Exhibit 5
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), dated as of June 18, 2002,
is by and among BIO-PLEXUS, INC., a Delaware corporation (the "Debtor"),
maintaining its principal place of business located at 000 Xxxxxxxxx Xxxx,
Xxxxxx, Xxxxxxxxxxx 00000, ComVest Venture Partners, L.P., a Delaware limited
partnership, as administrative agent for the Purchasers (the "Administrative
Agent" or the "Secured Party"), the general partner of which is ComVest
Management, LLC, a Delaware limited liability company, which is a wholly-owned
subsidiary of Commonwealth Associates Management Company, Inc., a New York
corporation and the general partner of Commonwealth Associates, L.P., the
placement agent ("Commonwealth"), and the purchasers (the "Purchasers") of the
Debtor's Senior Subordinated 7% Non-Convertible Promissory Notes and Warrants
(together, the "Units") under the terms of that certain Securities Purchase
Agreement of even date herewith (the "Purchase Agreement"), whose names are set
forth on the signature page of this Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Debtor has offered for sale to the Purchasers twenty-five
(25) Units (subject to an increase of another ten (10) Units to cover
over-allotments), each Unit (together, the "Units" and individually, a "Unit")
consisting of a (One Hundred Thousand Dollars Senior Subordinated 7%
Non-Convertible Promissory Note (together, the "Notes" and individually, a
"Note"), and associated warrants (together, the "Warrants" and individually, the
"Warrants"), pursuant to the terms of the Purchase Agreement;
WHEREAS, the Purchasers have appointed ComVest as Administrative Agent
to act on behalf of the Purchasers pursuant to the terms and conditions set
forth in detail in the Purchase Agreement and below, and expressly agree that
the Administrative Agent will be deemed the Secured Party for purposes of
administering the security interests granted to the Purchasers pursuant to the
terms and conditions set forth in detail below;
WHEREAS, under the terms and conditions of the Purchase Agreement, the
Purchasers have purchased an aggregate of up to 35 Units, evidenced by Notes and
Warrants dated the date hereof and as set forth in Exhibits A and B,
respectively, annexed hereto and made a part hereof, with payment of the Notes
and any other obligations of the Debtor to the Purchasers, and each of them, to
be secured as provided for in the Purchase Agreement;
WHEREAS, pursuant to the Purchase Agreement, the Debtor has agreed to
execute and deliver to the Secured Party, this Security Agreement granting the
Secured Party a first perfected priority lien and security interest in the
Collateral (as described below) to secure the Debtor's payment and discharge of
all of its obligations under the Purchase Agreement and the Notes.
NOW, THEREFORE, in consideration of the premises and agreements
hereinafter set forth, the parties hereto agree as follows:
1. Creation of Security Interest; Term.
In order to induce the Purchasers to enter into the Purchase Agreement
and purchase the Units, the Debtor hereby unconditionally and irrevocably grants
to the Secured Party a first perfected priority lien and security interest in
the Collateral described in Section 2A hereof (the "Collateral") to secure the
Debtor's prompt payment (alone, the "Indebtedness"), performance and discharge
in full of all of its obligations under the Purchase Agreement and the Notes
(together with the Indebtedness, the "Obligations"); provided, however, that the
Purchasers shall have a second perfected priority interest only in certain real
property of the Debtor, which consists of (i) the real estate owned by the
Debtor and located in Vernon, Connecticut (which is encumbered by a mortgage
(the "Mortgage") that is secured by a first perfected priority lien and security
interest in favor of the Mortgagee), (ii) any fixtures, attachments, accessions
to such property, and (iii) all products and proceeds of the sale or lease of
such real property (collectively, the "Mortgagee Collateral" and together with
the Collateral, the "Collateral"), pursuant to the terms and conditions of a
Mortgage and Security Agreement, by and among the Debtor and each of the
Purchasers, dated as of even date herewith, and substantially in the form
attached hereto as Exhibit C. Upon the earlier of the payment, performance and
discharge in full of all Obligations or the conversion of the Notes, the
security interests granted herein shall expire and so shall this Agreement.
Except with respect to the Mortgagee Collateral, the Secured Party's security
interest shall have priority and be superior to all other interests in the
Collateral; provided, that up to a maximum of One Million Dollars ($1,000,000)
of other senior subordinated 7% non-convertible notes of the Debtor that may be
sold following the date hereof on no more favorable terms as the Notes (the
"Additional Notes"), which Additional Notes shall rank equally with the Secured
Party regardless of the order of filing of any financing statement, and that the
Secured Party shall share pari passu in the Collateral with any purchaser of an
Additional Note in the event of a default by the Debtor under the Notes or the
Additional Notes, as applicable.
2. Collateral.
A. Collateral. The Collateral shall consist of the following:
(a) All of the Debtor's inventory, both now owned and
hereafter acquired, including raw materials, work in process, finished goods,
supplies and other tangible personal property held for sale or lease or
furnished or to be furnished under contracts of service or used or consumed in
the Debtor's business of whatsoever kind or nature, and any additions and
accession thereto and substitutions and replacements for any thereof, wherever
located.
