Exhibit 10.2

 

ICORIA, INC.

SECURITY AGREEMENT

 

To:   Laurus Master Fund, Ltd.     c/o M&C Corporate Services Limited     P.O.
Box 309 GT     Ugland House     South Church Street     George Town     Grand
Cayman, Cayman Islands

 

Date: October 19, 2004

 

To Whom It May Concern:

 

1. To secure the payment of all Obligations (as hereafter defined), Icoria,
Inc., a Delaware corporation (the “Assignor”), hereby assigns and grants to
Laurus a continuing security interest in all equipment and fixed assets listed
on Schedule 1.A to this agreement in which the Assignor now has or hereafter may
acquire any right, title or interest in and to, and all additions Assignor may
put on Schedule 1.A in the future, accessions, substitutions thereto or
therefor, and all proceeds and products thereof (including, without limitation,
proceeds of insurance)) (the “Collateral”). Except as otherwise defined herein,
all capitalized terms used herein shall have the meaning provided such terms in
the Securities Purchase Agreement referred to below.

 

2. The term “Obligations” as used herein shall mean and include all debts,
liabilities and obligations owing by the Assignor to Laurus arising under, out
of, or in connection with: (i) that certain Securities Purchase Agreement dated
as of the date hereof by and between the Company and Laurus (the “Securities
Purchase Agreement”) and (ii) the Related Agreements referred to in the
Securities Purchase Agreement, as each may be amended, modified, restated or
supplemented from time to time, are collectively referred to herein as the
“Documents”), or any documents, instruments or agreements relating to or
executed in connection with the Documents or any documents, instruments or
agreements referred to therein or otherwise, or any other indebtedness,
obligations or liabilities of the Assignor to Laurus, whether now existing or
hereafter arising, direct or indirect, liquidated or unliquidated, absolute or
contingent, due or not due and whether under, pursuant to or evidenced by a
note, agreement, guaranty, instrument, or otherwise in each case, irrespective
of the genuineness, validity, regularity or enforceability of

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such Obligations or of any instrument evidencing any of the Obligations or of
any collateral therefor or of the existence or extent of such collateral, and
irrespective of the allowability, allowance or disallowance of any or all of the
Obligations in any case commenced by or against the Assignor under Title 11,
United States Code, including, without limitation, obligations or indebtedness
of the Assignor for post-petition interest, fees, costs and charges that would
have accrued or been added to the Obligations but for the commencement of such
case.

 

3. The Assignor hereby represents, warrants and covenants to Laurus that:

 

(a) it is a corporation, partnership or limited liability company, as the case
may be, validly existing, in good standing and organized under the laws of the
State of Delaware, and it will provide Laurus thirty (30) days’ prior written
notice of any change in its jurisdiction of organization;

 

(b) its legal name, as set forth in its Certificate of Incorporation (or
equivalent organizational document) as amended through the date hereof, is
Icoria, Inc. and it will provide Laurus thirty (30) days’ prior written notice
of any change in its legal name;

 

(c) its Employer Identification Number (“EIN”) is 56-2047837, and it will
provide Laurus thirty (30) days’ prior written notice of any change in its EIN;

 

(d) it is the lawful owner of the Collateral and it has the sole right to grant
a security interest therein and will defend the Collateral against all claims
and demands of all persons and entities;

 

(e) it will keep the Collateral owned by it free and clear of all attachments,
levies, taxes, liens, security interests and encumbrances of every kind and
nature (“Encumbrances”), except (i) Encumbrances set forth on Schedule B hereto,
(ii) Encumbrances securing the Obligations and (iii) to the extent said
Encumbrance does not secure indebtedness in excess of $100,000 and such
Encumbrance is removed or otherwise released within ten (10) days of the
creation thereof;

 

(f) it will at its own cost and expense keep the Collateral in good state of
repair (ordinary wear and tear excepted) and will not waste or destroy the same
or any part thereof other than ordinary course discarding of items no longer
used or useful in its business;

 

(g) it will not without Laurus’ prior written consent, and which such consent
will not be unreasonably withheld, sell, exchange, lease or otherwise dispose of
the Collateral, whether by sale, lease or otherwise, except for the sale of
inventory in the ordinary course of business and for the disposition or transfer
in the ordinary course of business during any fiscal year of obsolete and
worn-out equipment or equipment no longer necessary for its ongoing needs,
having an aggregate fair market value of not more than $100,000 and only to the
extent that:

 

(i) the proceeds of any such disposition are used to acquire replacement
Collateral which is subject to Laurus’ first priority perfected security
interest or are used to repay Obligations or to pay general corporate expenses;
and

 

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(ii) following the occurrence of an Event of Default which continues to exist,
the proceeds of which are remitted to Laurus, to be held as cash collateral for
the Obligations;

 

(iii) Notwithstanding anything contained in this Section 3(g) to the contrary,
the Company may upon five (5) days prior written notice to Laurus (which such
notice shall contain reasonable detail regarding the Collateral to be sold)
effect sales of Collateral in the ordinary course of business consistent with
past practice, not to exceed $200,000 per instance or $600,000 in the aggregate
during any twelve (12) month period, and such proceeds may be retained by the
Company for working capital purposes.

