EXHIBIT 10.1
SERIES A SENIOR PREFERRED EQUITY SECURITY AGREEMENT
THIS SERIES A SENIOR PREFERRED SECURITY AGREEMENT (this "Agreement") is
made and entered into as of the 23rd day of April, 2004, by and among POWERHOUSE
TECHNOLOGIES GROUP, INC., a Delaware corporation and First Person Software,
Inc., a California corporation (together, the "Company"), and MIDDLEBURY
CAPITAL, LLC, a Delaware limited liability company ("MC" or "Agent") and each
other person or entity listed as a Secured Party on Schedule 1 attached to this
Agreement (the "Purchasers" and together with MC the "Secured Party").
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in those Series A Senior Units Purchase Agreements dated April 23,
2004, between the Company and the parties identified as Purchasers on Schedule 1
hereto (together, the "Purchase Agreement").
Recitals
--------
WHEREAS, Secured Party has agreed to purchase the Series A Senior
Preferred Stock from the Company pursuant to the terms of the Purchase Agreement
and the Certificate of Designations for the Series A Senior Preferred Stock.
WHEREAS, Secured Party has required, as a condition to purchasing
the Series A Senior Preferred Stock, that Company grant Secured Party a first
priority security interest in all of Company's patents listed in Exhibit A
hereto, the proceeds attributable to such patents and the employment agreements
of Company senior management, and to that end has required the execution and
delivery of this Agreement by Company.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in the Purchase Agreement, and the Certificate of
Designations for Series A Senior Preferred Stock, the parties hereto, intending
to be legally bound, agree as follows:
1. Incorporation of Recitals, Purchase Agreement, and Series A Senior
Preferred Stock. The foregoing Recitals, the Purchase Agreement, the Certificate
of Designations for the Series A Senior Preferred Stock are hereby incorporated
herein in their entirety by this reference.
2. Definitions. The following terms shall have the meanings set forth
below:
"Agreements" means all employment agreements with senior
management of the Company.
"Collateral" shall mean all General Intangibles, Agreements
and Proceeds. Notwithstanding the foregoing, the security interest granted
herein shall not extend to and the term "Collateral" shall not include any
property, rights or licenses to
the extent the granting of a security interest therein would be contrary
to applicable law.
"Copyrights" shall mean, collectively, all of Company's
copyrights, copyright registrations and applications for copyright
registration, whether under the laws of the United States or any other
country or jurisdiction, including all recordings, supplemental
registrations and derivative or collective work registrations, and all
renewals and extensions thereof, in each case whether published or
unpublished, now owned or existing or created or hereafter acquired or
arising.
"Copyright Collateral" shall mean, collectively, all
Copyrights and Copyright Licenses to which Company is or hereafter becomes
a party and all other General Intangibles embodying, incorporating,
evidencing or otherwise relating or pertaining to any Copyright or
Copyright License, in each case whether now owned or existing or hereafter
acquired or arising.
"Copyright License" shall mean any agreement now or hereafter
in effect granting any right to any third party under any Copyright now or
hereafter owned by Company or which Company otherwise has the right to
license, or granting any right to Company under any property of the type
described in the definition of Copyright herein now or hereafter owned by
any third party, and all rights of Company under any such agreement.
"General Intangibles" shall mean all of the Company's present
and future general intangibles of every kind and description, including
(without limitation) all Copyright Collateral, all Patent Collateral and
all Trademark Collateral and the goodwill of the business symbolized
thereby, Federal, State and local tax refund claims of all kinds.
"Obligations" means each and every debt, liability, and
obligation of every kind and description arising under or in connection
with the Purchase Agreement or the Series A Senior Certificate of
Designations which Company may now or at any time hereafter owe to Secured
Party.
"Patent Collateral" shall mean, collectively, all Patents and
all Patent Licenses to which Company is or hereafter becomes a party and
all other General Intangibles embodying, incorporating, evidencing or
otherwise relating or pertaining to any Patent or Patent License, in each
case whether now owned or existing or hereafter acquired or arising.
