Exhibit 10.4

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this "Agreement"), is entered into as of September 18,
2019, by and between VerifyMe, Inc., a Nevada corporation (the "Borrower"), and
TFK Investments, LLC, a Nevada limited liability company (the "Secured Party" or
"Secured Parties"). All capitalized terms not otherwise defined herein shall the
meanings ascribed to them in that certain securities purchase agreement and
Debenture (as defined below) by and between Borrower and the Secured Party of
even date (the "Securities Purchase Agreement").

 

RECITALS

 

WHEREAS, the Secured Parties have loaned monies to Borrower, as more
particularly described in the Securities Purchase Agreement and as evidenced by
the senior secured convertible debenture in the original principal amount of
$300,000.00 issued by Borrower to the Secured Party on September 18, 2019 (the
"Debenture");

 

WHEREAS, the term "Secured Party" as used in this Agreement shall mean,
collectively, all holders of the Debenture, including those persons who become
holders of the Debenture subsequent to the date hereof; and

 

WHEREAS, this Agreement is being executed and delivered by Borrower to secure
the

Debenture.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, each of the parties hereto hereby agrees as
follows:

 

1.       Obligations Secured. This Agreement secures, in part, the prompt
payment and performance of all obligations of Borrower under the Debenture, and
all renewals, extensions, modifications, amendments, and/or supplements thereto
(collectively, the "Secured Obligations").

 

2.       Grant of Security.

 

a.Collateral. Borrower hereby grants, pledges, and assigns for the benefit of
the Secured Parties, and there is hereby created in favor of each of the Secured
Parties, a security interest in and to all of Borrower’s (inclusive of all of
Borrower’s subsidiaries) right, title, and interest in, to, and under all of the
collateral set forth on Exhibit A hereto (collectively, "Collateral").

 

b.Effective Date. This grant of security shall be effective as of the date
hereof.

 

c.Subordination. The Debenture and the Secured Obligations shall not be
subordinated, or junior in right or interest, to any other obligations of
Borrower, subject to the definition of Permitted Liens herein.

 

 

  

 

 

d.Filings to Perfect Security. The Company will (and is hereby authorized to)
file with any filing office such financing statements, amendments, addenda,
continuations, terminations, assignments and other records (whether or not
executed by Borrower) to perfect and to maintain perfected security interests in
the Collateral by the Secured Parties, whereby (a) promptly upon the execution
of this Agreement, a Financing Statement on Form UCC-1 (the "Financing
Statement'') shall be filed in the appropriate jurisdiction(s) on behalf of the
Secured Parties with respect to the Collateral; The Financing Statement shall
designate each of the Secured Parties as a Secured Party and Borrower as the
debtor, shall identify the security interest in the Collateral, and contain any
other items required by law.

 

3.       Transfers and Other Liens. Except as set forth herein or in the
Debenture, Borrower shall not, without the prior written consent of all of the
Secured Parties, at their sole and absolute discretion:

 

a.Sell, transfer, assign, or dispose of (by operation of law or otherwise), any
of the Collateral outside of the ordinary course of business; or

 

b.Create or suffer to exist any lien, security interest, or other charge or
encumbrance upon or with respect to any of the Collateral, except (i) the
security interests created hereby and (ii) Permitted Liens (as defined herein);
or

 

c.Permit any of the Collateral to be levied upon under any legal process.

 

For purposes of this Agreement, the term “Permitted Liens” means (i) mechanic’s,
materialmen’s, warehousemen’s, carriers’, landlord’s, or manufacturer's liens on
assets acquired by the Borrower after the date of this Agreement in the ordinary
course of business (which do not materially impair the use of such assets in the
operation of business) with respect to obligations which are not overdue for a
period longer than thirty (30) days or which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been established
in accordance with generally accepted accounting principals, (ii) purchase money
liens held by a regional bank or national bank securing indebtedness incurred
after the date of this Agreement for the purchase of fixed or capital assets
after the date of this Agreement, which, if properly perfected, shall be senior
in priority to the security interest of the Debentures as to the fixed or
capital asset so purchased, and (iii) checks deposited by the Borrower into the
Borrower's bank account which have bounced within five (5) business days
thereafter due to insufficient funds in the payor's bank account.

 

