Document:

Exhibit 10.1

 

SECURITY AGREEMENT

 

 

This SECURITY AGREEMENT,
dated as of February 11, 2015 (this “Agreement”), is among Smartmetric, Inc., a Nevada corporation (“Debtor”),
and the undersigned lender(s) set forth on Schedule A hereto (the “Secured Party”).

 

Debtor hereby agrees
in favor of Secured Party as follows:

 

1.In
consideration for loans made or to be made to Debtor in the form of (i) compensation for services provided as an employee by the
Secured Party for the benefit of the Debtor, and (ii) a $25,000 cash loan made by the Secured Party to the Debtor, due to the
Debtor from the Company in the principal amounts set forth on Schedule A hereto, payable to the order of Secured Party
(such backpay and loan amount due, as amended, modified, supplemented, replaced or substituted from time to time, being herein
referred to as the “Backpay”), Debtor hereby grants to Secured Party a continuing security interest in, lien upon
and a right of setoff against, and Debtor hereby assigns to Secured Party, all of Debtor’s right, title and interest in
and to the Collateral described in Section 2, to secure the full and prompt payment, performance and observance of all present
and future indebtedness, obligations, liabilities and agreements of any kind of Debtor to Secured Party arising under or in connection
with the Backpay, which are existing now or arise after the date hereof (all of the foregoing being herein referred to as the
“Obligations”).

 

2.The Collateral is described on
Schedule B annexed hereto as part hereof and on any separate schedule(s) identified as Collateral at any time or from time
to time furnished by Debtor to Secured Party (all of which are hereby deemed part of this Security Agreement) and includes claims
of Debtor against third parties for loss or damage to or destruction of any Collateral.

 

3.1Debtor hereby warrants and represents
that (a) the Debtor is duly organized, validly existing and in good standing as a corporation under the laws of the State of Nevada
and has all requisite power and authority to own, lease and operate the Collateral and its other properties, to carry on its business
as now conducted and as proposed to be conducted and to enter into and perform its obligations under this Agreement, (b) the Debtor
has complied and will comply with any applicable federal and state securities laws in connection with the Backpay, (c) this Agreement
has been duly and validly authorized, executed and delivered by the Debtor, and constituted the valid and legally binding obligation
of the Debtor, enforceable against the Debtor in accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights
generally, (d) there is no claim or proceeding (i) pending, which if adversely determined (taking the fact as alleged in such proceeding
as true for such purposes) could reasonably be expected to have a material adverse effect on the Debtor or (ii) to the Debtor’s
knowledge, threatened against or affecting the Debtor or its subsidiaries or any of their respective properties or assets, which
if adversely determined could reasonably be expected to have a material adverse effect on the debtor and (e) the fair saleable
value of the Debtor’s assets is in excess of the total amount of its liabilities as they become absolute and matured, and
the Debtor is able to pay its debts as they mature.

 

    	 

    	 

    

 

3.2Debtor hereby warrants, represents,
covenants and agrees (as of the date hereof and so long as any Obligation remains outstanding) that: (a) the chief executive office
and other places of business of Debtor, the books and records relating to the Collateral (except for such records as are in the
possession or control of Secured Party) and the Collateral are located at 3960 Howard Hughes Parkway, Suite 500, Las Vegas NV 89109,
and Debtor will not change any of the same, or merge or consolidate with any person or change its name or conduct its business
under any trade, assumed or fictitious name, without prior written notice to and consent of Secured Party (and in the case of location
of Collateral, will from time to time notify Secured Party of the locations thereof); (b) the Collateral is and will be used in
the business of Debtor and not for personal, family, household or farming use; (c) the Collateral is now, and at all times will
be, owned by Debtor free and clear of all liens, security interests, claims and encumbrances, except pursuant to this Agreement;
(d) Debtor will not abandon or assign, sell, lease, transfer or otherwise dispose of, other than in the ordinary course of Debtor’s
business, nor will Debtor suffer or permit any of the same to occur with respect to, any Collateral, without prior written notice
to and consent of a designated representative of the Secured Party; (e) Debtor will make payment or will provide for the payment,
when due, of all taxes, assessments or contributions or other public or private charges which have been or may be levied or assessed
against Debtor, whether with respect to the Collateral, to any wages or salaries paid by Debtor, or otherwise, will deliver to
Secured Party, on demand, certificates or other evidence satisfactory to Secured Party attesting thereto and shall cause Debtor’s
subsidiaries to take any such action as described under this Section 3(e); (f) Debtor will, at its sole cost and expense, perform
all acts and execute all documents requested by Secured Party from time to time to evidence, perfect, maintain or enforce Secured
Party‘s security interest granted herein or otherwise in furtherance of the provisions of this Security Agreement; (g) at
any time and from time to time, Debtor shall, at its sole cost and expense, execute and deliver to Secured Party such financing
statements pursuant to the Uniform Commercial Code (“UCC”), applications for certificate of title and other papers,
documents or instruments as may reasonably be requested by Secured Party in connection with this Security Agreement, and to the
extent permitted by applicable law, Debtor hereby authorizes Secured Party to execute and file at any time and from time to time
one or more financing statements or copies thereof or of this Security Agreement with respect to the Collateral signed only by
Secured Party, and Debtor agrees to pay any recording tax or similar tax arising in connection with the filing of any such financing
statement and further agrees to pay any additional recording or similar tax which is incurred in connection therewith; (h) Debtor
assumes all responsibility and liability arising from the Collateral; (i) in its discretion, Secured Party may, at any time and
from time to time, upon the occurrence and during the continuance of a Default (as hereinafter defined), demand, sue for, collect
or receive any money or property at any time payable or receivable on account of or in exchange for, or make any compromise or
settlement deemed desirable by Secured Party with respect to, any Collateral, and/or extend the time of payment, arrange for payment
in installments, or otherwise modify the terms of, or release, any of the Obligations and/or the Collateral, or any obligor, maker,
endorser, acceptor, surety or guarantor of, or any Party to, any of the Obligations or the Collateral, all without notice

 

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to or
consent by Debtor and without otherwise discharging or affecting the Obligations, the Collateral or the security interest granted
herein; (j) in its discretion, Secured Party may, at any time and from time to time, for the account of Debtor, pay any amount
or do any act required of Debtor hereunder and which Debtor fails to do or pay, and any such payment shall be deemed an advance
by Secured Party to Debtor payable on demand together with interest at the highest rate then payable on any of the Obligations;
(k) Debtor will promptly pay Secured Party for any and all sums, costs, and expenses which Secured Party may pay or incur pursuant
to the provisions of this Security Agreement or in perfecting, defending, protecting or enforcing this Security Agreement or the
first priority security interest granted herein or in enforcing payment of the Obligations or otherwise in connection with the
provisions hereof, including but not limited to all search, filing and recording fees, taxes, fees and expenses for the service
and filing of papers, premium on bonds and undertakings, fees of marshals, sheriffs, custodians, auctioneers, court costs, collection
charges, travel expenses, and reasonable attorneys’ fees, all of which together with interest at the highest rate then payable
on any of the Obligations, shall be part of the Obligations and be payable on demand; (l) upon the occurrence and during the continuance
of a Default, any proceeds of the Collateral received by Debtor shall not be commingled with other property of Debtor, but shall
be segregated, held by Debtor in trust for Secured Party, and immediately delivered to Secured Party in the form received, duly
endorsed in blank where appropriate to effectuate the provisions hereof, the same to be held by Secured Party as additional Collateral
hereunder or, at Secured Party’s option, to be applied to payment of the Obligations, whether or not due and in any order;
(m) in its sole discretion, Secured Party may, at any time and from time to time, assign, transfer or deliver to any transferee
of any Obligations, any Collateral, whereupon Secured Party shall be fully discharged from all responsibility and the transferee
shall be vested with all powers and rights of Secured Party hereunder with respect thereto, but Secured Party shall retain all
rights and powers with respect to any Collateral not assigned, transferred or delivered; and (n) upon request of Secured Party,
at any time and from time to time, Debtor shall, at its cost and expense, execute and deliver to Secured Party reports as to the
Collateral listing all items thereof, describing the condition of same and setting forth the value thereof (lower of cost or market)
all in form and substance reasonably satisfactory to Secured Party.

