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Unassociated Document

EXHIBIT
10.4

THE NOTE
REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “ACT”). THIS NOTE MAY NOT BE TRANSFERRED EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR (B) PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
UNDER THE ACT AND SUCH STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON
ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.

INNCARDIO,
INC.

 

Senior
Secured Grid Note

 

Up
to $12,000,000                                              
March 9th, 2005

FOR VALUE
RECEIVED, Inncardio, Inc., a Utah corporation (the “Company”), with its
principal executive office 712 Fifth Avenue, New York, NY, 10019, promises to
pay to the order of Bioaccelerate, Inc, a Delaware Corporation with offices at
712 Fifth Avenue, New York, NY, 10019 (together with any permitted registered
assigns, the “Payee”) the principal sum of $12,000,000 or, if less, the
aggregate unpaid principal amount of all Tranches made to the Company by Payee
(the “Principal Amount”) pursuant to the letter agreement, dated as of even date
herewith, between the Company and the Payee (the “Letter Agreement”), on the
Maturity Date. Capitalized terms used, and not defined, herein shall have the
meanings ascribed thereto in the Letter Agreement.

 

The
Initial Tranche of will be immediately available to the Company, subject to the
satisfaction of all required conditions under the Letter Agreement. Additional
Tranches will be made available to the Company as per the agreed budget
thereafter from drawdown of initial tranche(each a “Funding Date”). Each
Additional Tranche will be funded within two (2) business days following receipt
by the Payee on a Funding Date of a Request Letter and a certification (in form
and substance satisfactory to Bioaccelerate) signed by an authorized officer of
the Company that all conditions to funding set forth herein have been satisfied
and that the Company is not in breach of any representation, warranty or
covenant provided in this Note, the Letter Agreement, the Security Documents,
the Security Agreement, any Warrant issued by the Company to the Payee, the
Engagement Letter or any agreement between the Company and either the Payee or
Bioaccelerate Limited related to the subject matter contained in such agreements
or documents. 

 

The
Company hereby authorizes the Payee to endorse on the Schedule of Tranches
annexed to this Note all Tranches made to the Company and all payments of
principal amounts in respect of such Traches, which endorsements shall, in the
absence of manifest error, be conclusive as to the outstanding principal amount
of all Tranches; provided,
however, that
the failure to make such notation with respect to any Tranche or payment shall
not limit or otherwise affect the obligations of the Company under the Letter
Agreement or this Note. 

 

The
Maturity Date shall mean the earliest of (i) the date on which any Placement
occurs, (ii) the date on which an Event of Default (as defined herein)
occurs, (iii)  the date on which a Change in Control occurs. “Change in
Control” shall mean (a) a merger , consolidation or any other combination of the
Company (other than a merger, consolidation or combination of a wholly-owned
subsidiary of the Company or any other person or entity with respect to which
the Payee has given its approval in writing) with any entity or person, (b) the
sale of all or substantially all of the assets of the Company, or (c) the
purchase by a single entity or group, as defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended, of more than 25% of the voting
stock of the Company in a single transaction or a series of related
transactions. A “Placement” shall mean the closing of either debt or equity
financing in which the Company receives at least Twenty Million Dollars
($20,000,000) in gross proceeds in any transaction or series of related
transactions after the date hereof. The Principal Amount, accrued interest and
any other amounts due under this senior secured grid note (this “Note”) are
payable in such coin or currency of the United States of America as at the time
of payment shall be legal tender for the payment of public and private debts.
Interest on this Note shall accrue on the Principal Amount outstanding from time
to time at a rate per annum computed in accordance with Section 4 hereof. This
Note is made with full recourse to the Company and upon all the warranties,
representations, covenants and agreements contained herein. 

 

The
Company (i) waives presentment, demand, protest or notice of any kind in
connection with this Note and (ii) agrees, in the event of an Event of Default
(as defined below), to pay to the holder of this Note, on demand, all reasonable
out-of-pocket costs and expenses (including legal fees) incurred in connection
with the enforcement and collection of this Note.

 

1.  Prepayments;
Mandatory Prepayments. The
Company may
prepay at any time all or any portion of the principal sum hereunder without
penalty or premium; provided, however, that (i) any prepayment (whether
voluntary or involuntary) shall be applied first to any accrued and unpaid
interest hereunder up to the date of such prepayment, then to any other sums
which may be payable to Payee hereunder, and then to the principal balance
outstanding hereunder, and (ii) the acceptance of any such prepayment following
the occurrence and during the continuance of any Event of Default hereunder
shall not constitute a waiver, release or accord and satisfaction thereof or of
any rights with respect thereto by Payee. Notwithstanding anything to the
contrary provided herein or elsewhere, in the event that prior to the Maturity
Date, a Placement has occurred, then the Company, upon the closing of such
transaction or transactions, as the case may be, will immediately repay in full
the Principal Amount and all accrued and unpaid interest thereon. The Company
shall provide in any applicable financing document that the Company uses in
connection with any Placement that the required amount of funds raised will be
used to repay the Principal Amount and all accrued and unpaid interest thereon
and the Company shall provide to the Payee no later than five (5) Business Days
prior to the date of funding of any such financing the date such financing is
expected to close, the amount of financing to be received and the place and time
of such closing. The Company shall provide to the Payee all other such
applicable information the Payee shall subsequently reasonably request. The
Company shall provide to the Payee at the closing of such financing in
immediately available funds such funds as is necessary to repay the entire
Principal Amount and all accrued and unpaid interest thereon.

 

2.  Day of
Payment.
Whenever any payment to be made hereunder shall become due and payable on a day
which is not a Business Day (as
defined below), such payment may be made on the next succeeding Business Day
without being deemed past due and, in the case of any payment of principal, such
extension of time shall in such case be included in computing interest on such
payment. As used herein, “Business Day” shall mean any day which is not a
Saturday or Sunday and on which banks in the State of New York are not
authorized or required to close. Interest on past due principal and accrued
interest thereon shall be calculated as follows: the amount of principal and
interest past due multiplied by the Penalty Interest Rate (as defined herein)
and multiplied by a fraction, the numerator of which is the number of days such
principal and interest is past due and the denominator of which is
360.

 

3.  Use of
Proceeds. The
Company shall use the proceeds of each Tranche solely for the purposes as agreed
with Bioaccelerate, Inc.

 

4.  Computation
of Interest.

 

A.  Base
Interest Rate. Subject
to subsections 4B and 4C below, the outstanding Principal Amount shall bear
interest per annum at the Applicable Federal Rate (the “Base Interest Rate”), as
defined in Section 1274(d) of the Internal Revenue Code of 1986, as amended (the
“Code”), payable on the Maturity Date.

 

B.  Penalty
Interest. In the
event the Note is not repaid on the Maturity Date, the rate of interest
applicable to the unpaid Principal Amount and accrued interest thereon shall be
adjusted to ten percent (10%) per annum (the “Penalty Interest Rate”) from the
date of default until repayment; provided, that in no event shall the interest
rate exceed the Maximum Rate provided in Section 4C below. 

 

C.  Maximum
Rate. In the
event that it is determined that New York law is not applicable to the
indebtedness evidenced by this Note or that under New York law (“Applicable
Usury Laws”) the interest, charges and fees payable by the Company in connection
herewith or in connection with any other document or instrument executed and
delivered in connection herewith cause the effective interest rate applicable to
the indebtedness evidenced by this Note to exceed the maximum rate allowed by
law (the “Maximum Rate”), then such interest shall be recalculated for the
period in question and any excess over the Maximum Rate paid with respect to
such period shall be credited, without further agreement or notice, to the
Principal Amount outstanding hereunder to reduce said balance by such amount
with the same force and effect as though the Company had specifically designated
such extra sums to be so applied to principal and the Payee had agreed to accept
such extra payment(s) as a premium-free prepayment. All such deemed prepayments
shall be applied to the principal balance payable at maturity.

 

5.  Collateral. This
Note is secured by a Security Agreement dated the date hereof (as amended,
modified or supplemented from time to time, the “Security Agreement”) of the
Company in favor of the Payee covering all assets and future assets of the
Company therein described (collectively, the “Collateral”), and is entitled to
the benefits thereof. The Security Agreement, the Uniform Commercial Code
financing statements in connection with the Security Agreement, and any and all
other documents executed and delivered by the Company to the Payee under which
the Payee is granted liens on assets of the Company are collectively referred to
as the “Security Documents.”

 

6.  Covenants
of Company.

 

A.  Affirmative
Covenants. The
Company covenants and agrees with respect to the Company and each of its
Subsidiaries (which, for purposes of this Note means any entity (i) in which the
Company, directly or indirectly, owns 51% of the capital stock or holds an
equity or similar interest and (ii) which conducts substantive business
activities or holds material assets) that on and after the date hereof, so long
as this Note shall remain in effect, or the Principal Amount of, or interest
thereon, or any fee, expense or amount payable hereunder or with respect to this
Note shall be unpaid, it will perform the obligations set forth in this Section
6A:

 

(i)  Conduct
of Business. The
Company will, and cause each of its Subsidiaries to, use its best efforts to
conduct its business in a manner consistent with past practices, do or to be
done all things necessary to preserve relationship with its material vendors,
customers, distributors, sales representatives and others having material
business relationships with the Company or any of its Subsidiaries, and inform
and consult with the Payee on any key decisions involving any capital
expenditure in excess of $25,000;

 

(ii)  Taxes
and Levies. The
Company will, and cause each of its Subsidiaries to, promptly pay and discharge
all taxes, assessments, and governmental charges or levies imposed upon the
Company or any of its Subsidiaries, or upon any of their income and profits, or
upon any of their property, before the same shall become delinquent, as well as
all claims for labor, materials and supplies which, if unpaid, might become a
lien or charge upon such properties or any part thereof; provided, however, that
neither the Company nor any of its Subsidiaries shall be required to pay and
discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings and
the Company and each of its Subsidiaries shall set aside on its books adequate
reserves in accordance with generally accepted accounting principles (“GAAP”)
with respect to any such tax, assessment, charge, levy or claim so contested;
provided, further, that this Section 6A(ii) shall not apply to those claims for
labor, materials and supplies which the Payee consents in writing shall be
excluded herewith, notwithstanding that such claims, if unpaid, might become a
lien or charge upon such properties or any part thereof.

