THIS
SECURITY AGREEMENT, dated for reference April 30, 2009 (the “
Security Agreement ”), is executed by PANGLOBAL
BRANDS INC , a company incorporated under the laws of Delaware
(“ Debtor ”), for the benefit of Chelsea
Capital Corporation., a company incorporated under the laws of
British Columbia (“ Chelsea ”) with an address
c/o Darryl Yea/Michael O’Brian, Chelsea Capital Corporation,
666 Burrard Street, Vancouver, BC, V6C ZX8, Canada, on behalf of
all subscribers (the “ Subscribers ”, together
with Chelsea, “ Secured Party ”) for a
convertible loan issue of Debtor pursuant to a convertible loan
agreement dated for reference April 9, 2009 (the “ Loan
Agreement ”).
WHEREAS,
Secured Party has agreed to subscribe for convertible loans of
Debtor in the aggregate amount of up to US$2,500,000 pursuant to
the Loan Agreement.
WHEREAS,
it is a condition precedent to the subscription for the convertible
loans that Debtor enter into this Agreement to secure, among other
things, the Indebtedness (as defined below), and Debtor has agreed
to enter into this Agreement in furtherance of the same.
NOW
THEREFORE, in consideration of the premises and mutual covenants
and agreements set forth herein, Debtor hereby agrees as
follows:
For value received, Debtor grants to Secured Party a continuing
security interest in the Collateral (as defined below) to secure
payment when due, whether by stated maturity, demand, acceleration
or otherwise, of all existing and future indebtedness and
obligations of Debtor (“ Indebtedness ”),
including but not limited to Indebtedness arising under the Loan
Agreement and all other agreements and instruments related thereto.
Indebtedness includes without limitation any and all obligations or
liabilities of Debtor to Secured Party, whether absolute or
contingent, direct or indirect, voluntary or involuntary,
liquidated or unliquidated, joint or several, known or unknown; any
and all obligations or liabilities for which Debtor would otherwise
be liable to Secured Party were it not for the invalidity or
unenforceability of such obligations or liabilities by reason of
any bankruptcy, insolvency or other law, or for any other reason;
any and all amendments, modifications, renewals and/or extensions
of any of the above; all costs incurred by Secured Party in
establishing, determining, continuing, or defending the validity or
priority of its security interest, or in pursuing its rights and
remedies under this Agreement or under any other agreement between
Secured Party and Debtor or in connection with any proceeding
involving Secured Party as a result of any financial accommodation
to Debtor; and all other costs of collecting indebtedness,
including without limitation attorneys’ fees. Debtor agrees
to pay Secured Party all such costs incurred by Secured Party,
immediately upon demand, and until paid all costs shall bear
interest at the highest per annum rate applicable to any of the
indebtedness, but not in excess of the maximum rate permitted by
law. Any reference in this Agreement to attorney fees shall be
deemed a reference to actual fees, costs, and expenses of both
in-house and outside counsel and paralegals, whether or not a suit
or action is instituted, and to court costs if a suit or action is
instituted, and whether attorneys’ fees or court costs are
incurred at the trial court level, on appeal, in a bankruptcy,
administrative or probate proceeding or otherwise.