 

4. Upon demand upon Debtor, the
Secured Party may declare any Obligations immediately due and payable and Secured Party shall have the following rights and remedies
(to the extent permitted by applicable law) in addition to all rights and remedies of a Secured Party under the UCC or of Secured
Party under the Obligations, all such rights and remedies being cumulative, not exclusive and enforceable alternatively, successively
or concurrently:

 

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(a)Secured Party may, at any time
and from time to time, with or without judicial process or the aid and assistance of others, (i) enter upon any premises in which
any Collateral may be located and, without resistance or interference by Debtor, take possession of the Collateral, (ii) dispose
of any part or all of the Collateral on any such premises, (iii) require Debtor to assemble and make available to Secured Party
at the expense of Debtor any part or all of the Collateral at any place and time designated by Secured Party which is reasonably
convenient to both parties, (iv) remove any part or all of the Collateral from any such premises for the purpose of effecting sale
or other disposition thereof (and if any of the Collateral consists of motor vehicles, Secured Party may use Debtor’s license
plates), and (v) sell, resell, lease, assign and deliver, grant options for or otherwise dispose of any part or all of the Collateral
in its then condition or following any commercially reasonable preparation or processing, at public or private sale or proceedings
or otherwise, by one or more contracts, in one or more parcels, at the same or different times, with or without having the Collateral
at the place of sale or other disposition, for cash and/or credit, and upon any terms, at such place(s) and time(s) and to such
person(s) as Secured Party deems best, all without demand, notice or advertisement whatsoever except that where an applicable statute
requires reasonable notice of sale or other disposition Debtor hereby agrees that the sending of ten days’ notice by overnight
mail, postage prepaid, to any address of Debtor set forth in this Security Agreement shall be deemed reasonable notice thereof.
If any Collateral is sold by Secured Party upon credit or for future delivery, Secured Party shall not be liable for the failure
of the purchaser to pay for same and in such event Secured Party may resell or otherwise dispose of such Collateral. Secured Party
may buy any part or all of the Collateral at any public sale and, if any part or all of the Collateral is of a type customarily
sold in a recognized market or is of the type which is the subject of widely distributed standard price quotations, Secured Party
may buy such Collateral at private sale and in each case may make payment therefor by any means, whether by credit against the
Obligations or otherwise. Secured Party may apply the cash proceeds actually received from any sale or other disposition to the
reasonable expenses of retaking, holding, preparing for sale, selling, leasing and the like, to reasonable attorneys’ fees
and all legal, travel and other expenses which may be incurred by Secured Party in attempting to collect the Obligations, proceed
against the Collateral or enforce this Security Agreement or in the prosecution or defense of any action or proceeding related
to the Obligations, the Collateral or this Security Agreement; and then to the Obligations in such order and as to principal or
interest as Secured Party may desire; and Debtor shall remain liable and will pay Secured Party on demand any deficiency remaining,
together with interest thereon at the highest rate then payable on the Obligations and the balance of any expenses unpaid, with
any surplus to be paid to Debtor, subject to any duty of Secured Party imposed by law to the holder of any subordinate security
interest in the Collateral known to Secured Party. 

 

(b)Secured Party may, at any time
and from time to time, as appropriate, set off and apply to the payment of the Obligations, any Collateral in or coming into the
possession of Secured Party or their agents, without notice to Debtor and in such manner as Secured Party may in its discretion
determine.

 

5.With respect to the enforcement
of Secured Party’s rights under this Security Agreement, Debtor hereby releases Secured Party from any claims, causes of
action and demands at any time arising out of or with respect to this Security Agreement, the Obligations, the Collateral and its
use and/or any actions taken or omitted to be taken by Secured Party in good faith with respect thereto, and Debtor hereby agrees
to hold Secured Party harmless from and with respect to any and all such claims, causes of action and demands.

 

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6.Secured Party’s prior recourse
to any Collateral shall not constitute a condition of any demand, suit or proceeding for payment or collection of the Obligations
nor shall any demand, suit or proceeding for payment or collection of the Obligations constitute a condition of any recourse by
Secured Party to the Collateral. Any suit or proceeding by Secured Party to recover any of the Obligations shall not be deemed
a waiver of, or bar against, subsequent proceedings by Secured Party with respect to any other Obligations and/or with respect
to the Collateral. No act, omission or delay by Secured Party shall constitute a waiver of their rights and remedies hereunder
or otherwise. No single or partial waiver by Secured Party of any covenant, warranty, representation, Default or right or remedy
which they may have shall operate as a waiver of any other covenant, warranty, representation, Default, right or remedy or of the
same covenant, warranty, representation, Default, right or remedy on a future occasion. Debtor hereby waives presentment, notice
of dishonor and protest of all instruments included in or evidencing any Obligations or Collateral, and all other notices and demands
whatsoever (except as expressly provided herein).

 

7.Debtor hereby agrees to pay,
on demand, all out-of-pocket expenses incurred by Secured Party in connection with the recoupment of the Backpay, this Security
Agreement, and the Obligations and in connection with any amendment, including, without limitation, the fees and disbursements
of counsel to Secured Party.

 

8.So long as any
principal of or interest on the Backpay (whether or not due) shall remain unpaid, Debtor will, unless the Secured Party shall otherwise
consent in writing, furnish to the Secured Party:

 

(a)            
Furnish to the Secured Party:

 

(i)                
within five business days following any request therefor, such other information regarding the results of operations, business
affairs and financial condition of, and litigation, investigation or proceeding pending against, threatened against or affecting,
Debtor, or any of its subsidiaries or any other matter relating to Debtor and its subsidiaries as the Secured Party may reasonably
request;  

 

(ii)              
within five business days after the end of each fiscal quarter, copies of any new material contract entered into during
the preceding fiscal quarter;

 

(iii)            
as soon as possible and in any event within three business days after any executive officer of Debtor obtains knowledge
of the occurrence of any event or development that could reasonably be expected to have a Material Adverse Effect, the written
statement of an executive officer of the Company setting forth the details of such event or development having a Material Adverse
Effect and the action which Debtor proposes to take with respect thereto;

 

(iv)            
promptly after the commencement thereof but in any event not later than five business days after service of process with
respect thereto on, or the obtaining of knowledge thereof by, Debtor, notice of each action, suit or proceeding before any court
or other governmental authority or other regulatory body or any arbitrator which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect;

 

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(v)              
promptly after the sending or filing thereof, copies of all statements, reports and other information Debtor sends to any
holders of any of its outstanding indebtedness or its securities; and

 

(vi)            
promptly upon receipt thereof, copies of all final financial reports (including, without limitation, management letters),
if any, submitted to Debtor by its auditors in connection with any annual or interim audit of the financial statements or books
thereof.

 

(b)           
Comply, and cause each of its subsidiaries to comply, with all applicable laws, judgments and awards (including any settlement
of any claim that, if breached, could give rise to any of the foregoing), such compliance to include, without limitation, (i) paying
before the same become delinquent all taxes, assessments and governmental charges or levies imposed upon it or upon its income
or profits or upon any of its properties, and (ii) paying all lawful claims which if unpaid might become a lien or charge
upon any of its properties, except in each case to the extent contested in good faith by proper proceedings which stay the imposition
of any penalty, fine or lien resulting from the non-payment thereof and with respect to which adequate reserves have been set aside
for the payment thereof in accordance with GAAP.

