SECURITY AGREEMENT
Exhibit
10.5
Form
8-K
Viking
Systems, Inc.
File
No.
000-49636
EXHIBIT
E
This
SECURITY AGREEMENT, dated as of February 23, 2006 (this “Agreement”),
is
among Viking Systems, Inc., a Delaware corporation
(the
“Company”),
all
of the Subsidiaries of the Company
(such
subsidiaries,
the
“Guarantors”
and
together with the Company,
the
“Debtors”)
and
the holders of the Company’s 8% Secured Convertible Debentures due February 23,
2009 and issued on February 23, 2007 in the original aggregate principal
amount
of $5,576,533 (collectively, the “Debentures”)
signatory hereto, their endorsees, transferees and assigns (collectively,
the
“Secured
Parties”).
W
I T N E S S E T H:
WHEREAS,
pursuant to the Purchase Agreement (as defined in the Debentures), the Secured
Parties have severally agreed to extend the loans to the Company evidenced
by
the Debentures;
WHEREAS,
pursuant to a certain Subsidiary Guarantee, dated as of the date hereof (the
“Guarantee”),
the
Guarantors
have
jointly and severally agreed to guarantee and act as surety for payment of
such
Debentures; and
WHEREAS,
in order to induce the Secured Parties to extend the loans evidenced by the
Debentures, each Debtor has agreed to execute and deliver to the Secured Parties
this Agreement and to grant the Secured Parties, pari passu
with
each other Secured Party and through the Agent, a security interest in certain
property of such Debtor to secure the prompt payment, performance and discharge
in full of all of the Company’s obligations under the Debentures and the
Guarantors’ obligations under the Guarantee.
NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Certain
Definitions.
As used
in this Agreement, the following terms shall have the meanings set forth in
this
Section 1. Terms used but not otherwise defined in this Agreement that are
defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial
tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general
intangibles”, “goods”, “instruments”, “inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have
the respective meanings given such terms in Article 9 of the
UCC.
(a) “Collateral”
means
the collateral in which the Secured Parties are granted a security interest
by
this Agreement and which shall include the following personal property of
the
Debtors, whether presently owned or existing or hereafter acquired or coming
into existence, wherever situated, and all additions and accessions thereto
and
all substitutions and replacements thereof, and all proceeds, products and
accounts thereof, including, without limitation, all proceeds from the sale
or
transfer of the Collateral and of insurance covering the same and of any
tort
claims in connection therewith,
and all
dividends, interest, cash, notes, securities, equity interest or other property
at any time and from time to time acquired, receivable or otherwise distributed
in respect of, or in exchange for, any or all of the Pledged Securities (as
defined below):
(i) All
goods, including, without limitation, (A) all machinery, equipment, computers,
motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
and
general tools, fixtures, test and quality control devices and other equipment
of
every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with any Debtor’s
businesses and all improvements thereto; and (B) all inventory;
(ii) All
contract rights and other general intangibles, including, without limitation,
all partnership interests, membership interests, stock or other securities,
rights
under any of the Organizational Documents, agreements related to the Pledged
Securities, licenses,
distribution and other agreements, computer software (whether “off-the-shelf”,
licensed from any third party or developed by any Debtor), computer software
development rights, leases, franchises, customer lists, quality control
procedures, grants and rights, goodwill, trademarks, service marks, trade
styles, trade names, patents, patent applications, copyrights, and income
tax
refunds;
(iii) All
accounts, together with all instruments, all documents of title representing
any
of the foregoing, all rights in any merchandising, goods, equipment, motor
vehicles and trucks which any of the same may represent, and all right, title,
security and guaranties with respect to each account, including any right of
stoppage in transit;
(iv)
All
documents, letter-of-credit rights, instruments and chattel paper;
(v) All
commercial tort claims;
(vi) All
deposit accounts and all cash (whether or not deposited in such deposit
accounts);
(vii) All
investment property;
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(viii) All
supporting obligations; and
(ix) All
files, records, books of account, business papers, and computer programs;
and
(x) the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(ix) above.