 

(h) it will insure the Collateral in Laurus’ name against loss or damage by
fire, theft, burglary, pilferage, loss in transit and such other hazards as
Laurus shall specify in amounts, not to exceed the fair market value of the
Collateral, unless specifically agreed to by the Assignor, and under policies by
insurers acceptable to Laurus and all premiums thereon shall be paid by the
Assignor and the proof of such policies delivered to Laurus. If the Assignor
fails to do so, Laurus may procure such insurance and the cost thereof shall be
promptly reimbursed by the Assignor and shall constitute Obligations;

 

(i) it will at all reasonable times, with sufficient notice and compliance with
procedures set forth by the Assignor, including showing proof of Laurus’ or
Laurus’ representatives’ insurance coverage for such an on-site inspection,
allow Laurus or Laurus’ representatives free access to and the right of
inspection of the Collateral; and

 

(j) the Assignor hereby indemnifies and saves Laurus harmless, from all loss,
costs, damage, liability and/or expense, including reasonable attorneys’ fees,
that Laurus may sustain or incur to enforce payment, performance or fulfillment
of any of the Obligations and/or in the enforcement of this Security Agreement
or in the prosecution or defense of any action or proceeding either against the
Assignor or Laurus concerning any matter growing out of or in connection with
this Security Agreement, and/or any of the Obligations and/or any of the
Collateral except to the extent caused by Laurus’ own gross negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final and nonappealable decision).

 

4. The occurrence of any of the following events or conditions shall constitute
an “Event of Default” (after the passage of any applicable cure period) under
this Security Agreement:

 

(a) any covenant, warranty, representation or statement made or furnished to
Laurus by the Assignor or on the Assignor’s behalf was breached in any material
respect or false in any material respect when made or furnished, as the case may
be, and, in the case of a covenant, shall not be cured for a period of fifteen
(15) business days;

 

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(b) the loss, theft, substantial damage, destruction, sale or encumbrance to or
of any of the Collateral or the making of any levy, seizure or attachment
thereof or thereon except to the extent:

 

(i) such loss is covered by insurance proceeds which are used to replace the
item or repay Laurus; or

 

(ii) said levy, seizure or attachment does not secure indebtedness in excess of
$200,000 and such levy, seizure or attachment has not been removed or otherwise
released within thirty (30) days of the creation or the assertion thereof;

 

(c) the Assignor shall cease operations, dissolve, terminate our business
existence, make an assignment for the benefit of creditors, suffer the
appointment of a receiver, trustee, liquidator or custodian of all or any part
of the Assignor’s property;

 

(d) any proceedings under any bankruptcy or insolvency law shall be commenced by
or against the Assignor;

 

(e) the Assignor shall repudiate, purport to revoke or fail to perform any of
its obligations under the Note (after passage of applicable cure period, if
any); or

 

(f) an Event of Default (or similar term) shall have occurred under and as
defined in the Securities Purchase Agreement or any other Document (after the
passage of any applicable cure period).

 

5. Upon the occurrence of any Event of Default and at any time thereafter,
Laurus may declare all Obligations immediately due and payable and Laurus shall
have the remedies of a secured party provided in the Uniform Commercial Code as
in effect in the State of New York, this Master Security Agreement and other
applicable law. Upon the occurrence of any Event of Default and at any time
thereafter, Laurus will have the right to take possession of the Collateral and
to maintain such possession on the Assignor’s premises or to remove the
Collateral or any part thereof to such other premises as Laurus may desire. Upon
the occurrence of an Event of Default and Laurus’ request, the Assignor shall
assemble the Collateral and make it available to Laurus for marketing in place
and, if sold, the shipping costs will be initially paid by Laurus and
subsequently subtracted from the proceeds. If any notification of intended
disposition of any Collateral is required by law, such notification, if mailed,
shall be deemed properly and reasonably given if mailed at least ten (10) days
before such disposition, postage prepaid, addressed to the Assignor either at
the Assignor’s address shown herein or at any address appearing on Laurus’
records for the Assignor. Any proceeds of any disposition of any of the
Collateral shall be applied by Laurus to the payment of all expenses in
connection with the sale of the Collateral, including reasonable attorneys’ fees
and other legal expenses and disbursements and the reasonable expense of
retaking, holding, preparing for sale, selling, and the like, and any balance of
such proceeds may be applied by Laurus toward the payment of the Obligations in
such order of application as Laurus may elect, and the Assignor shall be liable
for any deficiency.

