EXHIBIT 10.3
SECURITY AGREEMENT
This Security
Agreement is made and entered into this 12 th day of February, 2009, by and
between PRO-PHARMACEUTICALS, INC. (hereinafter referred to as
“Borrower”) and 10X FUND, L.P. (hereinafter referred to
as “Lender”) as follows:
FOR VALUE RECEIVED, and in order to
secure payment of any and all indebtedness of the Borrower to the
Lender, now existing or hereafter incurred, matured or unmatured,
direct or contingent, including any extensions, renewals and
substitutions thereof, the Borrower hereby grants to the Lender a
security interest in, all of Borrower’s furniture, fixtures,
equipment, furnishings, leases and lease rights, supplies,
inventory, accounts receivable, contract rights, general
intangibles, patents, trade secrets, intellectual property of any
and every kind, goods and tangible personal property of every kind
and nature, including additions, replacements, accessions and
proceeds now and hereafter owned and acquired (hereinafter referred
to as “Collateral”).
This Security Agreement secures the
indebtedness of the Borrower as evidenced by that promissory note
(“Promissory Note”) given by Borrower to Lender of even
date herewith in the Redemption Amount (as defined in the
Promissory Note). This Security Agreement secures to Lender:
(a) the payment of the Promissory Note and all renewals,
extensions and modifications of the Promissory Note; (b) the
payment of all other sums, with interest, advanced to protect the
security of this Security Agreement including all expenditures for
taxes, insurance and repairs and maintenance of the Collateral;
(c) the performance of Borrower’s covenants and
agreements under this Security Agreement and the Promissory Note;
and (d) any other indebtedness of the Borrower to the Lender,
whether now existing or hereafter incurred, matured or unmatured,
direct or contingent.
1. UCC FINANCING STATEMENT .
A UCC Financing Statement covering the Collateral herein secured
shall be filed for record with the appropriate office in
Massachusetts, as well as any notices required by the United States
Patent and Trademark Office.
2. PROMISSORY NOTE PAYMENTS .
Borrower shall promptly pay when due the principal and interest on
the debt evidenced by the Promissory Note and any late charges due
under the Promissory Note. Unless applicable law provides
otherwise, all payments received by Lender shall be applied first
to interest due on the indebtedness, second to the principal due on
the indebtedness, and third to any late charges outstanding under
the Promissory Note.
3. LIENS . Borrower shall pay
all taxes, assessments, charges, fines and impositions attributable
to the Collateral that may attain priority over this Security
Agreement, and all leasehold payment or ground rents, if any.
Borrower shall pay these obligations on time directly to the person
owed the payment. Borrower shall promptly furnish to Lender
receipts evidencing the payments, if requested by Lender. Borrower
shall promptly discharge any lien which may have priority over this
Security Agreement. If Lender determines that any part of the
Collateral is subject to a lien which may attain priority over this
Security Agreement Lender may give Borrower a notice identifying
the lien. Borrower shall satisfy the lien within ten (10) days
of the giving of notice. The Borrower will defend the Collateral
against all other claims or demands of all persons at any time
claiming any interest in the Collateral, when such claim is adverse
to the rights of the Lender conveyed in this Agreement.
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4. COMPLIANCE WITH LAWS .
Borrower shall, at all times, fully comply with all local, State
and Federal laws, regulations, statutes or ordinances relating to
the use of the Collateral and the operation of Borrower’s
business. Any Hazardous Substance used by Borrower shall be stored,
maintained, removed and disposed of in full compliance with all
local, State and Federal (EPA/EPD) laws, regulations, statutes or
ordinances. “Hazardous Substances” as used herein means
and includes, without limitation, petroleum products, flammable
explosives, radioactive materials, asbestos (or any material
containing asbestos), polychlorinated biphenyls and any other
hazardous, toxic, or dangerous waste, substances, or materials
defined as such (or any similar term) for the purposes of any State
or Federal laws.
5. TRANSFER OF COLLATERAL .
The Borrower shall not, without written consent of the Lender,
sell, contract to sell, lease, assign or dispose of any interest of
any kind in the Collateral, except for the sale of the Collateral
in the normal course of business, until this Security Agreement and
all debts secured hereby have been fully paid and satisfied. If all
or any part of the Collateral, or any interest in the Collateral,
is sold or transferred, or if a beneficial interest in Borrower is
sold or transferred, or if the Borrower’s business is sold,
assigned or transferred without Lender’s prior written
consent, Lender may, at its option, require immediate payment in
full of all sums secured by this Security Agreement.