Without
limiting the generality of the foregoing, the “Collateral”
shall
include all investment property and general intangibles respecting ownership
and/or other equity interests in each Guarantor, including, without limitation,
the shares of capital stock and the other equity interests listed on
Schedule
H
hereto
(as the same may be modified from time to time pursuant to the terms hereof),
and any other shares of capital stock and/or other equity interests of any
other
direct or indirect subsidiary of any Debtor obtained in the future, and,
in each
case, all certificates representing such shares and/or equity interests and,
in
each case, all rights, options, warrants, stock, other securities and/or
equity
interests that may hereafter be received, receivable or distributed in respect
of, or exchanged for, any of the foregoing and all rights arising under or
in
connection with the Pledged Securities, including, but not limited to, all
dividends, interest and cash.
Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of
any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden
by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the extent permitted by applicable law, this
Agreement shall create a valid security interest in such asset and, to the
extent permitted by applicable law, this Agreement shall create a valid security
interest in the proceeds of such asset.
(b) “Intellectual
Property”
means
the collective reference to all rights, priorities and privileges relating
to
intellectual property, whether arising under United States, multinational or
foreign laws or otherwise, including, without limitation, (i) all copyrights
arising under the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether published
or
unpublished, all registrations and recordings thereof, and all applications
in
connection therewith, including, without limitation, all registrations,
recordings and applications in the United States Copyright Office, (ii) all
letters patent of the United States, any other country or any political
subdivision thereof, all reissues and extensions thereof, and all applications
for letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof,
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(iii)
all
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade dress, service marks, logos, domain names
and
other source or business identifiers, and all goodwill associated therewith,
now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common law rights related thereto,
(iv) all trade secrets arising under the laws of the United States, any other
country or any political subdivision thereof, (v) all rights to obtain any
reissues, renewals or extensions of the foregoing, (vi) all licenses for any
of
the foregoing, and (vii) all causes of action for infringement of the
foregoing.
(c) “Majority
in Interest”
means,
at any time of determination, the majority in interest (based on
then-outstanding principal amounts of Debentures at the time of such
determination) of the Secured Parties.
(d) “Necessary
Endorsement”
means
undated stock powers endorsed in blank or other proper instruments of assignment
duly executed and such other instruments or documents as the Agent (as that
term
is defined below) may reasonably request.
(e) “Obligations”
means
all of the liabilities
and obligations (primary, secondary, direct, contingent, sole, joint or several)
due or to become due, or that are now or may be hereafter contracted or
acquired, or owing to, of any Debtor to the Secured Parties, including, without
limitation, all
obligations under this Agreement, the Debentures, the Guarantee and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith, in each case, whether now or hereafter
existing, 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 any of the Secured Parties as a preference,
fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time. Without
limiting the generality of the foregoing, the term “Obligations” shall include,
without limitation: (i) principal of, and interest on the Debentures and
the
loans extended pursuant thereto; (ii) any and all other fees, indemnities,
costs, obligations and liabilities of the Debtors from time to time under
or in
connection with this Agreement, the Debentures, the Guarantee and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith; and (iii) all amounts (including but not
limited to post-petition interest) in respect of the foregoing that would
be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Debtor.
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(f) “Organizational
Documents”
means
with respect to any Debtor, the documents by which such Debtor was organized
(such as a certificate of incorporation, certificate of limited partnership
or
articles of organization, and including, without limitation, any certificates
of
designation for preferred stock or other forms of preferred equity) and which
relate to the internal governance of such Debtor (such as bylaws, a partnership
agreement or an operating, limited liability or members
agreement).
(g) “Pledged
Securities”
shall
have the meaning ascribed to such term in Section 4(i).
(h) “UCC”
means
the Uniform Commercial Code of the State of New York and or any other applicable
law of any state or states which has jurisdiction with respect to all, or any
portion of, the Collateral or this Agreement, from time to time. It is the
intent of the parties that defined terms in the UCC should be construed in
their
broadest sense so that the term “Collateral” will be construed in its broadest
sense. Accordingly if there are, from time to time, changes to defined terms
in
the UCC that broaden the definitions, they are incorporated herein and if
existing definitions in the UCC are broader than the amended definitions, the
existing ones shall be controlling.
2. Grant
of Security Interest in Collateral.
As an
inducement for the Secured Parties to extend the loans as evidenced by the
Debentures and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations, each Debtor
hereby unconditionally and irrevocably pledges, grants and hypothecates to
the
Secured Parties a security interest in and to, a lien upon and a right of
set-off against all of their respective right, title and interest of whatsoever
kind and nature in and to, the Collateral (a “Security
Interest”
and
collectively, the “Security
Interests”).
3. Delivery
of Certain Collateral.