 

(c)            
Maintain and preserve, and cause each of its subsidiaries to maintain and preserve, (i) its existence, rights and privileges,
and (ii) become or remain, and cause each of its subsidiaries to become or remain, duly qualified and in good standing in each
jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such
qualification necessary, except to the extent that the failure to do so could not reasonably be expected, either individually or
in the aggregate, to have a Material Adverse Effect.

 

(d)           
Keep, and cause each of its subsidiaries to keep, adequate records and books of account, with complete entries made
to permit the preparation of financial statements in accordance with GAAP.

 

(e)            
Maintain and preserve, and cause each of its subsidiaries to maintain and preserve, all of its properties which are necessary
or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply,
and cause each of its subsidiaries to comply, at all times with the provisions of all leases to which it is a party as lessee or
under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.

 

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(f)            
Duly observe and perform, and cause each of its subsidiaries to duly observe and perform, all material terms and conditions
of all material contracts to which it is a party and diligently protect and enforce (or cause to be protected and enforced) the
material rights of Debtor under all such agreements in a manner consistent with prudent business judgment and subject to the terms
and conditions of such agreements as from time to time in effect.

 

(g)              
Maintain, and cause each of its subsidiaries to maintain, insurance with responsible and reputable insurance companies or
associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance)
with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering
such risks as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in
accordance with sound business practice by companies in similar businesses similarly situated

 

(h)           
Obtain, maintain and preserve, and cause each of its subsidiaries to obtain, maintain and preserve, and take all necessary
action to timely renew, all material permits, licenses, authorizations, approvals, entitlements and accreditations which are necessary
or useful in the proper conduct of its business.

 

(i)             
Take such action and execute, acknowledge and deliver, and cause each of its subsidiaries to take such action and execute,
acknowledge and deliver, at its sole cost and expense, such ancillary and related agreements, instruments or other documents as
the Secured Party may reasonably require from time to time consistent herewith in order (i) to carry out more effectively
the purposes of this Agreement, (ii) to subject to valid and perfected first priority liens any of the Collateral or any other
property of Debtor and its subsidiaries, (iii) to establish and maintain the validity and effectiveness of any documents and
the validity, perfection and priority of the liens intended to be created thereby, and (iv) to better assure, convey, grant,
assign, transfer and confirm unto the Secured Party the rights now or hereafter intended to be granted to it under this Agreement.

 

(j)             
Cause all indebtedness and any other obligations now or hereafter owed by it to any of its Affiliates, to be subordinated
in right of payment and security to obligations owing to the Secured Party.

 

9.  So long as any
principal of or interest on the Backpay (whether or not due) shall remain unpaid, Debtor shall not, unless the Secured Party shall
otherwise consent in writing:

 

(a)            
Wind-up, liquidate or dissolve, or merge, consolidate or amalgamate with any person, or convey, sell, lease or sublease,
transfer or otherwise dispose of, whether in one transaction or a series of related transactions, all or any part of its business,
property or assets, whether now owned or hereafter acquired (or agree to do any of the foregoing), or purchase or otherwise acquire,
whether in one transaction or a series of related transactions, all or substantially all of the assets of any person (or any division
thereof) (or agree to do any of the foregoing), or permit any of its subsidiaries to do any of the foregoing;

 

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(b)              
Enter into, renew, extend or be a party to, or permit any of its subsidiaries to enter into, renew, extend or be a party
to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange
of property or assets of any kind or the rendering of services of any kind) with any of its affiliates, unless reasonably consistent
with past practices of Debtor;

 

(c)               
Make any payment, prepayment, redemption, defeasance, sinking fund payment or repurchase of any subordinated indebtedness
in violation of the subordination provisions thereof or any subordination agreement with respect thereto, or make any payment,
prepayment, redemption, defeasance, sinking fund payment or repurchase of any Indebtedness as a result of any asset sale, change
of control, issuance and sale of debt or equity securities or similar event, or give any notice with respect to any of the foregoing;

 

(d)              
Amend, modify or otherwise change its name, jurisdiction of organization, organizational identification number or FEIN,
except that Debtor may change its name, jurisdiction of organization, organizational identification number or FEIN upon at least
30 days' prior written notice to the Secured Party;

 

(e)               
Establish, sponsor, maintain, become party or contribute to or become obligated to sponsor, maintain or contribute to any
multiemployer benefit plan or any defined benefit plan which provides benefits to employees after termination of employment other
than as required by Section 601 of ERISA or applicable law.

 

(f)               
Agree to any material amendment or other material change to or material waiver of any of its rights under any material contract
in any manner adverse to the Secured Party.

 

(g)              
Enter into, incur or permit to exist, or permit any subsidiary to enter into, incur or permit to exist, directly or indirectly,
any agreement, instrument, deed, lease or other arrangement that prohibits, restricts or imposes any condition upon the ability
of Debtor or any of its subsidiaries to create, incur or permit to exist any lien upon any of its property or revenues, whether
now owned or hereafter acquired, or that requires the grant of any security for an obligation if security is granted for another
obligation, except this Agreement. 

 

10.In the event of any litigation
with respect to any matter connected with this Security Agreement, the Obligations, or the Collateral, Debtor hereby waives the
right to a trial by jury and all rights of setoff. Debtor hereby waives personal service of any process in connection with any
such action or proceeding and agrees that the service thereof may be made by certified or registered mail directed to Debtor at
any address of Debtor set forth in this Security Agreement. Debtor so served shall appear or answer to such process within thirty
days after the mailing thereof. Should Debtor so served fail to appear or answer within said thirty-day period, Debtor shall be
deemed in default and judgment may be entered by Secured Party against Debtor for the amount or such other relief as may be demanded
in any process so served. In the alternative, Secured Party may in their discretion effect service upon Debtor in any other form
or manner permitted by law.

 

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11.Upon the payment in full of
the Backpay, the security interest granted hereby in the Collateral shall terminate and all rights to the Collateral under this
Agreement shall immediately revert to Debtor. Upon any such termination, the Secured Party shall within three (3) business days:
(x) return any Collateral that is in possession of the Secured Party, and (y) execute and deliver UCC–3 financing statement
releases or other documents of release reasonably requested by Debtor.

 

12.Secured Party may assign its
rights and obligation hereunder to any Affiliate of Secured Party provided that such Affiliate assumes all of the liabilities or
obligations of Secured Party hereunder. For purposes of this section, “Affiliate” of any person means any other person
or entity which, directly or indirectly, controls or is controlled by that person, or is under common control with that person
or entity. “Control” (including, with correlative meaning, the terms “controlled by” and “under common
control with”), as used with respect to any person or entity, means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such person or entity, whether through the ownership of voting
securities, by contract or otherwise.

 

13.All terms herein shall have
the meanings as defined in the UCC, unless the context otherwise requires. No provision hereof shall be modified, altered, waived,
released, terminated or limited except by a written instrument expressly referring to this Security Agreement and to such provision,
and executed by the party to be charged. The execution and delivery of this Security Agreement has been authorized by the Board
of Directors of Debtor and by any necessary vote or consent of stockholders of Debtor. This Security Agreement shall only be assignable
to the extent that the Backpay is assignable, and this Security Agreement and all Obligations shall be binding upon the permitted
successors and assigns of Debtor and shall, together with the rights and remedies of Secured Party hereunder, inure to the benefit
of Secured Party, their executors, administrators, successors, permitted endorsees and permitted assigns.