Notwithstanding the foregoing, Borrower shall provide written
notice by certified mail to the Lender of any sale, assignment or
transfer of any interest in the Borrower’s business or the
Collateral for so long as there are any debts outstanding from
Borrower to Lender.
6. CHANGES IN COLLATERAL .
The Borrower will keep the Collateral separate and identifiable at
the Borrower’s business premises and will not remove the
Collateral from said location without the Lender’s written
consent. The Borrower shall promptly notify Lender in writing of
any proposed change in the location or ownership of the
Borrower’s business. The Borrower shall be allowed to improve
or replace any portion of the Collateral with collateral of greater
or equal value without prior consent of the Lender. In the event
Borrower does replace any Collateral with collateral of greater or
equal value, Borrower shall not be obligated to give Lender any of
the proceeds from the prior held collateral.
7. INSURANCE . Borrower shall
maintain at all times fire, liability and other casualty insurance
and any other insurance required, including theft, to protect the
Collateral and fully secure Borrower’s obligation to Lender.
The Lender shall be named as an additional insured and loss payee
and shall be provided with a Certificate of Coverage. Such
insurance coverage may be reduced by Borrower subsequent to the
date of closing provided that said coverage is always at least
equal to the amount of Borrower’s debt to Lender at that
time. Such insurance shall be obtained from companies registered to
transact business in the State of Massachusetts and said policy
shall be issued in the names of Lender and Borrower, as their
respective interests may appear, and proof of coverage and copies
of all related documents shall be delivered to Lender, upon
Lender’s request, but at least annually, until such time as
all Borrower’s obligations to Lender are
satisfied.
In the event Borrower fails to
maintain the coverage described above, Lender may, at
Lender’s option, obtain coverage to protect Lender’s
rights in the Collateral, and Borrower shall be required to pay to
Lender the reasonable costs and expenses incurred by Lender in
obtaining such coverage.
In the event of loss, Borrower shall
give prompt notice to the insurance carrier and Lender.
Lender
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may make proof of loss if not made promptly by
Borrower. Unless Lender and Borrower otherwise agree in writing,
insurance proceeds shall be applied to restoration or repair of the
Collateral damaged, if the restoration or repair is economically
feasible and Lender’s security is not lessened. If the
restoration or repair is not economically feasible or
Lender’s security would be lessened, the insurance proceeds
shall be applied to the sums secured by this Security Agreement,
whether or not then due, with any excess paid to Borrower. If
Borrower abandons the Collateral, or does not answer within ten
(10) days after notice from Lender that the insurance carrier
has offered to settle the claim, then Lender may collect the
insurance proceeds. Lender may use the proceeds to repair or
restore the Collateral or to pay sums secured by this Agreement,
whether or not then due. The ten (10) day period will begin
when the notice is given. Unless Lender and Borrower otherwise
agree in writing, any application of insurance proceeds to
principal shall not extend or postpone the due date of any payments
due under the Promissory Note or change the amount of the payments.
If the Collateral is acquired by Lender, Borrower’s right to
any insurance policies and proceeds resulting from damage to the
Collateral prior to the acquisition shall pass to Lender to the
extent of the sums secured by this Security Agreement immediately
prior to the acquisition.
8. BUSINESS RECORDS . The
Borrower will at all times keep accurate and complete records of
its business and upon default or threat of default, the Lender, or
any of the Lender’s agents, shall have the right to call at
the Borrower’s place of business during normal hours of
business to inspect the books, records, journals, orders, receipts,
correspondence and other data relating to its business and the
Collateral or to any other transaction between the parties
hereto.
9. PROTECTION OF COLLATERAL .
The Borrower shall keep the Collateral in good working order and
repair and shall not waste or destroy the Collateral or any part
thereof. The Borrower shall not use the Collateral in violation of
any statute or ordinance and the Lender or its agent shall have the
right to examine and inspect the Collateral during normal business
hours upon prior notice to Borrower specifying the reasonable cause
for the inspection.
10. PROTECTION OF LENDER’S
RIGHTS IN THE COLLATERAL . If Borrower fails to perform the
covenants and agreements contained in this Security Agreement, or
there is a
