Ex-10.3 Patent Security Agreement



 





EXHIBIT 10.3




PATENT SECURITY AGREEMENT




     THIS PATENT SECURITY AGREEMENT (“Security Agreement”), dated as of December ___, 2007,
between Advanced Viral Research Corp., a Delaware corporation (the “Parent”),
Triad Biotherapeutics, Inc., incorporated and existing under the laws of the Delaware (the
“Subsidiary”) (collectively the Parent and the Subsidiary are referred to as the
“Grantors”) and YA Global Investments, L.P., a Cayman Island exempted limited
partnership (the “Lender”).



WITNESETH:




     WHEREAS, pursuant to a Securities Purchase Agreement, dated as of January 1, 2007 (together
with all amendments, supplements, restatements and other modifications, if any, from time to time
made thereto, the “Securities Purchase Agreement”) between the Parent, as borrower, and the
Lender, the Lender has agreed to purchase up to $1,500,000 of secured convertible debentures of the
Parent (the “January 2007 Convertible Debentures”) subject to the terms and provisions of
the Securities Purchase Agreement;



     WHEREAS, pursuant to a Securities Purchase Agreement, dated as of July 24, 2007 (together with
all amendments, supplements, restatements and other modifications, if any, from time to time made
thereto, the “July 2007 Securities Purchase Agreement”) between the Parent, as borrower,
and the Lender, the Lender has agreed to purchase up to $2,750,000 of secured convertible
debentures of the Parent (the “July 2007 Convertible Debentures”) subject to the terms and
provisions of the Securities Purchase Agreement; (the January 2007 Convertible Debentures and July
2007 Convertible Debenture shall be collectively referred to as the ”Convertible
Debentures”);



     AND WHEREAS, in connection with the Securities Purchase Agreement and the July 2007 Securities
Purchase Agreement, the Grantors have agreed to provide the Lender a general security interest,
pursuant to the Security Documents (as this term is defined in the Securities Purchase Agreement
and the July 2007 Securities Purchase Agreement, in the Pledged Collateral (as this term is defined
in the Security Documents (together with all amendments, supplements, restatements and other
modifications, if any, from time to time made thereto, the “Security Agreement”);



     AND WHEREAS, as a result of the Grantors obtaining waivers and consents of the Lender pursuant
to such letter dated December 3, 2007 necessary in order for the Grantors to enter into such
Purchase Agreement dated December 3, 2007 by and between the Parent, Triad Biotherapeutics, Inc.,
Vincent P. Gallo and Dallas E. Hughes (the “Purchase Agreement”), the Grantors have agreed
to provide the Lender a security interest in those assets described as the “Purchased Assets” in
the Purchase Agreement. Therefore, the Grantors are required to execute and deliver this
Agreement and to grant to the Lender a continuing security interest in all of the Patent Collateral
(as hereinafter defined) obtained pursuant to such Purchase Agreement to secure all Obligations (as
defined in the Security Agreement);



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     AND WHEREAS, the Grantors have duly authorized the execution, delivery and performance of this
Agreement;



     NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby
acknowledged, the Grantors agree as follows:



     SECTION 1. Definitions. Unless otherwise defined herein otherwise requires, terms
used in this Agreement, including its preamble and recitals, have the meanings provided in the
Securities Purchase Agreement.



     SECTION 2. Grant of Security Interest. For good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, to secure the payment and performance of
all of the Obligations of the Parent, the Grantors do hereby mortgage, pledge and hypothecate to
the Lender and grant to the Lender a security interest in all of the following property (the
“Patent Collateral”), now owned and existing:



          (a) all letters patent and applications for letters patent throughout the world, including all
patent applications in preparation for filing anywhere in the world and including each patent and
patent application referred to in Schedule “A” hereto;




          (b) all reissues, divisions, continuations, continuations-in-part, extensions, renewals and
reexaminations of any of the items described in clause (a);




          (c) all patent licenses and other agreements providing the Grantors with the right to use any
of the items of the type referred to in clauses (a) and (b), including each patent license referred
to in Schedule “A” hereto;




          (d) the right to sue third parties for past, present or future infringements of any Patent
Collateral described in clauses (a) and (b) and, to the extent applicable, clause (c); and




          (e) all proceeds of, and rights associated with, the foregoing, (including license royalties
and proceeds of infringement suits), and all rights corresponding thereto throughout the world.




     SECTION 3. Security Agreement. This Agreement has been executed and delivered by the
Grantors for the purpose of recording the security interest of the Lender in the Patent Collateral
relating to patents referred to in Schedule “A” with the United States Patent and Trade
Marks Office, to the extent it may be so registered therein. The security interest granted hereby
has been granted as a supplement to, and not in limitation of, the security interest granted to the
Lender under the Security Agreement. The Security Agreement (and all rights and remedies of the
Lender thereunder) shall remain in full force and effect in accordance with its terms.



