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Exhibit 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT made as of the 24 day of March,
2008, by and between USDC PORTSMOUTH, INC. ,
a California corporation (the “ Debtor
”); and NEWSTAR FINANCIAL, INC.
, a Delaware corporation (the “ Secured
Party ”).
Section 1 .
The Security Interests
. (A) In order to secure (i) the due and
punctual payment of that certain Time Note of the Debtor of even
date herewith issued by the Debtor to the Secured Party in the
principal amount of $975,000, as the same may be amended, modified,
extended, supplemented or replaced from time to time (the “
Note
”), and (ii) the due and punctual payment and
performance of all the obligations of the Debtor contained herein,
(all of the foregoing are hereinafter called the “
Obligations
”), the Debtor hereby grants to the Secured Party a
continuing security interest in the following described fixtures
and personal property (hereinafter collectively called the “
Collateral
”):
All
fixtures and all tangible and intangible personal property of
the Debtor, in each case whether now owned or hereafter
acquired by the Debtor, or in which the Debtor may now have or
hereafter acquire an interest, including, without limitation,
(a) all equipment (including all machinery, tools and
furniture), inventory (including all merchandise, raw
materials, work in process, finished goods and supplies), and
goods, in each case whether now owned or hereafter acquired by
the Debtor, or in which the Debtor may now have or hereafter
acquire an interest (the “ Tangible
Collateral ”); (b) all accounts, accounts
receivable, other receivables, contracts, payment intangibles,
letters of credit, letter-of-credit rights, chattel paper,
electronic chattel paper and general intangibles of the Debtor
(including, without limitation, customer lists, goodwill,
patents, trademarks, tradenames, blueprints, designs, product
lines and research and development), and all supporting
obligations, in each case whether now owned or hereafter
acquired by the Debtor, or in which the Debtor may now have or
hereafter acquire an interest; (c) all instruments,
documents of title, documents, policies and certificates of
insurance, securities, securities entitlements, investment
property, partnership interests, membership interests, limited
liability company interests, bank deposits, deposit accounts,
checking accounts, certificates of deposit, and cash, in each
case whether now or hereafter owned by the Debtor, or in which
the Debtor may now have or hereafter acquire an interest;
(d) in accordance with Section 1(D) hereof, all
commercial tort claims of the Debtor, whether now existing or
hereafter arising, including all such commercial tort claims
described in Exhibit C
hereto; (e) all accessions, additions or improvements to,
all replacements, substitutions and parts for, and all
proceeds and products of, all of the foregoing; and
(f) all books, records and documents relating to all of
the foregoing and all computer records, software and computer
disks and tapes relating to the foregoing.
(B) All
terms appearing in the foregoing description of Collateral
shall have the respective meanings given to such terms in the
Uniform Commercial Code. All Collateral consisting
of accounts, contracts, chattel paper and general intangibles
of the Debtor, whether now existing or hereafter arising, and
arising from the sale, delivery or provision of goods and/or
services are sometimes hereinafter collectively called the
“ Customer
Receivables .”
(C) The
security interests granted pursuant to this Section 1 (the
“ Security
Interests ”) are granted as security only and
shall not subject the Secured Party to, or transfer or in any
way affect or modify, any obligation or liability of the
Debtor under any of the Collateral or any transaction which
gave rise thereto.
(D) If
the Debtor shall at any time acquire a commercial tort claim,
as defined in Revised Article 9 of the Uniform Commercial
Code, the Debtor shall immediately notify the Secured Party in
writing of the details thereof and shall grant to the Secured
Party in writing a security interest therein and in the
proceeds thereof, all on the terms of this Security Agreement,
and in writing in form and substance reasonably satisfactory
to the Secured Party.
(E) For
avoidance of doubt it is expressly understood and agreed that,
to the extent the Uniform Commercial Code is revised
subsequent to the date hereof such that the definition of any
of the foregoing terms included in the description of
Collateral is changed, the parties agree that any property
which is included in such changed definitions which would not
otherwise be included in the foregoing grant on the date
hereof be included in such grant immediately upon the
effective date of such revision, it being the intention of the
parties hereto that the description of Collateral set forth
herein be construed to include the broadest possible range of
property and assets and all tangible and intangible personal
property and fixtures of the Debtor of every kind and
description.
Section 2 .
Delivery of Pledged Securities and Chattel Paper
. (a) All securities, securities entitlements, and
other investment property of the Debtor, whether now owned or
hereafter acquired by the Debtor (collectively, the “
Securities
”), shall be promptly delivered to the Secured Party by the
Debtor pursuant hereto (which Securities, together with such other
Securities which may hereafter be delivered to the Secured Party
pursuant to the terms hereof, are hereinafter called the “
Pledged
Securities ”), shall be in suitable form for transfer
by delivery, or shall be accompanied by duly executed instruments
of transfer or assignments in blank, and accompanied in each case
by any required transfer tax stamps, all in form and substance
satisfactory to the Secured Party. Exhibit A
attached hereto and made a part hereof sets forth a complete
description of all Securities owned by Debtor on the date
hereof.
(b) The
Secured Party may at any time or from time to time, after the
occurrence and during the continuance of an Event of Default,
at its sole discretion, require the Debtor to cause any
chattel paper included in the Customer Receivables to be
delivered to the Secured Party or any agent or representative
designated by it, or to cause a legend referring to the
Security Interests to be placed on such chattel paper and upon
any ledgers or other records concerning the Customer
Receivables.
Section 3 .
Filing; Further Assurances;
Control . (a) The Debtor will, at its
expense, execute, deliver, file and record (in such manner and form
as the Secured Party may require), or permit the Secured Party to
file and record, any financing statements, any carbon, photographic
or other reproduction of a financing statement or this Security
Agreement (which shall be sufficient as a financing statement
hereunder), any specific assignments or other paper that may be
reasonably necessary or desirable, or that the Secured Party may
reasonably request, in order to create, preserve, perfect or
validate any Security Interest or to enable the Secured Party to
exercise and enforce its rights hereunder with respect to any of
the Collateral. The Debtor hereby authorizes the Secured
Party to file one or more financing statements against the Debtor
describing or indicating the Collateral (the “ Financing
Statements ”) and hereby agrees that such Financing
Statements may, at the Secured Party’s option, indicate that
such Financing Statements cover “all assets” or
“all personal property” of the Debtor.
(b) If
requested by the Secured Party, the Debtor will execute such
additional agreements, and cooperate in obtaining agreements
from such third parties as Secured Party shall designate, as
may be necessary for Secured Party to obtain control over all
collateral consisting of deposit accounts, investment
property, letter-of-credit rights and electronic chattel
paper.
Section 4 .
Representations and Warranties of Debtor
. The Debtor hereby represents and warrants to the
Secured Party that (a) the Debtor is, or to the extent that
certain of the Collateral is to be acquired after the date hereof,
will be, the owner of the Collateral free from any adverse lien,
security interest or encumbrance (other than liens in favor of
Setal 2, LLC (the “ Senior
Secured Party ”)); (b) except for such financing
statements as may be described on Exhibit B
attached hereto and made a part hereof, no financing statement
covering the Collateral is on file in any public office, other than
the financing statements filed pursuant to this Security Agreement;
(c) all additional information, representations and warranties
contained in Exhibit C
attached hereto and made a part hereof are true, accurate and
complete on the date hereof; and (d) there are no restrictions
upon the voting rights or the transfer of all or any of the Pledged
Securities (other than those (i) in favor of the Senior Secured
Party, (ii)which may appear on the face of the certificate thereof
or (iii) as may be imposed by any federal, state or local
authorities) and the Debtor has the right to vote, pledge, or grant
a security interest in and otherwise transfer the Pledged
Securities free of any encumbrances (other than (i) the pledge in
favor of the Senior Secured Party, (ii) applicable restrictions
imposed by any federal, state or local authorities, or (iii)
Federal or state securities laws or regulations).
Section 5 .
Covenants of Debtor
. The Debtor hereby covenants and agrees with the
Secured Party that the Debtor (a) will defend the Collateral
against all claims and demands of all persons at any time claiming
any interest therein; (b) will provide the Secured Party with
twenty (20) days prior written notice of (i) any change in the
chief executive office of the Debtor or the office where the Debtor
maintains its books and records pertaining to the Customer
Receivables, or (ii) the movement or location of Collateral to or
at any address other than the addresses set forth in said
Exhibit C
; (c) will promptly pay any and all taxes, assessments and
governmental charges upon the Collateral prior to the date
penalties are attached thereto, except to the extent that such
taxes, assessments and charges shall be contested in good faith by
the Debtor; (d) will immediately notify the Secured Party of
any event causing a substantial loss or diminution in the value of
all or any material part of the Collateral and the amount or an
estimate of the amount of such loss or diminution; (e) will have
and maintain insurance at all times with respect to the Tangible
Collateral against risks of fire (including so-called extended
coverage) and theft, and such other risks as the Secured Party may
reasonably require in writing, containing such terms, in such form,
for such periods and written by such companies as may be reasonably
satisfactory to the Secured Party, such insurance to be payable to
the Secured Party and the Debtor as their interests may appear, and
shall provide for thirty (30) days prior written minimum
cancellation notice to the Secured Party, and Debtor shall furnish
the Secured Party with certificates or other evidence reasonably
satisfactory to the Secured Party of compliance with the foregoing
insurance provisions; (f) will not sell or offer to sell or
otherwise assign, transfer or dispose of the Collateral or any
interest therein (other than in the ordinary course of business),
without the prior written consent of the Secured Party; (g)
will keep the Collateral free from any adverse lien, security
interest or encumbrance and in good order and repair, reasonable
wear and tear excepted, and will not waste or destroy the
Collateral or any part thereof; and will not use the Collateral in
violation of any statute or ordinance; and (h) will not change
its name, identity or structure, or state of incorporation or
organization, without 30 days prior written notice to the Secured
Party.
Section 6 .
Records Relating to Collateral
. The Debtor will keep its records concerning the
Collateral, including the Customer Receivables and all chattel
paper included in the Customer Receivables, at its office at 3303
Airline Boulevard, Building 2A-H, Portsmouth, Virginia or 4040
MacArthur Blvd., Suite 305 Newport Beach, CA 92660 or at such other
place or places of business as the Secured Party may approve in
writing. The Debtor will hold and preserve such records
and chattel paper and will permit representatives of the Secured
Party at any time during normal business hours to examine and
inspect the Collateral and to make abstracts from such records and
chattel paper, and will furnish to the Secured Party such
information and reports regarding the Collateral as the Secured
Party may from time to time reasonably request.
Section 7 .
Record Ownership of Pledged Securities
. Upon the occurrence and during the continuance of an
Event of Default, the Secured Party may cause any or all of the
Pledged Securities to be transferred of record into the name of the
Secured Party. The Debtor will promptly give to the
Secured Party copies of any notices or other com
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