurisdictions indicated on Schedule A, attached hereto,
no authorization or approval of or filing with or notice to any governmental
authority or regulatory body is required either (i) for the grant by the
Subsidiary of, or the effectiveness of, the Security Interest granted hereby or
for the execution, delivery and performance of this Agreement by the Subsidiary
or (ii) for the perfection of, or exercise by the Secured Party of, their rights
and remedies hereunder.
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g. Prior to
or promptly after the closing of the Note Purchase Agreement, the Secured Party
shall file or cause to be filed one or more executed UCC financing statements on
Form-1 with respect to the Security Interest with the appropriate
jurisdictions. Furthermore, upon request of the Secured Party, the
Subsidiary shall execute and deliver any and all agreements, instruments,
documents, and papers as the Secured Party may reasonably request to evidence
the Secured Party’ security interest in the Intellectual Property and the
goodwill and general intangibles of the Subsidiary relating thereto or
represented thereby.
h. The
execution, delivery and performance of this Agreement does not conflict with or
cause a material breach or default, or an event that with or without the passage
of time or notice, shall constitute a material breach or default, under any
agreement to which the Subsidiary is a party or by which the Subsidiary is
bound. No consent (including, without limitation, from stockholders
or creditors of the Subsidiary) is required for the Subsidiary to enter into and
perform its obligations hereunder.
i. The
Subsidiary shall at all times safeguard, protect and maintain the Collateral for
the account of the Secured Party until this Agreement and the Security Interest
hereunder shall terminate pursuant to Section 12. Without limiting the
generality of the foregoing, the Subsidiary shall pay all governmental fees and
taxes necessary to maintain the Collateral and the Security Interest hereunder,
and the Subsidiary shall obtain and furnish to the Secured Party from time to
time, upon demand, such releases and/or subordinations of claims and liens which
may be required to maintain the priority of the Security Interest
hereunder.
j. The
Subsidiary will not transfer, pledge, hypothecate, encumber, license, sell or
otherwise dispose of any of the Collateral without the prior written consent of
the Secured Party.
k. The
Subsidiary shall, within ten (10) days of obtaining knowledge thereof, advise
the Secured Party promptly, in sufficient detail, of any substantial change in
the Collateral other than in the ordinary course of business, and of the
occurrence of any event which would have a material adverse effect on the value
of the Collateral or on the Secured Party’ security interest
therein.
l. The
Subsidiary shall promptly execute and deliver to the Secured Party such further
deeds, mortgages, assignments, security agreements, financing statements or
other instruments, documents, certificates and assurances and take such further
action as the Secured Party may from time to time request and may in its sole
discretion deem necessary to perfect, protect or enforce the Security
Interest.
m. The
Subsidiary shall permit the Secured Party and its representatives and agents to
inspect the Collateral at any time and to make copies of records pertaining to
the Collateral as may be requested by the Secured Party from time to
time.
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n. The
Subsidiary will take all steps reasonably necessary to diligently pursue and
seek to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.
o. The
Subsidiary shall promptly notify the Secured Party in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by the
Subsidiary that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Party hereunder.
p. All
information supplied to the Secured Party by or on behalf of the Subsidiary with
respect to the Collateral is accurate and complete in all material respects as
of the date hereof, and all information supplied after the date hereof to the
Secured Party shall be accurate in all material respects.
q. With
respect to any of the Subsidiary’s Intellectual Property:
i. such
Intellectual Property is subsisting and the rights in connection with such
Intellectual Property have not been adjudged invalid or unenforceable, in whole
or in part;
ii. the
rights in connection with such Intellectual Property are valid and
enforceable;
iii. the
Subsidiary has made all necessary filings and recordations necessary to protect
its interest in such Intellectual Property, including, without limitation,
recordations of all of its interests in the Patents, Patent Licenses, Trademarks
and Trademark Licenses in the United States Patent and Trademark Office and its
claims to the Copyrights and Copyright Licenses in the United States Copyright
Office;
iv. the
Subsidiary is the exclusive owner of the entire and unencumbered right, title
and interest in and to such Intellectual Property and no claim has been made
that the use of such Intellectual Property infringes on the asserted rights of
any third party; and
v. the
Subsidiary has performed and will continue to perform all acts and has paid all
required fees and taxes to maintain its rights with respect to each and every
item of Intellectual Property in full force and effect throughout the United
States, as applicable.