 

(iii)  Maintenance
of Existence. The
Company will, and cause each of its Subsidiaries to, do or cause to be done all
things reasonably necessary to preserve and keep in full force and effect its
corporate existence, rights (character and statutory) and franchises, except
where the failure to comply would not have a Material Adverse Effect (as defined
herein) on the Company or any of its Subsidiaries;

 

(iv)  Maintenance
of Property. The
Company will, and cause each of its Subsidiaries to, at all times maintain,
preserve, protect and keep its property used or useful in the conduct of its
business in good repair, working order and condition, and from time to time make
all needful and proper repairs, renewals, replacements and improvements thereto
as shall be reasonably required in the conduct of its business and protect and
maintain its licenses and its patents, copyrights, trademarks and trade secrets
and all registrations and application for registration thereof except where the
failure to take such action would not reasonably be expected to have a Material
Adverse Effect;

 

(v)  Compliance
with Laws. The
Company will, and cause each of its Subsidiaries to, use its best efforts to
comply with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, any governmental agency, in respect of the
conduct of its business and the ownership of its properties (including without
limitation applicable statutes, regulations and orders relating to equal
employment opportunities or environmental standards or controls), except such as
are being contested in good faith by appropriate proceedings, except where
failure to comply would not have a Material Adverse Effect;

 

(vi)  Insurance. The
Company will, and cause each of its Subsidiaries to, keep adequately insured all
property of a character usually insured by similar corporations and carry such
other insurance as is usually carried by similar corporations;

 

(vii)  Books
and Records. The
Company will, and cause each of its Subsidiaries to, at all times keep true and
correct books, records and accounts reflecting all of its business affairs and
transactions in accordance with GAAP. Such books and records shall be open at
reasonable times and upon reasonable notice to the inspection of the Payee or
its agents, subject to customary confidentiality restrictions but in no event
more than once in each month absent a good-faith showing of need for such
restrictions;

 

(viii)  Notice
of Certain Events. The
Company will, and cause each of its Subsidiaries to, give prompt written notice
(with a description in reasonable detail) to the Payee of:

 

(a)  the
occurrence of any Event of Default or any event which, with the giving of notice
or the lapse of time, would constitute an Event of Default; and

 

(b)  the
delivery of any notice effecting the acceleration of any indebtedness which
singly or together with any other accelerated indebtedness exceeds
$25,000;

 

(c)  the
issuance by any court or governmental agency or authority of any injunction,
order, decision or other restraint prohibiting, or having the effect of
prohibiting, the making of or invalidating, or having the effect of
invalidating, any material provision of this Agreement, of the initiation of any
litigation or similar proceedings seeking any such injunction, order, decision,
or other restraint;

 

(d)  the
filing or commencement of any action, suit or proceeding against the Company or
any of its Subsidiaries, whether at law or in equity or by or before any court
of any Federal, state, municipal or other governmental agency or authority,
which is brought by or on behalf of any governmental agency or authority, or in
which injunctive or other equitable relief is sought and such relief, if
obtained, would materially impair the right or ability of the Company to perform
it obligations under this Note;

 

(e)  the
commencement of any claim, litigation, proceeding or tax audit not covered by
insurance when the amount claimed is in any individual claim, litigation,
proceeding or tax audit in excess of $25,000 or, in the aggregate, $50,000;
and

 

(f)  of any
material development materially and adversely affecting the business,
properties, liabilities, obligations, financial condition, prospects, operations
or results of operations of the Company and its Subsidiaries, taken as a
whole;

 

(ix)  Financial
Statements and Information. The
Company shall furnish or cause to be furnished to the Payee:

 

(a)  within 90
days after the end of each fiscal year (or such time as permitted under
Rule 12b-25 of the Securities Exchange Act of 1934, as amended; provided
however, that in no event shall the Company be permitted more than one extension
pursuant to either Section 6A(ix)(a) or (b)), a copy of the audited consolidated
balance sheet of the Company and its Subsidiaries, together with the related
statements of income, changes in stockholder’s equity, changes in cash flows as
of the end of and for such fiscal year, all reported on by the accountants to
the effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the
Company and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;

 

(b)  within 45
days after the end of each of the first three fiscal quarters of each fiscal
year (or such time as permitted under Rule 12b-25 of the Securities
Exchange Act of 1934, as amended; provided, however, that in no event shall the
Company be permitted more than one extension pursuant to either Section
6A(ix)(a) or (b); provided, further, however, that the extension with respect to
the restatement of the quarterly report for the period ending September 30,
2001 shall not be deemed to count as an extension pursuant to (i) above), a copy
of the consolidated balance sheet of the Company and each of its Subsidiaries
together with the related statements of income and cash flows as of the end of
and for such fiscal quarter and the then elapsed portion of the fiscal year, all
certified by one of its financial officers as presenting fairly in all material
respects the financial conditions and results of operations of the Company and
its consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;

 

(c)  promptly
after the same become publicly available, copies of all periodic and other
reports, proxy statements and other materials filed by the Company or any of its
Subsidiary with the SEC or with any national securities exchange, or distributed
by the Company or any of its Subsidiaries to its shareholders, as the case may
be; and

 

(d)  promptly
following any request therefor, such other information regarding the business,
financial condition or operations of the Company or compliance with the terms of
this Note, as the Payee may reasonably request, subject to customary
confidentiality agreements and without causing undue expense to the Company or
undue distraction of its employees or management.

 

B.  Negative
Covenants. The
Company covenants and agrees with respect to the Company and each of its
Subsidiaries that, so long as this Note shall remain in effect, or the Principal
Amount of, or interest thereon, or any fee, expense or amount payable hereunder
or with respect to this Note shall be unpaid, it will perform the obligations
set forth in this Section 6B:

 

(i)  Business
in the Ordinary Course. The
Company will, and will cause each of its Subsidiaries to, (i) refrain from
engaging in transactions other than in the ordinary course of business
consistent with past practice; (ii) operate its respective businesses in
accordance and in compliance with all applicable laws, ordinances, rules or
regulations or orders, including, without limitation environmental laws, and all
permits, authorizations, consents and approvals; (iii) maintain all permits and
licenses in effect and, if necessary, make all appropriate filings for the
renewal of any permits or licenses; (iv) refrain from entering into any
transaction involving capital expenditures or commitments therefor (including
any borrowings in connection with such transaction) of more than $25,000,
individually, or $50,000 in the aggregate, or the disposal of any properties or
assets (other than inventory in the ordinary course) with a value of more than
$25,000, individually, or $50,000, in the aggregate, except in the case of
foregoing clauses (ii) and (iii) where the failure to take such action would not
reasonably be expected to have a Material Adverse Effect, and except, in the
case of all of the foregoing clauses, with respect to any financing transaction,
or as otherwise contemplated by the agreements entered into in connection with
this Note;

 

(ii)  Merger,
Liquidation, Dissolution. The
Company will not, and will not permit any of its Subsidiaries to, liquidate or
dissolve, consolidate with, or merge into or with, any other corporation or
other entity (other than a merger or consolidation of a wholly-owned subsidiary
of the Company.), except that any wholly-owned subsidiary may merge with another
wholly-owned subsidiary or with the Company (so long as the Company is the
surviving corporation and no Event of Default shall occur as a result thereof);
provided, however, that the Company may permit its Subsidiaries to liquidate or
dissolve only on the condition that all of the assets of such Subsidiaries are
immediately transferred to the Company and only if such liquidation or
dissolution, as the case may be, would not result in a Material Adverse
Effect;

 

(iii)  Sales
of Assets. The
Company will not, and will not permit any of its Subsidiaries to, sell,
transfer, lease or otherwise dispose of, or grant options, warrants or other
rights with respect to, all or a substantial part of its properties or assets to
any person or entity, provided that this clause (iii) shall not restrict any
disposition made in the ordinary course of business and consisting of capital
goods which are obsolete or have no remaining useful life;

 

(iv)  Redemptions. The
Company will not redeem or repurchase any outstanding equity and/or debt
securities of the Company or its Subsidiaries (or securities convertible into or
exchangeable for equity securities of such entity);

 

(v)  Indebtedness. Other
than indebtedness for borrowed money of the Company or any of its Subsidiaries
existing on the date of this Note and identified on the schedule delivered to
the Payee on the date hereof, neither the Company nor any of its Subsidiaries
will hereafter create, incur, assume or suffer to exist, contingently or
otherwise, any indebtedness for borrowed money, except in the ordinary course of
business (consistent with past practice) but not to exceed $50,000 at any time
outstanding;

 

(vi)  Negative
Pledge. Other
than Liens existing on the date of this Note and expressly identified in the
schedule delivered to the Payee on the date hereof, the Company will not, and
will not permit any of its Subsidiaries to, hereafter create, incur, assume or
suffer to exist any mortgage, pledge, hypothecation, assignment, security
interest, encumbrance, lien (statutory or other), preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and any
financing lease) (each, a “Lien”) upon any of its property, revenues or assets,
whether now owned or hereafter acquired, except:

 

(a)  Liens for
taxes, assessments or other governmental charges or levies not at the time
delinquent or thereafter payable without penalty or being contested in good
faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books;

 

(b)  Liens of
carriers, warehousemen, mechanics, materialman and landlords incurred in the
ordinary course of business for sums not overdue or being contested in good
faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books;

 

(c)  Liens
(other than Liens arising under the Employee Retirement Income Security Act of
1974, as amended, or Section 412(n) of the Internal Revenue Code of 1986, as
amended) incurred in the ordinary course of business in connection with workers’
compensation, unemployment insurance or other forms of governmental insurance or
benefits, or to secure performance of tenders, statutory obligations, leases and
contracts (other than for borrowed money) entered into in the ordinary course of
business or to secure obligations on surety or appeal bonds; and

 

(d)  Judgment
Liens in existence less than 30 days after the entry thereof or with respect to
which execution has been stayed in an amount not to exceed $25,000 singly or in
the aggregate (the liens described in (a)-(d) being referred to herein as
“Permitted Liens”);

 

(vii)  Investments. The
Company will not, and will not permit any of its Subsidiaries to, purchase, own,
invest in or otherwise acquire, directly or indirectly, any stock or other
securities or make or permit to exist any investment or capital contribution or
acquire any interest whatsoever in any other person or entity or permit to exist
any loans or advances for such purposes except for (i) investments in direct
obligations of the United States of America or any agency thereof, (ii)
obligations guaranteed by the United States of America, (iii) certificates of
deposit or other obligations of any bank or trust company organized under the
laws of the United States or any state thereof and having capital and surplus of
at least $500,000, (iv) existing investments in Subsidiaries, or (v) an
investment in any subsidiary created for the purpose of making that
investment;