(b) All of the Debtor's intangible personal property, cash
on hand and cash in and deposits with banks or other financial institutions,
whether now owned or hereafter acquired, including, without limitation, all
accounts, contract rights, goods, chattel paper, documents, instruments and
general intangibles; all tax refunds to which the Debtor may be or become
entitled; all existing and future accounts receivable of the Debtor and its
direct and indirect subsidiaries; all contracts, shares of stock, bonds, notes,
evidences of indebtedness and other securities, bills, notes, interests in life
insurance policies, copyrights, goodwill, trade names, trademarks, trademark
applications, patents, patent applications, copyrights, blue prints, drawings,
claims, credits, choses in action, licenses, permits, franchises and grants, any
and all tangible and intangible products, discoveries, developments, designs,
improvements, inventions, formulas, processes, techniques, know-how, data and
software source code whether or not registrable or patentable under statute,
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whenever made, conceived, reduced to practice, learned or developed by or for
the Debtor;
(c) Except for the real property expressly covered by the
Mortgagee Collateral, all other real, personal and mixed (tangible and
intangible) property and rights related thereto, of every character and wherever
situated, now owned and hereafter acquired (other than property that may be held
by the Debtor pursuant to leases) by the Debtor, including, without limitation,
equipment, machinery, vehicles, tools, furniture, fixtures, all attachments,
accessions and other property used in connection with the Debtor's business, all
additions, enlargements, extensions, modifications, repairs, substitutions and
replacements thereof, wherever located;
(d) All present and future books of account of the Debtor of
every kind or nature, invoices, purchase and sale agreements, ledger cards,
bills or lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in which the foregoing
are stored; and
(e) All products and proceeds of the foregoing, in any form,
including, without limitation, insurance proceeds and all claims against third
parties for loss or damage to or destruction of the foregoing
B. Lender Transaction. Notwithstanding the foregoing, each
Purchaser hereby expressly permits the Debtor to establish a revolving credit
facility (the "Credit Facility") with an institutional lender (the "Lender") for
a maximum of Two Million Dollars ($2,000,000), and acknowledges that in the
event the Debtor establishes such a Credit Facility, repayment of the Credit
Facility will be secured by a first perfected priority lien and security
interest in favor of the Lender in (i) all existing and future accounts
receivable of the Debtor its direct and indirect subsidiaries (whether existing
at the time of closing with the Lender or thereafter organized or acquired by
the Debtor) to payment for services rendered or goods sold or leased, or for
loans or other financial accommodations extended, whether or not evidenced by
instruments or chattel paper, and whether or not earned by performance; and (ii)
all inventory and proceeds of such accounts receivable, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing (the "Lender
Collateral"). The Purchasers hereby expressly acknowledge that, solely in the
event of the foregoing, the Purchasers' first priority perfected lien and
security interest in the portion of the Collateral that becomes Lender
Collateral shall become subordinate only to the Lender's first priority
perfected lien and security interest in the Lender's Collateral, so that
repayment of the Notes and the Additional Notes shall be secured by a second
perfected lien and security interest only with respect to the Lender Collateral.
3. Payment Obligations of the Debtor.
(a) The Debtor shall pay to the Purchasers any sum or sums due or
which may become due pursuant to the Notes payable to the order of each of the
Purchasers listed on the signature page hereto in the principal amount, together
with accrued interest thereon, in accordance with the terms of the Notes. The
Debtor shall also perform and discharge in full of all of its other Obligations.
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(b) Debtor shall account fully and faithfully to the Secured
Party for proceeds from disposition of the Collateral in any manner and,
following an Event of Default (as defined below) hereunder, shall pay or turn
over promptly in cash, negotiable instruments, drafts, assigned accounts or
chattel paper all the proceeds from each sale to be applied to Debtor's
Obligations to the Secured Party, subject, if other than cash, to final payment
or collection. Application of such proceeds to the Obligations shall be in the
sole discretion of the Secured Party, provided such application of proceeds is
made by the Secured Party in good faith and in accordance with Section 7 hereof.
(c) Following an Event of Default hereunder or under the Notes,
the Debtor shall pay to the Secured Party on demand all reasonable expenses and
expenditures (including, but not limited to, reasonable fees and expenses of
legal counsel) incurred or paid by the Secured Party in exercising or protecting
its interests, rights and remedies under this Agreement, plus penalties thereon
at the lesser of (i) the per diem rates described in the Notes or (ii) the
highest rate of interest then allowed by law.
(d) The Debtor shall pay immediately, without notice, the entire
unpaid principal amounts of the Notes, together with accrued interest thereon,
to the Purchasers whether created or incurred pursuant to this Agreement or
otherwise, upon an Event of Default.
4. Representations, Warranties and Covenants of the Debtor. The Debtor
hereby represents and warrants to, and covenants with, the Purchasers and the
Secured Party that:
(a) All information supplied and statements made by the Debtor
in any financial, credit or accounting statement or provided to the Purchasers
and/or the Secured Party prior to, contemporaneously with or subsequent to the
execution of this Agreement are and shall be true, correct, complete, valid and
genuine in all material respects as of the date made.
(b) The Collateral shall remain in the Debtor's possession or
control at all times at the Debtor's risk of loss until (i) sold, licensed or
otherwise disposed of in the ordinary course of business, provided that the
Secured Party shall be granted a security interest in the proceeds and other
consideration received for such Collateral, or (ii) as authorized in writing by
the Secured Party pursuant to a Majority Vote (as defined in Section 8 hereof).