"Patent License" shall mean any agreement, whether written or
oral, now or hereafter in effect granting to any third party any right to
make, use or sell any invention on which a Patent, now or hereafter owned
by Company or which Company otherwise has the right to license, is in
existence, or granting to Company any right to make, use or sell any
invention on which property of the type described in the
definition of Patent herein, now or hereafter owned by any third party, is
in existence, and all rights of Company under any such agreement.
"Patents" shall mean, collectively, all of Company's letters
patent under the laws of the United States listed on Exhibit A hereto, all
recordings and registrations thereof and applications therefor, including,
without limitation, the inventions described therein, all reissues,
continuations, divisions, renewals, extensions, continuations-in-part
thereof, in each case whether now owned or existing or hereafter acquired
or arising.
"Permitted Liens" shall mean, collectively, the following: (i)
liens for current taxes or other governmental or regulatory assessments
which are not delinquent, or which are being contested in good faith by
the appropriate procedures and for which appropriate reserves are
maintained; (ii) liens in favor of Agent and/or the Secured Party; and
(iii) licenses or sublicenses of Patents, in each instance granted to
others not interfering in any material respect with the business of the
Company.
"Proceeds" shall mean any consideration received from the
sale, exchange, lease or other disposition of any asset or property which
constitutes Collateral, any other value received as a consequence of the
possession of any Collateral and any payment received from any insurer or
other person or entity as a result of the destruction, loss, theft or
other involuntary conversion of whatever nature of any asset or property
that constitutes Collateral.
"Security Interest" has the meaning given in Section 3(b).
"Trademarks" shall mean, collectively, all of Company's
trademarks, service marks, trade names, corporate and company names,
business names, fictitious business names, service marks, logos, trade
dress, trade styles, other source or business identifiers, designs and
general intangibles of a similar nature, whether under the laws of the
United States or any other country or jurisdiction, all recordings and
registrations thereof and applications therefor, all renewals and
extensions thereof, all rights corresponding thereto, and all goodwill
associated therewith or symbolized thereby, in each case whether now owned
or existing or hereafter acquired or arising.
"Trademark Collateral" shall mean, collectively, all
Trademarks and Trademark Licenses to which Company is or hereafter becomes
a party and all other General Intangibles embodying, incorporating,
evidencing or otherwise relating or pertaining to any Trademark or
Trademark License, in each case whether now owned or existing or hereafter
acquired or arising.
"Trademark License" shall mean any agreement, whether written
or oral, now or hereafter in effect granting any right to any third party
under any Trademark now or hereafter owned by Company or which Company
otherwise has the right to license, or granting any right to Company under
any property of the type
described in the definition of Trademark herein now or hereafter owned by
any third party, and all rights of Company under any such agreement.
3. Security for Obligations.
a. This Agreement secures, and the Collateral is collateral security
for, the prompt payment or performance in full when due, whether at stated
maturity, by required prepayment, declaration, acceleration, conversion, demand
or otherwise (including the payment of amounts that would become due but for the
operation of the automatic stay under Section 363(a) of the Bankruptcy Code, 11
U.S.C. ss.362(a)) of all obligations and liabilities of every nature of Company
now or hereafter existing under or arising out of or in connection with the
Series A Senior Preferred Stock and this Agreement and all extensions or
renewals thereof, whether for principal, interest, (including, without
limitation, interest that, but for the filing of a petition in bankruptcy with
respect to Company, would accrue on such obligations), fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Agent or any Secured Party as a
preference, fraudulent transfer or otherwise (all such obligations of Company,
together with the Obligations, being the "Secured Obligations").
b. Security Interest. As security for the payment or performance, as
the case may be, of the Secured Obligations, the Company hereby creates and
grants to the Agent, its successors and its assigns, for its own benefit and for
the pro rata benefit of the Purchasers, their successors and their assigns, a
security interest in the Collateral (the "Security Interest"). Without limiting
the foregoing, the Agent is hereby authorized to file one or more financing
statements, continuation statements or other documents for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security
Interest, naming the Company as debtors and the Agent as secured party.
The Company agrees at all times to keep in all material respects accurate
and complete accounting records with respect to the Collateral, including, but
not limited to, a record of all payments and Proceeds received.
