Document:

ex_10-2.htm

THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

 

 

 

ULURU INC.

 

SECURED CONVERTIBLE PROMISSORY NOTE

 

     February 27, 2017

 

FOR VALUE RECEIVED, ULURU Inc., a Nevada corporation (the “Company”) promises to pay to Velocitas Partners LLC, a Delaware limited liability company ( the “Holder”), or its registered assigns, in lawful money of the United States of America the principal sum of $500,000, together with interest from the date of this Secured Convertible Promissory Note (this “Note”) on the unpaid principal balance at the rate of 12.5% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days.  Subject to the provisions of Section 6(b), all unpaid principal, together with any then unpaid and accrued interest and other Obligations, shall be due and payable on the earlier of (i) the second anniversary of the date first set forth above (the “Maturity Date”), or (ii) when, upon or after the occurrence of an Event of Default, such amounts are declared due and payable by Holder or made automatically due and payable in accordance with the terms hereof.  This Note is issued pursuant to the Note, Warrant and Preferred Stock Purchase Agreement dated as of even date herewith among the Company, the Holder and certain purchasers identified therein (the “Purchase Agreement”). All Dollar amounts set forth herein shall refer to United States Dollars.

 

The following is a statement of the rights of Holder and the conditions to which this Note is subject, and to which Holder, by the acceptance of this Note, agrees:

 

1. Definitions.  As used in this Note, the following capitalized terms have the following meanings:

 

(a) “BackStop Agreement” means that certain BackStop Agreement, dated as of the date hereof, by and among the Company, the Holder and Bradley Sacks.

 

(b) “Bankruptcy Event” means any of the following events: (a) any Borrower Entity commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to any Borrower Entity, (b) there is commenced against any Borrower Entity any such case or proceeding that is not dismissed within 60 days after commencement, (c) any Borrower Entity is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the appointment of a receiver, trustee or custodian for any party liable hereon, whether as maker, endorser, guarantor, surety, or otherwise, or for any substantial part of the assets of any of any Borrower Entity, or the institution of proceedings for the dissolution or the full or partial liquidation of any of the foregoing parties, and such receiver or trustee shall not be discharged within ninety (90) days of its appointment, or such proceedings shall not be discharged within ninety (90) days of their commencement, or (e) any Borrower Entity thereof makes a general assignment for the benefit of creditors.

 

(c) “Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

(d) “Change of Control Transaction” means the occurrence after the “Second Closing”, as defined in the Purchase Agreement, of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act), of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of fifty percent (50%) of the voting securities of the Company; (ii) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than fifty percent (50%) of the aggregate voting power of the Company or the successor entity of such transaction; (iii) the Company sells, licenses, transfers, or disposes in excess of fifty percent (50%) of the Company’s assets in one transaction or a series of related transactions to another Person; (iv) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors absent approval for such nominations or appointments by the majority of the Board of Directors on or before the date of the respective nomination or appointment; or (v) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (i) through (iv) above.

 

(e) “Common Stock” shall mean shares of the Company’s common stock, $0.001 par value per share.

 

(f)  “Company” means ULURU Inc. and any Person which shall succeed to or assume the obligations of the Company under this Note.

 

(g) “Default Interest Rate” has the meaning given in Section 16 hereof.

 

(h) “Event of Default” has the meaning given in Section 4 hereof.

 

(i)  “Holder” shall mean the Person specified in the introductory paragraph of this Note or any Person who shall at the time shall be the registered holder of this Note.

 

(j) “Indebtedness” means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables), whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit to the extent drawn (or reimbursement agreements in respect thereof); or (3) in respect of banker’s acceptances.

 

(k)  “Obligations” shall mean the unpaid principal amount, accrued but unpaid interest, fees, charges, expenses, attorneys’ fees and costs and accountants’ fees and costs chargeable to and payable by the Company hereunder.

 

(l)  “Person” shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority.

 

(m)  “Securities Act” shall mean the Securities Act of 1933, as amended.

 

(n) “Security Agreement” means the Security Agreement of even date herewith between the Company, Cardinia Acquisition Corp., a Delaware corporation (“Cardinia”), ULURU Delaware Inc., a Delaware corporation (“ULURU DE” and together with the Company and Cardinia, the “Borrower Entities”) and the Holder.

 

(o) “Loan Documents” shall mean this Note and the Security Agreement.

 

(p) “Preferred Shares” means shares of the Company’s Series B Convertible Preferred Stock.

 

2. Interest.  Subjection to the provision of Section 6(b), accrued interest on this Note shall be payable on the Maturity Date.

 

3. Prepayment.  At any time during the period beginning on the earlier of (i) the Second Closing, and (ii) if following the fifth (5th) Business Day following the date on which (x) all of the conditions to Purchasers’ obligations to consummate the Second Closing as set forth in Section 5.2(a) of the Purchase Agreement have been duly satisfied and (y) the Company confirms in writing that each of the conditions to the Company’s obligations to consummate the Second Closing have been duly satisfied or irrevocably waived, the Purchasers fail to consummate the Second Closing, the Borrower shall have the right, exercisable on not less than ten (10) Business Days prior written notice to the Holder, to prepay the outstanding Note in full by making a payment to the Holder of an amount in cash equal to the sum of: (1) the then outstanding principal amount of this Note plus (2) accrued and unpaid interest on the unpaid principal amount of this Note plus (3) if an Event of Default has occurred, interest on the unpaid principal balance hereof at the Default Interest Rate, plus (4) any amounts owed to the Holder pursuant to any other provision of this Note.