1. Collateral .
“ Collateral ” shall mean all the following
property Debtor now or later owns or has an interest in, wherever
located:
1.1
All present and future accounts, accounts receivable, agreements,
contracts, leases, contract rights, rights to payment, instruments,
documents, chattel paper, security agreements, guaranties, letters
of credit, undertakings, surety bonds, insurance policies, notes
and drafts, and all forms of obligations owing to Debtor or in
which Debtor may have any interest, however created or arising and
whether or not earned by performance;
1.2 All
present and future general intangibles, payment intangibles, all
tax refunds of every kind and nature to which Debtor now or
hereafter may become entitled, however arising, all other refunds,
and all deposits, reserves, loans, royalties, cost savings,
deferred payments, goodwill, chooses in action, liquidated damages,
rights to indemnification, trade secrets, computer programs,
software, customer and supplier lists, trademarks, trade names,
patents, licenses, permits, copyrights, technology, processes,
proprietary information and insurance proceeds of which Debtor is a
beneficiary;
1.3
All present and future deposit accounts of Debtor, including
, without limitation, any demand, time, savings, passbook or like
account maintained by Debtor with Secured Party or any other bank,
savings and loan association, credit union or like organization,
and all money, cash and cash equivalents of Debtor, whether or not
deposited in any such deposit account;
1.4
All present and future books and records, including ,
without limitation, books of account and ledgers of every kind and
nature, all electronically recorded data relating to Debtor or the
business thereof, all receptacles and containers for such records,
and all files and correspondence;
1.5 All
present and future goods, inventory, equipment and merchandise,
including , without limitation, all present and future goods
held for sale or lease or to be furnished under a contract of
service, all raw materials, work in process and finished goods, all
packing materials, supplies and containers relating to or used in
connection with any of the foregoing, and all bills of lading,
warehouse receipts or documents of title relating to any of the
foregoing;
1.6 All
present and future investment collateral and all rights,
preferences, privileges and distributions with respect
thereto;
1.7
All present and future accessions, appurtenances, components,
repairs, repair parts, spare parts, replacements, substitutions,
additions, issue and/or improvements to or of or with respect to
any of the foregoing;
1.8
All rights, remedies, powers and/or privileges with respect to any
of the foregoing, including the right to make claims
thereunder or with respect thereto;
1.9 Any
and all balances, credits, deposits, accounts or moneys of or in
its name arising from any of the foregoing in the possession or
control of, or in transit to, Secured Party or any other financial
institution and all sums on deposit therein from time to time and
all securities, instruments and accounts in which such sums are
invested from time to time;
1.10 Any
other collateral, rights and properties described in each and every
deed of trust, mortgage, security agreement, pledge, assignment and
other agreement which has been, or will at any time(s) later be,
executed by Debtor or its affiliates for the benefit of Secured
Party; and
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1.11
All products, rents, issues, profits, returns, income and proceeds
of and from any and all of the foregoing (including proceeds which
constitute property of the types described in the foregoing
clauses (1.1) through ( 1.10 ), and any and all
money, accounts, general intangibles, deposit accounts, documents,
instruments, chattel paper, goods, insurance proceeds, and any
other tangible or intangible property received upon the sale or
disposition of any of the foregoing).
2. Warranties,
Covenants and Agreements . Debtor warrants, covenants and
agrees as follows:
2.1
Debtor shall furnish to Secured Party, in form and at intervals as
Secured Party may request, any information Secured Party may
reasonably request and shall allow Secured Party to examine,
inspect, and copy any of Debtor’s books and records. Debtor
shall, at the request of Secured Party, mark its records and the
Collateral to clearly indicate the security interest of Secured
Party under this Agreement.
2.2
At the time any Collateral becomes, or is represented to be,
subject to a security interest in favor of Secured Party, Debtor
shall be deemed to have warranted that (a) Debtor is the lawful
owner of the Collateral and has the right and authority to subject
it to a security interest granted to Secured Party; (b) none of the
Collateral is subject to any security interest other than that in
favor of Secured Party and there are no financing statements on
file, other than in favor of Secured Party; and (c) Debtor acquired
its rights in the Collateral in the ordinary course of its
business.
2.3
Debtor confirms that the Collateral is and will keep the Collateral
free at all times from all claims, liens, security interests and
encumbrances other than those in favor of Secured Party, and other
than those agreed to by the Secured Party in writing. Debtor will
not, without the prior written consent of Secured Party, sell,
transfer, or lease, or permit to be sold, transferred or leased,
any or all of the Collateral, except (where inventory is pledged as
Collateral) for inventory in the ordinary course of its business
and will not return any inventory to its supplier. Secured Party or
its representatives may at all reasonable times inspect the
Collateral and may enter upon all premises where the Collateral is
kept or might be located.