(c) Until an Event of Default, the Debtor may use the
Collateral in any lawful manner not inconsistent with this Agreement or with the
terms or conditions of any policy of insurance thereon and may also sell,
license or otherwise dispose of the Collateral in the ordinary course of
business. The Secured Party's security interest shall attach to all proceeds of
sales, licenses and other dispositions of the Collateral.
(d) The Debtor shall promptly notify the Secured Party in
writing of any change in the location of its chief executive office and
principal place of business as set forth in the introduction to this Agreement.
(e) The Debtor shall pay prior to delinquency all material
taxes, charges, liens and assessments against the Collateral, except those the
Debtor is contesting in good faith and for which adequate accruals have been
made, and upon the Debtor's failure to do so after ten (10) days' prior written
notice, the Secured Party at its option may pay any of them and shall be the
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sole judge of the legality or validity thereof and the amount necessary to
discharge the same. Such payment shall become part of the Obligations secured by
this Agreement and shall be paid to the Purchasers by the Debtor immediately and
without demand, with interest thereon at the rate set forth in Section 3(c)
hereof.
(f) The Debtor shall have and maintain insurance at all times
with respect to all Collateral against risks of fire, theft and such other risks
as is reasonable for its business and as the Secured Party may reasonably
require (but in no event shall the Debtor be obligated to insure such Collateral
in an amount greater than the replacement value thereof), including extended
coverage. Within ten (10) days after the date hereof, the Debtor shall amend
such insurance policies to contain a standard mortgagee's endorsement providing
for payment of any loss to the Secured Party and to provide for ten (10) days'
written minimum cancellation notice to the Secured Party. Following an Event of
Default, subject to the provisions of Section 7 hereof, the Secured Party may
act as attorney for the Debtor in obtaining, adjusting, settling and canceling
such insurance and endorsing any drafts drawn by insurers of the Collateral. The
Secured Party may apply any proceeds of such insurance which may be received by
it in payment on account of the obligations secured hereby, whether due or not.
(g) The Debtor shall, at its own expense, do, make, procure,
execute and deliver all acts, things, writings and assurances as the Secured
Party may at any time reasonably request to protect, assure or enforce its
interests, rights and remedies created by, provided in or emanating from this
Agreement, including with respect to filings with the Patent and Trademark
Office. The Debtor shall execute financing statements and take whatever other
actions are reasonably requested by the Secured Party to perfect and continue
the Secured Party's security interests in the Collateral. In addition, the
Debtor shall use its best efforts to take all appropriate action (including but
not limited to all appropriate action requested by the Secured Party) to perfect
the Secured Party's security interest for any liens which may not be perfected
by the filing of a Form UCC-1 (including but not limited to filings with the
U.S. Patent and Trademark Office). Upon the reasonable request of the Secured
Party, the Debtor shall deliver to the Secured Party any and all of the
documents evidencing or constituting the Collateral, and the Debtor shall note
the Secured Party's interests upon any and all of such documents if not
delivered to the Secured Party for possession by it. The Debtor hereby agrees
that a carbon, photographic, photostatic or other reproduction of this Agreement
or of a financing statement is sufficient as a financing statement where
permitted by law.
(h) Except in the ordinary course of business, as authorized in
this Agreement or as authorized by the Secured Party in writing by a Majority
Vote (as defined in Section 8 hereof), the Debtor shall not sell, lend, license,
rent, lease or otherwise dispose of the Collateral or any interest therein, and
the Debtor shall keep the Collateral, including the proceeds thereof, free from
unpaid charges, including taxes, and from liens, encumbrances and security
interests other than the security interests created by this Agreement in favor
of the Secured Party and the security interests granted in favor of the Lender
and the Mortgagee (as provided herein).
(i) The Debtor shall keep accurate and complete records of the
Collateral and its proceeds.
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(j) The Debtor has good and valid rights in and title to the
Collateral and has the full power and authority to grant to the Secured Party
the security interests in the Collateral created by this Agreement and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other person other than
any consent or approval that has been obtained.
(k) Except as set forth on Schedule 4(k) hereof, the Debtor is
the owner of the Collateral free of all liens, claims and encumbrances, except
(i) the security interest created by this Security Agreement and granted in
favor of the Secured Party, and (ii) any security interest that have been or may
be granted to the Lender and the Mortgagee (as provided herein).
(l) With respect to any and all Collateral, the Debtor has not
obtained and is not in the process of applying for any patents, trademarks or
copyrights in any jurisdiction other than Connecticut or in the Patent and
Trademark Office. The Debtor shall notify the Secured Party at least thirty (30)
days prior to the filing of any patent, trademark or copyright applications with
respect to the Collateral and will provide the Secured Party with all
information necessary to assist the Secured Party in perfecting its security
interest in the Collateral prior to the filing of any patent, copyright or
trademark applications.
(m) The Debtor agrees that the Secured Party holds the Collateral
as agent for the Purchasers, and is hereby authorized to and may turn over to
the Purchasers upon request therefor any such Collateral after all obligations
and indebtedness of Debtor to the Secured Party have been fully paid and
performed. Notwithstanding the foregoing, the Debtor hereby acknowledges and
agrees that in terms of payments in respect of the Notes and from the proceeds
of any Collateral, each Purchaser shall be treated ratably in accordance with
its pro rata share of the Notes based upon the ratio of the then outstanding
principal amount of Purchaser's Note to the outstanding principal balance of all
of the Notes ("Pro Rata Share") and the Debtor shall execute and deliver such
additional documents and take such additional action as may be necessary or
desirable in the reasonable opinion of the Secured Party to effectuate the
provisions and purposes of the provisions of Section 7 hereof.