4. Representations and Warranties. Company represents and warrants as
follows:
a. Financing Statements. Except for the financing statements in
favor of Secured Party, at the time of granting the security interest
described herein, no financing statement covering the Collateral or any
portion thereof will be on file in any public office and Company agrees
not to execute or authorize the filing of any such additional financing
statement in favor of any person, entity or governmental agency (whether
federal, state or local) other than Secured Party as long as any portion
of the Obligations evidenced by the Series A Senior Preferred Stock remain
unpaid.
b. Legal Name. Company's exact legal name is as set forth in the
first paragraph of this Security Agreement. Company shall not change its
legal name or its form of organization without 30 days' prior written
notice to Secured Party.
c. Title and Authority. Company has (i) rights in and good title
to the Collateral in which it is granting a security interest hereunder
and (ii) the requisite corporate power and authority to grant to the Agent
the Security Interest in such Collateral pursuant hereto and to execute,
deliver and perform its obligations in accordance with the terms of this
Agreement, without the consent or approval of any other person other than
any consent or approval which has been obtained. Company has the sole,
full and clear title to each of the Patents shown on Schedule B hereto and
the registrations thereof are valid and subsisting and in full force and
effect. None of the Patents has been abandoned or dedicated, and, except
to the extent that the Agent, upon prior written notice by Company, shall
consent, Company will not do any act, or omit to do any act, whereby the
Patents may become abandoned or dedicated and shall notify the Agent
immediately if it knows of any reason or has reason to know that any
application or registration may become abandoned or dedicated. Company
hereby represents and warrants that the Patents shown on Schedule B are
the only issued U.S. patents owned by Company as of the date of this
Agreement.
d. Filing. Fully executed Uniform Commercial Code financing
statements containing a description of the Collateral shall have been, or
shall be delivered to the Agent in a form such that they can be, filed of
record in every governmental, municipal or other office in every
jurisdiction in which any portion of the Collateral is located necessary
to publish notice of and protect the validity of and to establish a valid,
legal and perfected security interest in favor of the Agent in respect of
the Collateral in which a security interest may be perfected by filing in
the United States and its territories and possessions, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided
under applicable law with respect to the filing of Uniform Commercial Code
continuation statements.
e. Validity of Security Interest. The Security Interest
constitutes a valid, legal and perfected first priority security interest
in all of the Collateral for payment and performance of the Secured
Obligations subject only to Permitted Liens.
f. Locations of Collateral; Place of Business. Company hereby
represents and warrants that all the Collateral is located at the
locations listed on Schedule 2 hereto and that its federal employer
identification number is as set forth on said Schedule. The Company agrees
not to establish, or permit to be established, any other location for
Collateral unless all filings under the Uniform Commercial Code as in
effect in any state or otherwise which are required by this Agreement or
the Purchase Agreement to be made with respect to the Collateral have been
made and the Agent has a valid, legal and perfected first priority
security interest in the Collateral. Company confirms that its chief
executive office is located at the office indicated on Schedule 2 hereto.
Company agrees not to change, or permit to be changed, the location of its
chief executive office unless all filings under the Uniform Commercial
Code or otherwise which are required by this Agreement to be made have
been made and the Agent has a valid, legal and perfected first priority
security interest
5. Covenants and Agreements. Company covenants and agrees as follows:
a. Restrictions. Company agrees that until the Obligations shall
have been satisfied in full, Company shall not, without Secured Party's
prior written consent, assign, transfer, encumber or otherwise dispose of
the Collateral, or any interest therein, except that Company may (i)
license (other than on an exclusive basis for all known fields of use for
the duration of the term of the patent) or grant similar rights and
interests on an arm's length basis consistent with good industry practice
in all or any part of the Collateral to unrelated third parties pursuant
to its business and (ii) sell, license on an exclusive basis for all known
fields of use for the duration of the term of the patent or otherwise
transfer for value all or any part of the Collateral with the prior
written consent of the Secured Party, which consent will not be
unreasonably withheld. Company further agrees that it will not take any
action, or permit any action to be taken by others subject to its control,
including licensees, or fail to take any action, which would affect the
validity or enforcement of the rights transferred to Secured Party under
this Agreement.
b. Defense. Company shall, at its own cost and expense, take any
and all actions reasonably necessary to defend title to the Collateral
owned by it against all persons and to defend the Security Interest of the
Agent in such Collateral, and the priority thereof, against any adverse
lien of any nature whatsoever (other than Permitted Liens).
c. Maintenance. Company shall at all times and at its own expense
maintain and keep, or cause to be maintained and kept, the Collateral.