 

4. Events of Default.  The occurrence of any of the following shall constitute an “Event of Default” under this Note and the other Loan Documents:

 

(a) the occurrence of a Bankruptcy Event;

 

(b) the closing of (i) a Change of Control Transaction or (ii) the liquidation, termination or dissolution of the Company;

 

(c) the failure to pay when due and payable (whether at maturity or otherwise) any payment of principal, interest, or expenses due hereunder;

 

(d) the failure of the Company to consummate, on or prior to the date that is one hundred eighty (180) days following the date hereof, the sale of a number of shares of Common Stock with an aggregate purchase price equal to the difference between (x) four million dollars ($4,000,000) and (y) the amount of gross proceeds received by the Company upon the sale of Preferred Shares, pursuant to the Secondary Placement and/or the BackStop Agreement; provided, that in the event that the Purchasers (as defined in the Purchase Agreement) breach their obligation to purchase the Preferred Shares in accordance with the terms and conditions of the Purchase Agreement, then this Event of Default shall be irrevocably waived;

 

(e) the failure of the Company to comply with any terms contained in the Security Agreement;

 

(f) a breach or default by the Company of any covenant or other term or condition contained in any of the other financial instrument with respect to Indebtedness of the Company or any of its Subsidiaries, including but not limited to all convertible promissory notes, currently issued, or hereafter issued, by the Company, to the Holder or any other third party, after the passage of all applicable notice and cure or grace periods under such other agreements; and

 

(g) a judgment, decree, writ, warrant of attachment or similar process in an amount equal to or exceeding $50,000.00 is entered against the Company or any of its assets, if such judgment, decree, writ, warrant of attachment or similar process is not adequately covered by insurance or has not been vacated, discharged, appealed from (with execution or similar process continuously stayed) within fifteen (15) days of such judgment’s entry.

 

5. Rights of Holder upon Default.  Upon the occurrence or existence of any Event of Default (other than an Event of Default described in Sections 4(a) or 4(d)) and at any time thereafter during the continuance of such Event of Default, Holder may, by written notice to the Company, declare all outstanding Obligations payable by the Company hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Loan Documents to the contrary notwithstanding.  Upon the occurrence or existence of any Event of Default described in Sections 4(a) or 4(d), immediately and without notice, all outstanding Obligations payable by the Company hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Loan Documents to the contrary notwithstanding.  In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Holder may exercise any other right, power or remedy granted to it by the Loan Documents or otherwise permitted to it by law, either by suit in equity or by action at law, or both.

 

6. Conversion.

 

(a) Optional Conversion. All or any portion of the principal amount of, and accrued interest under, this Note shall be convertible at the option of Holder into that number of shares of the Common Stock as is determined by dividing the dollar amount converted by $.04 per share of Common Stock, as adjusted to reflect subsequent stock dividends, stock splits, combinations or recapitalizations in accordance with Section 7 (the “Conversion Price”).  The Company shall, within five business days (the “Deadline”) of the receipt of a written notice of conversion hereunder, together with the original Note (collectively, a “Notice of Conversion”),  issue and deliver to Holder a certificate or certificates for the number of shares of Common Stock to which Holder shall be entitled upon conversion, together with a replacement Note (if any principal amount or interest is not converted) and any other securities and property to which Holder is entitled upon such conversion under the terms of this Note, including a check payable to Holder for any cash amounts payable as described in Section 6(c).

 

(b) Mandatory Conversion at Maturity. Unless an Event of Default has occurred and is continuing as of the Maturity Date, on the Maturity Date, all of the principal amount of, and accrued interest under, this Note shall automatically, without any action on the part of any person, convert into that number of shares of the Common Stock as is determined by dividing the (i) Outstanding Obligations under this Note, by (ii) $.04 per share of Common Stock (adjusted to reflect subsequent stock dividends, stock splits, combinations or recapitalizations) and the Company shall issue and deliver to Holder a certificate or certificates for the number of shares of Common Stock to which Holder shall be entitled upon conversion of the outstanding Obligations under the Note and any other securities and property to which Holder is entitled upon such conversion under the terms of this Note, including a check payable to Holder for any cash amounts payable as described in Section 6(c).  The conversion shall be deemed to have been made as of the Maturity Date, and the Person or Persons entitled to receive the shares of Common Stock upon such conversion shall be treated for all purposes as the record Holder of such shares of Common Stock as of such date.

 

(c) Fractional Shares; Interest; Effect of Conversion.  No fractional shares shall be issued upon conversion of this Note.  In lieu of the Company issuing any fractional shares to Holder upon the conversion of this Note, the Company shall pay to Holder an amount equal to the product obtained by multiplying the conversion price by the fraction of a share not issued pursuant to the previous sentence.  In addition, the Company shall pay to Holder any interest accrued on the amount converted and on the amount to be paid to the Company pursuant to the previous sentence.

 

(d) Obligation to Deliver Common Stock. Upon receipt by the Company of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Company defaults on its obligations under this Note, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Company to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Company, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with such conversion. The conversion date specified in the Notice of Conversion shall be the effective date of the conversion so long as the Notice of Conversion is received by the Company before 6:00 p.m., New York, New York time, on such date.

 

(e) Failure to Deliver the Common Stock. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline, the Company shall pay to the Holder $500 per day in cash, for each day beyond the Deadline that the Company fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Company by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Company agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties hereto hereby acknowledge and agree that the liquidated damages provision contained in this Section 6(e) are justified and reasonable.

 

(f) Transfer Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

7. Certain Adjustments.

 

(a) Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any securities convertible into or exchangeable for, directly or indirectly, Common Stock ("Convertible Securities"), other than the Note, or any rights or warrants or options to purchase any such Common Stock or Convertible Securities (collectively, the "Common Stock Equivalents"), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

(b) Pro Rata Distributions. During such time as this Note is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction other than a transaction described in Section 7(a)) (a “Distribution”), at any time after the issuance of this Note, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution.

 

(c) Calculations. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

 

8. Covenants.

 

(a) Reservation of Common Stock. The Company shall at all times, so long as any principal amount of the Note is outstanding, reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Note, the number of shares of Common Stock as shall at all times be sufficient to effect the conversion of all of the principal amount, plus any accrued interest and default interest thereon.

 

(b) Right of First Refusal. If at any time while this Note is outstanding, the Company receive a bona fide offer of debt financing from any third party that the Company intends to act upon, then the Company must first offer such opportunity to the Holder to provide such capital or financing to the Company on the same terms as each respective third party’s terms. If the Holder be unwilling or unable to provide such debt financing to the Company within ten (10) Business Days from Holder’s receipt of written notice of the offer (the “Offer Notice”) from the Company, then the Company may obtain such capital or financing from that respective third party upon the exact same terms and conditions offered by the Company to the Holder, which transaction must be completed within 30 days after the date of the Offer Notice. If the Company does not receive the debt financing from the respective third party within 30 days after the date of the respective Offer Notice, then the Company must again offer the capital or financing opportunity to the Holder as described above, and the process detailed above shall be repeated.

