Amended and Restated Security Agreement between GlobalOptions Group, Inc. and Silicon Valley Bank (October 12, 2006)

 Exhibit 10.3 AMENDED AND RESTATED SECURITY AGREEMENT --------------------------------------- This Amended and Restated Security Agreement (the "AGREEMENT") made as of this 12th day of October, 2006 (the "Effective Date") between GlobalOptions Group, Inc., a Nevada corporation (the "Guarantor") and Silicon Valley Bank, a California corporation ("Bank"). This Agreement amended and restates that certain Security Agreement between the parties dated March 8, ,2006. WHEREAS, the Guarantor is indebted to Bank pursuant to a Guaranty Agreement of even date herewith (as amended from time to time, the "Guaranty"), pursuant to which Guarantor has unconditionally guaranteed payment of all obligations owed to Bank by GlobalOptions, Inc. (the "Borrower") under, among other agreements, that certain Second Amended and Restated Loan and Security Agreement, dated October 12, 2006 (as may be further amended, restated, or otherwise modified from time to time, the "Loan Agreement" and, collectively with all other related agreements, the "Loan Documents"); and WHEREAS, it is in the interests of the Guarantor to grant in favor of the Bank security for all present and future indebtedness, liabilities and obligations of the Borrower to the Bank and therein charge, mortgage, assign, transfer and otherwise encumber and grant security interests in all its present and future undertaking, property and assets; WHEREAS, this Agreement is made to secure the obligations of the Guarantor under the Guaranty and in consideration of advances, credit or other financial accommodations now or hereafter being afforded to Borrower by Bank. NOW, THEREFORE, the parties hereto hereby agree as follows: 1. DEFINITIONS. "ACCOUNT", "ACCOUNT GUARANTOR", "CHATTEL PAPER", "COMMERCIAL TORT CLAIMS", "DEPOSIT ACCOUNTS", "DOCUMENTS", "EQUIPMENT", "FIXTURES", "GENERAL INTANGIBLES", "GOODS", "INSTRUMENTS", "INVENTORY", "INVESTMENT PROPERTY", "LETTER OF CREDIT RIGHTS", "PROCEEDS" and "TANGIBLE CHATTEL PAPER" shall have the respective meanings assigned to such terms, as of the Effective Date, in the California Uniform Commercial Code. "COLLATERAL" shall mean all of the property of Guarantor described in Exhibit "A" hereto. "INSOLVENCY PROCEEDING" is any proceeding by or against Guarantor under any bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief. "LIEN" is a mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance. "OBLIGATIONS" or "OBLIGATION" shall mean and include without limitation any and all of Borrower's and Guarantor's indebtedness and/or liabilities to Bank of every kind, nature and description, direct or indirect, joint or several, absolute or contingent, due or to become due, now existing or hereafter arising including, without limitation, the indebtedness and liabilities of Borrower to Bank under the Loan Agreement, and the liabilities of Guarantor to Bank under the Guaranty and under this Agreement.  "PERMITTED LIENS" shall mean: (a) Liens arising under this Agreement or other Loan Documents; (b) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Guarantor maintains adequate reserves on its Books, if they have no priority over any of Bank's security interests; (c) Leases or subleases and non-exclusive licenses or sublicenses granted in the ordinary course of Guarantor's business, IF the leases, subleases, licenses and sublicenses permit granting Bank a security interest; and (d) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), BUT any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase. "SCHEDULE" is any attached schedule of exceptions. 2. SECURITY INTEREST. As security for the payment or other satisfaction of all Obligations, Guarantor hereby assigns to Bank and grants to Bank a continuing security interest in the Collateral, whether now or hereafter owned, existing, acquired or arising and wherever now or hereafter located. 3. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until an Event of Default has occurred, Guarantor shall have the right, except as otherwise provided in this Agreement, in the ordinary course of Guarantor's business, to (a) sell, lease or furnish under contracts of service any of Guarantor's inventory normally held by Guarantor for any such purpose, and (b) use and consume any raw materials, work in process or other materials normally held by Guarantor for such purpose; PROVIDED, HOWEVER, that a sale in the ordinary course of business shall not include any transfer or sale in satisfaction, partial or complete, of a debt owed by Guarantor. Bank through its officers, employees or agents, shall have the right, at any time and from time to time in Bank's name, in the name of a nominee of Bank or in Guarantor's name, to verify the validity, amount or any other matter relating to any of Guarantor's accounts, by mail, telephone, telegraph or otherwise. Guarantor shall reimburse Bank, on demand, for all reasonable costs, fees and expenses incurred by Bank in this regard. Immediately upon Guarantor's receipt of any portion of the Collateral evidenced by an agreement, security, Instrument or Document, including, without limitation, any Tangible Chattel Paper and any Investment Property consisting of certificated securities, Guarantor shall deliver the original thereof to Bank together with an appropriate endorsement or other specific evidence of assignment thereof to Bank (in form and substance acceptable to Bank). If an endorsement or assignment of any such items shall not be made for any reason, Bank is hereby irrevocably authorized, as Guarantor's attorney and agent-in-fact, to endorse or assign the same on Guarantor's behalf. 