Company shall perform all acts and execute all documents, including,
without limitation, security agreements in form suitable for filing with
the United States Patent and Trademark Office, substantially in the form
of Exhibit B, hereof requested by the Agent at any time to evidence,
perfect, maintain, record and enforce the Agent's interest in the
Collateral or otherwise in furtherance of the provisions of this
Agreement, and Company hereby authorizes the Agent to execute and file one
or more financing
statements (and similar documents) or copies thereof or of this Agreement
with respect to the Collateral signed only by the Agent. Company will take
all necessary steps in any proceeding before the United States Patent and
Trademark Office or any similar office or agency of the United States or
any State thereof to maintain each application and registration of the
Patents, including, without limitation, filing of renewals, affidavits of
use, affidavits of incontestability and opposition, interference and
cancellation proceedings.
d. Secured Party's Right to Take Action. If, after ten days
written notice from Secured Party, Company fails to perform or observe any
of its covenants or agreements set forth in this Section 5 or if Company
notifies Secured Party that it intends to abandon all or any part of the
Collateral, Secured Party may (but need not) perform or observe such
covenant or agreement or take steps to prevent such intended abandonment
on behalf and in the name, place, and stead of Company (or, in the case of
intended abandonment, in Secured Party's own name) and may (but need not)
take any and all other actions that Secured Party may reasonably deem
necessary to cure or correct such failure or prevent such intended
abandonment.
e. Costs and Expenses. Except to the extent that the effect of
such payment would be to render any loan or forbearance of money usurious
or otherwise illegal under any applicable law, Company shall pay Secured
Party on demand the amount of all moneys expended and all costs and
expenses (including reasonable attorneys' fees and disbursements) incurred
by Secured Party in connection with or as a result of Secured Party's
taking action under subsection 5(d), except for intended abandonment of
the Collateral by Company, or exercising its rights under Section 7,
together with interest thereon from the date expended or incurred by
Secured Party.
f. Use and Disposition of Collateral. Company shall not make or
permit to be made any assignment, pledge or hypothecation of the
Collateral other than Permitted Liens, or grant any security interest in
the Collateral except for the Security Interest and Permitted Liens.
Company shall not make or permit to be made any transfer of any
Collateral, except in the ordinary course of business, and Company shall
remain at all times in possession of the Collateral owned by it other than
transfers to the Agent pursuant to the provisions hereof and as otherwise
provided in this Agreement. The Agent shall have the right, as the true
and lawful agent of the Company, with power of substitution for the
Company and in the Company's name, the Agent's name or otherwise, for the
use and benefit of the Agent and the Purchasers and solely to effect the
purposes of this Agreement, (i) to endorse the Company's name upon any
notes, acceptances, checks, drafts, money orders or other evidences of
payment with respect to the Collateral that may come into its possession;
(ii) to sign the name of the Company on any invoice relating to any of the
Collateral and (iii) upon the occurrence and during the continuance of an
event of default under this Agreement or under the Series A Senior
Preferred Stock, (A) to receive, endorse, assign and/or deliver any and
all notes, acceptances, checks, drafts, money orders or other evidences or
instruments of payment relating to the Collateral or any part thereof, and
Company hereby waives notice of presentment, protest and non-payment of
any instrument so endorsed, (B) to
demand, collect, receive payment of, give receipt for, extend the time of
payment of and give discharges and releases of all or any of the
Collateral and/or release the obligor thereon, (C) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to collect or otherwise realize on all
or any of the Collateral or to enforce any rights in respect of any
Collateral, (D) to settle, compromise, compound, adjust or defend any
actions, suits or proceedings relating to or pertaining to all or any of
the Collateral, and (H) to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of the
Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though the Agent
were the absolute owner of the Collateral for all purposes; provided,
however, that nothing herein contained shall be construed as requiring or
obligating the Agent or any Purchaser to make any commitment or to make
any inquiry as to the nature or sufficiency of any payment received by the
Agent or such Purchaser or to present or file any claim or notice, or to
take any action with respect to the Collateral or any part thereof or the
moneys due or to become due in respect thereof or any property covered
thereby, and no action taken by the Agent or any Purchaser or omitted to
be taken with respect to the Collateral or any part thereof shall give
rise to any defense, counterclaim or offset in favor of Company or to any
claim or action against the Agent or any Purchaser in the absence of the
gross negligence or willful misconduct of the Agent or such Purchaser; and
provided further that, the Agent shall at all times act reasonably and in
good faith. It is understood and agreed that the appointment of the Agent
as the agent of the Company for the purposes set forth above in this
Section 5(f) is coupled with an interest and is irrevocable. The
provisions of this Section 5(f) shall in no event relieve Company of any
of its obligations hereunder with respect to the Collateral or any part
thereof (other than obligations which are impaired as a result of actions
taken by the Agent pursuant to this Section 5(f)) or impose any obligation
on the Agent or any Purchaser to proceed in any particular manner with
respect to the Collateral or any part thereof, or in any way limit the
exercise by the Agent or any Purchaser of any other or further right which
it may have on the date of this Agreement or hereafter, whether hereunder
or by law or otherwise. Anytime action is taken under this Section 5(f),
prompt written notice of such action shall be provided to Company by
Agent.
g. Further Assurances. Company agrees, at its expense, to
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Agent may from
time to time reasonably request for the assuring and preserving of the
Security Interest and the rights and remedies created hereby, including,
without limitation, the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting
of the Security Interest and the filing of any financing statements or
other documents in connection herewith. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be
promptly pledged and delivered to the Agent, duly endorsed in a manner
satisfactory to the Agent. Company agrees to notify promptly the Agent of
any change in its corporate name or in the location of its chief executive
office, its chief place of business or the office where it keeps its
records.
6. Events of Default. Each of the following occurrences shall
constitute an event of default under this Agreement (herein called "Event of
Default"):
a. an Event of Default, under any indebtedness owed by the
Company shall occur; or
b. Company shall fail promptly to observe or perform any covenant
or agreement herein binding on it or shall fail to satisfy any Obligations
to the Secured Party; or
c. there is any levy, seizure, or attachment of all or any
material portion of the Collateral, other than as set forth in this
Agreement; or
d. any of the representations or warranties contained in Section
4 or in the Purchase Agreement shall prove to have been incorrect in any
material respect when made.
7. Remedies. Upon the occurrence of an Event of Default and at any time
thereafter, Secured Party may, at its option, take any or all of the following
actions:
a. exercise any or all remedies available under this Agreement
including, without limitation, any and all rights afforded to a secured
party under, and subject to its obligations contained in, the Uniform
Commercial Code as in effect in any state or other applicable law; or
b. sell, assign, transfer, pledge, encumber, or otherwise dispose
of the Collateral; or
c. enforce the patents and the Agreements comprising the
Collateral and if Secured Party shall commence any suit for such
enforcement, Company shall, at the request of Secured Party, do any and
all lawful acts and execute any and all proper documents reasonably
required by Secured Party in aid of such enforcement; or
d. incur expenses, including attorneys' fees at the regular
hourly rates of Secured Party's counsel from time to time in effect, legal
expenses and costs for the exercise of any right or power under this
Security Agreement, which expenses are secured by this Security Agreement.