r. Except
with respect to any Trademark or Copyright that the Subsidiary shall reasonably
determine is of negligible economic value to the Subsidiary, the Subsidiary
shall:
i. maintain
each Trademark and Copyright in full force free from any claim of abandonment
for non-use, maintain as in the past the quality of products and services
offered under such Trademark or Copyright; employ such Trademark or Copyright
with the appropriate notice of registration; not adopt or use any ▇▇▇▇ which is
confusingly similar or a colorable imitation of such Trademark or Copyright
unless the Secured Party shall obtain a perfected security interest in such ▇▇▇▇
pursuant to this Agreement; and not (and not permit any licensee or sublicensee
thereof to) do any act or knowingly omit to do any act whereby any Trademark or
Copyright may become invalidated;
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ii. not,
except with respect to any Patent that it shall reasonably determine is of
negligible economic value to it, do any act, or omit to do any act, whereby any
Patent may become abandoned; and
iii. notify
the Secured Party immediately if it knows, or has reason to know, that any
application or registration relating to any Patent, Trademark or Copyright may
become abandoned, or of any material adverse determination or development
(including, without limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
the United States Copyright Office or any court or tribunal in the United
States) regarding its ownership of any Patent, Trademark or Copyright or its
right to register the same or to keep and maintain the same.
s. Whenever
the Subsidiary, either by itself or through any agent, employee, licensee or
designee, shall file an application for the registration of any Patent,
Trademark or Copyright with the United States Patent and Trademark Office or the
United States Copyright Office or acquire rights to any new Patent, Trademark or
Copyright whether or not registered, report such filing to the Secured Party
within five (5) business days after the last day of the fiscal quarter in which
such filing occurs.
t. The
Subsidiary shall take all reasonable and necessary steps, including, without
limitation, in any proceeding before the United States Patent and Trademark
Office or the United States Copyright Office, to maintain and pursue each
application (and to obtain the relevant registration) and to maintain each
registration of the Patents, Trademarks and Copyrights, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability.
u. In the
event that any Patent, Trademark or Copyright included in the Intellectual
Property is infringed, misappropriated or diluted by a third party, the
Subsidiary shall promptly notify the Secured Party after it learns thereof and
shall, unless it shall reasonably determine that such Patent, Trademark or
Copyright is of negligible economic value to it, which determination it shall
promptly report to the Secured Party: promptly ▇▇▇ for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution,
or take such other actions as it shall reasonably deem appropriate under the
circumstances to protect such Patent, Trademark or Copyright. If the
Subsidiary lacks the financial resources to comply with this Section 3(v), the
Subsidiary shall so notify the Secured Party and shall cooperate fully with any
enforcement action undertaken by the Secured Party on behalf of the
Subsidiary.
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v. None of
such Patents, Trademarks, Copyrights and Trade Secrets is the subject of any
licensing or franchise agreement as of the date of this Agreement. No
holding, decision or judgment has been rendered by any governmental authority
which would limit, cancel or question the validity of any License, Patent,
Trademark, Copyright and Trade Secrets. No action or proceeding is
pending (i) seeking to limit, cancel or question the validity of any License,
Patent, Trademark, Copyright or Trade Secret, or (ii) which, if adversely
determined, would have a material adverse effect on the value of any License,
Patent, Trademark, Copyright or Trade Secret. The Subsidiary has used
and will continue to use for the duration of this Agreement, proper statutory
notice in connection with its use of the Patents, Trademarks and Copyrights and
consistent standards of quality in products leased or sold under the Patents,
Trademarks and Copyrights.
4. Defaults. The
following events shall be “Events of
Default”:
a. The
occurrence of an Event of Default as defined in the Note Purchase Agreement or
the Guaranty;
b. If any
representation or warranty of the Subsidiary in this Agreement proves to be
incorrect in any material respect when made; and
c. The
failure by the Subsidiary to observe or perform any of its obligations hereunder
for twenty (20) business days after receipt by the Subsidiary of notice of such
failure from the Secured Party.
5. Duty To
Hold In Trust. Upon the occurrence of an Event of Default, and
at any time thereafter, the Subsidiary shall, upon receipt by it of any revenue,
income or other sums subject to the Security Interest, whether payable pursuant
to the Notes or otherwise, or of any check, draft, note, trade acceptance or
other instrument evidencing an obligation to pay any such sum, hold the same in
trust for the Secured Party and shall forthwith endorse and transfer any such
sums or instruments, or both, to the Secured Party for application to the
satisfaction of the Obligations.