 

(viii)  Transactions
with Affiliates. The
Company will not, and will not permit any of its Subsidiaries to, enter into any
transaction, including, without limitation, the purchase, sale, lease or
exchange of property, real or personal, the purchase or sale of any security,
the borrowing or lending of any money, or the rendering of any service, with any
person or entity affiliated with the Company or any of its Subsidiaries
(including officers, directors and shareholders owning five (5%) percent or more
of the Company’s outstanding capital stock), except (i) in the ordinary course
of and pursuant to the reasonable requirements of its business and upon fair and
reasonable terms not less favorable than would be obtained in a comparable
arms-length transaction with any other person or entity not affiliated with the
Company and, where the transaction is valued at in excess of $5,000 with the
prior written consent of the Payee, which shall not be unreasonably withheld,
(ii) transactions pursuant to existing agreements as set forth on the schedule
delivered to the Payee on the date hereof and (iii) transactions contemplated by
the agreements entered into in connection with this Note;

 

(ix)  Fundamental
Changes. The
Company will not, and will not permit any of its Subsidiaries to, consolidate or
merge with any other person or entity, or to permit any other person or entity
to merge into or consolidate with it or any of its Subsidiaries (other than a
merger, consolidation or any other combination of a wholly-owned subsidiary of
the Company);

 

(x)  Acquisitions. The
Company will not, and will not permit any of it Subsidiaries to, at any time,
acquire all or substantially all of the assets or any of the capital stock of
any person or entity;

 

(xi)  Restricted
Payments. The
Company will not, and will not permit any of its Subsidiaries to, declare, play
or make any dividend or other distribution, direct or indirect, on account of
any shares of capital stock in such person or entity now or hereafter
outstanding (other than a dividend payable solely in shares of such capital
stock to the holders of such shares) or any redemption, retirement, sinking fund
or similar payment, purchase or other acquisition, direct or indirect, of any
shares of any class of its capital stock now or hereafter outstanding
(collectively, “Restricted Payments”), except:

 

(a)  any
wholly-owned subsidiary of the Company may make Restricted Payments to the
Company; and

 

(b)  Restricted
Payments made by any Subsidiary of the Company to the Company in amounts
sufficient to enable the Company, as the consolidated taxpayer for itself and
its Subsidiaries, if applicable, to pay taxes when due;

 

(xii)  Lines
of Business. Except
as contemplated by the agreements entered into in connection with this Note, the
Company will not, and will not permit any of its Subsidiaries to, materially
change the nature of the business of the Company and its Subsidiaries as
conducted on the date hereof or enter into any new business which materially
increase the risk profile of the Company and its Subsidiaries, taken as a whole;
and

 

(xiii)  Amendment
of Documents. The
Company will not, and will not permit any of its Subsidiaries to, modify, amend,
supplement or terminate, or agree to modify, amend, supplement or terminate,
their organizational documents in any way that could result in a Material
Adverse Effect without the written consent of the Payee; provided, however, that
with respect to the following (to the extent deemed to result in a Material
Adverse Effect), such consent shall not be unreasonably withheld: (i) amendment
to the by-laws of the Company or any Subsidiary to preclude actions by written
consent or nominations of directors other than through a prescribed nominations
process, and (ii) amendment to the Company’s or any Subsidiaries’
certificate of incorporation to increase its authorized common
stock.

 

(xiv)  Stock
Option Plan; Board of Directors.
Notwithstanding anything to the contrary set forth in this Note, the Company
will not, and not permit any of its Subsidiaries to, without the written consent
of the Lender (a) adopt a stock option plan, or to increase the number of shares
of common stock issuable pursuant to an existing stock option plan or (b) amend
its by-laws to increase the number of directors serving on its board of
directors.

 

7.  Events
of Default.

 

A.  The term
“Event
of Default” shall
mean any of the events set forth in this Section 7A:

 

(i)  Non-Payment
of Obligations. The
Company shall default in the payment of the principal or accrued interest of
this Note as and when the same shall become due and payable, whether by
acceleration or otherwise.

 

(ii)  Non-Performance
of Affirmative Covenants. The
Company shall default in the due observance or performance of any covenant set
forth in (a) clauses (i), (iii), (vi), (viii) and (ix) of Section 6A or (b)
clauses (ii), (iv), (v) and (vii) of Section 6A and such default of clauses
(ii), (iv), (v) and (vii) of Section 6A shall continue remedial for ten (10)
Business Days.

 

(iii)  Non-Performance
of Negative Covenants. The
Company shall default in the due observance or performance of any covenant set
forth in Section 6B.

 

(iv)  Bankruptcy. The
Company (or any of its Subsidiaries) shall:

 

(a)  apply
for, consent to, or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or any of its Subsidiaries, or
any of their property, or make a general assignment for the benefit of
creditors; or

 

(b)  in the
absence of such application, consent or acquiesce in the appointment of a
trustee, receiver, sequestrator or other custodian for the Company or any of its
Subsidiaries, or for any part of their property; or

 

(c)  permit or
suffer to exist (i) the commencement of any bankruptcy, reorganization, debt
arrangement or other case or proceeding under any bankruptcy or insolvency law,
(ii) any dissolution, winding up or liquidation proceeding, in respect of the
Company or any of its Subsidiaries, or (iii) the appointment of a trustee,
receiver, sequestrator or other custodian, without causing the same to be
dismissed within forty-five (45) days; and, if such case or proceeding is not
commenced by the Company or converted to a voluntary case, such case or
proceeding shall be consented to or acquiesced in by the Company or any of its
Subsidiaries, or shall result in the entry of an order for relief;
or

 

(d)  take any
corporate or other action authorizing, or in furtherance of, any of the
foregoing; or

 

(v)  Cross-Default.
The
Company (or any of its Subsidiary) shall default in the payment when due of any
amount payable under any other obligation for money borrowed in an
amount exceeding
Fifty Thousand Dollars ($50,000); or

 

(vi)  Cross-Acceleration. Any
indebtedness for borrowed money of the Company (or any of its Subsidiaries)
identified on the schedule delivered to the Payee on the date hereof in an
aggregate principal amount exceeding Twenty Five Thousand Dollars ($25,000)
shall be duly declared to be or shall become due and payable prior to the stated
maturity thereof; or

 

(vii)  Orders,
Judgments or Decrees. If any
order, judgment, or decree shall be entered in any proceeding against the
Company (or any Subsidiary) requiring such party to divest itself of a
substantial part of its or his assets, or awarding a money judgment or judgments
against any such entity aggregating more than $25,000, and if, within thirty
(30) days after entry thereof, such order, judgment or decree shall not have
been discharged or execution thereof stayed pending appeal; or if, within thirty
(30) days after the expiration of any such stay, such judgment, order or decree
shall not have been discharged; or

 

(viii)  Invalidity
of Note or Security Documents. This
Note or any other Security Document shall for any reason cease to be, or shall
be asserted by the Company not to be, a legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, or the security interest
or Lien purported to be created by any of the Security Documents shall for any
reason cease to be, or be asserted by the Company not to be, a valid, first
priority perfected security interest in any Collateral (except to the extent
otherwise permitted under any of the Security Documents); or

 

(ix)  Other
Breaches, Defaults. The
Company shall default and/or be in breach of any representation, warranty or
covenant made by the Company to the Payee provided under this Note, any Security
Document, the Warrant, the Letter Agreement, the Engagement Letter or any other
agreement between the Company and either the Payee or Bioaccelerate Limited
related to the subject matter contained in such agreements or
documents.

 

B.  Rights
and Remedies Cumulative. No
right or remedy herein conferred upon the Payee is intended to be exclusive of
any other right or remedy contained herein or in any instrument or document
delivered in connection with or pursuant to this Note or the Security Documents,
and every such right or remedy shall be cumulative and shall be in addition to
every other such right or remedy contained herein and therein or now or
hereafter existing at law or in equity or by statute, or otherwise.

 

C.  Rights
and Remedies Not Waived. No
course of dealing between the Company and the Payee or any failure or delay on
the part of the Payee in exercising any rights or remedies of the Payee and no
single or partial exercise of any rights or remedies hereunder or under the
Security Documents shall operate as a waiver or preclude the exercise of any
other rights or remedies hereunder. 

 

8.  Representations
of the Company. The
Company represents and warrants to the Payee that:

 

A.  Corporate
Organization; Etc. The
Company and its Subsidiaries are corporations duly organized, validly existing
and in good standing under the laws of the jurisdiction in which they are
incorporated, and have the full corporate power and authority to carry on their
business as they are now being conducted and to own the properties and assets
they now own; are duly qualified or licensed to do business as a foreign
corporation in good standing in the jurisdictions in which such qualification is
required, except where the failure to so qualify or to be so licensed would not
have a Material Adverse Effect on its business, financial condition, results of
operations or on its ability to continue to conduct its business as currently
conducted. The copies of the articles of incorporation and by-laws (or other
relevant organization documents) and any amendments thereto of the Company and
each of its Subsidiaries heretofore delivered to the Payee are complete and
correct copies of such instruments as currently in effect. As used in this Note,
“Material Adverse Effect” means any material adverse effect on the business,
properties, assets, operations, results of operations, prospects or financial
condition of the Company and its Subsidiaries, taken as a whole. The term
“Material Adverse Effect” does not include any material developments adversely
affecting (i) the industry in which the Company is engaged generally or (ii) the
national economy, security, stability or peace of the United States or any
country, taken as a whole.

 

B.  Capitalization. The
authorized, issued and outstanding capital stock of the Company prior to the
consummation of the transactions contemplated hereby is set forth in
Schedule
8B. All of
such outstanding shares have been and are, or upon issuance will be, validly
issued, fully paid and non-assessable. Except as disclosed in the schedule
delivered to the Payee on the date hereof, (i) no shares of the Company’s
capital stock are subject to preemptive rights under Delaware law or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding debt securities issued by the Company
(other than as may be issued pursuant to the Letter Agreement); (iii) there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries; (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act; (v) there are no outstanding securities of the Company or any of
its Subsidiaries which contain any redemption or similar provisions, and there
are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of this Note; and (vii) the Company does not have any
stock appreciation rights or “phantom stock” plans or agreements or any similar
plan or agreement. All prior sales of securities of the Company or any of its
Subsidiaries were either registered under the 1933 Act and applicable state
securities laws or exempt from such registration, and no security holder has any
rescission rights with respect thereto except to the extent any such rights
would not reasonably be expected to have a Material Adverse Effect.