     SECTION 4. Release of Security Interest. Upon an Expiration Event as defined in the
Amended and Restated Security Agreement of even date herewith, the Lender shall, at the Grantors’
expense, execute and deliver to the Grantors all instruments and other documents as may be
necessary or proper to release the lien on any security interest in the Patent Collateral which has
been granted hereunder.



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     SECTION 5. Acknowledgement. The Grantors do hereby further acknowledge and affirm
that the rights and remedies of the Lender with respect to the security interest in the Patent
Collateral granted hereby are more fully set forth in the Security Agreement, the terms and
provisions of which (including the remedies provided for therein) are incorporated by references
herein as if fully set forth herein.



     SECTION 6. Securities Purchase Agreements. Notwithstanding any other term or
provision hereof, in the event that any provisions hereof contradict and are incapable of being
construed in conjunction with the provisions of the Securities Purchase Agreement and the July 2007
Securities Purchase Agreement, the provisions of the Securities Purchase Agreement and the July
2007 Securities Purchase Agreement shall take precedence over those contained herein and, in
particular, if any act of the Grantors is expressly permitted under the Securities Purchase
Agreement and the July 2007 Securities Purchase Agreement but is prohibited hereunder, any such act
shall be permitted hereunder and any encumbrance expressly permitted under the Securities Purchase
Agreement and the July 2007 Securities Purchase Agreement to exist or to remain outstanding shall
be permitted hereunder and thereunder. This instrument, document or agreement may be sold, assigned
or transferred by the Agent in accordance with the terms of the Securities Purchase Agreement and
the July 2007 Securities Purchase Agreement.



     SECTION 7. Counterparts. This Agreement may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original and all of which shall
constitute together but one and the same agreement.



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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered by their respective officers thereunto duly authorized as of the day and first year above
written.



	 	 	 	 	 
	 	ADVANCED VIRAL RESEARCH CORP. 

 	 
	 	By:  	/s/
Martin Bookman 	 
	 	 	Name:  	Martin Bookman 	 
	 	 	Title:  	CFO 	 
	 




	 	 	 	 	 	 	 
	STATE OF

	 	 	 	)	 
	 

	 	 	 	 	 	) SS:


	COUNTY OF

	 	 	 	)	 






     BEFORE ME, a Notary Public in and for said County and State, personally appeared the
above-named _______________________________ who acknowledged that he/she did sign the foregoing agreement
and that the same is his/her free act and deed.



     IN TESTIMONY WHEREOF, I have hereunto set my hand an official seal at ___________________________________,
____________________________________________, this ____________ day of _____________________, 2007.



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Notary Public       	 
	 	 	 



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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered by their respective officers thereunto duly authorized as of the day and first year above
written.



	 	 	 	 	 
	 	TRIAD BIOTHERAPEUTICS, INC. 

 	 
	 	By:  	/s/
Martin Bookman 	 
	 	 	Name:  	Martin Bookman 	 
	 	 	Title:  	CFO 	 
	 




	 	 	 	 	 	 	 
	STATE OF

	 	 	 	)	 
	 

	 	 	 	 	 	) SS:


	COUNTY OF

	 	 	 	)	 







     BEFORE ME, a Notary Public in and for said County and State, personally appeared the
above-named _______________________________ who acknowledged that he/she did sign the foregoing agreement
and that the same is his/her free act and deed.



     IN TESTIMONY WHEREOF, I have hereunto set my hand an official seal at ___________________________________,
____________________________________________, this ____________ day of _____________________, 2007.



	 	 	 	 	 
	 	 	 
	 	 	 
	 	Notary Public       	 
	 	 	 



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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered by their respective officers thereunto duly authorized as of the day and first year above
written.



	 	 	 	 	 
	 	YA GLOBAL INVESTMENTS, L.P. 



By: Yorkville Advisors, LLC 

Its: Investment Manager 

 	 
	 	By:  	/s/
Mark Angelo 	 
	 	 	Name:  	Mark Angelo                                  	 
	 	 	Title:  	President and Portfolio Manager 	 
	 




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SCHEDULE “A”




U.S. Letters Patent And Applications

For Letters Patent Of Compliance Systems Corporation




	 	 	 	 	 	 	 	 	 	 	 
	Holder	 	Title	 	Filing Date	 	Application Number	 	Issue Date	 	Patent Number
	Triad Biotheraputics,
Inc.

	 	 	 	 	 	 	 	 	 	U.S. Patent
No. 7,179,592







A-1