(n) As to that portion of the Collateral which is accounts, the
Debtor represents, warrants and agrees with respect to each such account that:
(i) The account arose from the performance of services by
the Debtor which have been performed or from the lease or the absolute
sale of goods or provision of services by the Debtor in which the
Debtor had the sole and complete ownership, and the goods or services
have been delivered or provided to, as the case may be, the account
debtor.
(ii) The account is not subject to any prior or subsequent
assignment, claim, lien or security interest other than (i) the
security interest created by this Security Agreement and granted in
favor of the Secured Party and (ii) any security interests that may
have been or may be granted to the Lender and the Mortgagee (as
provided herein).
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(iii) The account arose in the ordinary course of the
Debtor's business, and no notice of bankruptcy, insolvency or
financial embarrassment of the account debtor has been received by the
Debtor.
(o) The Debtor does not have any subsidiaries, does not own any
stock or equity interests in any corporation, limited liability company,
partnership or other entity, and is not a party to a joint venture.
5. Events of Default. The Debtor shall be in default under this
Agreement upon the happening of any condition or event set forth below (each, an
"Event of Default"):
(a) An Event of Default (as defined in the Notes) under any Note;
(b) The Debtor's default under, or failure to perform or observe
any term, covenant or agreement contained in or contemplated by, the Purchase
Agreement to be performed or observed by the Debtor, which default or failure is
not cured within thirty (30) days after the Debtor receives written notice of
such default or failure from the Secured Party; or
(c) The creation of any liens (other than (i) the security
interest created by this Security Agreement and granted in favor of the Secured
Party, and (ii) any security interests that have been or may be granted to the
Lender and the Mortgagee (as provided herein)) without the consent of the
Secured Party pursuant to a Majority Vote (as defined in Section 8 hereof).
6. Secured Parties' Rights and Remedies.
(a) Rights Exclusive of Default. Until the termination of this
Agreement, upon reasonable notice to the Debtor:
(i) The Secured Party may enter the Debtor's premises at any
reasonable time during the Debtor's usual business hours without
interruption of the Debtor's business and without any breach of the
peace to inspect the Collateral and the Debtor's books and records
pertaining to the Collateral, and the Debtor shall assist the Secured
Party in making any such inspection; and
(ii) At its option, the Secured Party may (x) agree to
discharge taxes, liens or security interests or other encumbrances at
any time levied or placed on the Collateral; (y) pay for the insurance
on the Collateral; and (z) pay for the maintenance and preservation of
the Collateral. The Debtor agrees to reimburse the Secured Party on
demand for any payment made, or expense incurred by the Secured Party
pursuant to the foregoing authorization, plus interest thereon at the
rate set forth in Section 3(c) hereof, and will indemnify and hold the
Secured Party harmless from and against liability in connection
therewith.
(b) Rights in Event of Default. In addition to any other rights
which the Secured Party may have at law or hereunder, upon the occurrence of an
Event of Default, and at any time thereafter that such Event of Default remains
uncured, the Secured Party may:
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(i) Declare all obligations secured hereby immediately due
and payable and shall have the rights and remedies of a "secured
party" under the UCC in effect in the local jurisdiction where the
Collateral is located, including, without limitation, the right to
sell, lease or otherwise dispose of any or all of the Collateral and
the right to take possession of the Collateral, and for that purpose
the Secured Party may enter any premises on which the Collateral or
any part thereof may be situated and remove the same therefrom, so
long as the same may be accomplished without a breach of the peace.
The Secured Party may require the Debtor to assemble the Collateral
and, to the extent reasonably practicable, make it available to the
Secured Party at a place to be designated by the Secured Party which
is reasonably convenient to the parties and thereafter hold the
Collateral absolutely free from any claim or right whatsoever, and
such demand, notice and right or equity being hereby expressly waived
and released. Unless the Collateral threatens to decline speedily in
value or is of a type customarily sold on a recognized market, the
Secured Party will send the Debtor reasonable notice of the time and
place of any public sale thereof or of the time after which any
private sale or other disposition thereof is to be made. The
requirement of sending reasonable notice shall be met if such notice
is given to the Debtor at least ten (10) days before the time of the
sale or disposition. Expenses of retaking, holding, preparing for
sale, selling or the like shall include the Secured Party's reasonable
fees and expenses (including, but not limited to, reasonable fees and
expenses of legal counsel), and the Debtor agrees to pay such
reasonable fees and expenses, plus interest thereon at the rate set
forth in Section 3(c) hereof. The Debtor shall remain liable for any
deficiency hereunder or under the Notes;
(ii) Execute, sign, endorse, transfer or deliver in the name
of the Debtor, notes, checks, drafts or other instruments for the
payment of money and receipts, certificates of origin, applications
for certificates of title or any other documents, necessary to
evidence, perfect or realize upon the security interest and
obligations created by this Agreement.
(iii) Notify the account of debtors or obligors of any
accounts, chattel paper, negotiable instruments or other evidences of
indebtedness remitted by the Debtor to the Secured Party as proceeds
to pay the Purchasers directly;
(iv) Demand, xxx for, collect or make any compromise or
settlement with reference to the Collateral as the Secured Party, in
its sole discretion, chooses; and
(v) Remedy any default and may waive any default without
waiving or being deemed to have waived any other prior or subsequent
default.