 

14.This Security Agreement shall
be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of
laws. The parties to this Security Agreement irrevocably submit to the exclusive jurisdiction of the courts of the State of New
York located in New York County and the United States District Court for the Southern District of New York for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this Security Agreement and the transaction contemplated hereby.
The parties to this Security Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The
parties waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable

 

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attorney's fees
and costs. In the event that any provision of this Security Agreement or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any
agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action
or proceeding in connection with this Security Agreement by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Security Agreement and
agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

15.If any term or other provision
of this Security Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions
and provisions of this Security Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term
or other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify
this Security Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner
in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

 

16.Each party hereto acknowledges
and agrees it has had the opportunity to draft, review, and edit the language of this Security Agreement and that no presumption
for or against any party arising out of drafting all or any part of this Security Agreement will be applied in any dispute relating
to, in connection with, or involving this Security Agreement. Accordingly, the parties hereto hereby waive the benefit of any rule
of law or any legal decision that would require, in cases of uncertainty, that the language of a contract should be interpreted
most strongly against the party who drafted such language.

 

17.All notices and other communications
under this Agreement shall be in writing and shall be deemed given when delivered personally, by overnight mail or delivery service
or mailed by certified mail, return receipt requested, to the parties.

 

 

 

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IN WITNESS WHEREOF,
the undersigned have executed or caused this security agreement to be executed on the date first above set forth.

 

	 	
        COMPANY:

         

	 	SMARTMETRIC, INC.
	 	
         

         

         

	 	By: /s/ Jay Needelman
	 	      Name: Jay Needelman
	 	      Title: Chief Financial Officer
	 	 

 

 

Address of Debtor:

 

	
        3960 Howard Hughes Parkway, Suite 500

        Las Vegas NV 89109

	 
	 

 

Secured Parties:

 

/s/ Chaya Hendrick

Name: Chaya Hendrick

 

 

 

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SCHEDULE A

 

Chaya Hendrick: $245,015.00

 

 

 

 

 

 

 

 

 

 

 

 

 

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SCHEDULE B

 

The term “Collateral” means collectively,
wherever located, whether now owned or hereafter acquired or now existing or hereafter acquired or created, all right, title and
interest of Debtor in and to all of its assets, including, without limitation: (i) accounts, chattel paper, deposit accounts, documents,
general intangibles (including, but not limited to intellectual property, payment intangibles, software, licenses, franchises and
customer information), goods (including, but not limited to equipment, fixtures and inventory), instruments, investment property,
letter-of-credit rights, money, other personal property, software, any commercial tort claims; (ii) to the extent not referred
to in clause (i) of this sentence, all (A) supporting obligations and incidental property rights incident to, arising or accruing
pursuant to or otherwise relating to any of the things referred to in clause (i) of this sentence, whether arising or accruing
from any action taken by Debtor or the Secured Party or otherwise, (B) proceeds of any of the items
referred to in clauses (i) and (ii)(A) of this sentence and (C) books and records relating to any of the items
 referred to in clauses (i) and (ii)(A) and (B) of this sentence. Such Collateral shall include United States patent, U.S.
Patent No. 6,792,464, previously assigned by the Secured Party to the Debtor, and any and all other intellectual property rights
currently held or hereafter acquired or created by the Debtor.

 

 

    	13ex10-1.htm

Exhibit 10.1

 

Loan Agreement

Date of Agreement: November 13, 2014 

                                                            Account Number: XXXXXXXXX

Principal Amount:      $1,200,000

 

Introduction. This Agreement dated and effective as of November 13, 2014, is entered into between Tel-Instrument Electronics Corp. (the "Borrower") and Bank of America, NA (the "Bank"). The Borrower agrees to the following terms and conditions:

 

1.  LOAN

1.1       Loan Amount. The Bank agrees to provide a term loan to the Borrower in the amount of One Million Two Hundred Thousand and 00/100 Dollars ($1,200,000.00) (the "Commitment").

 

1.2       Availability Period. The loan is available in one disbursement from the Bank on the date of this Agreement.

1.3       Interest Rate. The interest rate is 6% per year.

1.4        Repayment Terms. The Borrower will repay principal and interest in equal combined installments of Thirty-Six Thousand Five Hundred Fifty-One and 26/100 Dollars ($36,551.26) beginning on December 13, 2014, and on the Same day of each month thereafter, and ending on November 13, 2017 (the "Repayment Period"). In any event, on the last day of the Repayment Period, the Borrower will repay the remaining principal balance plus any interest then due. Each installment, when paid, will be applied first to the payment of interest accrued. The balance of each installment will be applied to the repayment of principal.

 

1.5       Prepayments.

 

(a)        The Borrower may prepay the loan in full or in part at any time. The prepayment will be applied to the most remote payment of principal due under this Agreement

 

(b)        Each prepayment, whether voluntary, by reason of acceleration or otherwise, will be accompanied by the amount of accrued interest on the amount prepaid, and the prepayment fee described below.

 

(c)        The prepayment fee will be the sum of fees calculated separately for each Prepaid Installment, as follows:

 

(i)          The Bank will first determine the amount of interest which would have accrued each month for the Prepaid Installment had it remained outstanding until the applicable Original Payment Date, using the interest rate applicable to the Prepaid Installment under this Agreement;

 

(ii)         The Bank will then subtract from each monthly interest amount determined in (i), above, the amount of interest which would accrue for that Prepaid Installment if it were reinvested from the date of prepayment through the Original Payment Date, using the Treasury Rate.

 

(iii)        If (i) minus (ii) for the Prepaid Installment is greater than zero, the Bank will discount the monthly differences to the date of prepayment by the Treasury Rate. The Bank will then add together all of the discounted monthly differences for the Prepaid Installment.

 

(d)        The following definitions will apply to the calculation of the prepayment fee:

 

(i)           "Original Payment Dates" mean the dates on which the prepaid principal would have been paid if there had been no prepayment.  If any of the principal would have been paid later than the end of the fixed rate interest period in effect at the time of prepayment, then the Original Payment Date for that amount will be the last day of the interest period.

 

  

  

  

 

(ii)         "Prepaid Installment" means the amount of the prepaid principal which would have been paid on a single Original Payment Date.

 

(iii)        "Treasury Rate" means the interest rate yield for U.S. Government Treasury Securities which the Bank determines could be obtained by reinvesting a specified Prepaid Installment in such securities from the date of prepayment through the Original Payment Date. The Bank may adjust the Treasury Rate to reflect the compounding, accrual basis, or other costs of the prepaid amount Each of the rates is the Bank's estimate only and the Bank is under no obligation to actually reinvest any prepayment The rates will be based on information from either the Telerate or Reuters information services, The Wall Street Journal, or other information sources the Bank deems appropriate.

2.  COLLATERAL

2.1       Personal Property. The personal property listed below now owned or owned in the future by the parties listed below will secure Borrower's obligations to the Bank under this Agreement The collateral is further defined in security agreement(s) executed by the owners of the collateral. In addition, all personal property collateral owned by the Borrower securing this Agreement shall also secure all other present and future obligations of the Borrower to the Bank and to any affiliate of the Bank (excludlng any consumer credit covered by the federal Truth in Lending law, unless the Borrower has otherwise agreed in writing or received written notice thereof). All personal property collateral securing any other present or future obligations of the Borrower to the Bank shall also secure this Agreement.

(a)        Equipment and fixtures owned by the Borrower.

(b)        Inventory owned by the Borrower.

(c)        Receivables owned by the Borrower.

 

3.  LOAN ADMINISTRATION AND FEES

 

3.1       Fees.

 

(a)       The Borrower will pay to the Bank the fees set forth on Schedule A.

 

3.2       Collection of Payments.

 

(a)        Payments will be made by debit to a deposit account, if direct debit is provided for in this Agreement or is otherwise authorized by the Borrower. For payments not made by direct debit, payments will be made by mail to the address shown on the Borrower's statement, or by such other method as may be permitted by the Bank.

(b)       Each disbursement by the Bank and each payment by the Borrower will be evidenced by records kept by the Bank which will, absent manifest error, be conclusively presumed to be correct and accurate and constitute an

account stated between the Borrower and the Bank.