Contemporaneously or prior to the execution of this Agreement, each Debtor
shall
deliver or cause to be delivered to the Agent (a) any and all certificates
and
other instruments representing or evidencing the Pledged Securities, and
(b) any
and all certificates and other instruments or documents representing any
of the
other Collateral, in each case, together with all Necessary Endorsements.
The
Debtors are, contemporaneously with the execution hereof, delivering to Agent,
or have previously delivered to Agent, a true and correct copy of each
Organizational Document governing any of the Pledged
Securities.
4 Representations,
Warranties, Covenants and Agreements of the Debtors.
Except
as set forth under the corresponding section of the disclosure schedules
delivered to the Secured Parties concurrently herewith (the “Disclosure
Schedules”),
which
Disclosure Schedules shall be deemed a part hereof, each Debtor represents
and
warrants to, and covenants and agrees with, the Secured Parties as
follows:
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(a) Each
Debtor has the requisite corporate, partnership, limited liability company
or
other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder. The execution, delivery and performance by each
Debtor of this Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no further
action is required by such Debtor. This Agreement has been duly executed by
each
Debtor. This Agreement constitutes the legal, valid and binding obligation
of
each Debtor, enforceable against each Debtor in accordance with its terms except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors and by general principles of
equity.
(b) The
Debtors have no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of its
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule
A
attached
hereto. Except as specifically set forth on Schedule
A,
each
Debtor is the record owner of the real property where such Collateral is
located, and there exist no mortgages or other liens on any such real property
except for Permitted Liens (as defined in the Debentures). Except as disclosed
on Schedule
A,
none of
such Collateral is in the possession of any consignee, bailee, warehouseman,
agent or processor.
(c) Except
for Permitted Liens (as defined in the Debentures) and except as set forth
on
Schedule
B
attached
hereto, the Debtors are the sole owner of the Collateral (except for
non-exclusive licenses granted by any Debtor in the ordinary course of
business), free and clear of any liens, security interests, encumbrances, rights
or claims, and are fully authorized to grant the Security Interests. Except
as
set forth on Schedule
B
attached
hereto, there is not on file in any governmental or regulatory authority, agency
or recording office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other than those
that
will be filed in favor of the Secured Parties pursuant to this Agreement)
covering or affecting any of the Collateral. Except as set forth on Schedule
B
attached hereto and except pursuant to this Agreement, as long as this Agreement
shall be in effect, the Debtors shall not execute and shall not knowingly permit
to be on file in any such office or agency any other financing statement or
other document or instrument (except to the extent filed or recorded in favor
of
the Secured Parties pursuant to the terms of this Agreement).
(d) No
written claim has been received that any Collateral or Debtor's use of any
Collateral violates the rights of any third party. There has been no adverse
decision to any Debtor's claim of ownership rights in or exclusive rights to
use
the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
such Collateral in full force and effect, and there is no proceeding involving
said rights pending or, to the best knowledge of any Debtor, threatened before
any court, judicial body, administrative or regulatory agency, arbitrator or
other governmental authority.
6
(e) Each
Debtor shall at all times maintain its books of account and records relating
to
the Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule
A
attached
hereto and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Secured Parties at least 30 days prior
to
such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to perfect the
Security Interests to create in favor of the Secured Parties a valid, perfected
and continuing perfected first priority lien in the Collateral.
(f) This
Agreement creates in favor of the Secured Parties a valid, security interest
in
the Collateral, subject only to Permitted Liens (as defined in the Debentures)
securing the payment and performance of the Obligations. Upon making the
filings
described in the immediately following paragraph, all security interests
created
hereunder in any Collateral which may be perfected by filing Uniform Commercial
Code financing statements shall have been duly perfected. Except for the
filing
of the Uniform Commercial Code financing statements referred to in the
immediately following paragraph, the recordation of the Intellectual Property
Security Agreement (as defined below) with respect to copyrights and copyright
applications in the United States Copyright Office referred to in paragraph
(m),
the
execution and delivery of deposit account control agreements satisfying the
requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
account of the Debtors,
and the
delivery of the certificates and other instruments provided in Section
3,
no
action is necessary to create, perfect or protect the security interests
created
hereunder. Without limiting the generality of the foregoing, except for the
filing of said financing statements, the recordation of said Intellectual
Property Security Agreement, and the execution and delivery of said deposit
account control agreements, no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with,
any
governmental authority or regulatory body is required for (i) the execution,
delivery and performance of this Agreement, (ii) the creation or perfection
of
the Security Interests created hereunder in the Collateral or (iii) the
enforcement of the rights of the Agent and the Secured Parties
hereunder.