(c) Private Sale. The Secured Party shall not incur any liability
as a result of a private sale of the Collateral, or any part thereof, at any
sale pursuant to Section 6(b) hereof conducted in good faith. The Debtor hereby
waives any claims against the Secured Party arising by the reason of the fact
that the price at which the Collateral, as the case may be, may have been sold
at such private sale was less than the price that might have been obtained at a
public sale or was less than the aggregate amount of the Obligations, even if
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the Secured Party accepts the first offer received and does not offer the
Collateral to more than one offeree.
(d) Application of Proceeds. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization of all or
any part of the Collateral pursuant hereto shall be applied to the Obligations
in accordance with each Purchaser's Pro Rata Share and as set forth in the
intercreditor arrangement in Section 7 hereof.
(e) Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to this Section 6 are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Obligations, the Debtor shall remain liable for any deficiency.
7. Intercreditor Arrangement.
(a) ComVest Venture Partners, L.P., as the "Administrative Agent"
agrees, as to the certain rights and priorities of each with respect to the
Obligations and with respect to their respective liens upon and security
interest in the Collateral, to provide for the orderly sharing among the
Purchasers of the proceeds of such Collateral upon any foreclosure thereon or
other disposition thereof, to the intercreditor arrangement set forth in this
Section 7.
(b) The Administrative Agent shall, and is hereby expressly given
the authority to, enter into an intercreditor agreement with the Lender with
respect to the Lender Collateral and the Mortgagee Collateral (as provided
herein).
(c) Payments Held in Trust/Turnover; Application of Payments.
(i) In the event that any payment or distribution of assets
of the Debtor, whether in cash, property or securities, which is
prohibited by this Agreement, the Notes or the Purchase Agreement
(together, the "Loan Documents"), shall be received by a Purchaser in
contravention of such Loan Documents such payment or distribution
shall be held in trust for the benefit of and shall be paid over to or
delivered to the other Purchasers for application in accordance with
the terms hereof.
(ii) All payments of principal, interest, fees and expenses
after the issuance of the Notes, and proceeds of the Collateral shall
be apportioned ratably among the Purchasers, in accordance with each
Purchaser's Pro Rata Share.
(d) Permitted Liens and Relative Priorities. As among the
Purchasers, and notwithstanding the terms (including the description of
Collateral), dating, execution, or delivery of any document, instrument, or
agreement; the time, order, method, or manner of granting, attachment or
perfection of any security interest or lien; the time of filing or recording of
any financing statements, assignments, deeds of trust, mortgages, or any other
documents, instruments, or agreements under the UCC or any other applicable law,
and any provision of the UCC or any other applicable law to the contrary, the
Purchasers agree that the Administrative Agent not individually, but on behalf
of all of the Purchasers, shall have a security interest in and lien upon the
Collateral. For purposes of the foregoing allocation of priorities, any claim of
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a right to a setoff shall be treated in all respects as a security interest and
no claimed right of setoff shall be asserted to defeat or diminish the rights or
priorities provided for herein.
(e) No Alteration of Priority. The lien and security interest
priorities provided in Section 7(c) hereof shall not be altered or otherwise
affected by any amendment, modification, supplement, extension, renewal,
restatement or refinancing of any of the Obligations nor by any action or
inaction which the Administrative Agent may take or fail to take in respect of
the Collateral.
(f) Nonavoidability and Perfection. The provisions of this
Section 7 are intended solely to govern the respective priorities as among the
Purchasers. Each Purchaser agrees that it will not directly or indirectly take
any action to contest or challenge the validity, legality, perfection, priority,
availability, or enforceability of the liens of the other Purchasers or the
Administrative Agent upon the Collateral or seek to have the same avoided,
disallowed, set aside, or otherwise invalidated in any judicial proceeding or
otherwise. In the event that any other Purchaser (either individually or
together with others) breaches or causes to be breached the terms of the
preceding sentence, resulting (directly or indirectly) in the avoidance or
imperfection of the Administrative Agent's lien or security interest held on
behalf of all of the Purchasers in some or all of the Collateral, then the
priority of the lien or security interest of the Secured Party in any such
affected Collateral shall continue to be governed by the terms of Section 7(c)
hereof irrespective of the avoidance or imperfection of the Administrative
Agent's lien or security interest held on behalf of all of the Purchasers.
