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Exhibit 10.3
SECURITY AGREEMENT
SECURITY AGREEMENT (this "AGREEMENT"), dated as of June 16, 2008,
by
and among Ingen Technologies, Inc., a Georgia corporation
("PARENT"),
[_____________] (collectively the "SUBSIDIARY")(hereinafter the
Parent and the
Subsidiary shall collectively be referred to as the "COMPANY") and
the secured
parties signatory hereto and their respective endorsees,
transferees and assigns
(collectively, the "SECURED PARTY").
W I T N E S S E T H:
WHEREAS, pursuant to a Securities Purchase Agreement, dated the
date
hereof, between Parent and the Secured Party (the "PURCHASE
AGREEMENT"), Parent
has agreed to issue to the Secured Party and the Secured Party has
agreed to
purchase from Parent certain of Parent's 6% Callable Secured
Convertible Notes,
due three years from the date of issue (the "NOTES"), which are
convertible into
shares of Company's Common Stock, no par value share (the "COMMON
STOCK"). In
connection therewith, Parent shall issue the Secured Party certain
Common Stock
purchase warrants (the "WARRANTS"); and
WHEREAS, the Parent and the Subsidiary have been, and are now,
engaged
in [INSERT DESCRIPTION OF BUSINESS]. [INSERT DETAILED NATURE OF
RELATIONSHIP AND
BENEFIT RECEIVED BY SUBSIDIARY FROM PARENT -for example -- IN THE
PAST, AS NOW,
THE PARENT HAS PROVIDED FINANCING FOR THE SUBSIDIARY, AND THE
SUBSIDIARY HAS
RELIED UPON THE PARENT TO PROVIDE SUCH FINANCING. IN ADDITION, IT
IS ANTICIPATED
THAT, IF THE SUBSIDIARY EXECUTES AND DELIVERS THIS , THE PARENT
WILL CONTINUE TO
PROVIDE SUCH FINANCING TO THE SUBSIDIARY, AND THAT THE PROCEEDS OF
THE PURCHASE
AGREEMENT AND NOTES WILL BE USED, IN PART, FOR THE GENERAL WORKING
CAPITAL
PURPOSES OF THE SUBSIDIARY]; and
WHEREAS, [THE SUBSIDIARY CONSTITUTES ALL OF THE SUBSIDIARIES OF
THE
PARENT AND] it is in the best interest of the Subsidiary as
subsidiaries of the
Parent and the indirect beneficiaries of the Purchase Agreement and
Notes, that
the Secured Party enter into the Purchase Agreement and purchase
the Notes to
the Company; and
WHEREAS, in order to induce the Secured Party to purchase the
Notes,
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 first
priority
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 and exercise and discharge in full of Company's obligations
under the
Warrants; and
WHEREAS, in light of the foregoing, the Company expects to
derive
substantial benefit from the Purchase Agreement and sale of the
Notes and the
transactions contemplated thereby and, in furtherance thereof, has
agreed to
execute and deliver this.
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:
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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 the Company, including, without limitations,
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 the Company's businesses and all improvements
thereto
(collectively, the "EQUIPMENT"); and
(ii) All Inventory of the Company; and
(iii) All of the 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 the 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 the 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) "COMPANY" shall mean, collectively, Company and all of the
subsidiaries of Company, a list of which is contained in SCHEDULE
A, attached
hereto.
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(c) "OBLIGATIONS" means all of the 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.
(d) "UCC" means the Uniform Commercial Code, as currently in effect
in
the State of New York.
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
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 the Company'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
COMPANY. The Company represents and warrants to, and covenants and
agrees with,
the Secured Party as follows:
(a) The Company has the requisite corporate power and authority
to
enter into this Agreement and otherwise to carry out its
obligations thereunder.
The execution, delivery and performance by the Company of this
Agreement and the
filings contemplated therein have been duly authorized by all
necessary action
on the part of the Company and no further action is required by the
Company.
This Agreement constitutes a legal, valid and binding obligation of
the Company
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.
(b) The Company 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 Collateral is stored or located, except as set forth
on SCHEDULE A
attached hereto;
(c) The Company is the sole owner of the Collateral (except for
non-exclusive licenses granted by the Company 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, the Company 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
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recorded in favor of the Secured Party pursuant to the terms of
this Agreement).
(d) No part of the Collateral has been judged invalid or
unenforceable.
No written claim has been received that any Collateral or the
Company's use of
any Collateral violates the rights of any third party. There has
been no adverse
decision to the Company's claim of ownership rights in or exclusive
rights to
use the Collateral in any jurisdiction or to the Company's right to
keep and
maintain such Collateral in full force and effect, and there is no
proceeding
involving said rights pending or, to the best knowledge of the
Company,
threatened before any court, judicial body, administrative or
regulatory agency,
arbitrator or other governmental authority.
(e) The 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 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.
Except for the filing of financing statements on Form-1 under the
UCC with the
jurisdictions indicated on SCHEDULE B, attached hereto, no
authorization or
approval of or filing with or notice to any governmental authority
or regulatory
body is required either for the grant by the Company of, or the
effectiveness
of, the Security Interest granted hereby or for the execution,
delivery and
performance of this Agreement by the Company or for the perfection
of or
exercise by the Secured Party of its rights and remedies
hereunder.
(g) On the date of execution of this Agreement, the Company
will
deliver to the Secured Party one or more executed UCC financing
statements on
Form-1 with respect to the Security Interest for filing with the
jurisdictions
indicated on SCHEDULE B, attached hereto and in such other
jurisdictions as may
be requested by the Secured Party.
(h) The execution, delivery and performance of this Agreement does
not
conflict with or cause a breach or default, or an event that with
or without the
passage of time or notice, shall constitute a breach or default,
under any
agreement to which the Company is a party or by which the Company
is bound. No
consent (including, without limitation, from stock holders or
creditors of the
Company) is required for the Company to enter into and perform its
obligations
hereunder.
(i) The Company shall at all times maintain the liens and
Security
Interest provided for hereunder as valid and perfected first
priority liens and
security interests in the Collateral in favor of the Secured Party
until this
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Agreement and the Security Interest hereunder shall terminate
pursuant to
Section 11. The Company hereby agrees to defend the same against
any and all
persons. The Company shall safeguard and protect all Collateral for
the account
of the Secured Party. At the request of the Secured Party, the
Company will sign
and deliver to the Secured Party at any time or from time to time
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 or desirable to effect the rights
and obligations
provided for herein. Without limiting the generality of the
foregoing, the
Company shall pay all fees, taxes and other amounts necessary to
maintain the
Collateral and the Security Interest hereunder, and the Company
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 Company will not transfer, pledge, hypothecate,
encumber,
license (except for non-exclusive licenses granted by the Company
in the
ordinary course of business), sell or otherwise dispose of any of
the Collateral
without the prior written consent of the Secured Party.
(k) The Company shall keep and preserve its Equipment, Inventory
and
other tangible Collateral in good condition, repair and order and
shall not
operate or locate any such Collateral (or cause to be operated or
located) in
any area excluded from insurance coverage.
(l) The Company shall, within ten (10) days of obtaining
knowledge
thereof, advise the Secured Party promptly, 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.
(m) The 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 Party may from time to time
request and may
in its sole discretion deem necessary to perfect