 

3.3       Borrower's Instructions.

 

(a)        Subject to the terms. conditions and procedures stated elsewhere in this Agreement, the Bank may honor instructions for advances or repayments and any other instructions under this Agreement given by the Borrower (if an individual), or by anyone of the individuals the Bank reasonably believes is authorized to sign loan agreements on behalf of the Borrower, or any other individual(s) designated by anyone of such authorized signers (each an "Authorized Individual"). The Bank may honor any such instructions made by anyone of the Authorized Individuals. whether such instructions are given in writing or by telephone, telefax or Internet and intranet websites designated by the Bank with respect to separate products or services offered by the Bank.

 

  

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3.4       Direct Debit.

 

(a)        The Borrower agrees that on the due date of any amount due under this Agreement, the Bank will debit the amount due from deposit account number NJ-004044013471 owned by the Borrower, or such other of Borrower's accounts with the Bank as designated in writing by the Borrower (the "Designated Account"). Should there be insufficient funds in the Designated Account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by the Borrower.

 

(b)        The Borrower may terminate this direct debit arrangement at any time by sending written notice to the Bank. If the Borrower terminates this arrangement, then the principal amount outstanding under this Agreement will at the option of the Bank bear interest at a rate per annum which is one (1.0) percentage point higher than the rate of interest otherwise provided under this Agreement and the amount of each payment will be increased accordingly.

 

3.5       Banking Days. Unless otherwise provided in this Agreement, a banking day is a day other than a Saturday, Sunday or other day on which commercial banks are authorized to close, or are in fact closed, in the state where the Bank's lending office is located. All payments and disbursements which would be due or which are received on a day which is not a banking day will be due or applied, as applicable, to the credit on the next banking day.

 

3.6       Interest Calculation. Except as otherwise stated in this Agreement, all interest and fees, if any, will be computed on the basis of a 360-day year and the actual number of days elapsed. This results in more interest or a higher fee than if a 365-day year is used. Installments of principal which are not paid when due under this Agreement shall continue to bear interest until paid.

 

3.7       Default Rate. Upon the occurrence of any default or after maturity or after judgment has been rendered on any obligation under this Agreement, all amounts outstanding under this Agreement, including any unpaid interest, fees, or costs, will at the option of the Bank bear interest at a rate which is 6.0 percentage points) higher than the rate of interest otherwise provided under this Agreement. This may result in compounding of interest. This will not constitute a waiver of

any default.

4.  CONDITIONS

 

Before the Bank is required to extend any credit to the Borrower under this Agreement, it must receive any documents and other items it may reasonably require, in form and content acceptable to the Bank, including any items specifically listed below.

 

4.1       Authorizations. If the Borrower or any guarantor is anything other than a natura! person, evidence that the execution, delivery and performance by the Borrower and/or such guarantor of this Agreement and any instrument or agreement required under this Agreement have been duly authorized.

 

4.2       Governing Documents. If required by the Bank, a copy of the Borrower's organizational documents.

 

4.3       Security Agreements. Signed original security agreements covering the .personal property collateral! which the Bank requires.

 

4.4       Perfection and Evidence of Priority. Evidence that the security interests and liens in favor of the Bank are valid, enforceable, properly perfected in a manner acceptable to the Bank and prior to all others' rights and interests, except those the Bank consents to in writing. All title documents for motor vehicles which are part of the collateral must show the Bank's interest.

 

4.5       Payment of Fees. Payment of all fees, expenses and other amounts due and owing to the Bank. If any fee is not paid in cash, the Bank may, in its discretion, treat the fee as a principal advance under this Agreement or deduct the fee from the loan proceeds.

 

4.6       Environmental Information. A completed Bank form Environmental Questionnaire.

 

  

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5.  REPRESENTATION AND WARRANTIES

 

When the Borrower signs this Agreement, and until the Bank is repaid in full, the Borrower makes the following representations and warranties. Each request for an extension of credit constitutes a renewal of these representations and warranties as of the date of the request:

 

5.1       Formation. If the Borrower is anything other than a natural person, it is duly formed and existing under the laws of the state or other jurisdiction where organized.

5.2       Authorization. This Agreement, and any instrument or agreement required under this Agreement, are within the Borrower's powers, have been duly authorized, and do not conflict with any of its organizational papers.

 

5.3       Good Standing. In each state in which the Borrower does business, it is properly licensed, in good standing, and, where required, in compliance with fictitious name statutes.

 

5.4       Financial Information. All financial and other information that has been or will be supplied to the Bank is sufficiently complete to give the Bank accurate knowledge of the Borrowers (and any guarantor's) financial condition, including all material contingent liabilities. Since the date of the most recent financial statement provided to the Bank, there has been no material adverse change in the business condition (financial or otherwise), operations, properties or prospects of the Borrower (or any guarantor). If the Borrower is comprised of the trustees of a trust, the above representations shall also pertain to the trustor(s) of the trust.

 

5.5       Lawsuits. There is no lawsuit, tax claim or other dispute pending or threatened against the Borrower which, if lost, would impair the Borrower's financial condition or ability to repay the loan, except as have been disclosed in writing to the Bank.

 

5.6       Other Obligations. The Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation, except as have been disclosed in writing to the Bank.

 

5.7       Tax Matters. The Borrower has no knowledge of any pending assessments or adjustments of its income tax for any year and all taxes due have been paid, except as have been disclosed in writing to the Bank.

 

5.8       No Event of Default. There is no event which is, or with notice or lapse of time or both would be, a default under this Agreement.

 

5.9       Collateral. All collateral required in this Agreement is owned by the grantor of the security interest free of any title defects or any liens or interests of others, except those which have been approved by the Bank in writing.

 

5.10     ERISA Plans.

(a)        Each Plan (other than a multiemployer plan) is in compliance in all material respects with ERISA, the Code and other federal or state law, including all applicable minimum funding standards and there have been no prohibited transactions with respect to any Plan (other than a multiemployer plan), which has resulted or could reasonably be expected to result in a material adverse effect.

 

(b)        With respect to any Plan subject to Title IV of ERISA:

(i)         No reportable event has occurred under Section 4043(c) of ERISA which requires notice.

 

(ii)        No action by the Borrower or any ERISA Affiliate to terminate or withdraw from any Plan has been taken and no notice of intent to terminate a Plan has been filed under Section 4041 or 4042 of ERISA.

(c)        The following terms have the meanings indicated for purposes of this Agreement:

(i)         "Code" means the Internal Revenue Code of 1986, as amended.

 

  

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(ii)        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

(iii)       "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b} or (c) of the Code.

 

(iv)       "Plan" means a plan within the meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate, including any multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.

 

6.  COVENANTS

  

The Borrower agrees, so long as credit is available under this Agreement and until the Bank is repaid in full:

 

6.1       Use of Proceeds. To use the proceeds of the credit only for business purposes.

 

6.2       Financial Information. To provide the following financial information and statements in form and content acceptable to the Bank, and such additional information as requested by the Bank from time to time. The Bank reserves the right, upon written notice to the Borrower, to require the Borrower to deliver financial information and statements to the Bank more frequently than otherwise provided below, and to use such additional information and statements to measure any applicable financial covenants in this Agreement.

 

(a)        Within 120 days of Borrower's fiscal year end:

 

(i)         The annual financial statements of the Borrower, certified and dated by an authorized financial officer. These financial statements must be audited (with an opinion satisfactory to the Bank) by a Certified Public Accountant acceptable to the Bank.

 

(ii)        A detailed accounts payable aging of the Borrower by invoice or a summary aging by account creditor, as specified by the Bank.

 

(iii)       A detailed receivables aging of the Borrower by invoice or a summary aging by account debtor, as specified by the Bank.

 

(iv)       Copies of the Form 10-K Annual Report, with the Securities and Exchange Commission.

 

6.3       Other Debts. Not to have outstanding or incur any direct or contingent liabilities or lease obligations (other than

those to the Bank or to any affiliate of the Bank), or become liable for the liabilities of others, without the Bank's written consent. This does not prohibit:

(a)        Acquiring goods, supplies, or merchandise on normal trade credit.