 

(c) Change of Control Transaction. The Company shall provide the Holder at least ten (10) Business Days’ notice prior to the consummation of any Change of Control Transaction, and prompt written notice of the entry into any definitive agreement with respect to any Change of Control Transaction, including a copy of such definitive agreement and any related agreements binding upon the holders of the Common Stock.  The Company shall not consummate any Change of Control without providing the Holder at least ten (10) Business Days to convert this Note into Common Stock, in accordance and subject to the terms and conditions set forth in this Note.

 

9. Successors and Assigns.  Subject to the restrictions on transfer described in Sections 10 and 12 below, the rights and obligations of the Company and Holder shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.

 

10. Waiver and Amendment.  Any provision of this Note may be amended, waived or modified only upon the written consent of the Company and the Holder. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

11. Transfer of this Note or Securities Issuable on Conversion Hereof.  With respect to any offer, sale or other disposition of this Note or securities into which such Note may be converted, Holder will give written notice to the Company prior thereto describing briefly the manner thereof, which shall be accompanied by evidence reasonably satisfactory to the Company (including an opinion of counsel), to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Upon receiving such written notice and reasonably satisfactory evidence, the Company, as promptly as practicable, shall notify Holder that Holder may sell or otherwise dispose of this Note or such securities, all in accordance with the terms of the notice delivered to the Company.  Each Note thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Holder such legend is not required in order to ensure compliance with the Securities Act.  The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.  Subject to the foregoing transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company,  Prior to presentation of this Note for registration of transfer, the Company shall treat the registered holder hereof as the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and the Company shall not be affected by notice to the contrary.

 

12. Governing Law, Arbitration.  This Note, and all claims or causes of action (whether in contract or otherwise) that may be based upon, arise out of, or relate to this Note or the negotiation, execution, or performance of this Note (including any claim or cause or action based upon, arising out of, or related to any representation or warranty made in or in connection with this Note), shall be governed by the internal laws of the State of New York.  Any issue, controversy, or claim arising out of or related to this Note or any related documents hereto that cannot be resolved by mutual agreement shall be settled or resolved by binding arbitration in New York, New York pursuant to the Federal Arbitration Act and in accordance with the Commercial Arbitration Rules of the American Arbitration Association now or hereafter in effect. The parties to the dispute shall unanimously select the arbitrator. In the event the parties to the dispute are unable to unanimously select an arbitrator within ten (10) business days of a meeting called to appoint an arbitrator, the arbitrator shall be selected in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator shall have the right to award individual relief which the arbitrator deems proper under the evidence presented and applicable law and consistent with the parties’ rights to, and limitations on, damages and other relief as expressly set forth in this Note. The award and decision of the arbitrator shall be conclusive and binding on all parties, and judgment upon the award may be entered in any court of competent jurisdiction. The expenses of the arbitration, including the arbitrator’s fees and expert witness fees, incurred by the parties to the arbitration, may be awarded to the prevailing party, in the discretion of the arbitrator, or may be apportioned between the parties in any manner deemed appropriate by the arbitrator. Unless and until the arbitrator decides that one party is to pay for all (or a share) of such expenses, both parties shall share equally in the payment of the arbitrator’s fees as and when billed by the arbitrator. The foregoing agreement to arbitrate shall be specifically enforceable under applicable law in any court having jurisdiction thereof. IN AGREEING TO THE METHOD OF DISPUTE RESOLUTION SET FORTH IN THIS ARBITRATION CLAUSE, THE PARTIES SPECIFICALLY ACKNOWLEDGE THAT EACH PREFERS TO RESOLVE DISPUTES BY ARBITRATION RATHER THAN THROUGH THE FORMAL COURT PROCESS. FURTHER, EACH OF THEM UNDERSTANDS THAT BY AGREEING TO ARBITRATION EACH OF THEM IS WAIVING THE RIGHT TO RESOLVE DISPUTES ARISING OR RELATING TO THIS NOTE IN COURT BY A JUDGE OR JURY, THE RIGHT TO A JURY TRIAL, THE RIGHT TO DISCOVERY AVAILABLE UNDER THE APPLICABLE RULES OF CIVIL PROCEDURE, THE RIGHT TO FINDINGS OF FACT BASED ON THE EVIDENCE, AND THE RIGHT TO ENFORCE THE LAW APPLICABLE TO ANY CASE ARISING OR RELATING TO THIS NOTE BY WAY OF APPEAL, EXCEPT AS ALLOWED UNDER THE FEDERAL ARBITRATION ACT. EACH OF THEM ALSO ACKNOWLEDGES THAT EACH HAS HAD AN OPPORTUNITY TO CONSIDER AND STUDY THIS ARBITRATION PROVISION, TO CONSULT WITH COUNSEL, TO SUGGEST MODIFICATION OR CHANGES, AND, IF REQUESTED, HAS RECEIVED AND REVIEWED A COPY OF THE FEDERAL ARBITRATION ACT AND THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION.

 

13. Assignment by the Company.  Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of the Holder.

 

14. Notices.  All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall in writing and faxed, mailed or delivered to each party at the respective addresses of the parties as set forth in the Purchase Agreement, or at such other address or facsimile number as the Company shall have furnished to Holder in writing.  All such notices and communications will be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one business day after being deposited with an overnight courier service of recognized standing or (iv) four days after being deposited in the U.S. mail, first class with postage prepaid.

 

15. Payment.  Payment shall be made in lawful tender of the United States.

 

16. Security.  This Note, and the obligations of the Company pursuant to this Note, is secured by the Collateral (as defined in the Security Agreement).

 

17. Default Rate; Usury.  During any period in which an Event of Default has occurred and is continuing, the Company shall pay interest on the unpaid principal balance hereof at a rate per annum equal to the rate otherwise applicable hereunder plus five percent (5%) the (“Default Interest Rate”).  In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

 

18. Waivers.  The Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.

 

19. WAIVER OF JURY TRIAL.  EACH OF THE COMPANY AND HOLDER HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE, 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 NOTE, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED UPON CONTRACT, TORT OR ANY OTHER THEORY).