(g) Each
Debtor hereby authorizes the Agent to file one or more financing statements
under the UCC, with respect to the Security Interests with the proper filing
and
recording agencies in any jurisdiction deemed proper by it.
7
(h) The
execution, delivery and performance of this Agreement by the Debtors does not
(i) violate any of the provisions of any Organizational Documents of any Debtor
or any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to any Debtor
or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other
instrument (evidencing any Debtor's debt or otherwise) or other understanding
to
which any Debtor is a party or by which any property or asset of any Debtor
is
bound or affected. If any, all required consents (including, without limitation,
from stockholders or creditors of any Debtor) necessary for any Debtor to enter
into and perform its obligations hereunder have been obtained.
(i) The
capital stock and other equity interests listed on Schedule
H
hereto
(the “Pledged
Securities”)
represent all of the capital stock and other equity interests of the Guarantors,
and represent all capital stock and other equity interests owned, directly
or
indirectly, by the Company. All of the Pledged Securities are validly issued,
fully paid and nonassessable, and the Company is the legal and beneficial
owner
of the Pledged Securities, free and clear of any lien, security interest
or
other encumbrance except for the security interests created by this Agreement
and other Permitted Liens (as defined in the Debentures).
(j) The
ownership and other equity interests in partnerships and limited liability
companies (if any)
included
in the Collateral
(the
“Pledged
Interests”)
by
their express terms do not provide that they are securities governed by Article
8 of the UCC and are not held in a securities account or by any financial
intermediary.
(k) Except
for Permitted Liens (as defined in the Debentures), each Debtor shall at
all
times maintain the liens and Security Interests provided for hereunder as
valid
and perfected first priority liens and security interests in the Collateral
in
favor of the Secured Parties until this Agreement and the Security Interest
hereunder shall be terminated pursuant to Section 11 hereof. Each Debtor
hereby
agrees to defend the same against the claims of any and all persons and
entities. Each Debtor shall safeguard and protect all Collateral for the
account
of the Secured Parties. At the request of the Agent, each Debtor will sign
and
deliver to the Agent on behalf of the Secured Parties at any time or from
time
to time one or more financing statements pursuant to the UCC in form reasonably
satisfactory to the Agent and will pay the cost of filing the same in all
public
offices wherever filing is, or is deemed by the Agent to be, necessary or
desirable to effect the rights and obligations provided for herein. Without
limiting the generality of the foregoing, each Debtor shall pay all fees,
taxes
and other amounts necessary to maintain the Collateral and the Security
Interests hereunder, and each Debtor shall obtain and furnish to the Agent
from
time to time, upon demand, such releases and/or subordinations of claims
and
liens which may be required to maintain the priority of the Security Interests
hereunder.
8
(l) No
Debtor
will transfer, pledge, hypothecate, encumber, license, sell or otherwise
dispose
of any of the Collateral (except for non-exclusive licenses granted by a
Debtor
in its ordinary course of business and sales of inventory by a Debtor in
its
ordinary course of business) without the prior written consent of a Majority
in Interest.
(m) Each
Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.
(n) Each
Debtor shall maintain with financially sound and reputable insurers, insurance
with respect to the Collateral, including Collateral hereafter acquired,
against
loss or damage of the kinds and in the amounts customarily insured against
by
entities of established reputation having similar properties similarly situated
and in such amounts as are customarily carried under similar circumstances
by
other such entities and otherwise as is prudent for entities engaged in similar
businesses but in any event sufficient to cover the full replacement cost
thereof. Each Debtor shall cause each insurance policy issued in connection
herewith to provide, and the insurer issuing such policy to certify to the
Agent
that (a) the Agent will be named as lender loss payee and additional insured
under each such insurance policy; (b) if such insurance be proposed to be
cancelled or materially changed for any reason whatsoever, such insurer will
promptly notify the Agent and such cancellation or change shall not be effective
as to the Agent for at least thirty (30) days after receipt by the Agent
of such
notice, unless the effect of such change is to extend or increase coverage
under
the policy; and (c) the Agent will have the right (but no obligation) at
its
election to remedy any default in the payment of premiums within thirty (30)
days of notice from the insurer of such default. If no Event of Default (as
defined in the Debentures) exists and if the proceeds arising out of any
claim
or series of related claims do not exceed $100,000, loss payments in each
instance will be applied by the applicable Debtor to the repair and/or
replacement of property with respect to which the loss was incurred to the
extent reasonably feasible, and any loss payments or the balance thereof
remaining, to the extent not so applied, shall be payable to the applicable
Debtor, provided, however, that payments received by any Debtor after an
Event
of Default occurs and is continuing or in excess of $100,000 for any occurrence
or series of related occurrences shall be paid to the Agent on behalf of
the
Secured Parties and, if received by such Debtor, shall be held in trust for
the
Secured Parties and immediately paid over to the Agent unless otherwise directed
in writing by the Agent. Copies of such policies or the related certificates,
in
each case, naming the Agent as lender loss payee and additional insured shall
be
delivered to the Agent at least annually and at the time any new policy of
insurance is issued.