(b)        Liabilities, lines of credit and leases in existence on the date of this Agreement disclosed in writing to the Bank.

(c)        If the Borrower is a natural person, additional debts of the Borrower as an individual for consumer purposes.

 

6.4       Other Liens. Not to create, assume, or allow any security interest or lien (including judicial liens) on property the Borrower now or later owns, except

 

(a)        Liens and security interests in favor of the Bank or any affiliate of the Bank.

 

(b)        Liens outstanding on the date of this Agreement disclosed in writing to the Bank.

(c)        Liens in favor of BCA Mezzanine Fund, L.P., a Delaware limited partnership as related to the execution of Stock Warrants pursuant to the Common Stock Warrant Agreement between the Borrower and BCA Mezzanine Fund, L.P. dated September 10, 2010, July 13,2012, November 20,2012, February 19,2013, July 12, 2013, and August12, 2013 so long as said liens are subordinated to the Bank's first security interest in all corporate assets.

 

  

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(d)        Liens in favor of Millennium Trust Company, LLC Custodian FBO Vincent J. Dowling, Jr., Roth IRA (Account No. 287B5524), an Illinois limited liability company, as related to the execution of Stock Warrants pursuant to the Common Stock Warrant Agreement between Borrower and Millennium Trust Company, LLC Custodian FBO Vincent J. Dowling, Jr., Roth IRA (Account No. 287B5524) dated July 26, 2012 and revised on April 11, 2014, so long as said liens are subordinated to the Bank's first security interest in all corporate assets.

 

6.5       Maintenance of Assets.

(a)        Not to sell, assign, lease, transfer or otherwise dispose of any part of the Borrower's business or the Borrower's assets except inventory sold in the ordinary course of the Borrower's business.

 

(b)        Not to sell, assign, lease, transfer or otherwise dispose of any assets for less than fair market value, or enter into any agreement to do so.

 

(c)        Not to enter into any sale and leaseback agreement covering any of its fixed assets.

(d)        To maintain and preserve all rights, privileges, and franchises the Borrower now has.

 

(e)        To make any repairs, renewals, or replacements to keep the Borrower's properties in good working condition.

 

6.6       Loans.  Not to make any loans, advances or other extensions of credit to any individual or entity except for extensions of credit  in the nature of accounts receivable arising from the sale or lease of goods or services in the ordinary course of business to non-affiliated entities.

 

6.7       Change of Management. Not to make any substantial change in the present executive or management personnel of the Borrower.

 

6.8       Change of Ownership. If the Borrower is anything other than a natural person, not to cause, permit, or suffer any change in capital ownership such that there is a material change, as determined by the Bank in its sole discretion, in the direct or indirect capital ownership of the Borrower.

 

6.9       Additional Negative Covenants. Not to, without the Bank's written consent

(a)        Enter into any consolidation, merger, or other combination, or become a partner in a partnership, a member of a joint venture, or a member of a limited liability company.

 

(b)        Acquire or purchase a business or its assets.

 

(c)        Engage in any business activities substantially different from the Borrower's present business.

 

(d)        Liquidate or dissolve the Borrower's business.

 

6.10     Notices to Bank. To promptly notify the Bank in writing of:

(a)        Any event of default under this Agreement, or any event which, with notice or lapse of time or both, would constitute an event of default.

(b)        Any change in the Borrower's name, legal structure, principal residence, or name on any driver's license or special identification card issued by any state (for an individual), state of registration (for a registered entity), place of business, or chief executive office if the Borrower has more than one place of business.

 

  

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6.11     Insurance.

 

(a)        General Business Insurance. To maintain insurance as is usual for the business it is in.

 

(b)        Insurance Covering Collateral. To maintain all risk property damage insurance policies (including without limitation windstorm coverage, and hurricane coverage as applicable) covering the tangible property comprising the collateral. Each insurance policy must be for the full replacement cost of the collateral and include a replacement cost endorsement. The insurance must be issued by an insurance company acceptable to the Bank and must include a lender's loss payable endorsement in favor of the Bank in a form acceptable to the Bank.

(c)        Evidence of lnsurance. Upon the request of the Bank, to deliver to the Bank a copy of each insurance policy, or, if permitted by the Bank, a certificate of insurance listing all insurance in force.

 

6.12     Compliance with Laws. To comply with the laws (including any fictitious or trade name statute), regulations, and orders of any government body with authority over the Borrower's business. The Bank shall have no obligation to make any advance to the Borrower except in compliance with all applicable laws and regulations and the Borrower shall fully cooperate with the Bank in complying with all such applicable laws and regulations.

 

6.13     Books and Records. To maintain adequate books and records.

 

6.14     Audits. To allow the Bank and its agents to inspect the Borrower's properties and examine, audit, and make copies of books and records at any reasonable time. If any of the Borrower's properties, books or records are in the possession of a third party, the Borrower authorizes that third party to permit the Bank or its agents to have access to perform inspections or audits and to respond to the Bank's requests for information concerning such properties, books

and records.

 

6.15     Perfection of liens. To help the Bank perfect and protect its security interests and liens, and reimburse it for related costs it incurs to protect its security interests and liens.

 

6.16     Cooperation. To take any action reasonably requested by the Bank to carry out the intent of this Agreement.

 

6.17     Bank as Principal Depository. To maintain the Bank or one of its affiliates as its principal depository bank, including for the maintenance of business, cash management, operating and administrative deposit accounts.

7.  HAZARDOUS SUBSTANCES

 

7.1        Indemnity Regarding Hazardous Substances. The Borrower will indemnify and hold harmless the Bank from any loss or liability the Bank incurs in connection with or as a result of this Agreement, which directly or indirectly arises out of the use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence of a hazardous substance. This indemnity will apply whether the hazardous substance is on, under or about the Borrower's property or operations or property leased to the Borrower. The indemnity includes but is not limited to attorneys' fees (including the reasonable estimate of the allocated cost of in-house counsel and staff). The indemnity extends to the Bank, its parent, subsidiaries and all of their directors, officers, employees, agents, successors, attorneys and assigns

 

7.2       Compliance Regarding Hazardous Substances. The Borrower represents and warrants that the Borrower has complied with all current and future laws, regulations and ordinances or other requirements of any governmental authority relating to or imposing liability or standards of conduct concerning protection of health or the environment or hazardous substances.

 

7.3       Notices Regarding Hazardous Substances. Until full repayment of the loan, the Borrower will promptly notify the Bank in writing of any threatened or pending investigation of the Borrower or its operations by any governmental agency under any current or future law, regulation or ordinance pertaining to any hazardous substance.

 

  

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7.4       Site Visits, Observations and Testing. The Bank and its agents and representatives will have the right at any reasonable time, after giving reasonable notice to the Borrower, to enter and visit any locations where the collateral securing this Agreement (the "Collateral") is located for the purposes of observing the Collateral, taking and removing environmental samples, and conducting tests. The Borrower shall reimburse the Bank on demand for the costs of any such environmental investigation and testing. The Bank will make reasonable efforts during any site visit, observation or testing conducted pursuant to this paragraph to avoid interfering with the Borrower's use of the Collateral. The Bank is under no duty to observe the Collateral or to conduct tests, and any such acts by the Bank will be solely for the purposes of protecting the Bank's security and preserving the Bank's rights under this Agreement. No site visit, observation or testing or any report or findings made as a result thereof ("Environmental Report") (I) will result in a waiver of any default of the Borrower; (ii) impose any liability on the Bank; or (iii) be a representation or warranty of any kind regarding the Collateral (including its condition or value or compliance with any laws) or the Environmental Report (including its accuracy or completeness). In the event the Bank has a duty or obligation under applicable laws, regulations or other requirements to disclose an Environmental Report to the Borrower or any other party, the Borrower authorizes the Bank to

make such a disclosure. The Bank may also disclose an Environmental Report to any regulatory authority, and to any other parties as necessary or appropriate in the Bank's judgment. The Borrower further understands and agrees that any Environmental Report or other information regarding a site visit, observation or testing that is disclosed to the Borrower by the Bank or its agents and representatives is to be evaluated (including any reporting or other disclosure obligations of the Borrower) by the Borrower without advice or assistance from the Bank.

