EXHIBIT 4.2
SECURITY
AGREEMENT
THIS SECURITY AGREEMENT (this
“ Agreement ”) is made and entered into as of
the 21st day of September, 2009 by and between Castle Brands Inc.,
a Delaware corporation (the “ Maker ”), and
Betts & Scholl, LLC, a Florida limited liability company (the
“ Holder ”).
W I T N E S S E T
H :
WHEREAS , the Maker and the
Holder are parties to that certain Asset Purchase Agreement, dated
September 21, 2009 (the “ Asset Purchase
Agreement ”), pursuant to which the Maker’s
subsidiary, Castle Brands (USA) Corp., will concurrently
herewith purchase from the Holder certain assets; and
WHEREAS , also concurrently
herewith, the Maker will become indebted to the Holder in the
amount of $1,084,816.98 (the “ Indebtedness ”),
which Indebtedness is represented by that certain Secured
Non-Negotiable Promissory Note, dated of even date herewith (the
“ Note ”); and
WHEREAS , the Maker has agreed
to grant to the Holder a security interest in certain assets of the
Maker to secure the Indebtedness.
NOW, THEREFORE , in
consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Maker and the Holder hereby agree as follows:
1. Creation of Security
Interest in Collateral . The Maker hereby grants a continuing
security interest to the Holder in and to the Inventory (as defined
in the Asset Purchase Agreement), which is referred to herein
collectively as the “ Collateral ” from the date
hereof through the Termination Date. The Collateral is pledged,
assigned and transferred, and a first priority lien security
interest therein is granted to the Holder as security for the
payment and performance by the Maker as and when due and payable
(by scheduled maturity, acceleration or otherwise) of all amounts
owing by Maker pursuant the Note.
2. Financing Statements
. The Maker will join with the Holder in the execution and filing
of appropriate financing statements or other documents under the
Uniform Commercial Code of the State of California (the “
UCC ”) and/or the laws of the Commonwealth of
Australia, and at all times the Maker will do, execute, acknowledge
and deliver, and will cause to be done, executed, acknowledged and
delivered, itself and by any corporation or person obligated to the
Maker so to do, all and every such further acts, deeds, and
assurances as the Holder shall reasonably require for the better
assuring, perfecting and confirming unto the Holder, the security
interest in the Collateral.
3. Use of Collateral .
In the absence of an Event of Default (as hereinafter defined), the
Maker shall have all rights to retain possession of and use the
Collateral and the proceeds thereof and to sell or otherwise
dispose of the Inventory in the ordinary course of business.
4. Maintenance of Books and
Records . During the term of this Agreement, the Maker shall
maintain its books, accounts and records related to the Collateral
in accordance with GAAP and permit the Holder, its officers and its
designated professionals, at any time during normal business hours
and upon reasonable notice to visit and inspect the Collateral,
books, accounts and records and to discuss its accounts, books and
records with the Holder, it being agreed that unless an Event of
Default shall have occurred and be continuing, there shall be no
more than two (2) such visits in any twelve month period.
Maker shall not remove its books and records from its current
principal executive offices, 122 East 42nd Street, Suite 4700,
New York, New York 10168, without prior notification to the Holder;
provided , however , that the filing by the Maker of
any publicly-available report with the United States Securities and
Exchange Commission designating new principal executive offices of
the Maker shall constitute notice for purposes of this
Section 4.
5. Holder Appointed
Attorney-in-Fact . Upon the occurrence and during the
continuance of an Event of Default, with notice to the Maker, the
Maker hereby irrevocably constitutes and appoints the Holder as the
Maker’s true and lawful attorney-in-fact, with full power of
substitution, to execute, acknowledge and deliver any instruments
and to exercise and enforce every right, power, remedy, option and
privilege of the Maker with respect to the Collateral, including
the right to demand, collect, receive, settle, compromise, sue for,
foreclose or realize the Collateral as and when the Holder may
determine, and do in the name, place and stead of the Maker, all
such acts, things and deeds for and on behalf of and in the name of
the Maker which the Maker could or might do or which the Holder may
deem necessary or desirable to more fully vest in the Holder the
rights and remedies provided for herein and to accomplish the
purposes of this Agreement, including the right to notify account
debtors and obligors on any of the Collateral to make payments
directly to Holder. The foregoing power of attorney is irr