 

20. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including a decree of specific performance and/or other injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Note. The Company agrees that irreparable damage, for which monetary relief, even if available, would not be an adequate remedy, would occur in the event that any provision of this Note is not performed in accordance with its specific terms or is otherwise breached, including if the Company fails to take any action required of them hereunder to consummate the conversion of the Note. It is accordingly agreed that (i) the Holder shall be entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of this Note and to enforce specifically the terms and provisions hereof in the courts having jurisdiction without proof of damages or otherwise, this being in addition to any other remedy to which they are entitled under this Note and (ii) the right of specific performance and other equitable relief is an integral part of the transactions contemplated by this Note and without that right, none of the parties hereto would have entered into this Note. The Company agrees not to assert that a remedy of specific performance or other equitable relief is unenforceable, invalid, contrary to law or inequitable for any reason, and not to assert that a remedy of monetary damages would provide an adequate remedy or that the Holder otherwise has an adequate remedy at law. The Company acknowledges and agrees that in seeking an injunction or injunctions to prevent breaches of this Note and to enforce specifically the terms and provisions of this Note, the Holder shall not be required to provide any bond or other security in connection with any such order or injunction.  The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder thereof and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).

 

[Remainder of Page Intentionally Left Blank]

 

[Signature page follows]

 

 

  

  

  

 

The Company has caused this Secured Convertible Promissory Note to be issued as of the date first written above.

 

ULURU INC.

a Nevada corporation

 

By: /s/ Terrance K. Wallberg                                                                               

 

Name: Terrance K. Wallberg                                                                               

 

Title: Vice President / Chief Financial Officerex_10-3.htm

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Security Agreement”) is entered into effective as of February 27, 2017, by and between Velocitas Partners LLC, a Delaware limited liability company (together with its successors and/or assigns, the “Lender”), ULURU INC., a Nevada corporation (the “Borrower”), Cardinia Acquisition Corp., a Delaware corporation (“Cardinia”) and ULURU Delaware Inc. (“ULULU DE”, and together with the Borrower and Cardinia, the “Borrower Entities”).

 

RECITALS:

 

           WHEREAS, Lender has made a loan to Borrower in the amount of Five Hundred Thousand and no/100 dollars ($500,000) (the “Initial Loan”) and has agreed to make a subsequent loan to Borrower in the amount of Five Hundred Thousand and no/100 dollars ($500,000) (the “Second Loan” and together with the Initial Loan, the “Loans” and each, a “Loan”)  pursuant to and subject to the terms and conditions set forth in the Note, Warrant and Preferred Stock Purchase Agreement date as the same date hereof among Borrower, Lender and certain purchasers identified therein (as amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”) and as evidenced by the Secured Convertible Promissory Note with respect to the Initial Loan issued by Borrower in favor of Lender dated of even date herewith in the principal amount of Five Hundred Thousand and no/100 dollars ($500,000) (the “Initial Note”) and the Secured Convertible Promissory Note with respect to the Second Loan issued by Borrower in favor of Lender dated of even date herewith in the principal amount of Five Hundred Thousand and no/100 dollars ($500,000) (the “Second Note” and together with the Initial Note, the “Notes” and each, a “Note”).  Capitalized terms used but not defined in this Security Agreement shall have the meanings given to such terms in the Notes.

 

WHEREAs, the proceeds of the Notes shall be made available to the Borrower Entities to support the ongoing business operations of the Borrower Entities.

 

WHEREAS, as a condition to making the Loans, Lender requires that the Borrower Entities grant to Lender a continuing security interest in all of each Borrower Entity’s personal property.

 

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

 

1. Security Interest.  To secure the Obligations (defined below), each Borrower Entity hereby grants to Lender a security interest in all of such Borrower Entity’s personal property, including, without limitation, all right, title and interest of such Borrower Entity, whether now owned or existing or hereafter acquired or arising, and wherever located, in, to and under (with each of the following capitalized terms having the meaning given thereto in the UCC (as defined below) the following property of such Borrower Entity:

 

(a) all Accounts;

 

(b) all Contracts;

 

(c) all As-Extracted Collateral;

 

(d) all Chattel Paper;

 

(e) all Commercial Tort Claims;

 

(f) all Commodity Accounts;

 

(g) all Commodity Contracts;

 

(h) all Securities Accounts;

 

(i) all Deposit Accounts;

 

(j) all Money;

 

(k) all Documents;

 

(l) all Equipment;

 

(m) all Fixtures;

 

(n) all General Intangibles;

 

(o) all Goods and all Accessions thereto, and Goods with which the Goods are commingled;

 

(p) all Instruments;

 

(q) all Intellectual Property;

 

(r) all Inventory;

 

(s) all Investment Property;

 

(t) all Letter-of-Credit Rights;

 

(u) all Supporting Obligations;

 

(v) all Promissory Notes;

 

(w) all Software;

 

(x) all other personal property not otherwise described above;

 

(y) all books and records pertaining to the Collateral; and

 

(z) to the extent not otherwise included, all Proceeds, products, income and profits of the foregoing, and all accessions thereto and all collateral security and guarantees given by any person or entity with respect to any of the foregoing (collectively, the “Collateral”).

 

2. Obligations.  The security interest granted by this Security Agreement is given as security for all indebtedness and obligations owed by the Borrower Entities to Lender pursuant to the provisions of the Notes, including, without limitation, the following (collectively, the “Obligations”):

 

(a) payment of all amounts outstanding with respect to the Loans, with interest thereon, evidenced by the Notes;

 

(b) payment of all sums advanced by Lender to protect the Collateral, with interest at the Default Interest Rate;

 

(c) payment of all other sums, with interest thereon, that may hereafter be loaned to Borrower, or its successors or assigns, by Lender, or its successors or assigns when evidenced by a promissory note or notes reciting that they are secured by this Security Agreement;

 

(d) performance of every obligation of the Borrower Entities contained in this Security Agreement or the Notes; and

 

(e) all modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not, in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note.

 

3. Proceeds.  As used in this Security Agreement, the term “Proceeds” means all of Borrower’s proceeds (as such term is defined in the New York Uniform Commercial Code in effect from time to time, the “UCC”) including all products of the Collateral and all additions and accessions to, replacements of, insurance or condemnation proceeds of, and documents covering any of the Collateral, all property received wholly or partly in trade or exchange for any of the Collateral, all leases of any of the Collateral, and all rents, revenues, issues, profits and proceeds arising from the sale, lease, license, encumbrance, collection or any other temporary or permanent disposition of any of the Collateral or any interest therein.