4.       Representations and Warranties. Borrower hereby represents and warrants
to the Secured Parties as follows: (a) to Borrower's knowledge, Borrower is the
owner of the Collateral (or, in the case of after-acquired Collateral, at the
time Borrower acquires rights in the Collateral, will be the owner thereat) and
that, except as expressly provided herein, no other person has (or, in the case
of after-acquired Collateral, at the time Borrower acquires rights therein, will
have) any right, title, claim or interest (by way of Lien or otherwise) in,
against or to the Collateral; (b) to Borrower's knowledge, except as expressly
provided herein, upon the filing of a Financing Statement as provided herein,
the Secured Parties (or in the case of after-acquired Collateral, at the time
Borrower acquires rights therein, will have) will have a perfected security
interest in the Collateral to the extent that a security interest in the
Collateral can be perfected by such filing; (c) all Accounts Receivable (as
defined in Exhibit A) are genuine and enforceable against the party obligated to
pay the same; (d) Borrower has full power and authority to enter into the
transactions provided for in this Agreement and the Debenture; (e) this
Agreement and the Debenture, when executed and delivered by Borrower, will
constitute the legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms (subject to general principles of equity
and to bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors’ rights generally); (f) the execution and delivery by
Borrower of this Agreement and the Debenture and the performance and
consummation of the transactions contemplated hereby and thereby do not and will
not violate Borrower's Certificate of Incorporation or Bylaws or any material
judgment, order, writ, decree, statute, rule or regulation applicable to
Borrower; (g) there does not exist any default or violation by Borrower of or
under any of the terms, conditions or obligations of (i) any indenture,
mortgage, deed of trust, franchise, permit, contract, agreement, or other
instrument to which Borrower is a party or by which Borrower is bound, or (ii)
any law, ordinance, regulation, ruling, order, injunction, decree, condition or
other requirement applicable to or imposed upon Borrower by any law, the action
of any court or any governmental authority or agency; and the execution,
delivery and performance of this Agreement will not result in any such default
or violation; (h) there is no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand pending or, to the knowledge, of Borrower,
threatened which adversely affects Borrower's business or financial condition
and there is no basis known to Borrower for any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand which could result
in the same; and (i) this Agreement and the Debenture do not contain any untrue
statement of material fact or omit to state a material fact necessary in order
to make the statements contained in this Agreement and the Debenture not
misleading.

 

 -2- 

 

 

5.       Events of Default. For purposes of this Agreement, the term "Event of
Default" shall mean and refer to any of the following:

 

a.Failure of Borrower to perform or observe any covenant set forth in this
Agreement, or to perform or observe any other term, condition, covenant,
warranty, agreement or other provision contained in this Agreement, where such
failure continues for fifteen (15) days after receipt of written notice from
Lender specifying such failure;

 

b.Any representation or warranty made or furnished by Borrower in writing in
connection with this Agreement and the Debenture or any statement or
representation made in any certificate, report or opinion delivered pursuant to
this Agreement or in connection with this Agreement is false, incorrect or
incomplete in any material respect at the time it is furnished; or

 

c.Occurrence of any Event of Default as defined in the Debenture.

 

6.       Remedies. Upon the occurrence and during the continuance of an Event of
Default (subject to the notice and cure provisions provided for herein, if any),
each Secured Party shall have the rights of a secured creditor under the Uniform
Commercial Code of the applicable jurisdiction(s), all rights granted by the
Debenture, this Security Agreement and by law, including the right to require
Borrower to assemble the Collateral and make it available to the Secured Parties
at a place to be designated by Borrower. The rights and remedies provided in
this Agreement and the Debenture are cumulative and may be exercised
independently or concurrently, and are not exclusive of any other right or
remedy provided at law or in equity. No failure to exercise or delay by the
Secured Parties in exercising any right or remedy under this Agreement or the
Debenture shall impair or prohibit the exercise of any such rights or remedies
in the future or be deemed to constitute a waiver or limitation of any such
right or remedy or acquiescence therein. Every right and remedy granted to the
Secured Parties under this Agreement and the Debenture or by law or in equity
may be exercised by any Secured Party at any time and from time to time.

 

 -3- 

 

 

7.       Further Assurances. Borrower agrees that, from time to time, at its own
expense, it will:

 

a.Protect and defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein, and preserve and
protect Secured Party's security interest in the Collateral.

 

b.Promptly execute and deliver to Secured Parties all instruments and documents,
and take all further action necessary or desirable, as any Secured Party may
reasonably request to (i) continue, perfect, or protect any security interest
granted or purported to be granted hereby, and (ii) enable a Secured Party to
exercise and enforce any of Secured Party's rights and remedies hereunder with
respect to any Collateral.

 

c.Permit a Secured Party's representatives to inspect and make copies of all
books and records relating to the Collateral, wherever such books and records
are located, and to conduct an audit relating to the Collateral at any
reasonable time or times.

 

8.       Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex, e-mail or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent as follows:

 

If to the Borrower, to:

 

VERIFYME, INC.

75 S. Clinton Ave., Suite 510

Rochester, NY 14604

e-mail : ap@verifyme.com

 

If to the Secured Party:

 

TFK INVESTMENTS, LLC

1500 NW 10th Ave., Suite 101

Boca Raton, FL 33486

e-mail: Chad@TFKInvestments.com

 

or to such other address or telecopy number as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.

 

10.       Amendments and Waivers. No modification, amendment or waiver of any
provision of, or consent required by, this Agreement, nor any consent to any
departure herefrom, shall be effective unless it is in writing and signed by
each of the parties hereto. Such modification, amendment, waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.

 

11.       Exclusivity and Waiver of Rights. No failure to exercise and no delay
in exercising on the part of any party, any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege preclude any other right, power or privilege. The
rights and remedies herein provided are cumulative and are not exclusive of any
other rights or remedies provided by law.

 

 -4- 

 

 

12.       Invalidity. Any term or provision of this Agreement shall be
ineffective to the extent it is declared invalid or unenforceable, without
rendering invalid or enforceable the remaining terms and provisions of this
Agreement.

