Exhibit 10.4
SECURITY
AGREEMENT
This Security Agreement (this
“Security Agreement” ) is made effective
as of September 21, 2009 ( “Effective
Date” ), by and between DayStar Technologies, Inc., a
Delaware corporation ( “Debtor” ), and TD
Waterhouse RRSP Account 240832S, in trust for Peter Alan Lacey as
beneficiary ( “Secured Party” ), with
reference to the essential facts stated in the Recitals
below.
RECITALS
A. Pursuant to the terms of that
certain Purchase Agreement dated September 18, 2009 (the
“Purchase Agreement” ), the Secured
Convertible Promissory Note of even date herewith (the
“Note” ), the warrant of even date
herewith (the “First Warrant” ), the
second warrant as described in the Purchase Agreement (the “
Second Warrant ”, and together with the First
Warrant, the “ Warrants ”), and the
Registration Rights Agreement of even date herewith (the
“Registration Rights Agreement” ), all
between Debtor and Secured Party, Secured Party is loaning to
Debtor a total amount of $2,000,000 (the
“Loan” ). This Security Agreement, the
Purchase Agreement, the Note, the Warrants and the Registration
Rights Agreement shall collectively be referred to as the
“Loan Documents” .
B. As a condition to receiving the
Loan, the terms of the Loan Documents require that Debtor enter
into this Security Agreement.
C. As security for the payment and
performance of Debtor’s obligations to Secured Party under
the Loan Documents, and as a condition precedent to Secured
Party’s obligation to make the Loan, it is the intent of
Debtor to create and grant to Secured Party and a security interest
in certain property as hereinafter provided.
AGREEMENT
NOW, THEREFORE, in consideration of
the Loan, the above recitals and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor hereby agrees as follows:
1. Grant of Security Interest
. As security for the full and timely payment and performance of
the obligations of Debtor to Secured Party described in
Section 2 below (such obligations, collectively and severally,
the “Obligations” ), Debtor hereby
pledges and grants to Secured Party a security interest (
“Security Interest” ) in and to
(a) all of Debtor’s right, title and interest in and to
contracts to which Debtor is a party, and all other contracts
relating to Debtor’s assets, business and operations,
(b) all of Debtor’s intellectual property and rights
therein and thereto, (c) all of Debtor’s other assets,
and all assets used and useful in Debtor’s business and
operations, and (d) all other items identified in Exhibit
A hereto and incorporated herein by this reference
(collectively and severally, the
“Collateral” ).
2. Obligations . The
Obligations secured by this Security Agreement shall consist of
(a) the Loan Documents (including, but not limited to, any
liquidated damages that may be payable by the Company pursuant to
Section 1.2(b) of the Registration Rights Agreement),
(b)
any additional monies advanced to or borrowed by
Debtor from Secured Party, (c) this Security Agreement, and
(d) all amendments or extensions or renewals of such
documents, whether now existing or hereafter arising, voluntary or
involuntary, whether or not jointly owed with others, direct or
indirect, absolute or contingent, liquidated or unliquidated, and
whether or not from time to time decreased or extinguished and
later increased, created or incurred.
3. Representations and
Warranties . Debtor hereby represents and warrants
that:
(a) Debtor is the owner of the
Collateral and no other person has any right, title, claim or
interest (by way of security interest or other lien or charge or
otherwise) in, against or to the Collateral, except liens for
taxes, assessments and other government charges not yet due and
payable; except a security interest held by Banc of America
Leasing & Capital, LLC in certain of the Collateral as
described in that certain UCC 1 financing statement filed on
October 22, 2008 in the Office of the Secretary of State of
the State of Delaware under filing number 83561188 (the
“Prior Lien” );
(b) Debtor will not sell or offer to
sell or otherwise transfer the Collateral or any interest therein
without the prior written consent of Secured Party, except as may
be permitted under the Prior Lien;
(c) Debtor will not create or permit
to exist any future lien on or security interest in the Collateral
in favor of any third party with priority over Secured Party,
without the prior written consent of Secured Party; except in
connection with the Prior Lien;
(d) Debtor will, upon Secured
Party’s request, remove any unauthorized lien or security
interest on the Collateral, and defend any claim affecting the
Collateral;
(e) Debtor will pay all charges
against the Collateral, including, but not limited to, taxes,
assessments, encumbrances, and insurance, and upon Debtor’s
failure to do so, Secured Party may pay any such charge as it deems
necessary and add the amount paid to the indebtedness of Debtor
secured hereunder;
(f) Debtor will not use or permit
any Collateral to be used unlawfully or in violation of any
provision of the Loan Documents, this Security Agreement, or any
applicable statute, regulation or ordinance or any policy of
insurance covering the Collateral; and
(g) all information heretofore,
herein or hereafter supplied to Secured Party by or on behalf of
Debtor or Debtor with respect to the Collateral is true and correct
in all material respects.
4. Covenants of Debtor and
Debtor . Debtor hereby agrees:
(a) to do all acts that may be
necessary to maintain, preserve and protect the
Collateral;
(b) to notify Secured Party promptly
of any change in Debtor’s name or place of business, or, if
Debtor has more than one place of business, its head office, or
office in which Debtor’s records relating to the Collateral
are kept;
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(c) to procure, execute and deliver
from time to time any endorsements, assignments, financing
statements and other writings deemed necessary or appropriate by
Secured Party to perfect, maintain and protect its security
interest hereunder and the priority thereof and to deliver promptly
to Secured Party all originals of Collateral or proceeds consisting
of chattel paper or instruments including but not limited to one or
more UCC-1 financing statements, leasehold deeds of trust and
patent and trademark collateral filings, all in a form reasonably
requested by Secured Party;
(d) to appear in and defend any
action or proceeding which may affect its title to or Secured
Party’s interest in the Collateral;
(e) to keep separate, accurate and
complete records of the Collateral and to provide Secured Party
with such records and such other reports and information relating
to the Collateral as Secured Party may reasonably request from time
to time;
(f) not to cause or permit any waste
or unusual or unreasonable depreciation of the Collateral;
and
(g) at any reasonable time, upon
reasonable request by Secured Party, to exhibit to and allow
inspection by Secured Party (or persons designated by Secured
Party) of the Collateral.
5. Events of Default . The
occurrence of the following event ( “Event of
Default” ) shall constitute an Event of Default under
this Agreement:
(a) Debtor shall default in its
performance of any covenant under this Security
Agreement;
(b) Debtor fails to pay when due any
sum payable under the terms of the Loan Documents or this Security
Agreement and Debtor has failed to cure such nonpayment within
ninety (90) days after such sum has become due and
payable;
(c) Debtor files any petition or
action for relief under any bankruptcy, reorganization, insolvency
or moratorium law or any other law for the relief of, or relating
to, debtors, now or hereafter in effect, or makes any assignment
for the benefit of creditors or takes any corporate action in
furtherance of any of the foregoing; or
(d) An involuntary petition is filed
against Debtor under any bankruptcy statute now or hereafter in
effect, unless such petition is dismissed or discharged within
sixty (60) days thereafter, or a custodian, receiver, trustee,
assignee for the benefit of creditors (or other similar
offici