6. Rights
and Remedies Upon Default. Upon occurrence and continuance of
any Event of Default and at any time thereafter, the Secured Party shall have
the right to exercise all of the remedies conferred to the Secured Party
hereunder and under the Notes, and the Secured Party shall have all the rights
and remedies of a secured party under the UCC and/or any other applicable law
(including the Uniform Commercial Code of any jurisdiction in which any
Collateral is then subject). Without limitation, the Secured Party
shall have the following rights and powers:
a. to have a
third party custodian take possession of the Collateral and, for that purpose,
enter, with the aid and assistance of any person, any premises where the
Collateral, or any part thereof, is or may be placed and remove the same, and
the Subsidiary shall assemble the Collateral and make it available to the
Secured Party for the benefit of the Secured Party at places which the Secured
Party shall reasonably select, whether at the Subsidiary’s premises or
elsewhere, and make available to the Secured Party, without rent, all of the
Subsidiary’s respective premises and facilities for the purpose of the Secured
Party taking possession of, removing or putting the Collateral in saleable or
disposable form; and
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b. to
operate the business of the Subsidiary using the Collateral and shall have the
right to assign, sell, lease or otherwise dispose of and deliver all or any part
of the Collateral, at public or private sale or otherwise, either with or
without special conditions or stipulations, for cash or on credit or for future
delivery, in such parcel or parcels and at such time or times and at such place
or places, and upon such terms and conditions as the Secured Party may deem
commercially reasonable, all without (except as shall be required by applicable
statute and cannot be waived) advertisement or demand upon or notice to the
Subsidiary or right of redemption of the Subsidiary, which are hereby expressly
waived. Upon each such sale, lease, assignment or other transfer of
Collateral, the Secured Party may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Collateral being sold, free
from and discharged of all trusts, claims, right of redemption and equities of
the Subsidiary, which are hereby waived and released.
7. Indemnification
of the Secured Party. Neither the Secured Party nor any of its
affiliates or representatives will be liable for any action taken or omitted to
be taken by it or them under this Agreement in good faith and believed by it or
them to be within the discretion or power conferred upon it or them by this
Agreement or be responsible for the consequences of any error of judgment
(except for fraud, gross negligence, or willful misconduct). The
Subsidiary shall indemnify the Secured Party and its representatives and hold
them harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, reasonable expenses, and
reasonable disbursements of any kind or nature whatsoever that may be imposed
on, asserted against, or incurred by them in any way relating to or arising out
of this Agreement or any action taken or omitted by them under this
Agreement.
8. Applications
of Proceeds. The proceeds of any such sale, lease or other
disposition of the Collateral hereunder shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and
the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable
attorneys’ fees and expenses incurred by the Secured Party in enforcing its
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations, and to the payment of
any other amounts required by applicable law, after which the Secured Party
shall pay to the Subsidiary any surplus proceeds. If, upon the sale,
license or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which the Secured Party are legally entitled,
then the Subsidiary will be liable for the deficiency, together with interest
thereon, , plus interest at the Default Rate as set forth in the Note Purchase
Agreement, and the reasonable fees of any attorneys employed by the Secured
Party to collect such deficiency. To the extent permitted by
applicable law, the Subsidiary waives all claims, damages and demands against
the Secured Party arising out of the repossession, removal, retention or sale of
the Collateral.
9. Costs and
Expenses. The
Subsidiary agrees to pay all out-of-pocket fees, costs and expenses incurred in
connection with any filing required hereunder, including without limitation, any
financing statements, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Secured Party. The Subsidiary shall also
pay all other claims and charges which would reasonably be expected to
prejudice, imperil or otherwise affect the Collateral or the Security Interest
therein. Upon the occurrence and continuance of an Event of Default,
the Subsidiary shall upon demand, pay to the Secured Party the amount of any and
all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which the Secured Party incurs in
connection with (a) the enforcement of this Agreement, (b) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral, or (c) the exercise or enforcement of any of the rights of
the Secured Party under the Notes, including costs of
collection. Until so paid, any fees payable hereunder shall be added
to the principal amount of the Notes and shall bear interest as set forth in the
Notes.
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10. Responsibility
for Collateral. The Subsidiary assumes all liabilities and
responsibility in connection with all Collateral, and the obligations of the
Subsidiary hereunder or under the Notes shall in no way be affected or
diminished by reason of the loss, destruction, damage or theft of any of the
Collateral or its unavailability for any reason.
