Exhibit 10.16
 
SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Security Agreement”), dated as of
___________________, 2009, by and between SwissINSO SA, a Swiss corporation
(“SwissINSO”), with an address at Biopole, Route de la Corniche, 1066 Epalinges,
Switzerland, and each of those persons and entities whose names are set forth on
the signature page hereto (collectively, the “Secured Parties”).

W I T N E S S E T H:

WHEREAS, SwissINSO Holding Inc. (the “Issuer”) has issued or will be issuing to
the Secured Parties secured promissory notes (the “Notes”), in the aggregate
maximum principal  amount of $15,000,000;

WHEREAS, SwissINSO is a wholly-owned subsidiary of the Issuer and will benefit
directly from the issuance of the Notes;

WHEREAS, as security for the prompt and complete payment and performance in full
by the Issuer of the Notes and the other Secured Obligations (as herein
defined), SwissINSO has agreed to enter into this Security Agreement assigning,
pledging, conveying, hypothecating, transferring, granting and delivering to the
Secured Parties a security interest in and to the Collateral (as defined
herein).

NOW, THEREFORE, in consideration of the mutual promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, it is hereby agreed as follows:

1.           SECURITY INTEREST.

1.1           Grant of Security.   As security for the prompt and complete
payment and performance in full by the Issuer of the indebtedness, together with
all interest, fees and other charges, arising under the Notes and including any
of its remedies under the Notes (the “Secured Obligations”), SwissINSO hereby
grants, assigns, conveys, mortgages, pledges, hypothecates and transfers to the
Secured Parties a first priority lien on and security interest in, all of
SwissINSO’s right, title and interest in, to and under, all of the property and
assets currently owned by or owing to, or hereafter acquired by or arising in
favor of, SwissINSO, wherever located, including, but not limited to, all
accounts, deposit accounts, chattel paper, instruments, documents, securities,
contract rights, receivables, equipment, goods, inventory, investment property,
goodwill, general intangibles, intellectual property, patents, patent
applications, trademarks, trademark applications, trade names, copyrights,
copyright applications, Internet domain names, service marks, trade secrets,
know-how, technology, software, hardware, commercial tort claims, warranties and
guarantees, as any of the foregoing terms may be defined in the UCC, and
including any products, proceeds (including insurance proceeds) or income
derived therefrom, whether by disposition or otherwise (all of the above,
collectively, the “Collateral”).  Notwithstanding the foregoing, in the event
that SwissINSO obtains commercial or equipment financing for the purchase of
water purification units, machinery and other similar equipment in connection
with its business and the lender requires a first priority lien on and security
interest in such property, the Secured Parties agree that their lien on such
property will be subordinate to that of the lender.
 
 
 
 

--------------------------------------------------------------------------------

 

 
1.2           Continuing Agreement.  This Security Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until performance in full of the Secured Obligations.

1.3           Termination. Upon satisfaction of the Secured Obligations, whether
by payment or conversion into shares of the Common Stock of the Issuer pursuant
to the terms and provisions of the Notes, this Agreement shall automatically be
null and void and have no further force and effect without any action on the
part of any party.

2.           PERFECTION OF SECURITY INTEREST.

2.1           Authorization to File Financing Statements.  SwissINSO agrees to
execute all such financing statements pursuant to the Uniform Commercial Code or
similar filings as in effect from time to time in Switzerland or other foreign
jurisdictions (the “UCC”) or other notices appropriate under applicable law.
2.2           Collateral Covenants.  To further insure the attachment,
perfection and  priority of, and the ability of the Secured Parties to enforce
the Secured Parties’ security interest in the Collateral, SwissINSO agrees to
take any and all other actions as the Secured Parties may determine to be
necessary or useful for the attachment, perfection, and priority of, and the
ability of the Secured Parties to enforce, the Secured Parties' security
interest in the Collateral, including, without limitation, (a) executing,
delivering and, where appropriate, filing financing statements and amendments
relating thereto under the UCC, to the extent, if any, that SwissINSO's
signature is required therefor, (b) complying with any provision of any statute,
regulation or treaty of the United States or any foreign country as to the
Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of the Secured Parties to enforce, the
Secured Parties' security interest in such Collateral, (c) obtaining
governmental and other third party waivers, consents, and approvals in form and
substance satisfactory to the Secured Parties, and (d) taking all actions under
any other law, as reasonably determined by the Secured Parties to be applicable.

3.           EVENTS OF DEFAULT.

3.1           Event of Default.  An Event of Default, as defined in the Notes,
shall constitute an automatic default hereunder.

3.2           Rights upon Event of Default.  Upon an Event of Default, the
Secured Parties shall have all the rights and remedies of a secured party under
the UCC or with respect to the Collateral, provided that Secured Parties holding
at least eighty percent (80%) of the aggregate amount of Notes elect to exercise
such rights and remedies.
 