(g) Management of Collateral. Notwithstanding anything to the
contrary contained in any of the Notes (with respect to provisions addressing
management of Collateral only):
(i) Until the Notes have been paid in full and subject to
the remaining provisions of this Section 7: (i) the Administrative
Agent, on behalf of the Purchasers, shall have the exclusive right to
manage, perform, and enforce the terms of the Loan Documents with
respect to the Collateral and to exercise and enforce all privileges
and rights thereunder in its reasonable discretion and its exercise of
its business judgment, including, without limitation, the exclusive
right to enforce or settle insurance claims with respect to
Collateral, take or retake control or possession of Collateral and to
hold, prepare for sale, process, sell, lease, dispose of, or liquidate
Collateral; (ii) none of the Purchasers shall exercise or take any
action in furtherance of the sale, foreclosure, realization upon, or
the repossession or liquidation of any of the Collateral, including,
without limitation: (A) the exercise of any remedies or rights of a
"Secured Creditor" under Article 9 of the UCC, such as, without
limitation, the notification of account debtors; (B) the exercise of
any remedies or rights as a mortgagee or beneficiary (or by the
trustee on behalf of the beneficiary), including, without limitation,
the appointment of a receiver, or the commencement of any foreclosure
proceedings or the exercise of any power of sale, including, without
limitation, the placing of any advertisement for the sale of any
Collateral; (C) the exercise of any remedies available to a judgment
creditor; or (D) any other remedy available in respect of the
Collateral available to such Secured Creditor under any of the Loan
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Documents (the "Secured Party Remedies") with respect to
Collateral; and (iii) any and all proceeds of Collateral which shall
come into the possession, control, or custody of the Purchasers will
be deemed to have been received for the account of the Administrative
Agent and all other Purchasers, and shall be immediately paid over to
the Administrative Agent for application in accordance with the
provisions hereof. Each Purchaser waives any and all rights to affect
the method or challenge the appropriateness of any action by the
Administrative Agent with respect to the Collateral other than actions
arising out of the gross negligence or willful misconduct of the
Administrative Agent, and waives any claims or defenses they may have
against the Administrative Agent, including any such claims or
defenses based on any actions or omissions of any such person in
connection with the perfection, maintenance, enforcement, foreclosure,
sale, liquidation or release of any lien or security interest therein,
or any modification or waiver of the Loan Documents specifically
relating to the management of the Collateral other than those arising
out of the gross negligence or willful misconduct of the
Administrative Agent.
(ii) The rights and priorities set forth in this Section 7
shall remain binding irrespective of the terms of any plan of
reorganization in any proceeding commenced by or against the Debtor
under any provision of the United States Bankruptcy Code (11 U.S.C.
ss. 101, et seq.), as amended, and any successor statute (the
"Bankruptcy Code") or under any other federal or state bankruptcy or
insolvency law, including assignments for the benefit of creditors,
formal or informal moratoria, compositions, extensions generally with
its creditors, or proceedings seeking reorganization, arrangement, or
other similar relief, and all converted or succeeding cases in respect
thereof (the "Bankruptcy Case") or other provisions of the Bankruptcy
Code or any similar federal or state statute.
(h) Sale of Collateral. Until the Notes have been paid in full,
only the Administrative Agent on behalf of the Purchasers shall have the right
to restrict or permit, or approve or disapprove, the sale, transfer or other
disposition of the Collateral; provided, that the proceeds of any given sale
shall be applied to the Obligations of each Purchaser in accordance with its Pro
Rata Share and no such sale, transfer or other disposition shall be consented to
by the Administrative Agent with respect to all or substantially all of the
Collateral without the consent of the Purchasers by a Majority Vote (as defined
in Section 8 hereof).
(i) Sections 9-504 and 9-505 Notice and Waiver of Marshalling.
Each Purchaser hereby acknowledges that this Agreement shall constitute notice
of the other Purchasers' respective interests in the Collateral as provided by
Sections 9-504 and 9-505 of the UCC and each of the Purchasers waives any right
to compel the other Purchasers to marshal any of the Collateral or to seek
payment from any particular assets of Debtor or from any third party.
(j) Bankruptcy Issues.
(i) Except as provided in this Section 7(j), this Section 7
shall continue in full force and effect after the commencement of a
Bankruptcy Case and shall apply with full force and effect with
respect to all Collateral acquired by Debtor, and to all Indebtedness
11
incurred by the Debtor, subsequent to such commencement to the extent
consented to by the Purchasers.
(ii) If the Debtor shall become subject to a Bankruptcy
Case, and if the Administrative Agent shall desire to permit the use
of cash collateral or to provide post-petition financing to the
Debtor, the Administrative Agent shall obtain the prior written
consent of the Purchasers by a Majority Vote (as defined in Section 8
hereof) for such use of cash collateral or post-petition financing. No
objection will be raised by the Purchasers to the Administrative
Agent's motion for relief from the automatic stay in any proceeding
under the Bankruptcy Code to foreclose on and sell the Collateral.
(iii) In any Bankruptcy Case by or against the Debtor,
(A) the Administrative Agent may, and is hereby
irrevocably authorized and empowered (in its own name or in
the name of the Purchasers or otherwise), but shall have no
obligation, to, (1) demand, xxx for, collect and receive
every payment or distribution in respect of the Indebtedness
and give acquittance therefor and (2) file claims and proofs
of claim in respect of all of the Indebtedness and take such
other action (including, without limitation, voting all of
the Indebtedness or enforcing any security interest or other
lien securing payment of all of the Indebtedness) as the
Administrative Agent may reasonably deem necessary or
advisable for the exercise or enforcement of any of the
rights or interests of the Administrative Agent and the
Purchasers; provided, that if the Administrative Agent
elects not to do any of the foregoing it shall notify each
Purchaser in writing in a manner such that such notice is
received by the Purchasers on a date no less than ten (10)
business days prior to the date any such action is required
to be taken under applicable law and regulation and each
Purchaser may take all actions necessary thereunder
consistent with the terms of this Security Agreement; and
(B) the Purchasers will duly and promptly take such
action as the Administrative Agent may reasonably request
(1) to collect the Indebtedness and to file appropriate
claims or proofs of claim with respect thereto, (2) to
execute and deliver to the Administrative Agent such powers
of attorney, assignments or other instruments as the
Administrative Agent may request in order to enable it to
enforce any and all claims with respect to, and any security
interests and other liens securing payment of, the
Indebtedness, and (3) to collect and receive any and all
payments or distributions which may be payable or
deliverable upon or with respect to the Indebtedness for
application to the Purchasers in accordance with this
Security Agreement.