11. Security
Interest Absolute. All rights of the Secured Party and all
Obligations of the Subsidiary hereunder, shall be absolute and unconditional,
regardless of: (a) any change in the time, manner or place of payment or
performance of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from the Notes or
any other agreement entered into in connection with the foregoing; (b) any
exchange, release or nonperfection of any of the Collateral, or any release or
amendment or waiver of or consent to departure from any other collateral for, or
any guaranty, or any other security, for all or any of the Obligations; or
(c) any action by the Secured Party to obtain, adjust, settle and cancel in
its sole discretion any insurance claims or matters made or arising in
connection with the Collateral. The Subsidiary expressly waives
presentment, protest and notice of protest. In the event that at any
time any transfer of any Collateral or any payment received by the Secured Party
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Secured Party, then, in any such event, the
Subsidiary’s obligations hereunder shall survive cancellation of this Agreement,
and shall not be discharged or satisfied by any prior payment thereof and/or
cancellation of this Agreement, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof. The
Subsidiary waives all right to require the Secured Party to proceed against any
other person or to apply any Collateral which the Secured Party may hold at any
time, or to marshal assets, or to pursue any other remedy.
12. Term of
Agreement. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Notes have been
indefeasibly made in full and all other Obligations have been indefeasibly
paid.
13. Power of
Attorney; Further Assurances.
a. The
Subsidiary authorizes the Secured Party, and does hereby make, constitute and
appoint it, and its respective officers, agents, successors or assigns with full
power of substitution, as the Subsidiary’s true and lawful attorney-in-fact,
with power, in its own name or in the name of the Subsidiary, to, after the
occurrence and during the continuance of an Event of Default, (i) endorse
any notes, checks, drafts, money orders, or other instruments of payment
(including payments payable under or in respect of any policy of insurance) in
respect of the Collateral that may come into possession of the Secured Party;
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(ii) to
sign and endorse any UCC financing statement or any invoice, freight or express
▇▇▇▇, ▇▇▇▇ of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts, and other
documents relating to the Collateral; (iii) to pay or discharge taxes,
liens, security interests or other encumbrances at any time levied or placed on
or threatened against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and ▇▇▇ for monies due in respect of the Collateral; and
(v) generally, to do, at the option of the Secured Party, and at the
Subsidiary’s expense, at any time, or from time to time, all acts and things
which the Secured Party deems necessary to protect, preserve and realize upon
the Collateral and the Security Interest granted therein in order to effect the
intent of this Agreement and the Notes, all as fully and effectually as the
Subsidiary might or could do; and the Subsidiary hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. This
power of attorney is coupled with an interest and shall be irrevocable for the
term of this Agreement and thereafter as long as any of the Obligations shall be
outstanding.
b. On a
continuing basis, the Subsidiary will cooperate in good faith with the Secured
Party to make, execute, acknowledge, deliver, file and record, as the case may
be, in the proper filing and recording places in any applicable jurisdiction,
all such instruments, and take all such action as may reasonably be deemed
necessary or advisable, or as reasonably requested by the Secured Party, to
perfect the Security Interest granted hereunder and otherwise to carry out the
intent and purposes of this Agreement, or for assuring and confirming to the
Secured Party the grant or perfection of a security interest in all the
Collateral.
c. The
Subsidiary hereby irrevocably appoints the Secured Party as the Subsidiary’s
attorney-in-fact, with full authority in the place and stead of the Subsidiary
and in the name of the Subsidiary, from time to time in the Secured Party’s
discretion, to take any action and to execute any instrument which the Secured
Party may deem necessary or advisable in order to perfect the Security Interest,
including the filing, in its sole discretion, of one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of the Subsidiary where permitted by
law.
14. Notices. All
notices, requests, demands and other communications hereunder shall be in
writing, with copies to all the other parties hereto, and shall be deemed to
have been duly given (i) if delivered by hand, (ii) upon receipt of proof
of sending thereof if sent by facsimile, (iii) upon receipt if sent by
nationally recognized overnight delivery service (receipt requested), the next
business day, or (iv) if mailed by first-class registered or certified
mail, return receipt requested, postage prepaid, four days after posting in the
U.S. mails, in each case if delivered to the following addresses:
(A) if to the Subsidiary, to the address set forth immediately below
the Subsidiary’s name on the signature pages hereto; and (B) if to the Investor,
to the address set forth immediately below the Investor’s name on the signature
pages hereto. Each party shall provide notice to all of the other
parties of any change in address.
15. Other
Security. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Party shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Party’ rights and
remedies hereunder.