 

13.       Headings. Headings used in this Agreement are inserted for convenience
only and shall not affect the meaning of any term or provision of this
Agreement.

 

14.       Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original instrument, but all of
which collectively shall constitute one and the same agreement.

 

15.       Assignment. This Agreement and the rights and obligations hereunder
shall not be assignable or transferable by the any of the parties without the
prior written consent of all Secured Parties, at their sole and absolute
discretion.

 

16.       Survival. Unless otherwise expressly provided herein, all
representations warranties, agreements and covenants contained in this Agreement
shall survive the execution hereof and shall remain in full force and effect
until the earliest to occur of (a) the payment in full of the Debenture, and (b)
the conversion of the principal and accrued and unpaid interest and all other
amounts owing under the Debenture into common stock of Borrower.

 

17.       Miscellaneous. This Agreement shall inure to the benefit of each of
the parties hereto and all their respective successors and permitted assigns.
Nothing in this Agreement is intended or shall be construed to give to any other
person, firm or corporation any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision herein contained.

 

18.       GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA (WITHOUT GIVING EFFECT TO ANY
CHOICE OR CONFLICT OF LAWS PROVISIONS).

 

19.       CONSENT TO JURISDICTION. Each of the parties consents to the exclusive
jurisdiction and venue of the state located in PALM BEACH County, Florida and/or
federal courts located in PALM BEACH County, Florida in connection with any
dispute arising under this Agreement, and each waives any objection based on
forum non conveniens. This provision is intended to be a “mandatory” forum
selection clause and governed by and interpreted consistent with Florida law
(Nevada law governing all other, substantive matters). Each of the parties
hereby consents to the exclusive jurisdiction and venue of any state or federal
court having its situs in PALM BEACH County, Florida, and each waives any
objection based on forum non conveniens.

 

20.       Attorneys' Fees. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.

 

 -5- 

 

 

21.       Entire Agreement. This Agreement contains the entire agreement among
the parties with respect to the transactions contemplated by this Agreement and
supersedes all prior agreements or understandings among the parties with respect
to the subject matter hereof.

 

[SIGNATURE PAGE(S) FOLLOW]

 

 -6- 

 

 

IN WITNESS WHEREOF, this Security Agreement has been executed as of the date
first set written above.

 

 

“SECURED PARTY”

 

TFK INVESTMENTS, LLC

 

 

 

By: /s/ Chad Friend     

Name: Chad Friend

Title: Authorized Signatory

 

 

"BORROWER"

 

VERIFYME, INC.

 

 

 

By: /s/ Patrick White     

Name: Patrick White

Title: Chief Executive Officer

 

 -7- 

 

 

EXHIBIT A

 

COLLATERAL

 

Borrower hereby grants, pledges, and assigns for the benefit of each Secured
Party, and there is hereby created in favor of the Secured Parties, a security
interest in and to all of Borrower's right, title, and interest in, to, and
under all assets and all personal property of Borrower and its subsidiaries,
whether now or hereafter existing, or now owned or hereafter acquired, including
but not limited to the following (collectively, "Collateral"):

 

1.       All accounts, chattel paper, contracts, contract rights, accounts
receivable, tax refunds, note receivable, documents, other choses in action and
general intangibles, including, but not limited to, proceeds of inventory and
returned goods and proceeds from the sale of goods and services, and all rights,
liens, securities, guaranties, remedies and privileges related thereto,
including the right of stoppage in transit and rights and property of any kind
forming the subject matter of any of the foregoing ("Accounts Receivable");

 

2.       All time, savings, demand, certificate of deposit or other accounts in
the name of Borrower or in which Borrower has any right, title or interest,
including but not limited to all sums now or at any time hereafter on deposit,
and any renewals, extensions or replacements of and all other property which may
from time to time be acquired directly or indirectly using the proceeds of any
of the foregoing;

 

3.       All inventory and equipment of every type or description wherever
located, including, but not limited to all raw materials, parts, containers,
work in process, finished goods, goods in transit, wares, merchandise furniture,
fixtures, hardware, machinery, tools, parts, supplies, automobiles, trucks,
other intangible property of whatever kind and wherever located associated with
the Borrower's business, tools and goods returned for credit, repossessed,
reclaimed or otherwise reacquired by Borrower;

 

4.       All documents of title and other property from time to time received,
receivable or otherwise distributed in respect of, exchange or substitution for
or addition to any of the foregoing including, but not limited to, any documents
of title;

 

5.       All know-how, information, permits, patents, copyrights, goodwill,
trademarks, trade names, licenses and approvals held by Borrower, including all
other intangible property of Borrower;

 

6.       All assets of any type or description that may at any time be assigned
or delivered to or come into possession of Borrower for any purpose for the
account of Borrower or as to which Borrower may have any right, title, interest
or power, and property in the possession or custody of or in transit to anyone
for the account of Borrower, as well as all proceeds and products thereof and
accessions and annexations thereto; and

 

7.       All proceeds (including but not limited to insurance proceeds) and
products of and accessions and annexations to any of the foregoing.