 

7.5       Definition of Hazardous Substances. "Hazardous substances" means any substance, material or waste that is or becomes designated or regulated as "toxic," "hazardous," "pollutant," or "contaminant" or a similar designation or regulation under any current or future federal, state or local law (Whether under common law, statute, regulation or otherwise) or judicial or administrative interpretation of such, including without limitation petroleum or natural gas.

 

7.6       Continuing Obligation. The Borrower's obligations to the Bank under this Article, except the obligation to give

notices to the Bank, shall survive termination of this Agreement and repayment of the Borrower's obligations to the Bank under this Agreement

8.  DEFAULT AND REMEDIES

 

Without limiting any of the Bank's rights and remedies in this Agreement, if any of the following events of default occurs, the Bank may do one or more of the following without prior notice: declare the Borrower in default, stop making any additional credit available to the Borrower, and require the Borrower to repay its entire debt immediately. If an event which, with notice or the passage of time, will constitute an event of default has occurred and is continuing, the Bank has no obligation to make advances or extend additional credit under this Agreement. In addition, if any event of default occurs, the Bank shall have all rights, powers and remedies available under any instruments and agreements required by or executed in connection with this Agreement, as well as all rights and remedies available at law or in equity. If an event of default occurs under the paragraph entitled "Bankruptcy/Receivers," below, with respect to the Borrower, then the entire debt outstanding under this Agreement will automatically be due immediately.

 

8.1       Failure to Pay. The Borrower fails to make a payment under this Agreement when due.

 

8.2       Covenants. Any default in the performance of or compliance with any obligation, agreement or other provision contained in this Agreement (other than those specifically described as an event of default in this Article).

 

8.3       Other Bank Agreements. Any default occurs under any guaranty, subordination agreement, security agreement, deed of trust, mortgage, or other document required by or delivered in connection with this Agreement or any such document is no longer in effect, or any guarantor purports to revoke or disavow the guaranty; or any representation or warranty made by any guarantor is false when made or deemed to be made; or any default occurs under any other agreement the Borrower (or any Obligor) has with the Bank or any affiliate of the Bank. For purposes of this Agreement, "Obligor" shall mean any guarantor, any party pledging collateral to the Bank, or, if the Borrower is comprised of the trustees of a trust, any trustor.

 

8.4       Cross-default. Any default occurs under any agreement in connection with any credit the Borrower (or any Obligor) has obtained from anyone else or which the Borrower (or any Obligor) or any of the Borrower's related entities or affiliates has guaranteed.

 

8.5       False Information. The Borrower or any Obligor has given the Bank false or misleading information or representations.

 

  

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8.6       Bankruptcy/~Receivers. The Borrower, any Obligor, or any general partner of the Borrower or of any Obligor files a bankruptcy petition, a bankruptcy petition is filed against any of the foregoing parties and such petition is not dismissed within a period of forty-five (45) days after the filing, or the Borrower, any Obligor, or any general partner of the Borrower or of any Obligor makes a general assignment for the benefit of creditors; or a receiver or similar official is appointed for a substantial portion of Borrower's or any Obligor's business; or the business is terminated, or such Obligor is liquidated or dissolved

 

8.7       Revocation or Termination. If the Borrower is comprised of the trustee(s) of a trust, the trust is revoked or otherwise terminated or all or a substantial part of the Borrower's assets are distributed or otherwise disposed of.

 

8.8       Lien Priority. The Bank fails to have an enforceable first lien (except for any prior liens to which the Bank has consented in writing) on or security interest in any property given as security for this Agreement (or any guaranty).

 

8.9       Judgments. Any judgments or arbitration awards are entered against the Borrower or any Obligor.

 

8.10     Death. If the Borrower or any Obligor is a natural person, the Borrower or such Obligor dies or becomes legally incompetent; if the Borrower or any Obligor is ~ trust, a trustor dies or becomes legally incompetent; if the Borrower or any Obligor is a partnership, any general partner dies or becomes legally incompetent.

 

8.11     Material Adverse Change. A material adverse change occurs, or is reasonably likely to occur, in the Borrower's (or any Obligor's) business condition (financial or otherwise), operations, or properties, or ability to repay the credit

 

8.12     Government Action. Any government authority takes action that the Bank believes materially adversely affects the Borrower's or any Obligor's financial condition or ability to repay.

 

8.13     ERISA Plans. A reportable event occurs under Section 4043(c) of ERISA, or any Plan termination (or commencement of proceedings to terminate a Plan) or the full or partial withdrawal from a Plan under Section 4041 or 4042 of ERISA occurs; provided such event or events could reasonably be expected, in the judgment of the Bank, to have

a material adverse effect.

9.  ENFORCING THIS AGREEMENT; MISCELLANEOUS

 

9.1       GAAP. Except as otherwise stated in this Agreement, all financial information provided to the Bank and all financial covenants will be made under generally accepted accounting principles, consistently applied or another basis acceptable to the Bank.

 

9.2       Governing Law. Except to the extent that any law of the United States may apply, this Agreement shall be governed and interpreted according to the laws of New Jersey (the "Governing Law State"), without regard to any choice of law, rules or principles to the contrary. Nothing in this paragraph shall be construed to limit or otherwise affect any rights or remedies of the Bank under federal law,

 

9.3       Venue and Jurisdiction. The Borrower agrees that any action or suit against the Bank arising out of or relating to this Agreement shall be filed in federal court or state court located in the Governing Law State. The Borrower agrees that the Bank shall not be deemed to have waived its rights to enforce this section by filing an action or suit against the Borrower in a venue outside of the Governing Law State. If the Bank does commence an action or suit arising out of or relating to this Agreement, the Borrower agrees that the case may be filed in federal court or state court in the Governing Law State. The Bank reserves the right to commence an action or suit in any other jurisdiction where the Borrower, any Guarantor, or any collateral has any presence or is located, The Borrower consents to personal jurisdiction and venue in such forum selected by the Bank and waives any right to contest jurisdiction and venue and the convenience of any such forum, The provisions of this section are material inducements to the Bank's acceptance of this Agreement.

 

9.4       Successors and Assigns. This Agreement is binding on the Borrower's and the Bank's successors and assignees. The Borrower agrees that it may not assign this Agreement without the Bank's prior consent.

 

  

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9.5       Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (b) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER DOCUMENTS CONTEMPLATED HEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION AND (c) CERTIFIES THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE.

 

9.6       Severability; Waivers. If any part of this Agreement is not enforceable, the rest of the Agreement may be enforced. The Bank retains all rights, even if it makes a loan after default. If the Bank waives a default, it may enforce a later default. Any consent or waiver under this Agreement must be in writing.

 

9.7       Expenses.

 

(a)        The Borrower shall pay to the Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees, expended or incurred by the Bank in connection with (i) the negotiation and preparation of this Agreement and any related agreements, the Bank's continued administration of this Agreement and such related agreements, and the preparation of any amendments and waivers related to this Agreement or such related agreements, (ii) filing, recording and search fees. appraisal fees, field examination fees, title report fees, and documentation fees with respect to any collateral and books and records of the Borrower or any Obligor, (iii) the Bank's costs or losses arising from any changes in law which are allocated to this Agreement or any credit outstanding under this Agreement, and (iv) costs or expenses required to be paid by the Borrower or any Obligor that are paid, incurred or advanced by the Bank,

 

(b)        The Borrower will indemnify and hold the Bank harmless from any loss, liability, damages, judgments, and costs of any kind relating to or arising directly or indirectly out of (i) this Agreement or any document required hereunder, (ii) any credit extended or committed by the Bank to the Borrower hereunder, and (iii) any litigation or proceeding related to or arising out of this Agreement, any such document, or any such credit, including, without limitation, any act resulting from the Bank complying with instructions the Bank reasonably believes are made by any Authorized Individual. This paragraph will survive this Agreement's termination, and will benefit the Bank and its officers, employees, and agents.

