Exhibit 10.9
SECURITY
AGREEMENT
SECURITY AGREEMENT (this " Agreement "), dated as of July
31, 2008, by and among Itronics Inc., a Texas corporation ("
Parent "), Whitney & Whitney, Inc., a Nevada
corporation; Itronics Metallurgical, Inc., a Nevada corporation;
Itronics California, Inc., a Nevada corporation; American Hydromet,
a Nevada corporation; Nevada Hydrometallurgical Project, a Nevada
corporation; Itronics Gold’n Minerals, Inc. (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 12% Callable Secured Convertible
Notes, due three years from the date of issue (the " Notes
"), which are convertible into shares of Company’s Common
Stock, par value $.001 per 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 recycling photographic wastes into the GOLD’n GRO
line of liquid fertilizers, performing technical services to the
mining industry, and operating insidemetals.com, a subscription
based website for investors and others interested in precious
metals markets . 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:
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.
(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
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 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, protect or enforce its
security interest in the Collateral including, without limitation,
the execution and delivery of a separate security agreement with
respect to the Company’s intellectual property ("
Intellectual Property Security Agreement ") in which the
Secured Party has been granted a security interest hereunder,
substantially in a form acceptable to the Secured Party, which
Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions
hereof.
(n) The Company shall permit the Secured Party and its
representatives and agents to inspect the Collateral at any time,
and to make copies of records pertaining to the Collateral as may
be requested by the Secured Party from time to time.
(o) The Company will take all steps reasonably necessary to
diligently pursue