(o)
Each
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise
the
Secured Parties promptly, in sufficient detail, of any material adverse change
in the Collateral, and of the occurrence of any event which would have a
material adverse effect on the value of the Collateral or on the Secured
Parties’ security interest, through the Agent, therein.
9
(p) Each
Debtor shall promptly execute and deliver to the Agent such further deeds,
mortgages, assignments, security agreements, financing statements or other
instruments, documents, certificates and assurances and take such further
action
as the Agent may from time to time request and may in its sole discretion
deem
necessary to perfect, protect or enforce the Secured Parties’ security interest
in the Collateral including, without limitation, if applicable, the execution
and delivery of a separate security agreement with respect to each Debtor’s
Intellectual Property (“Intellectual
Property Security Agreement”)
in
which the Secured Parties have been granted a security interest hereunder,
substantially in a form reasonably acceptable to the Agent, which Intellectual
Property Security Agreement, other than as stated therein, shall be subject
to
all of the terms and conditions hereof.
(q) Each
Debtor shall permit the Agent and its representatives and agents to inspect
the
Collateral during normal business hours and upon reasonable prior notice,
and to
make copies of records pertaining to the Collateral as may be reasonably
requested by the Agent from time to time.
(r) Each
Debtor shall take all steps reasonably necessary to diligently pursue and
seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.
(s) Each
Debtor shall promptly notify the Secured Parties in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by such
Debtor that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Parties
hereunder.
(t) All
information heretofore, herein or hereafter supplied to the Secured Parties
by
or on behalf of any Debtor with respect to the Collateral is accurate and
complete in all material respects as of the date furnished.
(u) The
Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises
material to its business.
(v) No
Debtor
will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides
at
least 30 days prior written notice to the Secured Parties of such change
and, at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this
Agreement.
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(w) Except
in
the ordinary course of business, no Debtor may consign any of its Inventory
or
sell any of its Inventory on xxxx and hold, sale or return, sale on approval,
or
other conditional terms of sale without the consent of the
Agent
which shall not be unreasonably withheld.
(x) No
Debtor
may relocate its chief executive office to a new location without providing
30
days prior written notification thereof to the Secured Parties and so long
as,
at the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this
Agreement.
(y) Each
Debtor was organized and remains organized solely under the laws of the state
set forth next to such Debtor’s name in Schedule
D
attached
hereto, which Schedule
D
sets
forth each Debtor’s organizational identification number or, if any Debtor does
not have one, states that one does not exist.
(z)
(i) The
actual name of each Debtor is the name set forth in Schedule
D
attached
hereto; (ii) no Debtor has any trade names except as set forth on Schedule
E
attached
hereto; (iii) no Debtor has used any name other than that stated in the preamble
hereto or as set forth on Schedule
E
for the
preceding five years; and (iv) no entity has merged into any Debtor or been
acquired by any Debtor within the past five years except as set forth on
Schedule
E.
(aa) At
any
time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession
by the
secured party to perfect the security interest created hereby, the applicable
Debtor shall deliver such Collateral to the Agent.
(bb)
Each
Debtor, in its capacity as issuer, hereby agrees to comply with any and all
orders and instructions of Agent regarding the Pledged Interests consistent
with
the terms of this Agreement without the further consent of any Debtor as
contemplated by Section 8-106 (or any successor section) of the UCC. Further,
each Debtor agrees that it shall not enter into a similar agreement (or one
that
would confer “control” within the meaning of Article 8 of the UCC) with any
other person or entity.