 

4. Filing.  Each Borrower Entity covenants that so long as any portion of the Obligations remain unpaid, such Borrower Entity will not file or authorize the filing of a financing statement or security agreement covering the Collateral to anyone other than Lender.  Each Borrower Entity authorizes Lender to prepare and file one or more financing statements or supplements thereto or other instruments as Lender may from time to time reasonably require to comply with the UCC or other applicable law to preserve, protect and enforce the security interest of Lender.  In addition, each Borrower Entity hereby authorizes Lender to file any change, financing statement or continuation statement in such form, with or without such Borrower Entity’s signature, and in such places as may be appropriate.  At any time upon the written request of Lender and at the sole expense of the Borrower Entities, each Borrower Entity will promptly execute and deliver any and all such further instruments and documents and take such further actions as Lender may reasonably deem necessary to obtain the full benefits of this Security Agreement and of the rights and powers granted herein, including, without limitation, the execution and filing of any financing or continuation statements under the UCC with respect to the security interest granted hereby and, if otherwise required hereunder, giving notice to any party of Lender’s security interest in the Collateral.

 

5. Covenants.  Each Borrower Entity hereby covenants to Lender as follows:

 

(a) Maintenance of Collateral. Such Borrower Entity will at all times: (i) keep in effect all licenses, permits and franchises required by law or contract relating to such Borrower Entity’s business (if applicable), property or the Collateral; (ii) defend such Borrower Entity’s ownership and possession of and Lender’s security interest in the Collateral; (iii) maintain insurance policies insuring the Collateral against loss or damage from such risks; (iv) pay when due all taxes, license fees and other charges upon the Collateral or upon such Borrower Entity’s business, property or the income therefrom; and (iv) not misuse, conceal or in any way use or dispose of the Collateral unlawfully or contrary to the provisions of this Security Agreement (provided that such Borrower Entity shall be permitted to sell inventory, or disposed of expired inventory, in the ordinary course of business).  Loss of, damage to, or uncollectability of the Collateral or any part thereof will not release any Borrower Entity from any of its obligations hereunder.

 

(b) Change of Jurisdiction; Relocation. Without providing at least thirty (30) days’ prior written notice to Lender, such Borrower Entity will not change its jurisdiction of organization, name or its principal place of business.

 

(c) Limitation on Indebtedness.  Other than (1) accounts payable to vendors and similar obligations of such Borrower Entity incurred in the ordinary course of Borrower Entity’s business consistent with past practices (2) indebtedness and accounts payable outstanding on the date hereof, whether or not overdue, and (3) the Notes, such Borrower Entity shall not, without the prior written consent of the Lender, create or issue any promissory notes or incur any other Indebtedness.

 

(d) Limitation on Liens on Collateral.  Such Borrower Entity shall not, directly or indirectly, create, permit or suffer to exist, and shall defend the Collateral against and take such other action as is necessary to remove, any mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance (“Lien”) on the Collateral, except (i) the Lien granted to the Lender under this Security Agreement; (ii) Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings, subject to sufficient reserves; (iii) leases or subleases and licenses or sublicenses granted to others in the ordinary course of such the Borrower Entities’ business if such are not otherwise prohibited under this Security Agreement and do not interfere in any material respect with the business of the Borrower Entities; (iv) easements, reservations, rights-of-way, restrictions, minor defects or irregularities in title and other similar Liens affecting real property not interfering in any material respect with the ordinary conduct of the Borrower Entities’ business; (v) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; and (vi) Liens in favor of a depository bank or a securities intermediary pursuant to such  depository bank’s or securities intermediary’s customary customer account agreement or by statute; provided that any such Liens shall at no time secure any indebtedness or obligations other than customary fees and charges payable to such depository bank or securities intermediary.

 

(e) Defense of Intellectual Property. Such Borrower Entity shall use commercially reasonable efforts (taking into account the financial resources of the Borrowers) to protect, defend and maintain the validity and enforceability of its Copyrights, Patents and Trademarks material to the Borrower Entities’ business.

 

(f) Financial Statements. Such Borrower Entity shall make available to Lender quarterly and annual financial reports with respect to the Borrower Entities on a consolidated basis through the EDGAR filing system of the Securities and Exchange Commission.

 

(g) Tax Returns. Within thirty (30) days after filing the same, such Borrower Entity shall deliver to Lender a copy of the Federal income tax returns of each Borrower Entity (or the return of the applicable Person into which the Federal income tax return of Borrower and each Borrower Entity is consolidated) certified on its behalf by its chief financial officer (or similar position) to be true and correct.

 

(h) Dissolution. No Borrower Entity nor any of its subsidiaries shall (i) engage in any Bankruptcy Event or any dissolution, liquidation or consolidation or merger with or into any other business entity, (ii) transfer, license, lease or sell, in one transaction or any combination of transactions, or all or substantially all of the properties or assets of such Borrower Entity, or (iii) modify, amend, waive or terminate its organizational documents or its qualification and good standing in any jurisdiction.

 

(i) Restrictions on Distributions. Such Borrower Entity will not, and will not permit any of its subsidiaries to, pay any dividends, in cash or otherwise, or make any other distributions in respect of its capital stock or other equity securities, or any option, warrant or other right to acquire such capital stock or other equity securities, or purchase, redeem or otherwise acquire any of its outstanding capital stock or other equity securities, or any option, warrant or other right to acquire such capital stock or other equity securities, other than (i) repurchases of outstanding equity securities from employees, directors and consultants upon the termination of such employee’s, director’s or consultant’s employment or engagement by the Borrower at a repurchase price equal to the fair market value of such equity securities on the date of purchase, pursuant to agreements entered in connection with the grant of such equity securities, (ii) any such dividend or distribution by a subsidiary of such Borrower Entity to another Borrower Entity or any wholly-owned subsidiary of a Borrower Entity, (iii) any stock dividends, combinations, splits, recapitalizations and the like to the extent that such dividends or distributions are made solely in the form of additional shares of capital stock of the Borrower.

 

(j) Restriction on Investments. Unless otherwise consented to in writing by the Lender (which consent shall not be unreasonably withheld or delayed), such Borrower Entity will not, and will not permit any of its subsidiaries to, acquire any equity securities or make any loans or advances to any other person or entity.

 

(k) Restrictive Agreements. Such Borrower Entity will not, and will not permit any other Borrower Entity or any of their respective subsidiaries to, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon the ability of any Borrower Entity or any of their respective subsidiaries to make or repay loans or advances to the Borrower; provided, that the foregoing shall not apply to restrictions and conditions imposed by applicable law, regulation or order of any governmental authority.