(c)        The Borrower shall reimburse the Bank for any reasonable costs and attorneys' fees incurred by the Bank in connection with (i) the enforcement or preservation of the Bank's rights and remedies and/or the collection of any obligations of the Borrower which become due to the Bank and in connection with any "workout" or restructuring, and (ii) the prosecution or defense of any action in any way related to this Agreement, the credit provided hereunder or any related agreements, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by the Bank or any other person) relating to the Borrower or any other person or entity.

 

9.8       Individual Liability. If the Borrower is a natural person, the Bank may proceed against the Borrower's business and non-business property in enforcing this and other agreements relating to this loan. If the Borrower is a partnership, the Bank may proceed against the business and non-business property of each general partner of the Borrower in enforcing this and other agreements relating to this loan.

 

9.9       Joint and Several Liability. If two or more Borrowers sign this Agreement, each Borrower agrees that it is jointly and severally liable to the Bank for the payment of all obligations arising under this Agreement, and that such liability is independent of the obligations of the other Borrowers.

 

  

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9.10     Set-Off. Upon and after the occurrence of an event of default under this Agreement, (a) the Borrower hereby authorizes the Bank, at any time and from time to time, without notice, which is hereby expressly waived by the Borrower, and whether or not the Bank shall have declared any credit subject hereto to be due and payable in accordance with the terms hereof, to set off against, and to appropriate and apply to the payment of, the Borrower's Obligations (whether matured or unmatured, fixed or contingent. liquidated or unliquidated), any and all amounts owing by the Bank to the Borrower (Whether payable in U.S. dollars or any other currency, whether matured or unmatured, and in the case of deposits, whether general or special (except trust and escrow accounts), time or demand and however evidenced), and (b) pending any such action, to the extent necessary, to hold such amounts as collateral to secure such Obligations and to return as unpaid for insufficient funds any and all checks and other items drawn against any deposits so held as the Bank, in its sole discretion, may elect. The Borrower hereby grants to the Bank a security interest in all deposits and accounts maintained with the Bank to secure the payment of all Obligations of the Borrower to the Bank under this Agreement and all agreements, instruments and documents related to this Agreement "Obligations" means all obligations, now or hereafter existing, of the Borrower to the Bank under this Agreement and under any other agreement or instrument executed in connection with this Agreement.

 

9.11     One Agreement. This Agreement and any related security or other agreements required by this Agreement constitute the entire agreement between the Borrower and the Bank with respect to each credit subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof.

In the event of any conflict between this Agreement and any other agreements required by this Agreement, this Agreement will prevail.

 

9.12     Notices. Unless otherwise provided in this Agreement or in another agreement between the Bank and the Borrower, all notices required under this Agreement shall be personally delivered or sent by first class mail. postage prepaid. or by overnight courier to the addresses on the signature page of this Agreement, or to such other addresses as the Bank and the Borrower may specify from time to time in writing. Notices and other communications shall be effective (i) if mailed, upon the earlier of receipt or five (5) days after deposit in the U.S. mail, first class, postage prepaid, or (ii) if hand-delivered, by courier or otherwise (including telegram, lettergram or mailgram). when delivered.

 

9.13     Headings. Article and paragraph headings are for reference only and shall not affect the interpretation or meaning of any provisions of this Agreement. Ref #: 1001739330" Tel-Instrument Electronics Corp.

 

9.14     Counterparts. This Agreement may be executed in any number of counterparts, each of which, when so executed, shall be deemed to be an original, and all of which when taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of this Agreement (or of any agreement or document required by this Agreement and any amendment to this Agreement) by telecopy or other electronic imaging means shall be as effective as delivery of a manually executed counterpart of this Agreement; provided, however, that the telecopy or other electronic image shall be promptly followed by an original if required by the Bank.

 

9.15     Borrower Information; Reporting to Credit Bureaus. The Borrower authorizes the Bank at any time to verify or check any information given by the Borrower to the Bank, check the Borrower's credit references, verify employment, and obtain credit reports. The Borrower agrees that the Bank shall have the right at all times to disclose and report to credit reporting agencies and credit rating agencies such information pertaining to the Borrower and/or all guarantors as is consistent with the Bank's policies and practices from time to time in effect.

 

9.16     Customary Advertising Material. The Borrower and each Obligor consent to the publication by the Bank of customary advertising material relating to the transactions contemplated hereby using the name, product photographs, logo or trademark of the Borrower or such Obligor.

 

9.17    Amendments. This Agreement may be amended or modified only in writing signed by each party hereto.

 

9.18     Limitation of Interest and Other Charges. If, at any time, the rate of interest, together with all amounts which constitute interest and which are reserved, charged or taken by the Bank as compensation for fees, services or expenses incidental to the making, negotiating or collection of the loan evidenced hereby, shall be deemed by any competent court of law, governmental agency or tribunal to exceed the maximum rate of interest permitted to be charged by the Bank to the Borrower under applicable law, then, during such time as such rate of interest would be deemed excessive, that portion of each sum paid attributable to that portion of such interest rate that exceeds the maximum rate of interest so permitted shall be deemed a voluntary prepayment of principal. As used herein, the term "applicable law" shall mean the law in effect as of the date hereof; provided, however, that in the event there is a change in the law which results in a higher permissible rate of interest, then this Agreement shall be governed by such new law as of its effective date.

 

  

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This Agreement is executed as of the date stated at the top of the first page,

 

 

 

 

Borrower:   Tel-Instrument Electronics Corp.

 

 

 

 

	

Address where notices to Tel-Instrument Electronics Corp, are to be sent:

 

1 Branca Road

East Rutherford, NJ 07073

	
Address where notices to the Bank are to be sent:

 

Doc Retention -GCF

CT2-515-BB-03

70 Batterson Park Road

Farmington, CT 06032

 

 

Federal law requires Bank of America, N.A. (the "Bank") to provide the following notice. The notice is not part of the foregoing agreement or instrument and may not be altered. Please read the notice carefully.

 

(1) USA PATRIOT ACT NOTICE

 

Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account or obtains a loan. The Bank will ask for the Borrower's legal name, address, tax ID number or social security number and other identifying information. The Bank may also ask for additional information or documentation or take other actions reasonably necessary to verify the identity of the Borrower, guarantors or other related persons.

 

 

 

Ref #: 1001739330: -Tel-Instrument 

Electronics Corp. AFS Loan Agreement

 

  

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SCHEDULE A

FEES

 

 

(a)        Loan Fee. The Borrower agrees to pay a loan fee in the amount of Ten Thousand and 00/100 Dollars ($10,000.00). This fee is due on the date of this Agreement.

 

(b)       Waiver Fee. If the Bank, at its discretion, agrees to waive or amend any terms of this Agreement, the Borrower will, at the Bank's option, pay the Bank a fee for each waiver or amendment in an amount advised by the Bank at the time the Borrower requests the waiver of amendment. Nothing in this paragraph shall imply that the Bank is obligated to agree to any waiver or amendment requested by the Borrower. The Bank may impose additional requirements as a condition to any waiver or amendment.

 

(c)        Late Fee. To the extent permitted by law, the Borrower agrees to pay a late fee in an amount not to exceed four percent (4%) of any payment that is more than fifteen (15) days late. The imposition and payment of a late fee shall not constitute a waiver of the Bank's rights with respect to the default.

 

 

 

 

 

 

 

 

 

  

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