(cc) Each
Debtor shall cause all tangible chattel paper constituting Collateral to
be
delivered to the Agent, or, if such delivery is not possible, then to cause
such
tangible chattel paper to contain a legend noting that it is subject to the
security interest created by this Agreement. To the extent that any Collateral
consists of electronic chattel paper, the applicable Debtor shall cause the
underlying chattel paper to be “marked” within the meaning of Section 9-105 of
the UCC (or successor section thereto).
11
(dd) If
there
is any investment property or deposit account included as Collateral that
can be
perfected by “control” through an account control agreement, the applicable
Debtor shall cause such an account control agreement, in form and substance
in
each case satisfactory to the Agent, to be entered into and delivered to
the
Agent for the benefit of the Secured Parties.
(ee)
To
the
extent that any Collateral consists of letter-of-credit rights, the applicable
Debtor shall cause the issuer of each underlying letter of credit to consent
to
an assignment of the proceeds thereof to the Secured Parties.
(ff)
To
the
extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Agent in notifying such third party
of the
Secured Parties’ security interest in such Collateral and shall use its best
efforts to obtain an acknowledgement and agreement from such third party
with
respect to the Collateral, in form and substance reasonably satisfactory
to the
Agent.
(gg) If
any
Debtor shall at any time hold or acquire a commercial tort claim, such Debtor
shall promptly notify the Secured Parties in a writing signed by such Debtor
of
the particulars thereof and grant to the Secured Parties in such writing
a
security interest therein and in the proceeds thereof, all upon the terms
of
this Agreement, with such writing to be in form and substance satisfactory
to
the Agent.
(hh) Each
Debtor shall immediately provide written notice to the Secured Parties of
any
and all accounts which arise out of contracts with any governmental authority
and, to the extent necessary to perfect or continue the perfected status
of the
Security Interests in such accounts and proceeds thereof, shall execute and
deliver to the Agent an assignment of claims for such accounts and cooperate
with the Agent in taking any other steps required, in its judgment, under
the
Federal Assignment of Claims Act or any similar federal, state or local statute
or rule to perfect or continue the perfected status of the Security Interests
in
such accounts and proceeds thereof.
(ii) Each
Debtor shall cause each subsidiary
of such
Debtor to immediately become a party hereto (an “Additional
Debtor”),
by
executing and delivering an Additional Debtor Joinder in substantially the
form
of Annex A attached hereto and comply with the provisions hereof applicable
to
the Debtors. Concurrent therewith, the Additional Debtor shall deliver
replacement schedules for, or supplements to all other Schedules to (or referred
to in) this Agreement, as applicable, which replacement schedules shall
supersede, or supplements shall modify, the Schedules then in effect. The
Additional Debtor shall also deliver such opinions of counsel, authorizing
resolutions, good standing certificates, incumbency certificates, organizational
documents, financing statements and other information and documentation as
the
Agent may reasonably request.
12
Upon
delivery of the foregoing to the Agent, the Additional Debtor shall be and
become a party to this Agreement with the same rights and obligations as the
Debtors, for all purposes hereof as fully and to the same extent as if it were
an original signatory hereto and shall be deemed to have made the
representations, warranties and covenants set forth herein as of the date of
execution and delivery of such Additional Debtor Joinder, and all references
herein to the “Debtors” shall be deemed to include each Additional
Debtor.
(jj)
Each
Debtor shall vote the Pledged Securities to comply with the covenants and
agreements set forth herein and in the Debentures.
(kk) Each
Debtor shall register the pledge of the applicable Pledged Securities on
the
books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities
to register the pledge of the applicable Pledged Securities in the name of
the
Secured Parties on the books of such issuer. Further, except with respect
to
certificated securities delivered to the Agent, the applicable Debtor shall
deliver to Agent an acknowledgement of pledge (which, where appropriate,
shall
comply with the requirements of the relevant UCC with respect to perfection
by
registration) signed by the issuer of the applicable Pledged Securities,
which
acknowledgement shall confirm that: (a) it has registered the pledge on its
books and records; and (b) at any time directed by Agent during the continuation
of an Event of Default, such issuer will transfer the record ownership of
such
Pledged Securities into the name of any designee of Agent, will take such
steps
as may be necessary to effect the transfer, and will comply with all other
instructions of Agent regarding such Pledged Securities without the further
consent of the applicable Debtor.