 

C.  Title. Except
as set forth in or contemplated by the schedule to be delivered to the Payee on
the date hereof, the Company has good and marketable title to all material
properties and assets owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except as not prohibited by Section 6(B)(vi)
hereof or such as are not significant or important in relation to the Company’s
business; all of the material leases and subleases under which the Company is
the lessor or sublessor of properties or assets or under which the Company holds
properties or assets as lessee or sublessee are in full force and effect, and
the Company is not in default in any material respect with respect to any of the
terms or provisions of any of such leases or subleases, and no material claim
has been asserted by anyone adverse to rights of the Company as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company to continued
possession of the leased or subleased premises or assets under any such lease or
sublease. .

 

D.  Intellectual
Property Rights. The
Company and its Subsidiaries own or possess adequate rights or licenses to use
all trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. Except as set forth on the schedule
delivered to the Payee on the date hereof, none of the Company’s trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, government
authorizations, trade secrets or other intellectual property rights has expired
or terminated, or is expected to expire or terminate within two years from the
date of this Note, except where such expiration or termination would not have
either individually or in the aggregate a Material Adverse Effect. The Company
and its Subsidiaries do not have any knowledge of any infringement by the
Company or its Subsidiaries of trademarks, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
mark registrations, trade secrets or other similar rights of others, or of any
such development of similar or identical trade secrets or technical information
by others and, except as set forth on such schedule, no claim, action or
proceeding has been made or brought against, or to the Company’s knowledge, has
been threatened against, the Company or its Subsidiaries regarding trademarks,
trade name rights, patents, patent rights, inventions, copyrights, licenses,
service names, service marks, service mark registrations, trade secrets or other
infringement, except where such infringement, claim, action or proceeding would
not reasonably be expected to have either individually or in the aggregate a
Material Adverse Effect. Except as set forth on such schedule, the Company and
its Subsidiaries are unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties except where the failure to do so would not
reasonably be expected to have either individually or in the aggregate a
Material Adverse Effect.

 

E.  Litigation. Except
as set forth in or contemplated by the schedule delivered to the Payee on the
date hereof, there is no material action, suit, investigation, customer
complaint, claim or proceeding at law or in equity by or before any court,
arbitrator, governmental instrumentality or authority or other agency now
pending or, to the knowledge of the Company, threatened against the Company, the
adverse outcome of which would be reasonably likely to have a Material Adverse
Effect. The Company is not subject to any judgment, order, writ, injunction or
decree of any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign which
have a Material Adverse Effect.

 

F.  Taxes. Except
as set forth in or contemplated by the schedule delivered to the Payee on the
date hereof, the Company has filed all Federal, state, local and foreign tax
returns which are required to be filed by it or otherwise met its disclosure
obligations to the relevant agencies and all such returns are true and correct
in all material respects. The Company has paid or adequately provided for all
tax liabilities of the Company as reflected on such returns or determined to be
due on such returns or pursuant to any assessments received by it or which it is
obligated to withhold from amounts owing to any employee, creditor or third
party. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company has properly accrued all taxes required to
be accrued by GAAP consistently applied. The tax returns of the Company have
never been audited by any state or Federal authorities. The Company has not
waived any statute of limitations with respect to taxes or agreed to any
extension of time with respect to any tax assessment or deficiency.

 

G.  Compliance
With Laws; Licenses; Etc. The
business of the Company and its Subsidiaries is not being conducted in violation
of any law, ordinance or regulation of any governmental entity except for such
violations the sanctions for which either individually or in the aggregate would
not reasonably be expected to have a Material Adverse Effect, and the Company
has not received notice of any violation of or noncompliance with any Federal,
state, local or foreign, laws, ordinances, regulations and orders applicable to
its business which has not been cured, the violation of, or noncompliance with
which, would be reasonably likely to have a Material Adverse Effect. The Company
has all material licenses and permits and other governmental certificates,
authorizations and permits and approvals (collectively, “Licenses”) required by
every Federal, state and local government or regulatory body for the operation
of its business as currently conducted and the use of its properties, except
where the failure to be licensed or possess a permit would not reasonably be
expected to have a Material Adverse Effect. The Licenses are in full force and
effect and to the Company’s knowledge no violations currently exist in respect
of any License and no proceeding is pending or threatened to revoke or limit any
thereof.

 

H.  Existing
Indebtedness. The
schedule delivered to the Payee on the date hereof is a complete and correct
list of all indebtedness for borrowed money of the Company and its Subsidiaries
in an unpaid principal amount exceeding $10,000, showing as to each item of such
indebtedness the obligor, the aggregate principal amount outstanding and a brief
description of any security therefor (after giving effect to the application of
the proceeds of the sale of this Note). The Company is not in default in any
material respect in the performance or observance of any of the terms, covenants
or conditions contained in any instrument evidencing any such indebtedness and
no event has occurred and is continuing which, with notice or the lapse of time
or both, would become such a default.

 

I.  Security
Interest.
Assuming that the Security Documents are in proper form and are perfected in
accordance with applicable laws and regulations on the date thereof, the
Security Documents create and grant to the Payee a legal, valid and perfected
first priority security interest in the Collateral. The Collateral is not
subject to any other Lien or security interest whatsoever except Permitted
Liens.

 

J.  Subsidiaries. As of
the date hereof, (i) the Company has only the Subsidiaries set forth on, and the
authorized, issued and outstanding capital stock of each Subsidiary is as set
forth on, the schedule delivered to the Payee on the date hereof and (ii) the
ownership interests in each Subsidiary of the Company are duly authorized,
validly issued, fully paid and nonassessable and are owned beneficially and of
record by the persons set forth on such schedule, free and clear of all Liens.
As of the date hereof, the Subsidiaries of the Company have not issued any
securities convertible into, or options or warrants for, any common or preferred
equity securities thereof, except as set forth on such schedule. Except as set
forth on such schedule, there are no agreements, voting trusts or understandings
binding on the Company or any of its Subsidiaries restricting the transfer of
the voting securities of any of the Company’s Subsidiaries or affecting in any
manner the sale, pledge, assignment or other dispositions thereof, including any
right of first refusal, option, redemption, call or other right with respect
thereto, whether similar or dissimilar to any of the foregoing.

 

K.  Investment
Companies and Other Regulated Entities. Neither
the Company nor any of its Subsidiaries is (i) an “investment company” or a
company “controlled” by an “investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940, as amended, or (ii) a
“holding company” as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935 or the Federal Power Act, as
amended.

 

L.  Absence
of Certain Restrictions. No
indenture, certificate of designation for preferred stock, agreement or
instrument to which the Company or any of its Subsidiary is a party (other than
this Note or any Note issued pursuant to the Letter Agreement), prohibits or
limits in any way, directly or indirectly the ability of any such Subsidiary to
make Restricted Payments or repay any indebtedness to the Company or to another
Subsidiary of the Company.

 

M.  ERISA. Each
Pension Plan is in compliance with the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the rules and regulations issued
thereunder, as from time to time in effect (“ERISA”) and the Code, where
applicable, in all material respects and no ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all other ERISA
Events for which liability is reasonably expected to occur, is reasonably
expected to result in a Material Adverse Effect. As used in this Note, “Pension
Plan” means, at any date of determination, any employee pension benefit plan,
the funding of which (under Section 302 of ERISA or Section 412 of the Code)
are, or at any time within the six years immediately preceding such date, were
in whole or in part, the responsibility of the Company or any of its
Subsidiaries, or any person or entity which is a member of any group of
organizations within the meaning of Section 414(b) or (c) of the Code (or,
solely for the purposes of potential liability under Section 302(c)(11) of
ERISA, and Section 412(n) of the Code, Sections 414(m) or (o) of the Code) which
the Company or any of its Subsidiaries is a member (each, an “ERISA Affiliate”).
As used in this Note, “ERISA Event” means (i) a “reportable event”, as defined
in Section 4043 of ERISA with respect to a Pension Plan (other than an event for
which the 30-day notice period is waived), (ii) the existence with respect to
any Pension Plan of an “accumulated funding deficiency” (as defined in Section
412 of the Code or Section 302 of ERISA), whether or not waived; (iii) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Pension Plan; (iv) the incurrence by the Company or its Subsidiaries or any
ERISA Affiliate of any liability under Title IV of ERISA with respect to the
termination of any Pension Plan; (v) the receipt by the Company or any of its
Subsidiaries or any ERISA Affiliate from the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA (or any
governmental authority succeeding to the functions thereof) or a plan
administrator of any notice relating to an intention to terminate any Pension
Plan or Pension Plans or to appoint a trustee to administer any Pension Plan;
(vi) the incurrence by the Company or any of its Subsidiaries or any ERISA
Affiliate of any liability with respect to the withdrawal or partial withdrawal
from any Pension Plan or Multiemployer Plan (as defined in Section 4003(a)(3) of
ERISA); or (vii) the receipt by the Company or any of its Subsidiaries or ERISA
Affiliate of any notice, concerning the imposition of Withdrawal Liability (as
defined in Part I of Subtitle E of Title IV of ERISA) or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

 

N.  Authorization;
No Violation.

 

(a)  The
Company has full corporate power and authority necessary to enter into this Note
and the Security Documents to carry out the transactions contemplated by the
Documents. The Board of Directors of the Company has taken such necessary action
to authorize the execution and delivery of this Note and the Security Documents
and the consummation of the transactions contemplated thereby. This Note and the
Security Documents have been duly executed and delivered by the Company and are
legal, valid and binding obligations of the Company enforceable against it in
accordance with its terms except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors’ rights and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought.

 

(b)  Neither
the execution and delivery of any of the Security Documents nor the consummation
of the transactions contemplated thereby will violate any provision of the
articles or certificate of incorporation or by-laws or other organizational
documents of the Company, be in conflict with, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under or result in the termination of, or accelerate the performance required
by, or cause the acceleration of the maturity of any debt or obligation pursuant
to, or result in the creation or imposition of any security interest, lien or
other encumbrance upon any property or assets of the Company, any agreement or
commitment to which the Company is a party or by which the Company is bound or
to which the property of the Company is subject, or violate any statute or law
or any judgment, decree, order, regulation or rule of any court or governmental
authority applicable to the Company.