 

(l) Transactions with Affiliates. Unless otherwise consented to in writing by the Purchaser (which consent shall not be unreasonably withheld or delayed) and except for transactions exclusively among the Borrower Entities or the Borrower Entities and any Affiliate of the Lender, such Borrower Entity will not, and will not permit any other Borrower Entity or any of their respective subsidiaries to, sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except that (i) the Borrower Entities may pay dividends to all of the holders of the Common Stock; (ii) securities may be issued and other payments, awards or grants (in cash, securities or otherwise) may be made pursuant to, or with respect to the funding of, employment arrangements, stock or share options and stock or share ownership plans for the benefit of employees approved by the board of directors of the Borrower, and (iii) reasonable fees and compensation may be paid to, and reasonable indemnities may be provided on behalf of, officers, directors and employees of the Borrower Entities, as determined by the board of directors of the Borrower in good faith.

 

(m) Business of the Borrower Entities. Such Borrower Entity will not, and will not permit any other Borrower Entity or any of their respective subsidiaries to, engage at any time in any business or business activity other than the business currently conducted by the Borrower Entities and similar, related, ancillary or complementary businesses.

 

(n) Further Assurances.  At any time and from time to time, upon the written request of the Lender, and at the sole expense of the Borrower Entities, such Borrower Entity shall promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the may reasonably be necessary or desirable to obtain the full benefits of this Security Agreement, including, without limitation, (a) executing, delivering and causing to be filed any financing or continuation statements under the UCC with respect to the security interests granted hereby as well as any other filings requested by the Lender at either of the United States Patent and Trademark Office or the United States Copyright Office, (b) at the Lender’s reasonable request, placing the interest of the Lender as lienholder on the certificate of title (or similar evidence of ownership) of any vehicle, watercraft or other Equipment constituting Collateral owned by such Borrower Entity which is covered by a certificate of title (or similar evidence of ownership), (c) at the Lender’s request, executing and delivering and using commercially reasonable efforts to cause the applicable depository institution, securities intermediary, commodity intermediary or issuer or nominated party under a letter of credit to execute and deliver a collateral control agreement with respect to any Deposit Account, Securities Account or Commodity Account or Letter-of-Credit Right in or to which such Borrower Entity has any right or interest and (d) at the Lender’s reasonable request, using commercially reasonable efforts to obtain acknowledgments 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.  Such Borrower Entity also hereby authorizes the Lender to file any such financing or continuation statement without the signature of such Borrower Entity.

 

6. Representations and Warranties. Each Borrower Entity represents and warrants for the benefit of Lender that:

 

(a) Such Borrower Entity is the sole holder and owner, beneficially and as of record, of the Collateral pledged by such Borrower Entity and, as of the date hereof, has not granted, pledged, transferred, hypothecated, created, assigned or otherwise created any rights in such Collateral to any person other than Lender;

 

(b) the execution of this Security Agreement by such Borrower Entity will not violate or conflict with (i) any legal requirement affecting such Borrower Entity or any of its properties, including the Collateral, or (ii) any agreement by which such Borrower Entity or the Collateral is bound or to which it is a party and will not result in or require the creation (except as provided in or contemplated by this Security Agreement) of any lien upon any of such properties;

 

(c) this Security Agreement has been validly executed and delivered by such Borrower Entity and is the legal, valid and binding obligation of such Borrower Entity, enforceable against such Borrower Entity in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by equitable principles;

 

(d) no effective (i) security agreement, (ii) financing statement or (iii) equivalent security or lien instrument or continuation statement covering all or any part of the Collateral exists, except such as may have been filed by such Borrower Entity in favor of the Lender pursuant to this Security Agreement or filed by the owner of personal property with respect to personal property leased by one or more Borrower Entities;

 

(e) this Security Agreement creates a legal and valid security interest on and in all of the Collateral in which such Borrower Entity now has rights;

 

(f) except as disclosed in the Disclosure Letter (as defined in the Purchase Agreement), there is no action, suit, investigation, proceeding or arbitration (whether or not purportedly on behalf of such Borrower Entity) at law or in equity or before or by any foreign or domestic court or other governmental entity (a “Legal Action”) pending or, to the knowledge of such Borrower Entity, threatened against or affecting such Borrower Entity or any of its assets which could reasonably be expected to result in any material adverse change in the business, operations, assets (including the Collateral) or condition (financial or otherwise) of such Borrower Entity or would materially and adversely affect such Borrower Entity’s ability to perform its obligations under the Note or this Security Agreement;  and

 

(g) no Event of Default, and no event which, with the giving of notice or passage of time or both, would constitute an Event of Default under the Note has occurred.

 

7. Rights and Obligations of the Lender.

 

(a) The Lender shall not have any obligation or liability under any such Contract, Chattel Paper, Document or Instrument by reason of or arising out of this Security Agreement or the granting to the Lender of a lien therein or the receipt by the Lender of any payment relating to any such Contract, Chattel Paper, Document or Instrument pursuant hereto, nor shall the Lender be required or obligated in any manner to perform or fulfill any of the obligations of any Borrower Entity under or pursuant to any such Contract, Chattel Paper, Document or Instrument, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any such Contract, Chattel Paper, Document or Instrument, 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 it or to which it may be entitled at any time or times.

 

(b) Subject to Section 7(c) below, each Borrower Entity hereby irrevocably constitutes and appoints the Lender, and any officer or agent of the Lender, with full power of substitution, as its true and lawful attorney-in-fact with full, irrevocable power and authority in the place and stead of such Borrower Entity and in the name of such Borrower Entity or in its own name, from time to time at the Secured Party’s discretion, for the purpose of carrying out the terms of this Security Agreement, to take any and all appropriate action and to execute and deliver any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Security Agreement and, without limiting the generality of the foregoing, but subject to Section 7(c) below, hereby gives the Lender the power and right, on behalf of such Borrower Entity, without notice to or assent by such Borrower Entity to do, at the Secured Party’s option and the Borrower Parties’ expense, at any time, or from time to time, all acts and things which the Lender may reasonably deem necessary to protect, preserve or realize upon the Collateral and the Secured Party’s security interest therein in order to effect the intent of this Security Agreement, all as fully and effectively as such Borrower Entity might do.

 

(c) The Lender agrees that, except upon the occurrence and during the continuation of an Event of Default, it shall not exercise the power of attorney or any rights granted to the Lender pursuant to this Section 7.  Each Borrower Party hereby ratifies, to the extent permitted by law, all that said attorney shall lawfully do or cause to be done by virtue hereof.  The power of attorney granted pursuant to this Section 7 is a power coupled with an interest and shall be irrevocable until the Obligations are completely and indefeasibly paid and performed in full and the Lender no longer have any commitment to make any Loans to the Borrower.