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16. Miscellaneous.
a. No course
of dealing between the Subsidiary and the Secured Party, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Party, any
right, power or privilege hereunder or under the Notes shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
b. All of
the rights and remedies of the Secured Party with respect to the Collateral,
whether established hereby or by the Notes or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised
singly or concurrently.
c. This
Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof and is intended to supersede all prior negotiations,
understandings and agreements with respect thereto, including the prior
Agreement. Any term of this Agreement may be terminated or amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only with
written consent of the Subsidiary and the holders of more than fifty percent
(50%) of the then-outstanding principal amount of the Notes. Any
termination, amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of the Notes, each future holder of the Notes,
their successors and assigns, and the Subsidiary.
d. In the
event that any provision of this Agreement is held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason, unless such provision is
narrowed by judicial construction, this Agreement shall, as to such
jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable. If, notwithstanding the foregoing, any provision of
this Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other
jurisdiction.
e. No waiver
of any breach or default or any right under this Agreement shall be considered
valid unless in writing and signed by the party giving such waiver, and no such
waiver shall be deemed a waiver of any subsequent breach or default or right,
whether of the same or similar nature or otherwise.
f. This
Agreement shall be binding upon and inure to the benefit of each party hereto
and its successors and assigns.
g. Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
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h. The
validity and interpretation of this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New
York. Each of the parties hereto hereby consents to the exclusive
jurisdiction and venue of the Courts of the State of New York, located in the
City and County of New York and the United States District Court, Southern
District, for the State of New York with respect to any matter relating to this
Agreement and performance of the parties’ obligations hereunder, the documents
and instruments executed and delivered concurrently herewith or pursuant hereto
and performance of the parties’ obligations thereunder and each of the parties
hereto hereby consents to the personal jurisdiction of such courts and shall
subject itself to such personal jurisdiction. Any action, suit or
proceeding relating to such matters shall be commenced, pursued, defended and
resolved only in such courts and any appropriate appellate court having
jurisdiction to hear an appeal from any judgment entered in such
courts. The parties irrevocably waive the defense of an inconvenient
forum to the maintenance of such suit or proceeding. Service of
process in any action, suit or proceeding relating to such matters may be made
and served within or outside the State of New York by registered or certified
mail to the parties and their representatives at their respective addresses
specified in Section 14 hereof, provided that a reasonable time, not less than
thirty (30) days, is allowed for response. Service of process may
also be made in such other manner as may be permissible under the applicable
court rules.
i. Each
party hereto hereby agrees to waive its respective rights to a jury trial of any
claim or cause of action based upon or arising out of this
Agreement. The scope of this waiver is intended to be all
encompassing of any disputes that may be filed in any court and that relate to
the subject mater of this Agreement, including without limitation contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is
a material inducement for each party to enter into a business relationship, that
each party has relied on this waiver in entering into this Agreement and that
each party will continue to rely on this waiver in their related future
dealings. Each party further warrants and represents that it has
reviewed this waiver with its legal counsel, and that such party has knowingly
and voluntarily waives its rights to a jury trial following such
consultation. This waiver is irrevocable, meaning that,
notwithstanding anything herein to the contrary, it may not be modified either
orally or in writing, and this waiver shall apply to any subsequent amendments,
renewals and supplements or modifications to this agreement. In the
event of litigation, this Agreement may be filed as a written consent to a trial
by the court.
17. Counterparts. This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument.
18. Facsimile
Signature. In the event that any signature is delivered by
facsimile transmission, PDF, electronic signature or other similar electronic
means, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such signature page were an original thereof.
[remainder of page intentionally left
blank]
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IN WITNESS WHEREOF, the
parties hereto have caused this Security Agreement to be duly executed on the
day and year first above written.
COMPANY:
ORGANIC
GROWING SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Title:
|
Notices:
|
Organic
Growing Systems, Inc.
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
|
|
with
copies to (which shall not constitute notice):
▇▇▇▇▇▇
& Jaclin LLP
▇▇▇
▇▇▇▇▇ ▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
|
|
ACKNOWLEDGEMENT
STATE OF
________________________ )
) ss.:
COUNTY OF
______________________ )
On the
___ day of __________________, 200__, before me, the undersigned, a notary
public in and for such state, personally appeared ________________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity as an executive
officer on behalf of _________________________, and that by his signature on the
instrument, he executed the instrument, and that he made such appearance before
the undersigned.
__________________________________
Notary Public
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ADDITIONAL
SIGNATURE PAGE TO SECURITY AGREEMENT
SECURED
PARTY:
CCM
PARTNERS FUND, LP
By: /s/
▇▇▇▇▇
▇▇▇▇▇▇
Name: ▇▇▇▇▇
▇▇▇▇▇▇
Title:
|
Notices:
|
CCM
Partners, Fund, LP,
c/o
Conative Capital Management, LLC
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ ▇▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
|
|
with
copies to:
▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇
▇. ▇▇▇▇▇, Esq.
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
|
|
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