 

9.  Miscellaneous.

 

A.  Parties
in Interest. All
covenants, agreements and undertakings in this Note binding upon the Company or
the Payee shall bind and inure to the benefit of the successors and permitted
assigns of the Company and the Payee, respectively. The Payee shall not be
entitled to assign this Note without the written consent of the Company, which
consent shall not be unreasonably withheld.

 

B.  Governing
Law. This
Note shall be governed by and construed in accordance with the laws of the State
of New York without regard to the conflicts of laws or principles thereof. The
parties hereto hereby agree that any suit or proceeding arising directly and/or
indirectly pursuant to or under this instrument or the consummation of the
transactions contemplated hereby, shall be brought solely in a federal or state
court located in the City, County and State of New York. By its execution
hereof, the parties hereby covenant and irrevocably submit to the in personam
jurisdiction of the federal and state courts located in the City, County and
State of New York and agree that any process in any such action may be served
upon any of them personally, or by certified mail or registered mail upon them
or their agent, return receipt requested, with the same full force and effect as
if personally served upon them in New York City. The parties hereto waive any
claim that any such jurisdiction is not a convenient forum for any such suit or
proceeding and any defense or lack of in personam jurisdiction with respect
thereto. In the event of any such action or proceeding, the party prevailing
therein shall be entitled to payment from the other party hereto of its
reasonable counsel fees and disbursements in an amount judicially
determined.

 

C.  Waiver
of Jury Trial. THE
PAYEE AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS NOTE OR ANY OTHER
DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF THE PAYEE OR THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE PAYEE’S PURCHASING THIS NOTE.

 

D.  Expenses
and Fees. All
fees, costs and expenses of every kind and nature, including but not limited to
the reasonable attorneys’ fees and legal expenses, incurred by Payee in
connection with the collection, administration, or enforcement of its rights
under this Note or in defending or prosecuting any actions or proceedings
arising out of or related to any amounts due to Payee under this Note shall be
borne and paid by the Company upon written demand by the Payee and until paid,
shall be added to the amounts due hereunder and bear interest at a rate per
annum equal to 12%.

 

E.  Repricing
of Options. No
representation or covenant shall be deemed to be breached in the event that the
Company effectuates a repricing of any options previously issued pursuant to a
stock option plan in accordance with the terms therewith as a result of the
receipt by Holder of any Warrant; provided, however, that under no circumstances
shall such repricing result in an exercise price less than the Warrant Share
Price. 

 

F.  Entire
Agreement. This
Note (including any schedule referenced herein), the Security Documents and the
Letter Agreement set forth the entire agreement of the parties with respect to
the subject matter hereof and thereof, superseding and replacing any agreement
or understanding that may have existed between the parties prior to the date
hereof in respect to such subject matter.

 

IN
WITNESS WHEREOF, this Note has been executed and delivered on the date first
specified above by the duly authorized representative of the
Company.

INNCARDIO,
INC.

By:   /s/
Bernard Ross    

Name:
Bernard Ross

Title:
Chief Executive OfficerUnassociated Document

EXHIBIT
10.5

SECURITY
AGREEMENT

 

THIS
SECURITY AGREEMENT (this
“Agreement”) is
dated as of March 9th, 2005, by INNCARDIO, INC., a Utah corporation (the
“Grantor”), in
favor of BIOACCELERATE, INC, a Delaware corporation (the “Lender”).

 

Recitals

 

WHEREAS,
pursuant to that certain letter agreement (the “Letter Agreement”) of even date
herewith between the Grantor and Lender, Lender has made available a senior,
secured credit facility in the aggregate principal amount of up to Twelve
Million Dollars ($12,000,000); 

 

WHEREAS,
pursuant to that certain Note of even date herewith, issued by the Grantor in
favor of the Lender (as the same may from time to time be amended, modified,
supplemented or restated, the “Note”),
Grantor has promised to pay the Obligations (as defined herein) to the Lender;
and

 

WHEREAS, the
obligations of the Lender under the Letter Agreement are subject to the
condition, among others, that Grantor shall have executed and delivered to
Lender this Agreement.

 

NOW,
THEREFORE, for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Grantor, Grantor hereby represents, covenants and agrees with
Lender as follows:

 

	1.  	
      Definitions.

 

	a.  	
      When
      used in this Agreement the following terms shall have the following
      meanings (such meanings being equally applicable to both the singular and
      plural forms of the terms defined):

 

“Collateral” has the
meaning assigned to such term in Section 2 of this Agreement.

 

“Contracts” means
all contracts (including any customer, vendor, supplier, service or maintenance
contract), leases, licenses, undertakings, purchase orders, permits, franchise
agreements or other agreements (other than any right evidenced by Chattel Paper,
Documents or Instruments), whether in written or electronic form, in or under
which Grantor now holds or hereafter acquires any right, title or interest,
including, without limitation, with respect to an Account, any
agreement relating to the terms of payment or the terms of performance
thereof.

 

“Copyrights” means all
of the following now owned or hereafter acquired or created (as a work for hire
for the benefit of Grantor) by Grantor or in which Grantor now holds or
hereafter acquires or receives any right or interest, in whole or in part: (a)
all copyrights, whether registered or unregistered, held pursuant to the laws of
the United States, any State thereof or any other country; (b) registrations,
applications, recordings and proceedings in the United States Copyright Office
or in any similar office or agency of the United States, any State thereof or
any other country; (c) any continuations, renewals or extensions thereof; (d)
any registrations to be issued in any pending applications, and shall include
any right or interest in and to work protectable by any of the foregoing which
are presently or in the future owned, created or authorized (as a work for hire
for the benefit of Grantor) or acquired by Grantor, in whole or in part; (e)
prior versions of works covered by copyright and all works based upon, derived
from or incorporating such works; (f) income, royalties, damages, claims and
payments now and hereafter due and/or payable with respect to copyrights,
including, without limitation, damages, claims and recoveries for past, present
or future infringement; (g) rights to sue for past, present and future
infringements of any copyright; and (h) any other rights corresponding to any of
the foregoing rights throughout the world.

 

“Obligations” has the
meaning set forth in Section 3 of this Agreement.

 

“Patents” means
all of the following in which Grantor now holds or hereafter acquires any
interest: (a) all letters patent of the United States or any other country,
all registrations and recordings thereof and all applications for letters patent
of the United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country; (b) all reissues, divisions,
continuations, renewals, continuations-in-part or extensions thereof;
(c) all petty patents, divisionals and patents of addition; (d) all
patents to issue in any such applications; (e) income, royalties, damages,
claims and payments now and hereafter due and/or payable with respect to
patents, including, without limitation, damages, claims and recoveries for past,
present or future infringement; and (f) rights to sue for past, present and
future infringements of any patent.

 

“Trademark” means any
of the following in which Grantor now holds or hereafter acquires any interest:
(a) all trademarks, whether registered or unregistered, held pursuant to the
laws of the United States, and State thereof, or any country
(b) registrations, applications, recordings and proceedings in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country; (c) any continuations,
renewals or extensions thereof; (d) any registrations to be issued in any
pending applications (e) income, royalties, damages, claims and payments now and
hereafter due and/or payable with respect to trademarks, including, without
limitation, damages, claims and recoveries for past, present or future
infringement; (g) rights to sue for past, present and future infringements of
any trademark; and (h) any other rights corresponding to any of the
foregoing rights throughout the world.

 

“UCC” means
the Uniform Commercial Code as the same may from time to time be in effect in
the State of New York; provided,
however, in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of Lender’s security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term “UCC” shall
mean the Uniform Commercial Code (including the Articles thereof) as in effect
at such time in such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions. In addition, the following terms shall
have the meanings set forth for such terms in the UCC: “Account,”
“Account
Debtor,”
“Chattel
Paper”
(including tangible and electronic chattel paper), “Commercial
Tort Claims,”
“Commodity
Account,”
“Deposit
Account,”
“Documents,”
”Equipment,”
“Fixtures,”
“Fixture
Filing,”
“General
Intangible”
(including, without limitation, Payment Intangibles, Copyrights, Patents,
Trademarks, designs, drawings, technical information, marketing plans, customer
lists, trade secrets, proprietary or confidential information, inventions
(whether or not patentable), procedures, know-how, models and data),
“Instrument,”
“Intellectual
Property,”
“Inventory”
(including all goods held for sale or lease or to be furnished under a contract
of service, and including returns and repossessions), “Investment
Property”
(including Securities, Securities Accounts and Securities entitlements),
“Letter-of-Credit
Right”
(whether or not the letter of credit is evidenced by a writing), “Payment
Intangibles,”
“Proceeds,”
“Promissory
Notes,”
“Securities,”
“Securities
Account,”
“Securities
Entitlement” and
“Supporting
Obligations.” Each
of the foregoing terms shall include all of such items now owned, or hereafter
acquired, by Grantor.

 

	b.  	
      Except
      as otherwise defined herein, all capitalized terms used in this Agreement
      have the meanings stated in the Note.

 

	2.  	
      Grant
      of Security.
      As collateral security for the full, prompt, complete and final payment
      and performance when due (whether at stated maturity, by acceleration or
      otherwise) of all the Obligations, Grantor hereby grants to Lender a lien
      on and security interest in, all of Grantor's right, title and interest
      in, to and under the following, whether now owned or hereafter acquired
      (all of which being collectively referred to herein as the “Collateral”):

 

	a.  	
      All
      Accounts of Grantor (including, but not limited to, and notwithstanding
      anything in this Agreement to the contrary, any and all proceeds, money or
      accounts under all Contracts (without
exception).

 

	b.  	
      All
      Chattel Paper of Grantor;

 

	c.  	
      All
      Contracts of Grantor;

 

	d.  	
      All
      Deposit Accounts of Grantor;

 

	e.  	
      All
      Documents of Grantor;

 

	f.  	
      All
      Equipment of Grantor;

 

	g.  	
      All
      Fixtures of Grantor;

 

	h.  	
      All
      General Intangibles of Grantor;

 

	i.  	
      All
      Instruments of Grantor, including, without limitation, Promissory
      Notes;

 

	j.  	
      All
      Inventory of Grantor;

 

	k.  	
      All
      Investment Property of Grantor;

 

	l.  	
      All
      Letter-of Credit Rights of Grantor;

 

	m.  	
      All
      Supporting Obligations of Grantor;

 

	n.  	
      All
      property of Grantor held by Lender, including, without limitation, all
      property of every description now or hereafter in the possession or
      custody of or in transit to Lender for any purpose, including, without
      limitation, safekeeping, collection or pledge, for the account of Grantor,
      or as to which Grantor may have any right or
power;

 

	o.  	
      All
      other goods and personal property of Grantor wherever located, whether
      tangible or intangible, and whether now owned or hereafter acquired,
      existing, leased or consigned by or to Grantor, except those goods and
      personal property which are excluded pursuant to Section 2(c) or 2(h)
      hereunder; and

 

	p.  	
      To
      the extent not otherwise included, all Proceeds of each of the foregoing
      and all accessions to, substitutions and replacements for and rents,
      profits and products of each of the
foregoing.