 

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6. If the Assignor defaults in the performance or fulfillment of any of the
terms, conditions, promises, covenants, provisions or warranties on the
Assignor’s part to be performed or fulfilled under or pursuant to this Security
Agreement, Laurus may, at its option while waiving its right to enforce this
Security Agreement according to its terms, immediately or at any time thereafter
and without notice to the Assignor, perform or fulfill the same or cause the
performance or fulfillment of the same for the Assignor’s account and at the
Assignor’s cost and expense, and the cost and expense thereof (including
reasonable attorneys’ fees) shall be added to the Obligations and shall be
payable within seven business days with interest thereon at the highest rate
permitted by law.

 

7. The Assignor hereby appoints Laurus, any of Laurus’ officers, employees or
any other person or entity whom Laurus may designate as our attorney, with power
to execute such documents in our behalf and to supply any omitted information
and correct patent errors in any documents executed by the Assignor or on our
behalf; to file financing statements against the Assignor covering the
Collateral; to sign the Assignor’s name on public records; and to do all other
things Laurus deems necessary to carry out this Security Agreement. The Assignor
hereby ratifies and approve all acts of the attorney and neither Laurus nor the
attorney will be liable for any acts of commission or omission, nor for any
error of judgment or mistake of fact or law other than their gross negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final and non-appealable decision). This power being coupled with an interest,
is irrevocable so long as any Obligations remains unpaid.

 

8. No delay or failure on Laurus’ part in exercising any right, privilege or
option hereunder shall operate as a waiver of such or of any other right,
privilege, remedy or option, and no waiver whatever shall be valid unless in
writing, signed by Laurus and then only to the extent therein set forth, and no
waiver by Laurus of any default shall operate as a waiver of any other default
or of the same default on a future occasion. Laurus’ books and records
containing entries with respect to the Obligations shall be admissible in
evidence in any action or proceeding, shall be binding upon the Assignor for the
purpose of establishing the items therein set forth and shall constitute prima
facie proof thereof. Laurus shall have the right to enforce any one or more of
the remedies available to Laurus, successively, alternately or concurrently. The
Assignor agrees to join with Laurus in executing financing statements or other
instruments to the extent required by the Uniform Commercial Code in form
satisfactory to Laurus and in executing such other documents or instruments as
may be required or deemed necessary by Laurus for purposes of affecting or
continuing Laurus’ security interest in the Collateral.

 

9. This Security Agreement shall be governed by and construed in accordance with
the laws of the State of New York and cannot be terminated orally. All of the
rights, remedies, options, privileges and elections given to Laurus hereunder
shall inure to the benefit of Laurus’ successors and assigns. The term “Laurus”
as herein used shall include Laurus, any parent of Laurus, any of Laurus’
subsidiaries and any co-subsidiaries of Laurus’ parent, whether now existing or
hereafter created or acquired, and all of the terms, conditions, promises,
covenants, provisions and warranties of this Security Agreement shall inure to
the benefit of each of the foregoing, and shall bind the representatives,
successors and assigns of the Assignor. Each of Laurus and the Assignor hereby
(a) waives any and all right to trial by jury in litigation relating to this
Security Agreement and the transactions contemplated hereby and the Assignor
hereby agrees not to assert any counterclaim in such litigation, (b) submit to
the nonexclusive

 

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jurisdiction of any New York State court sitting in the borough of Manhattan,
the city of New York and (c) waive any objection the Assignor or Laurus may have
as to the bringing or maintaining of such action with any such court.

 

10. All notices from Laurus to the Assignor shall be sufficiently given if
mailed or delivered to the Assignor at its address set forth in the Securities
Purchase Agreement and the Security Agreement, as applicable.

 

Very truly yours, ICORIA, INC. By:  

/s/ Philip R. Alfano

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Name:   Philip R. Alfano Title   Vice President, Finance, and CFO

 

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ACKNOWLEDGED: LAURUS MASTER FUND, LTD. By:  

/s/ Eugene Grin

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Name:   Eugene Grin Title:   Director

 

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Schedule 1.A

 

See attached list

 

Schedule B

 

See attached list

 

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