 

(d) If the Borrower Entities fail to perform or comply with any of its agreements contained herein and the Lender, as provided for by the terms of this Security Agreement, shall perform or comply, or otherwise cause performance or compliance, with such agreement, the reasonable expenses, including reasonable attorneys’ fees and costs, of the Lender incurred in connection with such performance or compliance, together with interest thereon at a rate of interest equal to the highest per annum rate of interest charged on the Loans, shall be payable by the Borrower Entities to the Lender within ten (10) business days of written demand and shall constitute Obligations secured hereby.

 

(e) Lender shall not intentionally authorize or effect any transactions, occurrence, act or omission by any Borrower Entity that constitute an Event of Default or breach of the covenants of any Borrower Entity hereunder. The Lender acknowledges that the officers of the Company are obligated, in such capacities, to act in the best interests of the Company at all times.  The foregoing shall not restrict Lender from exercising its rights and remedies under this Agreement, including in connection with an Event of Default.

 

8. Default.  The occurrence of any of the following events shall constitute an “Event of Default” hereunder: (a) Borrower fails to pay any portion of the Obligations when due; (b) any statement, representation or warranty of any Borrower Entity in this Security Agreement, the Purchase Agreement or the Note is untrue in any material respect when made; or (c) an Event of Default occurs under the Note.  Waiver of any default will not constitute a waiver of any other or subsequent default hereunder. Each Borrower Entity hereby waives presentment, demand, protest or any notice (to the maximum extent permitted by applicable law) of any kind in connection with this Security Agreement or any Collateral.

 

9. Remedies.

 

(a) If an Event of Default exists, then Lender may (a) accelerate the payment of all amounts due under the Notes, (b) exercise any collection rights with respect to any of the Collateral, (c) take possession of, sell or dispose of, or otherwise deal with such Collateral as permitted by the UCC, or (d) exercise or enforce any right or remedy that may be available to Lender with respect to such Collateral upon default, whether existing under the Notes, this Security Agreement, at law or in equity.

 

(b) Without limiting the generality of the foregoing, each Borrower Entity expressly agrees that in any such event the Lender, without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon such Borrower Entity or any other person, may (i) reclaim, take possession, recover, store, maintain, finish, repair, prepare for sale or lease, shop, advertise for sale or lease and sell or lease (in the manner provided herein) the Collateral, and in connection with the liquidation of the Collateral and collection of the accounts receivable pledged as Collateral, use any Trademark, Copyright, or process used or owned by Grantor and (ii) forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and may forthwith sell, lease, assign, give an option or options to purchase or sell or otherwise dispose of and deliver said Collateral (or contract to do so), or any part thereof, in one or more parcels at public or private sale or sales, at any exchange or broker’s board or at the Borrower Entities’ offices or elsewhere at such prices as it may deem commercially reasonable, for cash or on credit or for future delivery without assumption of any credit risk.

 

(c) Upon the occurrence and during the continuance of any Event of Default, at the request of the Lender, the Borrower Entities shall deliver all original and other documents evidencing and relating to the Collateral.  The Lender may at any time, upon the occurrence and during the continuance of any Event of Default, notify Account Debtors of the Borrower Entities, parties to the Contracts of the Borrower Entities, and obligors in respect of Instruments of the Borrower Entities and obligors in respect of Chattel Paper of the Borrower Entities that the Accounts and the right, title and interest of the Borrower Entities in and under such Contracts, Instruments and Chattel Paper have been assigned to the Lender and that payments shall be made directly to the Lender.  Upon the occurrence and during the continuance of any Event of Default, upon the request of the Lender, the Borrower Entities shall 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 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 Lender’s satisfaction, the existence, amount and terms of any such Accounts, Contracts, Instruments or Chattel Paper.

 

10. Application of Proceeds of Collateral.  In the event of the repossession, sale, collection or other disposition of any of the Collateral pursuant to the terms of this Security Agreement, the proceeds thereof shall be applied as follows:

 

(a) First, to satisfaction of any reasonable costs and expenses, including attorneys’ fees, incurred in pursuing the enforcement action; and

 

(b) Second, to satisfaction of the Obligations; and

 

(c) Third, to the extent there is a remainder after satisfaction of the Obligation, to the Borrower.

 

11. Termination. This Security Agreement shall terminate and the Collateral shall be released from the lien of Lender at such time as the Obligations to Lender have been indefeasibly satisfied in full.  Upon the termination of the Security Agreement, the Borrower Entities shall be permitted termination statements with respect to any existing UCC filings.  This Security Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Borrower Entity 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 any Borrower Entity’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.

 

12. Indemnification.  Without limitation of any other obligation or liability of any Borrower Entity or right or remedy of the Lender contained herein, each Borrower Entity, hereby covenants and agrees to jointly and severally indemnify and hold the Lender, and the directors, officers, subsidiaries, shareholders, agents, affiliates and Persons controlling the Lender, harmless from and against any and all damages, losses, settlement payments, obligations, liabilities, claims, including, without limitation, claims for finder’s or broker’s fees, actions or causes of action, and reasonable costs and expenses incurred, suffered, sustained or required to be paid by any such indemnified party in each case by reason of or resulting from any claim relating to the transactions contemplated hereby, including any breach of this Security Agreement, the Notes or the Purchase Agreement by the Borrower Entities, other than any such claims which are the result of the gross negligence or willful misconduct of such indemnified party as determined by final judgment of a court of competent jurisdiction.  Promptly upon receipt by any indemnified party hereunder of notice of the commencement of any action against such indemnified party for which a claim is to be made against any Borrower Entity hereunder, such indemnified party shall notify the Borrower in writing of the commencement thereof, although the failure to provide such notice shall not affect the indemnification rights of any such indemnified party hereunder.  The Borrower shall have the right, at its option upon notice to the indemnified parties, to defend any such matter at its own expense and with its own counsel, except as provided below, which counsel must be reasonably acceptable to the indemnified parties.  The indemnified party shall cooperate with the Borrower in the defense of such matter.  The indemnified party shall have the right to employ separate counsel and to participate in the defense of such matter at its own expense.  In the event that (a) the employment of separate counsel by an indemnified party has been authorized in writing by the Borrower, (b) the Borrower has failed to assume the defense of such matter within fifteen (15) days of notice thereof from the indemnified party, or (c) the named parties to any such action (including impleaded parties) include any indemnified party who has been advised by counsel that there may be one or more legal defenses available to it or prospective bases for liability against it, which are different from those available to or against the Borrower Entities, then no Borrower Entity shall have the right to assume the defense of such matter with respect to such indemnified party.  No Borrower Entity or indemnified party shall compromise or settle any such matter against an indemnified party without the written consent of the indemnified party or the Borrower Entities, as applicable, which consent may not be unreasonably withheld or delayed.