 

If
Grantor shall at any time acquire a Commercial Tort Claim, Grantor shall
promptly notify the Lender in a writing signed by Grantor of the brief details
thereof and grant to Lender in such writing a security interest therein and in
the proceeds thereof, all upon the terms of this Agreement, with such writing to
be in form and substance reasonably satisfactory to the Lender.

 

Grantor
hereby authorizes the Lender to file, without Grantor's signature thereon and at
Grantor's expense, financing statements, continuation statements (including “in
lieu” continuation statements) and amendments thereto, that describe the
Collateral and which contain any other information required by Part 5 of
Article 9 of the UCC for the sufficiency or filing office acceptance of any
financing statement, continuation statement or amendment, including if Grantor
is an organization, the type of organization and any organization identification
number issued to Grantor.

 

	3.  	
      Security
      for Obligations.
      This Agreement secures the payment of (i) all of the unpaid principal
      amount of, and accrued interest on (including any interest that accrues
      after the commencement of any bankruptcy proceeding) the Note,
      (ii) the obligation of Grantor to pay any fees, costs and expenses of
      Lender under the Note, and (iii) all other obligations, liabilities and
      indebtedness owed by Grantor to the Lender under the Note, in each case,
      whether now existing or hereafter incurred (collectively, the
      “Obligations”).

 

	4.  	
      Rights
      of Lender; Collection of Accounts.

 

	a.  	
      Grantor
      expressly agrees that Grantor shall remain liable under each of its
      Contracts to observe and perform all the conditions and obligations to be
      observed and performed by it thereunder and that Grantor shall perform all
      of its duties and obligations thereunder such that the Grantor shall not
      be deemed to be in breach of each such Contract. The Lender shall not have
      any obligation or liability under any Contract by reason of or arising out
      of this Agreement or the granting to the Lender of a lien therein or the
      receipt by the Lender of any payment relating to any Contract pursuant
      hereto, nor shall the Lender be required or obligated in any manner to
      perform or fulfill any of the obligations of Grantor under or pursuant to
      any Contract, or to make any payment, or to make any inquiry as to the
      nature or the sufficiency of any payment received by them or the
      sufficiency of any performance by any party under any Contract, or to
      present or file any claim, or to take any action to collect or enforce any
      performance or the payment of any amounts which may have been assigned to
      them or to which they may be entitled at any time or
  times.

 

	b.  	
      The
      Lender authorizes Grantor to collect its accounts, provided
      that such collection is performed in a prudent and businesslike manner,
      and the Lender may, upon the occurrence and during the continuation of any
      Event of Default and without notice, limit or terminate said authority at
      any time. Upon the occurrence and during the continuance of any Event of
      Default, at the request of the Lender, Grantor shall deliver to Lender all
      original and other documents which created and/or relate to such accounts,
      including, without limitation, all original orders, invoices and shipping
      receipts.

 

	c.  	
      The
      Lender may at any time, upon the occurrence and during the continuance of
      any Event of Default, without notifying Grantor of its intention to do so,
      notify Account Debtors of Grantor, parties to the Contracts of Grantor,
      obligors in respect of Instruments of Grantor and obligors in respect of
      Chattel Paper of Grantor that the Accounts and the right, title and
      interest of Grantor in, to and under such Contracts, Instruments and
      Chattel Paper have been assigned to Lender and that payments thereunder or
      with respect thereto are to be made directly to the Lender. Upon the
      request of the Lender, Grantor shall promptly so notify such Account
      Debtors, parties to such Contracts, obligors in respect of such
      Instruments and obligors in respect of such Chattel Paper. Upon the
      occurrence and during the continuance of any Event of Default, the Lender
      may, in Lender’s name or in the name of others, communicate with such
      Account Debtors, parties to such Contracts, obligors in respect of such
      Instruments and obligors in respect of such Chattel Paper to verify with
      such parties, to the Lender’s satisfaction, the existence, amount and
      terms of any such Accounts, Contracts, Instruments or Chattel Paper.
      Notwithstanding the foregoing, Lender shall not notify or otherwise
      communicate with any parties to Contracts or Account Debtors of Grantor
      except upon the occurrence of any Event of
Default.

 

	d.  	
      Without
      limiting the foregoing and Lender’s rights as set forth in the foregoing,
      any action by the Lender pursuant to or as described in Section 4(b)
      or Section 4(c) hereof shall be in compliance with the provisions set
      forth in Section 12(b)(v) hereof.

 

	5.  	
      Representations
      and Warranties of Grantor.
      Grantor represents and warrants as follows:

 

	a.  	
      Grantor
      is a corporation duly organized, existing and in good standing under the
      laws of the Delaware, (b) has the legal power to own its property and
      to carry on its business as now being conducted, and (c) is duly
      qualified to do business and is in good standing in each jurisdiction in
      which the character of the properties owned or leased by it therein or in
      which the transaction of its business makes such qualification necessary,
      except where the failure to so qualify or be in good standing would not
      have a Material Adverse Effect;

 

	b.  	
      Grantor
      is, and as to Collateral acquired by it from time to time after the date
      hereof Grantor will be, the owner of all Collateral free from any liens,
      other than liens created hereby and other than Permitted
      Liens;

 

	c.  	
      This
      Agreement creates, for the benefit and security of Lender in respect of
      the Obligations, a legally valid and binding lien on, pledge of, and
      security interest in the Collateral and, upon the filing of a UCC
      Financing Statement, and any applicable filings with respect to
      Copyrights, Patents or Trademarks in respect of the Collateral, such lien,
      pledge and security interest will be perfected and will have priority over
      the claims of any other present and future creditors of the Company (other
      than Permitted Liens or liens upon such of the Collateral that must be
      perfected by possession or control of such Collateral);
  and

 

	d.  	
      Grantor's
      chief executive office, principal place of business and the place where
      Grantor maintains its records concerning the Collateral are each presently
      located at the address set forth on the signature page hereof; and
      Grantor's Federal taxpayer identification number and Grantor's
      organizational identification number under the laws of the State in which
      Grantor, as a registered organization, was organized are as set forth on
      the signature page hereto. 

 

	6.  	
      As
      to the Collateral.

 

	a.  	
      Notwithstanding
      anything to the contrary contained herein, the assignment by Grantor
      herein stated is intended to be an assignment for security purposes and is
      not intended to divest Grantor of its ownership of the Collateral, except
      as otherwise provided herein.

 

	b.  	
      So
      long as no Event of Default has occurred and is continuing,
      (i) Grantor shall retain title to and record ownership of the
      Collateral, and (ii) Grantor shall be entitled to receive any and all
      income or distributions made with respect to the Collateral, except as
      provided in Section 6(c) hereof.

 

	c.  	
      Upon
      the occurrence and during the continuance of an Event of Default, all
      income and proceeds of the Collateral which are received by Grantor shall
      be (i) received in trust for the benefit of the Lender, (ii) segregated
      from other funds of Grantor, and (iii) forthwith paid over by Grantor to
      the Lender (for application in accordance with this Agreement) in the same
      form as so received.

 

	7.  	
      Covenants
      of Grantor.
      Grantor covenants and agrees with Lender that unless approved by
      Lender:

 

	a.  	
      Grantor
      shall not sell, assign (by operation of law or otherwise), or otherwise
      transfer any of the Collateral, or attempt or contract to do so, or grant
      any option with respect to any of the Collateral, except Inventory in the
      ordinary course of business.

 

	b.  	
      Grantor
      shall not, directly or indirectly, create or permit to exist any lien upon
      or with respect to any of the Collateral, and shall defend the Collateral
      against, and take such other action as is necessary to remove, any lien on
      the Collateral, except for the lien created hereby and any Permitted
      Liens.

 

	c.  	
      Grantor
      shall maintain all tangible Collateral in good condition and repair,
      ordinary wear and tear excepted.

 

	d.  	
      Grantor
      shall maintain on the Collateral property damage and liability insurance
      in such amounts, against such risks, and in such forms and with such
      companies as are customarily maintained by businesses similar to Grantor.
      Each such policy shall not be materially altered or canceled, and the
      coverage will not be materially reduced, in any case, without at least
      thirty (30) days' prior written notice to the Lender. Grantor shall
      provide the Lender with satisfactory evidence of such insurance coverage
      at the request of the Lender.

 

	e.  	
      Grantor
      shall promptly pay when due all property and other taxes, assessments and
      government charges or levies imposed upon, and all claims (including
      claims for labor, materials and supplies) against, the Collateral, except
      to the extent the validity thereof is being contested in good faith and by
      appropriate proceedings and adequate reserves are being maintained in
      connection therewith; provided that this Section 7(f) shall not apply to
      claims for labor, materials or supplies which Payee consents in writing
      shall be excluded herewith, notwithstanding that such claims, if unpaid,
      might become a lien or charge upon such properties or any part
      thereof.

 

	f.  	
      Grantor
      shall keep and maintain at its own cost and expense satisfactory and
      reasonably complete records of the Collateral. Grantor shall furnish the
      Lender with such information regarding the Collateral as the Lender may
      reasonably request from time to time and shall allow the Lender, upon
      reasonable notice, access during normal business hours to inspect the
      Collateral and Grantor's records, accounts and books pertaining to the
      Collateral, provided that no restriction as to normal business hours shall
      be required during the continuance of an Event of
  Default.

 

	g.  	
      Grantor
      shall not knowingly take or omit to take any action, the taking or
      omission of which might impair Lender’s lien on the Collateral or
      adversely affect the value of the
Collateral.

 

	h.  	
      Upon
      the occurrence and during the continuance of any Event of Default, Grantor
      shall not grant any extension of the time of payment of any of its
      Accounts, Chattel Paper, Instruments or amounts due under any of its
      Contracts or Documents, compromise, compound or settle the same for less
      than the full amount thereof, release, wholly or partly, any Person liable
      for the payment thereof, or allow any credit or discount whatsoever
      thereon other than trade discounts and rebates granted in the ordinary
      course of Grantor's business.