 
 
2

--------------------------------------------------------------------------------

 

 

4.           REPRESENTATIONS AND WARRANTIES.

4.1           Validity. The security interest in the Collateral granted to the
Secured Parties hereunder constitutes and shall continue to constitute a legal,
valid and, upon the filing of a UCC financing statement, or similar statement in
any foreign jurisdiction applicable to the Collateral, fully perfected, security
interest in the Collateral.

4.2           No Other Liens.  Except for the liens granted hereunder, SwissINSO
owns and, as to all Collateral whether now existing or hereafter acquired, will
continue to own, the Collateral free and clear of any and all liens, rights or
claims, encumbrances, limitations or restrictions of all other persons or
entities; provided however that the foregoing restriction shall not prohibit
SwissINSO from obtaining a bank loan, revolving line of credit or similar
arrangements pursuant to which a security interest is customarily granted in the
ordinary course of business if, in connection therewith, the Secured Parties and
the new lender agree to an intercreditor agreement acceptable to the Secured
Parties and such new lender and provided further that the foregoing restriction
shall not prohibit SwissINSO from obtaining commercial or equipment financing as
contemplated in the last sentence of Section 1.1 hereof.

4.3           Corporate Representations.  SwissINSO (i) is a duly organized and
validly existing corporation in good standing under the laws of Switzerland,
(ii) has the corporate power and authority to own its property and assets and to
transact the business in which it is engaged or presently proposes to engage and
(iii) has duly qualified and is authorized to do business and is in good
standing in every jurisdiction in which it owns or leases real property or in
which the nature of its business requires it to be so qualified.  SwissINSO has
the corporate power and authority to execute, deliver and carry out the terms
and provisions of this Security Agreement and has taken all necessary corporate
action to authorize the execution, delivery and performance and filing of this
Security Agreement and any UCC financing or continuation statements, or
amendments thereto, and related agreements, instruments, endorsements, powers of
attorney or notices.  SwissINSO has duly executed and delivered this Security
Agreement, and this Security Agreement constitutes the legal, valid and binding
obligation of SwissINSO, enforceable in accordance with its terms.

5.           MISCELLANEOUS.

5.1           Waiver.  No course of dealing or usage of trade, and no oral or
written representations or agreement, between SwissINSO and the Secured Parties,
whether or not relied on or acted upon, and no act, delay or omission by Secured
in exercising any right or remedy hereunder or with respect to any Obligations
shall operate as a waiver thereof or of any other right or remedy, and no single
or partial exercise thereof shall preclude any other or further exercise thereof
or the exercise of any other right or remedy.  The giving of notice or a demand
by the Secured Parties at any time shall not operate as a waiver in the future
of the Secured Parties’ right to exercise any right or remedy without notice or
demand.  The Secured Parties may remedy any default by SwissINSO in any
reasonable manner, without waiving the default remedied, and without waiving any
other prior or subsequent default by SwissINSO.
 
 
 
3

--------------------------------------------------------------------------------

 
 

 
5.2           Amendment.  This Agreement may be amended or modified only by a
writing signed by all of the parties hereto and any provision hereof may be
waived only by a writing signed by the Secured Parties.

5.3           Severability.  The provisions of this Security Agreement are
severable, and if any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction and shall not in any manner affect such clause or provision in
any other jurisdiction, or any other clause or provision of this Security
Agreement in any jurisdiction.

5.4           Assignment.  The benefits of this Security Agreement shall inure
to the benefit of the successors and assigns of the Secured Parties.  The rights
and obligations of SwissINSO under this Security Agreement shall not be assigned
or delegated, by operation of law or otherwise, without the prior consent of the
Secured Parties, and any such assignment or attempted assignment shall be void,
of no force or effect, and shall constitute a material default by SwissINSO.

5.5           Headings.  The headings contained herein shall be for convenience
of reference only and shall not have any bearing in the meaning of the
provisions contained herein.

5.6           CHOICE OF LAW.  THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF SWITZERLAND.

5.7          SWISSINSO WAIVES ANY AND ALL RIGHTS TO A TRIAL BY JURY. ALL PARTIES
TO THIS AGREEMENT UNCONDITIONALLY, IRREVOCABLY, AND EXPRESSLY WAIVE ALL RIGHTS
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, SUIT, COUNTERCLAIM, OR CROSS-CLAIMS
ARISING DIRECTLY OR INDIRECTLY IN ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT, OR OTHERWISE) IN ANY WAY ARISING OUT OF OR OTHERWISE RELATING TO THIS
AGREEMENT OR TRANSACTIONS OR THE RELATIONSHIPS ESTABLISHED THEREUNDER. ALL
PARTIES CONFIRM THAT THE FOREGOING WAIVER OF A TRIAL BY JURY IS INFORMED AND
FREELY MADE.

[Remainder of Page Intentionally Omitted; Signature Pages to Follow]
 
 
 
 
4

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, the undersigned have executed this Security Agreement on the
date first set forth above.

 
 

SWISSINSO SA
 
By:           __________________________
Name:      Yves Ducommun
Title:        Chief Executive Officer
 
 
 
SECURED PARTIES
 
By:          __________________________
Name:     __________________________
Title:        __________________________

 
 5

--------------------------------------------------------------------------------