(k) Notice of Default and Certain Events. Each Purchaser shall
send written notice to the other Purchasers upon the occurrence of any of the
following as applicable: (a) a request to the Administrative Agent that the
Administrative Agent declare any default under such Loan Document, (b) a request
12
to the Administrative Agent that the Administrative Agent accelerate any
Indebtedness, or (c) the intention of such Purchaser to exercise any of its
enforcement rights or remedies. Each such notice shall be sent to the other
Purchasers contemporaneously with the sending of such notice to Debtor if and
when sent under the applicable Loan Document. The failure of any Purchaser to
give such notice shall not affect the relative lien or security interest
priorities or the other privileges of such Purchaser as provided in this
Security Agreement or give rise to any liability.
(l) Bailment. With respect to any Collateral in which a security
interest may be perfected under the UCC or other relevant law only by possession
("Possessory Collateral"), the Administrative Agent will act as pledgeholder for
the Purchasers until the payment in full in cash of the Indebtedness. Each
Purchaser acknowledges and agrees that: (i) the Administrative Agent makes no
representation or warranty whatsoever as to the nature, extent, description,
validity or priority of any Possessory Collateral or the security interests in
or liens upon any Possessory Collateral; (ii) while any Possessory Collateral is
held by the Administrative Agent, the Administrative Agent shall not have any
liability to, and shall be held harmless by, the Purchasers, for any losses,
damages, claim, or liability of any kind to the extent arising out of the
holding of such Possessory Collateral, other than losses, damages, claims, or
liabilities arising out of the Administrative Agent's gross negligence or
willful misconduct; (iii) the Administrative Agent need not act as a
pledgeholder for the Purchasers with respect to any Collateral in which a
security interest may be perfected by means other than possession; (iv) the
Purchasers shall immediately deliver to the Administrative Agent any Possessory
Collateral that is now or in the future comes into their possession to be held
by the Administrative Agent pursuant to the terms hereof; and (v) the claim of
each of the Purchasers in the security interests in and liens upon the
Possessory Collateral shall be governed by the terms of this Security Agreement.
(m) Authority of Agents/Trustees. Each of the Purchasers agrees
that any assignment or transfer of an interest in any of the Indebtedness held
by it shall be made expressly subject to the terms and conditions of this
Security Agreement.
(n) Successor Administrative Agent. The Administrative Agent may
resign and be discharged from all further duties and obligations hereunder by
giving each of the Purchasers thirty (30) days prior written notice or such
shorter notice period as may be agreed between the Administrative Agent and the
Purchasers. In addition, the Administrative Agent may be removed at any time by
the Purchasers by a Majority Vote (as defined in Section 8 hereof). Upon the
resignation or removal of the Administrative Agent, a successor Administrative
Agent shall be elected by the Purchasers by a Majority Vote (as defined in
Section 8 hereof). Upon the appointment of a successor Administrative Agent, all
of the resigning or removed Administrative Agent's liens or security interests
held on behalf of all of the Purchasers in some or all of the Collateral shall
be assigned to the successor Administrative Agent, and the resigning or removed
Administrative Agent shall do all acts necessary or appropriate to accomplish
the above to vest in the successor Administrative Agent all of the powers of the
resigning or removed Administrative Agent.
8. Modification of Agreement. Except as otherwise expressly provided
by this Agreement, the Administrative Agent is hereby authorized to take all
actions as the Secured Party under this Agreement (including, without
13
limitation, issuing any consents or approvals), and the Debtor is entitled to
rely on any certification, notice or other communications from the
Administrative Agent which the Debtor believes to be genuine and correct and to
have been signed or sent by or on behalf of the Administrative Agent; provided,
however, that no modification, amendment or waiver of any provision of, this
Agreement, nor any consent to any departure by the Debtor therefrom, shall in
any event be effective unless the same shall be in writing by the Administrative
Agent at the direction of a majority in aggregate principal amount of
then-outstanding Notes under the Purchase Agreement (the "Majority Vote") and
then such modification, amendment, waiver or consent shall be effective only in
the specific instance and for the purpose given; provided, further, however,
that, without the written consent of each Purchaser affected thereby, no such
action shall (i) reduce the amount of principal or required principal payments
due to the Purchasers; (ii) reduce the rate of interest payable to the
Purchasers; or (iii) postpone any date fixed for payment of principal. No notice
to or demand on the Debtor in any case shall entitle the Debtor to any other or
further notice or demand in the same, similar or other circumstances. When any
amendment, modification or waiver to this Agreement, the Notes, the Warrants, or
the Security Agreement is made in accordance with the terms of this Section 8,
such amendment, modification or waiver shall be enforceable against each
Purchaser or the Purchasers, as applicable, as if such Purchaser or Purchasers,
as applicable, had signed such amendment, modification or waiver. The terms of
this Agreement may be amended, modified or waived only in a written instrument
signed by the party against whom enforcement may be sought.