 

	i.  	
      Grantor
      shall (i) protect, defend and maintain the validity and enforceability of
      the Copyrights, Patents and Trademarks, (ii) use commercially reasonable
      efforts to detect infringements of the Copyrights, Patents and Trademarks
      and promptly advise the Lender in writing of material infringements
      detected, and (iii) not allow any material Copyrights, Patents or
      Trademarks to be abandoned, forfeited or dedicated to the public without
      the written consent of the Lender, unless any such abandonment is
      appropriate in accordance with reasonable and customary business
      practice.

 

	j.  	
      Grantor
      shall not execute or authorize to be filed in any public office any UCC
      financing statement (or similar statement or instrument of registration
      under the law of any jurisdiction) except UCC financing statements filed
      or to be filed in respect of and covering the lien created by this
      Agreement.

 

	k.  	
      Grantor
      shall not amend, modify, waive, take any action or fail to take any action
      with respect to all or a portion of any Contract which Grantor reasonably
      expects or should expect would adversely affect Lender’s interest in the
      Collateral (including, but not limited to, the value of the Collateral) or
      which affect the timing, value or amount of any proceeds due under any
      Contract.

 

	8.  	
      Further
      Assurances.
      Grantor agrees, at any time and from time to time, at the expense of
      Grantor, and upon request of the Lender, to promptly execute and deliver
      all further instruments and documents, and take all further action, that
      may be necessary or desirable, in order to perfect and protect any
      security interest granted or purported to be granted hereby or to enable
      the Lender to exercise and enforce Lender’s rights and remedies hereunder
      with respect to any Collateral, including, without limitation,
      (i) delivering and causing to be filed any financing or continuation
      statements (including “in lieu” continuation statements) under the UCC
      with respect to the security interests granted hereby, (ii) obtaining
      “control” by or on behalf of Lender of any Investment Property, Deposit
      Accounts, Letter-of-Credit Rights or Electronic Chatter Paper (with
      reference to applicable provisions of the UCC with respect to “control”
      for such items of Collateral), (iii)  placing the interest of the
      Lender as lienholders on the certificate of title (or similar evidence of
      ownership) of any Equipment constituting Collateral owned by Grantor which
      is covered by a certificate of title (or similar evidence of ownership),
      (iv) filing or cooperating with the Lender in filing any forms or
      other documents required to be recorded with the United States Patent and
      Trademark Office, United States Copyright Office, or any actions, filings,
      recordings or registrations in any foreign jurisdiction or under any
      international treaty, required to secure or protect Lender’s interest in
      the Collateral, (v) transferring Collateral to the possession of the
      Lender (if a security interest in such Collateral can only be perfected by
      possession), (vi)  executing and delivering or causing to be
      delivered written notice to insurers of Lender’s security interest in, or
      claim in or under, any policy of insurance (including unearned premiums),
      and (vii)  using its best efforts to obtain acknowledgements from
      bailees having possession of any Collateral and waivers of liens from
      landlords and mortgagees of any location where any of the Collateral may
      from time to time be stored or located. If Grantor executes and delivers
      any document or instrument pursuant to this Section 8, such document
      or instrument shall be in form and substance reasonably satisfactory to
      the Lender and a copy thereof shall be provided by Grantor to the Lender;
      and if Grantor takes any other action pursuant to this Section 8,
      such action shall be taken with the prior written consent of the Lender
      and notice thereof shall be given by Grantor to the
  Lender.

 

	9.  	
      Security
      Interest Absolute.
      All rights of the Lender and the assignment and security interest
      hereunder, and all obligations of Grantor hereunder, shall remain in full
      force and effect and shall secure the Obligations, and shall be absolute
      and unconditional, irrespective of:

 

	a.  	
      any
      change in the time, manner or place of payment of, or in any other term
      of, all or any of the Obligations or any other amendment or waiver of or
      any consent to any departure from the Note;
or

 

	b.  	
      any
      taking, exchange, release or non-perfection of any other collateral, or
      any release or amendment or waiver of or consent to departure from any
      guaranty, for all or any of the Obligations;
or

 

	c.  	
      any
      manner of application of any Collateral, or proceeds thereof, to all or
      any of the Obligations or any manner of sale or other disposition of any
      Collateral; or

 

	d.  	
      any
      other circumstances other than releases, waivers and the like by the
      Lender that might otherwise constitute a defense available to, or a
      discharge of, Grantor's obligations hereunder or Lender’s security
      interest hereunder.

 

	10.  	
      Continuing
      Security Interest; Sale of Participations; Release of
      Collateral.
      This Agreement shall create a continuing security interest in the
      Collateral and shall (i) remain in full force and effect until the
      payment in full of the Obligations (subject to Section 14 hereof),
      (ii) be binding upon Grantor, its successors and its permitted
      assigns under the Note, and (iii) inure to the benefit of, and be
      enforceable by (subject to the terms hereof), the Lender and its
      successors and assigns. No sales of participations in, and no other sales,
      assignments, transfers or other dispositions of, any agreement governing
      or instrument evidencing the Obligations or any portion thereof or
      interest therein by the Lender shall in any manner affect the lien granted
      to the Lender hereunder. Subject to Section 14 hereof, upon the
      payment in full of the Obligations, the security interest granted hereby
      shall terminate and all rights to the Collateral shall revert to Grantor.
      Upon any such termination, the Lender will, at Grantor' expense, execute
      and deliver to Grantor such documents as Grantor shall reasonably request
      to evidence such termination. The Lender shall, at the request of Grantor,
      deliver any document reasonably necessary to release any lien granted
      hereunder with respect to any Collateral Grantor is
      transferring.

 

	11.  	
      Lender’s
      Duties.
      The powers conferred on the Lender hereunder are solely to protect
      Lender’s interest in the Collateral as a secured party and shall not
      impose any duty upon the Lender to exercise any such powers. Except for
      the safe custody of any Collateral in Lender’s possession and the
      accounting for money actually received by Lender hereunder, the Lender
      shall not have any duty as to any Collateral or as to the taking of any
      necessary steps to preserve any rights pertaining to any Collateral. The
      Lender shall not have any responsibility or liability for the collection
      of any proceeds of any Collateral or by reason of any invalidity, lack of
      value or uncollectability of any of the Collateral. The Lender shall be
      deemed to have exercised reasonable care in the custody and preservation
      of any Collateral in the Lender’s possession if such Collateral is
      accorded treatment substantially equal to that which the Lender accords
      its own property.

 

	12.  	
      Events
      of Default; Remedies Upon Default; Actions by Lender.

 

	a.  	
      The
      occurrence of an Event of Default under and as defined in the Note shall
      constitute an “Event
      of Default”
      hereunder.

 

	b.  	
      If
      any Event of Default shall have occurred:

 

	i.  	
      The
      Lender may exercise in respect of the Collateral, in addition to other
      rights and remedies provided for herein or otherwise available to Lender
      (or any of them), all the rights and remedies of a secured party on
      default under the UCC (whether or not the UCC applies to the affected
      Collateral), and may also, without notice of any kind or demand of
      performance or other demand (all and each of which demands and notices are
      hereby expressly waived to the maximum extent provided by the UCC and
      other applicable law) reclaim, take possession, recover, store, maintain,
      finish, repair, prepare for sale or lease, advertise for sale or lease and
      sell the Collateral or any part thereof in one or more parcels at public
      or private sale, at any exchange, broker’s board or at the Lender’s
      offices or elsewhere, for cash, on credit, or for future delivery, and
      upon such other terms as the Lender may deem commercially reasonable. In
      connection with the liquidation, sale or other disposition of the
      Collateral, the Lender is granted a non-exclusive, royalty-free license or
      other right to use, without charge, Grantor’ labels, patents, copyrights,
      trade secrets, trade names, trademarks, service marks, or any similar
      property as it pertains to the Collateral, in completing a liquidation,
      sale or other disposition of the Collateral. The Lender shall not be
      obligated to make any sale of Collateral regardless of notice of sale
      having been given. The Lender may adjourn any public or private sale from
      time to time by announcement at the time and place fixed therefor, and
      such sale may, without further notice, be made at the time and place to
      which it was so adjourned. Grantor agrees that in any sale of any of the
      Collateral, whether at a foreclosure sale or otherwise, the Lender is
      hereby authorized to comply with any limitation or restriction in
      connection with such sale as it may be advised by counsel is necessary in
      order to avoid any violation of applicable law (including compliance with
      such procedures as may restrict the number of prospective bidders and the
      Lender, require that such prospective bidders and the Lender have certain
      qualifications and restrict such prospective bidders and the Lender to
      Persons who will represent and agree that they are purchasing for their
      own account for investment and not with a view to the distribution or
      resale of such Collateral), and Grantor further agrees that such
      compliance shall not result in such sale being considered or deemed not to
      have been made in a commercially reasonable manner, nor shall the Lender
      be liable or accountable to Grantor for any discount allowed by reason of
      the fact that such Collateral is sold in compliance with any such
      limitation or restriction.

 

	ii.  	
      Grantor
      authorizes the Lender, on the terms set forth herein, to enter the
      premises where the Collateral (or any part of it) is located, to take
      possession of the Collateral (or any part of it), and to pay, purchase,
      contract, or compromise any encumbrance, charge or lien which, in the
      opinion of the Lender, appears to be prior or superior to its security
      interest. Grantor further agrees, at the Lender’s request, to assemble the
      Collateral and make it available to the Lender at places which the Lender
      shall reasonably select. To the maximum extent permitted by applicable
      law, Grantor hereby waives all claims, damages, and demands against the
      Lender arising out of the repossession, retention or sale of the
      Collateral.

 

	iii.  	
      The
      Lender may sell Collateral without giving warranties as to such
      Collateral. The Lender may specifically disclaim any warranties of title
      or the like. The foregoing will not be considered adversely to affect the
      commercial reasonableness of any sale of
Collateral.

 

	iv.  	
      If
      the Lender sells any of the Collateral upon credit, Grantor will be
      credited only with, and at the time of, payments actually made by the
      purchaser in such sale received by the purchaser and applied to the
      indebtedness of such purchaser. In the event the purchaser in such sale
      fails to pay for the Collateral, the Lender may resell the Collateral and
      Grantor shall be credited with the proceeds of the resale in accordance
      with the preceding sentence. In the event the Lender purchase any of the
      Collateral being sold, the Lender may pay for the Collateral by crediting
      some or all of the amounts described in clauses first, second, third and
      fourth of Section 12(b)(vi) hereof.