2.4
Debtor will do all acts and or cause to be executed all writings
requested by Secured Party to establish, maintain and continue a
perfected and first security interest of Secured Party in the
Collateral. Debtor agrees that Secured Party has no obligation to
acquire or perfect any lien on or security interest in any
asset(s), whether realty or personalty, to secure payment of the
Indebtedness, and Debtor is not relying upon assets in which
Secured Party may have a lien or security interest for payment of
the Indebtedness. Without limiting the generality of the foregoing,
Debtor hereby authorizes Secured Party to prepare, execute and file
all financing statements, continuation statements or other
documents or instruments as Secured Party shall determine are
necessary or desirable to perfect, evidence, continue or otherwise
take action in connection with the security interests granted
hereunder.
2.5
Debtor will pay within the time that they can be paid without
interest or penalty all taxes, assessments and similar charges
which at any time are or may become a lien, charge, or encumbrance
upon any Collateral, except to the extent contested in good faith
and bonded in a manner satisfactory to Secured Party. If Debtor
fails to pay any of these taxes, assessments, or other charges in
the time provided above, Secured Party has the option (but not the
obligation) to do so, and Debtor agrees to repay all amounts so
expended by Secured Party immediately upon demand, together with
interest at the highest lawful default rate which could be charged
by Secured Party to Debtor on any indebtedness.
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2.6
Debtor will keep the Collateral in good condition and will protect
it from loss, damage, or deterioration from any cause. Debtor has
and will maintain at all times (a) with respect to the Collateral,
insurance under an “all risk” policy against fire and
other risks customarily insured against; and (b) public liability
insurance and other insurance as may be required by law or
reasonably required by Secured Party; all of which insurance shall
be in amount, form and content, and written by companies as may be
satisfactory to Secured Party, containing a lender’s loss
payable endorsement acceptable to Secured Party. Debtor will
deliver to Secured Party immediately upon demand evidence
satisfactory to Secured Party that the required insurance has been
procured. If Debtor fails to maintain satisfactory insurance,
Secured Party has the option (but not the obligation) to do so and
Debtor agrees to repay all amounts so expended by Secured Party
immediately upon demand, together with interest at the highest
lawful default rate which could be charged by Secured Party to
Debtor on any indebtedness.
2.7
If Debtor’s accounts are pledged as Collateral under this
Agreement, then on each occasion on which Debtor evidences to
Secured Party the account balances on, and the nature and extent
of, the accounts, Debtor shall be deemed to have warranted that
except as otherwise indicated (a) each of those accounts is valid
and enforceable without performance by Debtor of any act; (b) each
of those account balances are in fact owing, (c) there are no
setoffs, recoupments, credits, contra accounts, counterclaims or
defenses against any of those accounts, (d) as to any accounts
represented by a note, trade acceptance, draft or other instrument
or by any chattel paper or document, the same have been endorsed
and/or delivered by Debtor to Secured Party, (e) Debtor has not
received with respect to any account, any notice of the death of
the related account debtor, nor the dissolution, liquidation,
termination of existence, insolvency, business failure, appointment
of a receiver for, assignment for the benefit of creditors by, or
filing of a petition in bankruptcy by or against, the account
debtor, and (f) as to each account, the account debtor is not an
affiliate of Debtor, the United States of America or any
department, agency or instrumentality of it, or a citizen or
resident of any jurisdiction outside of the United States. Debtor
will do all acts and will execute all writings requested by Secured
Party to perform, enforce performance of, and collect all accounts.
Debtor shall neither make nor permit any modification, compromise
or substitution for any account without the prior written consent
of Secured Party. Debtor shall, at Secured Party’s request
arrange for verification of accounts directly with account debtors
or by other methods acceptable to Secured Party.
2.8
Debtor at all times shall be in strict compliance with all
applicable laws, including without limitation any laws, ordinances,
directives, orders, statutes, or regulations an object of which is
to regulate or improve health, safety, or the environment (“
Environmental Laws ”).
2.9
If Secured Party, acting in its sole discretion, redelivers
Collateral to Debtor or Debtor’s designee for the purpose of
(a) the ultimate sale or exchange thereof; or (b) presentation,
collection, renewal, or registration of transfer thereof; or (c)
loading, unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing with it
prel