2  4. WARRANTIES AND COVENANTS. Guarantor warrants and agrees that: A. All of the Collateral is and will at all times be owned by Guarantor free and clear of all Liens and security interests, except for (i) the security interests granted hereunder, (ii) Permitted Liens, and (iii) the Liens set forth on the Schedule. B. Guarantor is duly existing and in good standing in its jurisidiction of formation and qualified and licensed to do business in, and in good standing in, any jurisdiction in which the conduct of its business or its ownership of property requires that it be qualified, except where the failure to do so could not reasonably be expected to have a material adverse effect of the business and operations of Guarantor (a "Material Adverse Effect"). The execution, delivery and performance of this agreement, the Guaranty and any other documents executed by Guarantor in connection herewith have been duly authorized, and do not conflict with Guarantor's formation documents, nor constitute an event of default under any material agreement by which Guarantor is bound. Guarantor is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Effect. C. Except as shown in the Schedule, there are no actions or proceedings pending or, to the knowledge of Guarantor, threatened by or against Guarantor in which a likely adverse decision could reasonably be expected to cause a Material Adverse Effect. D. Guarantor will keep its business and the Collateral insured for risks and in amounts standard for Guarantor's industry, and as Bank may reasonably request. Insurance policies will be in a form, with companies, and in amounts that are satisfactory to Bank in Bank's reasonable discretion. All property policies will have a lender's loss payable endorsement showing Bank as an additional loss payee and all liability policies will show the Bank as an additional insured and provide that the insurer must give Bank at least 20 days notice before cancelling its policy. At Bank's request, Guarantor will deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy will, at Bank's option, be payable to Bank on account of the Obligations. E. Guarantor will not sell, lease, transfer, assign or otherwise dispose of any of its property or any interest therein, EXCEPT FOR transfers (i) of inventory in the ordinary course of business; (ii) of non-exclusive licenses and similar arrangements for the use of the property of Guarantor in the ordinary course of business; or (iii) of worn-out or obsolete Equipment, without the prior written consent of Bank in each instance or as otherwise permitted in this Agreement. F. The fair salable value of Guarantor's assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities. G. Guarantor has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Effect. H. No written representation, warranty or other statement of Guarantor in any certificate or written statement given to Bank (taken together with all such written certificates and written statements to Bank) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading. 3  I. Guarantor will not, without at least 30 days prior written notice, relocate its principal office or add any new offices or business locations. J. Guarantor will not directly or indirectly enter into or permit to exist any material transaction with any affiliate of Guarantor except for transactions that are in the ordinary course of Guarantor's business, upon fair and reasonable terms that are no less favorable to Guarantor than would be obtained in an arm's length transaction with a non-affiliated person. K. Guarantor will execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank's security interest in the Collateral or to effect the purposes of this Agreement. 5. EVENTS OF DEFAULT. Any one of the following is an Event of Default A. An event of default occurs under the Loan Agreement or any other Loan Documents that is not cured within the applicable cure period, if any; B. Failure by Guarantor to pay or perform any of its Obligations when first due or demanded. C. Breach by Guarantor of any warranty, representation or covenant contained herein or in the Guaranty Agreement; or D. Except for Transfers permitted hereunder, the loss, theft or destruction of, or sale, lease or furnishing under a contract of service of, any of the Collateral. 6. RIGHTS AND REMEDIES. Upon the occurrence of an Event of Default, Bank may exercise from time to time any rights and remedies available to it under any applicable law in addition to, and not in lieu of, any rights and remedies expressly granted in this Agreement or in any other agreements between Bank and Guarantor and all of Bank's rights and remedies shall be cumulative and non-exclusive to the extent permitted by law. In particular, but not by way of limitation of the foregoing, Bank may, without notice, demand or legal process of any kind, take possession of any or all of the Collateral (in addition to Collateral of which it already has possession), wherever it may be found, and for that purpose may pursue the same wherever it may be found, and may enter onto any of Guarantor's premises where any of the Collateral may be, and search for, take possession of, remove, keep and store any of the Collateral until the same shall be sold or otherwise disposed of, and Bank shall have the right to store the same at any of Guarantor's premises without cost to Bank. At Bank's request, Guarantor shall, at Guarantor's expense, assemble the Collateral and make it available to Bank at one or more places to be designated by Bank and reasonably convenient to Bank and Guarantor. Guarantor recognizes that if Guarantor fails to perform, observe or discharge any of its Obligations, no remedy at law will provide adequate relief to Bank, and agrees that Bank shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. Any notification of intended disposition of any of the Collateral required by law will be deemed to be a reasonable authenticated notification of disposition if given at least ten (10) days prior to such disposition and such notice shall (i) describe Bank and Guarantor, (ii) describe the Collateral that is the subject of the intended disposition, (iii) state the method of the intended disposition, (iv) state that Guarantor is entitled to an accounting of the Obligations and state the charge, if any, for an accounting and (v) state the time and place of any public disposition or the time after which any private sale is to be made. Bank may disclaim any warranties that might arise in connection with the sale, lease or other disposition of the Collateral and has no obligation to provide any warranties at such time. Any 4  Proceeds of any disposition by Bank of any of the Collateral may be applied by Bank to the payment of expenses in connection with the Collateral, including, without limitation, legal expenses and reasonable attorneys' fees, and any balance of such Proceeds may be applied by Bank toward the payment of such of the Obligations, and in such order of application, as Bank may from time to time elect. In the event of any excess Proceeds after payment in full of the Obligations, such excess shall be paid to Guarantor. 7. FEES, COSTS AND CHARGES. Guarantor shall be obligated to reimburse Bank, as part of the Obligations, for all fees, costs or charges of any kind incurred by Bank in connection with this Agreement, including without limitation, any reasonable fees, costs or charges incurred by Bank in enforcing its rights and remedies under the Loan Documents, the Guaranty, this Agreement or any other agreement between Bank and Guarantor. 8. MISCELLANEOUS. A. Any failure or delay by Bank to require strict performance by Guarantor of any of the provisions, warranties, terms and conditions contained herein or in any other agreement, document or instrument, shall not affect Bank's right to demand strict compliance and performance therewith, and any waiver of any Event of Default shall not waive or affect any other Event of Default, whether prior or subsequent thereto, and whether of the same or of a different type. None of the warranties, conditions, provisions and terms contained herein, or in any other agreement, document or instrument shall be deemed to have been waived by any act or knowledge of Bank, its agents, officers or employees, other than pursuant to an instrument in writing, signed by an officer of Bank, directed to Guarantor and specifying such waiver. B. Any notice under this Agreement shall be addressed to the parties at their respective addresses set forth herein, or to such other address as either party designates to the other in the manner herein described. C. In the event that any provision hereof shall be deemed to be invalid by any court, such invalidity shall not affect the remainder of this Agreement. D. This Agreement shall be binding upon and for the benefit of the parties hereto and their respective successors and assigns. E. California law governs this Agreement without regard to principles of conflicts of law. Guarantor and Bank each submit to the exclusive jurisdiction of the State and Federal Courts in Santa Clara County, California. GUARANTOR AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. 5  IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement on the date set forth above. SILICON VALLEY BANK GLOBALOPTIONS GROUP, INC. By /s/ Ian C. Willard By /s/ Harvey W. Schiller, Ph.D. ------------------------------- ---------------------------------------- Name: Ian C. Willard Name: Harvey W. Ph.D. Schiller ---------------------------- ------------------------------------- Title: Vice President Title: Chairman and Chief Executive Officer --------------------------- ------------------------------------