 

	v.  	
      Any
      cash held by the Lender as Collateral and all cash proceeds received by
      the Lender in respect of any sale of, collection from, or other
      realization upon, all or any part of the Collateral or the exercise of any
      other remedies consequent upon an Event of Default shall be applied in
      whole or in part by the Lender against all or any part of the Obligations
      in the following order:

 

First, to the
Lender in an amount sufficient to pay in full the Obligations, including all
reasonable fees, costs, expenses, liabilities and advances incurred or made by
the Lender in connection with the sale, disposition or other realization of the
Collateral, including without limitation, reasonable attorneys'
fees;

 

Second, upon
payment in full of all the Obligations, to Grantor or to whomsoever may be
lawfully entitled to receive such surplus.

 

	vi.  	
      Grantor
      shall remain liable for any deficiency if the proceeds of any sale or
      disposition of the Collateral are insufficient to fully pay the
      Obligations, and Grantor also shall be liable for the reasonable costs and
      expenses (including reasonable attorneys' fees and expenses) incurred by
      Lender to collect such deficiency.

 

	vii.  	
      Grantor
      hereby waives presentment, demand, protest or any notice (to the maximum
      extent permitted by applicable law) of any kind in connection with this
      Agreement or any Collateral.

 

	13.  	
      Expenses.
      Grantor shall upon demand pay to the Lender the amount of any and all
      reasonable expenses, including the reasonable and necessary fees and
      expenses the Lender’s counsel and of any experts and agents, which the
      Lender may incur in connection with (a) the administration of this
      Agreement, (b) the custody or preservation of, or the sale of, collection
      from, or other realization upon, any of the Collateral, (c) the exercise
      or enforcement of any of the rights of the Lender hereunder, or (d) the
      failure by Grantor to perform or observe any of the provisions hereof or
      of under the Note.

 

	14.  	
      Reinstatement.
      This Agreement shall remain in full force and effect and continue to be
      effective should any petition be filed by or against Grantor for
      liquidation or reorganization, should Grantor become insolvent or make an
      assignment for the benefit of creditors or should a receiver or trustee be
      appointed for all or any significant part of Grantor's property and
      assets, and shall continue to be effective or be reinstated, as the case
      may be, if at any time payment and performance of the Obligations, or any
      part thereof, is, pursuant to applicable law, rescinded or reduced in
      amount, or must otherwise be restored or returned by any obligee of the
      Obligations, whether as a “voidable preference,” “fraudulent conveyance,”
      or otherwise, all as though such payment or performance had not been made.
      In the event that any payment, or any part thereof, is rescinded, reduced,
      restored or returned, the Obligations shall be reinstated and deemed
      reduced only by such amount paid and not so rescinded, reduced, restored
      or returned.

 

	15.  	
      Amendments,
      Etc. No
      amendment or waiver of any provision of this Agreement, nor consent to any
      departure by Grantor herefrom, shall in any event be effective unless the
      same shall be in writing and signed by the parties necessary to amend the
      Note, and then such waiver or consent shall be effective only in the
      specific instance and for the specific purpose for which
      given.

 

	16.  	
      Cumulative
      Remedies.
      The rights and remedies hereunder provided are cumulative and may be
      exercised singly or concurrently, and are not exclusive of any rights and
      remedies provided by law. The Lender shall not by any act, delay, omission
      or otherwise be deemed to have waived any of their respective rights or
      remedies hereunder, nor shall any single or partial exercise of any right
      or remedy hereunder on any one occasion preclude the further exercise
      thereof or the exercise of any other right or
remedy.

 

	17.  	
      Lender
      May Perform; Reimbursement; Power of Attorney.

 

	a.  	
      If
      Grantor fails to perform any obligation of Grantor under this Agreement,
      the Lender may, but shall not have the obligation to, without prior notice
      to or obtaining the consent of Grantor, perform that obligation on behalf
      of Grantor, including, without limitation, obtaining insurance coverage
      for the Collateral and satisfying tax obligations or liens on the
      Collateral. Grantor shall reimburse the Lender on demand for all
      reasonable expenses and reasonable attorneys’ fees incurred by the Lender
      in performing any such obligation, including interest at the interest rate
      specified in the Note.

 

	b.  	
      Grantor
      hereby absolutely and irrevocably constitutes and appoints the Lender as
      Grantor’s true and lawful agent and attorney-in-fact, with full power of
      substitution, in the name of Grantor: (a) to take any and all such
      action as the Lender or any of its agents, nominees or attorneys may, in
      its or their sole and absolute discretion, reasonably determine as
      necessary or advisable for the purpose of maintaining, preserving or
      protecting the security constituted by this Agreement or any of the
      rights, remedies, powers or privileges of the Lender under this Agreement;
      and (b) generally, in the name of Grantor to exercise all or any of
      the powers, authorities and discretions, conferred on or reserved to the
      Lender by or pursuant to this Agreement, and (without prejudice to the
      generality of any of the foregoing) to seal and deliver or otherwise
      perfect any deed, assurance, agreement, instrument or act as the Lender
      may deem proper in or for the purpose of exercising any of such powers,
      authorities or discretions, in each case. Grantor hereby ratifies and
      confirms, and hereby agrees to ratify and confirm, whatever lawful acts
      the Lender or any of its agents, nominees or attorneys shall do or purport
      to do in the exercise of the power of attorney granted to the Lender
      pursuant to this Section 17(b), which power of attorney, being given
      for security, is irrevocable. Notwithstanding anything to the contrary in
      this Section 17(b), no such action as Grantor’s true and lawful agent and
      attorney-in-fact may be taken by Lender except upon the occurrence of any
      Event of Default.

 

	18.  	
      Addresses
      for Notices.
      All notices and other communications to any party provided for hereunder
      shall be in writing and mailed by registered or certified mail, return
      receipt requested, to the addresses for the Grantor and the Lender set
      forth on the signature pages hereto, or, as to any party, to such other
      address as shall be designated by such party in a written notice to each
      other party complying as to delivery with the terms of this Section 18:
      All such notices and other communications shall be effective (i) upon
      personal delivery to the party to be notified; (ii) on the date of first
      attempted delivery after having been sent by registered or certified mail,
      return receipt requested, postage prepaid; (iii) one (1) day after deposit
      with a nationally recognized overnight courier, specifying next day
      delivery, with written verification of
receipt.

 

	19.  	
      Forbearance;
      Delay.
      Any forbearance, failure or delay by the Lender in exercising any right,
      power or remedy hereunder shall not preclude the exercise thereof. Every
      right, power or remedy of the Lender shall continue in full force and
      effect until such right, power or remedy is specifically waived by an
      instrument in writing executed by the
Lender.

 

	20.  	
      Severability.
      Any provision of this Agreement which is prohibited or unenforceable in
      any jurisdiction shall, as to such jurisdiction, be ineffective to the
      extent of such prohibition or unenforceability without invalidating the
      remaining provisions hereof, and any such prohibition or unenforceability
      in any jurisdiction shall not invalidate or render unenforceable such
      provision in any other jurisdiction.

 

	21.  	
      Successors
      and Assigns.
      This Agreement is for the benefit of the Lender and its successors and
      assigns, and in the event of an assignment of all or any of the
      Obligations, the rights hereunder, to the extent applicable to the
      indebtedness so assigned, may be transferred with such indebtedness. This
      Agreement shall be binding on the Grantor and its respective successors
      and assigns.

 

	22.  	
      Consent
      To Jurisdiction And Service Of Process.
      ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE
      BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR
      THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS
      AGREEMENT, EACH OF GRANTOR AND LENDER CONSENTS, FOR ITSELF AND IN RESPECT
      OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH
      OF THE GRANTOR AND LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
      OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
      CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
      ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR
      ANY DOCUMENT RELATED HERETO. EACH OF GRANTOR AND LENDER WAIVES PERSONAL
      SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY
      ANY OTHER MEANS PERMITTED BY NEW YORK LAW.

 

	23.  	
      Waiver
      Of Jury Trial.
      EACH OF GRANTOR AND LENDER WAIVES ITS RIGHT TO A TRIAL BY JURY OF ANY
      CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
      AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION,
      PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY PARTY AGAINST
      ANY OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
      OTHERWISE. EACH OF GRANTOR AND LENDER AGREES THAT ANY SUCH CLAIM OR CAUSE
      OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING
      THE FOREGOING, EACH OF GRANTOR AND LENDER FURTHER AGREES THAT ITS RIGHT TO
      A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
      COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
      CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY
      PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
      RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
  AGREEMENT.

 

	24.  	
      Advice
      of Counsel; Construction.
      Each of Grantor and Lender represents and warrants that it has discussed
      this Agreement, including, without limitation, Section
      22 and Section 23
      hereof, with its counsel. The parties hereto have participated jointly in
      the negotiation and drafting of this Agreement. In the event an ambiguity
      or question of intent or interpretation arises, this Agreement shall be
      construed as if drafted jointly by the parties hereto and no presumption
      or burden of proof shall arise favoring or disfavoring any party by virtue
      of the authorship of any provisions of the
Agreement.

 

	25.  	
      Headings.
      The various headings in this Agreement are inserted for convenience only
      and shall not affect the meanings or interpretation of this Agreement or
      any provision hereof.

 

	26.  	
      Governing
      Law.
      This Agreement shall be governed by, and construed in accordance with, the
      internal laws of the State of New York determined without reference to
      principles of conflicts of law, except to the extent that the validity or
      perfection of any security interest created hereunder, or remedies
      hereunder, in respect of any item of the Collateral is governed by the
      laws of a jurisdiction other than the State of New
York.

 

	27.  	
      Counterparts.
      This Agreement may be executed in counterparts, each of which shall
      constitute an original.

 

 

 

IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and
delivered as of the date first above written.

 

	 	
      INNCARDIO,
      INC.

       

      By: /s/
      Bernard Ross  

      Name:
      Bernard Ross

      Title:
      Chief Executive Officer

	 	 
	 	
       

       

	 	
      BIOACCELERATE,
      INC.

       

      By: /s/
      Lee Cole   

      Name:
      Lee Cole

      Title:
      CEO

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