Any disposition of Collateral by Agent shall be subject to the mandatory
requirements of applicable law and subject to the requirement that Agent act
reasonably and in good faith. Subject to such conditions, Agent may sell or
otherwise dispose of all or any part of the Collateral, at public or private
sale, for cash, upon credit or for future delivery as the Agent shall deem
appropriate. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Company, and Company
hereby
waives (to the extent permitted by law) all rights of redemption, stay
and appraisal which Company now has or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted. The Agent shall
give the Company ten (10) days' written notice (which Company agrees is
reasonable notice within the meaning of Section 9-504(3) of the Uniform
Commercial Code) of the Agent's intention to make any sale of Collateral. Such
notice, in the case of a public sale, shall state the time and place for such
sale. Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Agent may fix and state in the
notice (if any) of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot, as an entirety or in separate
parcels, as the Agent may (in its sole and absolute discretion) determine. The
Agent shall not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Agent until the sale price is paid by the purchaser or purchasers thereof, but
the Agent shall not incur any liability in case any such purchaser or purchasers
shall fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice. At any public
sale made pursuant to this Section 7, any Purchaser may bid for or purchase,
free (to the extent permitted by law) from any right of redemption, stay or
appraisal on the part of Company (all said rights being also hereby waived and
released to the extent permitted by law), with respect to the Collateral or any
part thereof offered for sale and any such Purchaser may make payment on account
thereof by using any claim then due and payable to any such Purchaser from
Company as a credit against the purchase price, and any such Purchaser may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to Company therefor. For purposes hereof, a
written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof; the Agent shall be free to carry out such sale and
purchase pursuant to such agreement, and Company shall not be entitled to the
return of the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after the Agent shall have entered into such an agreement all
events of default shall have been remedied and the Secured Obligations paid in
full. Company shall remain liable for any deficiency. As an alternative to
exercising the power of sale herein conferred upon it, the Agent may proceed by
a suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a court
appointed receiver.
8. Designation of Agent; Indemnity.
a. The Purchasers hereby irrevocably designate MC (and its
successors and assigns) as their agent and MC hereby accepts such
designation, in order to execute any and all instruments or other
documents on behalf of the Purchasers and to do any and all other acts or
things on behalf of the Purchasers that MC (or its successors or assigns)
in its sole discretion deems necessary or advisable or that may be
required
pursuant to this Agreement or otherwise, to exercise Secured Party's
rights and remedies under this Agreement. None of the Purchasers may take
any action or exercise any rights under this Agreement except through MC
as their agent. Company hereby appoints the Agent the attorney-in-fact of
Company solely for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument which the
Agent may reasonably deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable so long as this
Agreement and the Security Interest have not been terminated and coupled
with an interest.
b. MC, as agent, shall have no duties or responsibilities
whatsoever with respect to the Collateral except as are specifically set
forth herein. MC, in its capacity as agent for the Purchasers, shall
neither be responsible for or under, nor chargeable with knowledge of the
terms and conditions of, any other agreement, instrument or document in
connection herewith. MC may conclusively rely upon, and shall be fully
protected from all liability, loss, cost, damage or expense in acting or
omitting to act pursuant to any written notice, instrument, request,
consent, certificate, document, letter, telegram, opinion, order,
resolution or other writing hereunder without being required to determine
the authenticity of such document, the correctness of any fact stated
therein, the propriety of the service thereof or the capacity, identity or
authority of any party purporting to sign or deliver such document. MC
shall have no responsibility for the contents of any such writing
contemplated herein and may rely without any liability upon the contents
thereof.
c. MC, in its capacity as agent for the Purchasers, shall not be
liable for any action taken or omitted by it in good faith and reasonably
believed by it to be authorized hereby or with the rights or powers
conferred upon it hereunder, nor for action taken or omitted by it in good
faith, and in accordance with advice of counsel (which counsel may be of
MC's own choosing), and shall not be liable for any mistake of fact or
error of judgment or for any acts or omissions of any kind except for its
own willful misconduct or negligence.
d. Each of the Purchasers and the Company (each, an "Indemnifying
Parties") agrees to indemnify MC, in its capacity as agent for the
Purchasers, and its employees, directors, officers and agents and hold
each harmless against any and all liabilities incurred by it hereunder as
a consequence of such party's action, and each Indemnifying Party agrees
to indemnify MC, in its capacity as agent for the Purchasers, and hold it
harmless against any claims, costs, payments, and expenses (including the
fees and expenses of counsel) and all liabilities incurred by it in
connection with the performance of its duties hereunder, except in the
case for claims, costs, payments, and expenses (including the fees and
expenses of counsel) and liabilities incurred by MC resulting from its own
willful misconduct or gross negligence.