9. Remedies Cumulative, etc. No right, power or remedy herein
conferred upon or reserved to the Administrative Agent or the Purchasers is
intended to be exclusive of any other right, power or remedy or remedies, and
each and every right, power and remedy of the Administrative Agent or the
Purchasers pursuant to the Loan Documents or now or hereafter existing at law or
in equity or by statute or otherwise shall, to the extent permitted by law, be
cumulative and concurrent and shall be in addition to every other right, power
or remedy pursuant to this Agreement or the Note, now or hereafter existing at
law or in equity or by statute or otherwise, and the exercise or beginning of
the exercise by the Administrative Agent or the Purchasers of any one or more of
such rights, powers or remedies shall not preclude the simultaneous or later
exercise by the Administrative Agent and the Purchasers of any or all such other
rights, powers or remedies.
10. No Waiver, etc. To the fullest extent permitted by law, no failure
or delay by the Administrative Agent or the Purchasers to insist upon the strict
performance of any term, condition, covenant or agreement of this Agreement, the
Purchase Agreement, or of the Note or Warrant, or to exercise any right, power
or remedy hereunder or thereunder or consequent upon a breach hereof or thereof,
shall constitute a waiver of any such term, condition covenant, agreement,
right, power or remedy or of any such breach, or preclude the Administrative
Agent or the Purchasers from exercising any such right, power or remedy at any
later time or times.
11. Notices. All notices, demands, requests, consents, approval or
instructions hereunder shall be in writing and delivered personally, sent by
registered or certified mail, postage prepaid, by nationally recognized
overnight courier service, or by telecopy (or like transmission), as follows:
14
(1) if to the Debtor:
000 Xxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxx 00000
Attn: President
with a copy to:
Xxxx and Xxxxx, P.C.
Xxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
(2) if to the Administrative Agent:
c/o Commonwealth Associates, L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxxx
with a copy to:
Xxxxxxxxx Traurig, LLP
The MetLife Building
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Annex, Esq.
(2) if to the Purchasers, at the addresses set forth in the Purchase
Agreement.
Any notice personally delivered shall be deemed to be given upon delivery. Any
notice so addressed and mailed shall be deemed to be given when so mailed. Any
notices addressed and otherwise delivered shall be deemed to be given when
actually received by the addressee. Any of the above addresses and telecopy
numbers may be changed at any time by notice given as provided above; provided,
however, that any such notice of change of address shall be effective only upon
receipt.
12. Survival of Agreement. Each representation, warranty, covenant and
agreement herein contained, shall survive the making by the Purchasers of the
purchase of the Notes and Warrants and the execution and delivery to the
Purchasers of the Notes and Warrants, notwithstanding any investigation at any
time made by or on behalf of any party, and shall continue in full force and
effect so long as any obligation is outstanding and unpaid.
13. Entire Agreement. This Agreement (including those documents and
instruments referred to herein) contains the entire agreement with respect to
the transactions contemplated hereby, and supersedes all prior understandings,
arrangements and agreements with respect to the subject matter hereof.
15
14. Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and may be assigned, without
limitation, to the affiliates of the Purchasers or the Secured Party, as the
case may be. Assignments of this Agreement to any non-affiliate of the
Purchasers or the Secured Party, as the case may be, shall not be made without
the prior written consent of the Debtor (which shall not be unreasonably
withheld or delayed). In no event may a Purchaser assign its rights under this
Agreement separate from an assignment of the Purchaser's Note.
15. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
principles governing conflicts of law, except that the laws of the state in
which any Collateral is located (if different from the State of New York) shall
govern the creation, perfection and foreclosure of the liens created hereunder
on such property or any interest therein. The parties hereby irrevocably
consents to the exclusive personal jurisdiction of any state or federal court
for New York County in the State of New York or the Southern District of New
York. The parties hereby waive any objection to venue and any objection based on
a more convenient form in any action instituted under this Agreement.
16. Further Assurances. All property acquired by the Debtor after the
date hereof, which by the terms hereof is required or intended to be subjected
to the lien of this Agreement, shall, immediately upon the acquisition thereof
and without further mortgage, conveyance or assignment, become subject to the
lien of this Agreement as fully as though now owned by Debtor and specifically
described herein. Nevertheless, the parties will do all such further acts and
execute, acknowledge and deliver all such further conveyances, mortgages,
financing statements and assurances as the other shall reasonably require for
accomplishing the purposes of this Agreement.
17. Captions. The captions appearing herein are for the convenience of
the parties only and shall not be construed to affect the meaning of the
provisions of this Agreement.
18. Severability. In the event that one or more of the provisions of
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or unenforceable provision and
never been contained herein.
19. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one agreement.
[The remainder of this page intentionally left blank]
16
IN WITNESS WHEREOF, the undersigned have executed this Security
Agreement as of the date first above written.
DEBTOR:
BIO-PLEXUS, INC.
By: /s/ Xxxx X. Xxxx
-----------------
Name: Xxxx X. Xxxx
Title: President
17
IN WITNESS WHEREOF, the undersigned have executed this Security
Agreement as of the date first above written.
ADMINISTRATIVE AGENT AND
SECURED PARTY
COMVEST VENTURE PARTNERS, L.P.
By: /s/ Xxx Xxxxx
--------------------------------
Name: Xxx Xxxxx
Title: Chief Financial Officer