 

13. General.

 

(a) Notices. All notices or other communications required or permitted to be given by Lender and the Borrower Entities pursuant to the provisions of this Security Agreement shall be delivered as required by the Purchase Agreement.

 

(b) Assignment; Binding Upon Successors and Assigns. No Borrower Entity may assign any of its obligations hereunder without the prior written consent of Lender.  The terms and conditions of this Security Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties. No sales of participations, other sales, assignments, transfers or other dispositions of any agreement governing or instrument evidencing the Obligations or any portion thereof or interest therein shall in any manner affect the lien granted to the Lender hereunder.

 

(c) Entire Agreement.  This Security Agreement, the Notes and the other Loan Documents set forth the entire agreement between the Borrower Entities and Lender with respect to all matters herein, and supersede all prior and contemporaneous security agreements, representations and understandings of the parties, written or oral.  No supplement, amendment or modification of this Security Agreement shall be binding unless executed in writing by Borrower and Lender.

 

(d) No Waiver.  Subject to the provisions of this Security Agreement requiring the consent of Lender, no waiver of any of the provisions of this Security Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver, and no waiver shall be binding unless executed in writing by the Borrower Entities and Lender.

 

(e) Governing Law; Arbitration.  This Security Agreement, and all claims or causes of action (whether in contract or otherwise) that may be based upon, arise out of, or relate to this Security Agreement or the negotiation, execution, or performance of this Security Agreement (including any claim or cause or action based upon, arising out of, or related to any representation or warranty made in or in connection with this Security Agreement or as an inducement to this Security Agreement), shall be governed by the internal laws of the State of New York.  Any issue, controversy, or claim arising out of or related to this Security Agreement or any related documents hereto that cannot be resolved by mutual agreement shall be settled or resolved by binding arbitration in New York, New York pursuant to the Federal Arbitration Act and in accordance with the Commercial Arbitration Rules of the American Arbitration Association now or hereafter in effect. The parties to the dispute shall unanimously select the arbitrator. In the event the parties to the dispute are unable to unanimously select an arbitrator within ten (10) business days of a meeting called to appoint an arbitrator, the arbitrator shall be selected in accordance with the Commercial Arbitration Rules of the American Arbitration Association.  The arbitrator shall have the right to award individual relief which the arbitrator deems proper under the evidence presented and applicable law and consistent with the parties’ rights to, and limitations on, damages and other relief as expressly set forth in this Security Agreement. The award and decision of the arbitrator shall be conclusive and binding on all parties, and judgment upon the award may be entered in any court of competent jurisdiction. The expenses of the arbitration, including the arbitrator’s fees and expert witness fees, incurred by the parties to the arbitration, may be awarded to the prevailing party, in the discretion of the arbitrator, or may be apportioned between the parties in any manner deemed appropriate by the arbitrator. Unless and until the arbitrator decides that one party is to pay for all (or a share) of such expenses, both parties shall share equally in the payment of the arbitrator’s fees as and when billed by the arbitrator. The foregoing agreement to arbitrate shall be specifically enforceable under applicable law in any court having jurisdiction thereof. IN AGREEING TO THE METHOD OF DISPUTE RESOLUTION SET FORTH IN THIS ARBITRATION CLAUSE, THE PARTIES SPECIFICALLY ACKNOWLEDGE THAT EACH PREFERS TO RESOLVE DISPUTES BY ARBITRATION RATHER THAN THROUGH THE FORMAL COURT PROCESS. FURTHER, EACH OF THEM UNDERSTANDS THAT BY AGREEING TO ARBITRATION EACH OF THEM IS WAIVING THE RIGHT TO RESOLVE DISPUTES ARISING OR RELATING TO THIS SECURITY AGREEMENT IN COURT BY A JUDGE OR JURY, THE RIGHT TO A JURY TRIAL, THE RIGHT TO DISCOVERY AVAILABLE UNDER THE APPLICABLE RULES OF CIVIL PROCEDURE, THE RIGHT TO FINDINGS OF FACT BASED ON THE EVIDENCE, AND THE RIGHT TO ENFORCE THE LAW APPLICABLE TO ANY CASE ARISING OR RELATING TO THIS SECURITY AGREEMENT BY WAY OF APPEAL, EXCEPT AS ALLOWED UNDER THE FEDERAL ARBITRATION ACT. EACH OF THEM ALSO ACKNOWLEDGES THAT EACH HAS HAD AN OPPORTUNITY TO CONSIDER AND STUDY THIS ARBITRATION PROVISION, TO CONSULT WITH COUNSEL, TO SUGGEST MODIFICATION OR CHANGES, AND, IF REQUESTED, HAS RECEIVED AND REVIEWED A COPY OF THE FEDERAL ARBITRATION ACT AND THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION.

 

(f) Severability of Provisions.  Any provision of this Security Agreement that 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 of this Security Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

 

[SIGNATURE PAGE IMMEDIATELY FOLLOWS]

 

 

  

  

  

IN WITNESS WHEREOF, the parties hereto have duly executed this Security Agreement as of the day and year first above written.

 

	
LENDER

	
 

VELOCITAS PARTNERS LLC

a Delaware limited liability company

 

/s/ Vaidehi Ashok Shah                                                                

By:Vaidehi Ashok Shah                                                                

Its: Managing Member                                                                

 

 

	
BORROWER ENTITIES

 

	
ULURU INC.

a Nevada corporation

 

/s/ Terrance K. Wallberg                                                                

By:Terrance K. Wallberg                                                                

Its:Vice President / CFO                                                                

 

CARDINIA ACQUISITION CORP.

a Delaware corporation

 

/s/ Terrance K. Wallberg                                                                

By:Terrance K. Wallberg                                                                

Its: President                                                                

 

ULURU DELAWARE INC.

a Delaware corporation

 

/s/ Terrance K. Wallberg                                                                

By:Terrance K. Wallberg                                                                

Its: President

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