9. Application of Proceeds. The proceeds of any collection or sale of
Collateral, as well as any Collateral consisting of cash, shall be applied by
the Agent as follows:
FIRST, to the payment of all reasonable costs and expenses incurred
by the Agent in connection with such collection or sale or otherwise in
connection with this Agreement or any of the Secured Obligations,
including, but not limited to, all court costs and the reasonable fees and
expenses of its agents and legal counsel, the repayment of all advances
made by the Agent hereunder on behalf of the Company and any other
reasonable costs or expenses incurred in connection with the exercise of
any right or remedy hereunder;
SECOND, pro rata to the payment in full of the liquidation
preference and accrued and unpaid dividends in respect of the Series A
Senior Preferred Stock outstanding (pro rata as among the Purchasers in
accordance with the number of shares of Series A Senior Preferred Stock
held by them);
THIRD, to the Company, its successors and assigns, or as a court of
competent jurisdiction may otherwise direct.
10. Security Interest Absolute. All rights of the Agent hereunder, the
Security Interest, and all obligations of the Company hereunder, shall be
absolute and unconditional irrespective of (i) any partial invalidity or
unenforceability of any Obligations, any other agreement with respect to any of
the Secured Obligations or any other agreement or instrument relating to any of
the foregoing, (ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other amendment
or waiver of or consent to any departure from the Series A Senior Preferred
Stock or any other agreement or instrument, (iii) any exchange, release or
nonperfection of any other Collateral, or any release or amendment or waiver of
or consent to or departure from any guarantee, for all or any of the Secured
Obligations, or (iv) any other circumstance which might otherwise constitute a
defense available to, or discharge of the Company in respect of the Secured
Obligations or in respect of this Agreement.
11. Miscellaneous. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by Secured Party. A waiver signed by Secured
Party shall be effective only in the specific instance and for the specific
purpose given. Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party's rights or remedies. All rights and
remedies of Secured Party shall be cumulative and may be exercised singularly or
concurrently, at Secured Party's option, and the exercise or enforcement of any
one such right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other. Secured Party shall not be obligated to preserve any
rights Company may have against prior parties, to realize on the Collateral at
all or in any particular manner or order, or to apply any cash proceeds of the
Collateral in any particular order of application. This Agreement shall be
binding upon and inure to the benefit of Company and Secured Party and their
respective participants, successors, and permitted assigns and shall take effect
when signed by Company and Secured Party, and Company waives notice of Secured
Party's acceptance hereof; provided, however, that the Secured Party's rights
hereunder may not be transferred or assigned to any third party without the
prior written consent of Company. This Agreement shall be governed by the
internal law of the State of New York without regard to conflicts of
law provisions. If any provision or application of this Agreement is held
unlawful or unenforceable in any respect, such illegality or unenforceability
shall not affect other provisions or applications which can be given effect and
this Agreement shall be construed as if the unlawful or unenforceable provision
or application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement and the creation and
payment of the Obligations.
12. Waiver of Jury Trial: COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THE RIGHT COMPANY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
SECURED PARTY ENTERING INTO THIS AGREEMENT.
13. Termination. This Agreement and the Security Interest shall
terminate when all the Secured Obligations have been fully and indefeasibly paid
in full, at which time the Agent shall execute and deliver to the Company all
Uniform Commercial Code termination statements and similar documents which the
Company shall reasonably request to evidence such termination; provided,
however, that all indemnities of the Company contained in this Agreement shall
survive, and remain operative and in full force and effect regardless of, the
termination of this Agreement for a period of six (6) months following the
termination of this Agreement
IN WITNESS WHEREOF, the parties have duly executed and delivered
this Security Agreement as of the date and year first written above.
SECURED PARTY AND AGENT:
------------------------
MIDDLEBURY CAPITAL LLC
By:____________________________________
Name:_______________________________
Title:________________________________
COMPANY:
POWERHOUSE TECHNOLOGIES GROUP, INC.
By:_________________________________
Name: Xxx Xxxxxx
-----------------------------
Title: Chief Executive Officer
-----------------------------
COUNTERPART SIGNATURE PAGE
TO SECURITY AGREEMENT
DATED APRIL 23, 2004,
AMONG POWERHOUSE TECHNOLOGIES GROUP, INC.,
MIDDLEBURY CAPITAL LLC, AND
THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Purchasers" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.
PURCHASER:_____________________________
By:_____________________________
Name:
Title:
