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Exhibit 10.2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this “ Agreement ”),
dated as of November 9, 2007, is by and among Sentinel Emergency
Response Technology, Inc., a Nevada corporation (“
Company ”), and AJW Partners, LLC; AJW Offshore, LLC;
AJW Qualified Partners, LLC; New Millennium Capital Partners II,
LLC; Alpha Capital Aktiengesellschaft; Harborview Master Fund LP
and DKR Soundshore Oasis Holding Fund Ltd. and their respective
endorsees, transferees and assigns (collectively, the “
Secured Party ”).
W I T N E S S E T H:
WHEREAS, pursuant to an Assignment, Assumption and Consent
Agreement, dated the date hereof, between Company and the Secured
Party (the “ Assignment Agreement ”), Company
has agreed to issue to the Secured Party and the Secured Party has
agreed to purchase from Company certain of Company’s
Convertible Notes (as defined in the Assignment Agreement),
Deferred Convertible Note (as defined in the Assignment Agreement)
and Loan Notes (as defined in the Assignment Agreement)
(collectively, the “ Notes ”), which are
convertible into shares of Company’s common stock, par value
$.001 per share (the “ Common Stock ”); and
WHEREAS, in connection with the transactions contemplated by the
Assignment Agreement, Company has agreed to execute and deliver to
the Secured Party this Agreement for the benefit of the Secured
Party and to grant to it a security interest in certain property of
Company to secure the prompt payment, performance and discharge in
full of all of Company’s obligations under 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 of Company, 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 used and useful in connection with Company’s
businesses and all improvements thereto (collectively, the “
Equipment ”); and
(ii)
All Inventory of Company; and
(iii)
All of Company’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, leases, franchises, customer
lists, quality control procedures, grants and rights, goodwill,
trademarks, service marks, trade styles, trade names, patents,
patent applications, copyrights, deposit accounts, and income tax
refunds (collectively, the “ General Intangibles
”); and
(iv)
All Receivables of Company 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 Company’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 clauses (i)-(iv) above.
(b)
“ Obligations ” means all of
Company’s obligations under this Agreement and the Notes, 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.
(c)
“ UCC ” means the Uniform Commercial Code, as
currently in effect in the State of New York.
(d)
“ Permitted Liens ” means (i) mechanics',
materialmen's and similar liens, (ii) liens for taxes not yet due
and payable or for taxes that the taxpayer is contesting in good
faith through appropriate proceedings, (iii) purchase money liens
and liens securing rental payments under capital lease
arrangements, (iv) other liens arising in the ordinary course of
business and not incurred in connection with the borrowing of
money, (v) any mortgage, pledge, lien, encumbrance, charge or other
security interest arising prior to the date of this Agreement, or
(vi) leases and licenses in the ordinary course of business.
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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, subject to Permitted Liens, Company
hereby, unconditionally and irrevocably, pledges, grants and
hypothecates to the Secured Party, a continuing 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
Company’s right, title and interest of whatsoever kind and
nature in and to the Collateral (the “ Security
Interest ”).
3.
Representations and Warranties of Company . Company
represents and warrants to Secured Party that the statements
contained in this §3 are correct and complete as of the date
of this Agreement, and covenants and agrees with, the Secured Party
as follows:
(a)
Company has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation
of Company, enforceable in accordance with its terms and
conditions, except that such enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting
or relating to creditors’ rights generally and is subject to
general principals of equity.
(b)
Company 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
Collateral is stored or located, except as set forth on Schedule
A attached hereto;
(c)
Subject to Permitted Liens, Company’s right, title and
interest of whatsoever kind and nature in and to the Collateral is
free and clear of any liens, security interests, encumbrances,
rights or claims. Subject to Permitted Liens, Company has the
authority to grant the Security Interest in, and to pledge, the
Collateral. Subject to Permitted Liens, 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) naming Buyer as debtor and covering or
affecting any of the Collateral.
(d)
No written claim has been received by Company claiming that any
Collateral or Company’s use of any Collateral violates the
rights of any third party. There has been no adverse decision
to Company’s claim of ownership rights in or exclusive rights
to use the Collateral in any jurisdiction, and there is no
proceeding involving Company’s ownership rights pending or,
to the knowledge of Company, threatened before any court, judicial
body, administrative or regulatory agency, arbitrator or other
governmental authority.
(e)
The provisions of this Agreement create in favor of Secured Party a
security interest in the Collateral. Upon the due filing of
Form UCC-1 Financing Statements with the with the jurisdictions
indicated on Schedule B attached hereto (the “
Jurisdictions ”), the security interest of Secured
Party in the personal property Collateral will be perfected to the
extent that a security interest in the Collateral can be perfected
under the UCC (including the Uniform Commercial Code of any
jurisdiction in which any Collateral is then located) by the filing
of a UCC-1 financing statement (“ Form UCC-1’s
”) in the Jurisdictions.
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(f)
Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will conflict
with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other
arrangement to which Company is a party or by which it is bound or
to which any of its assets is subject. Other than the filing of the
Patent Assignment (as defined in the Assignment Agreement) with the
USPTO (as defined in the Assignment Agreement) and the filing of
the Form UCC-1’s in the Jurisdictions, Company does not need
to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency in order for the parties to consummate the
transactions contemplated by this Agreement.
4.
Covenants and Agreements of Company . Company
covenants and agrees with the Secured Party as follows:
(a)
Company 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 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, subject to Permitted Liens, valid, perfected and continuing
first priority liens in the Collateral.
(b)
At the reasonable request of the Secured Party, Company will sign
and deliver to the Secured Party one or more financing statements
pursuant to the UCC (or any other applicable statute) in form
reasonably satisfactory to the Secured Party and will pay the cost
of filing the same in all public offices wherever filing is, or is
deemed by the Secured Party to be, necessary to effect the rights
and obligations provided for herein.
(c)
Subject to Permitted Liens and other than in the ordinary course of
business, Company 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.
(d)
Company shall keep and preserve its Equipment, Inventory and other
tangible Collateral in good condition, repair and order, subject to
normal wear and tear.
(e)
Company shall, within ten (10) days of obtaining knowledge thereof,
advise the Secured Party, in sufficient detail, of any substantial
change in the Collateral, 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’s security interest therein.
(f)
Company 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
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Party may from time to time reasonably request to perfect, protect
or enforce the Security Interest, substantially in a form
reasonably acceptable to the Secured Party.
(g)
Company shall permit the Secured Party and its representatives and
agents to inspect the Collateral upon reasonable prior notice and
during business hours, and to make copies of records pertaining to
the Collateral as may be requested by the Secured Party from time
to time.
(h)
Company will take all commercially reasonable steps 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.
5.
Defaults . The following events shall be “
Events of Default ”:
(a)
The occurrence of an Event of Default (as defined in the Notes)
under the Notes;
(b)
Any representation or warranty of Company in this Agreement shall
prove to have been incorrect in any material respect when made and
the breach of which has (or with the passage of time will have) a
material adverse effect on the rights of the Secured Party with
respect to this Agreement; or
(
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