(ll)
In
the
event that, upon an occurrence of an Event of Default, Agent shall sell all
or
any of the Pledged Securities to another party or parties (herein called
the
“Transferee”)
or
shall purchase or retain all or any of the Pledged Securities, each Debtor
shall, to the extent applicable: (i) deliver to Agent or the Transferee,
as the
case may be, the articles of incorporation, bylaws, minute books, stock
certificate books, corporate seals, deeds, leases, indentures, agreements,
evidences of indebtedness, books of account, financial records and all other
Organizational Documents and records of the Debtors and their direct and
indirect subsidiaries; (ii) use its best efforts to obtain resignations of
the
persons then serving as officers and directors of the Debtors and their direct
and indirect subsidiaries, if so requested; and (iii) use its best efforts
to
obtain any approvals that are required by any governmental or regulatory
body in
order to permit the sale of the Pledged Securities to the Transferee or the
purchase or retention of the Pledged Securities by Agent and allow the
Transferee or Agent to continue the business of the Debtors and their direct
and
indirect subsidiaries.
13
(mm) Without
limiting the generality of the other obligations of the Debtors hereunder,
each
Debtor shall promptly (i) cause to be registered at the United States Copyright
Office all of its material copyrights, (ii) cause the security interest
contemplated hereby with respect to all Intellectual Property registered at
the
United States Copyright Office or United States Patent and Trademark Office
to
be duly recorded at the applicable office, and (iii) give the Agent notice
whenever it acquires (whether absolutely or by license) or creates any
additional material Intellectual Property.
(nn) Each
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents,
and
take all such further action as may be necessary or desirable, or as the
Agent
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Parties
to
exercise and enforce their rights and remedies hereunder and with respect
to any
Collateral or to otherwise carry out the purposes of this
Agreement.
(oo) Schedule
F
attached
hereto lists all of the patents, patent applications, trademarks, trademark
applications, registered copyrights, and domain names owned by any of the
Debtors as of the date hereof. Schedule
F
lists
all material licenses in favor of any Debtor for the use of any patents,
trademarks, copyrights and domain names as of the date hereof. All material
patents and trademarks of the Debtors have been duly recorded at the United
States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright
Office.
(pp) Except
as
set forth on Schedule
G
attached
hereto, none of the account debtors or other persons or entities obligated
on
any of the Collateral is a governmental authority covered by the Federal
Assignment of Claims Act or any similar federal, state or local statute or
rule
in respect of such Collateral.
5. Effect
of Pledge on Certain Rights. If
any of
the Collateral subject to this Agreement consists of nonvoting equity or
ownership interests (regardless of class, designation, preference or rights)
that may be converted into voting equity or ownership interests upon the
occurrence of certain events (including, without limitation, upon the transfer
of all or any of the other stock or assets of the issuer), it is agreed that
the
pledge of such equity or ownership interests pursuant to this Agreement or
the
enforcement of any of Agent’s rights hereunder shall not be deemed to be the
type of event which would trigger such conversion rights notwithstanding
any
provisions in the Organizational Documents or agreements to which any Debtor
is
subject or to which any Debtor is party.
6.
Defaults.
The
following events shall be “Events
of Default”:
(a) The
occurrence of an Event of Default (as defined in the Debentures) under the
Debentures;
(b) Any
representation or warranty of any Debtor in this Agreement shall prove to have
been incorrect in any material respect when made;
14
(c) The
failure by any Debtor to observe or perform any of its obligations hereunder
for
five (5) days after delivery to such Debtor of notice of such failure by or
on
behalf of a Secured Party unless such default is capable of cure but cannot
be
cured within such time frame and such Debtor is using best efforts to cure
same
in a timely fashion; or
(d)
If
any provision of this Agreement shall at any time for any reason be declared
to
be null and void, or the validity or enforceability thereof shall be contested
by any Debtor, or a proceeding shall be commenced by any Debtor, or by any
governmental authority having jurisdiction over any Debtor, seeking to establish
the invalidity or unenforceability thereof, or any Debtor shall deny that any
Debtor has any liability or obligation purported to be created under this
Agreement.
7. Duty
To Hold In Trust.
(a) Upon
the
occurrence of any Event of Default and at any time thereafter, each Debtor
shall, upon receipt of any revenue, income,
dividend, interest
or other
sums subject to the Security Interests, whether payable pursuant to the
Debentures or otherwise, or of any check, draft, note, trade acceptance or
other
instrument evidencing an obligation to pay any such sum, hold the same in
trust
for the Secured Parties and shall forthwith endorse and transfer any such
sums
or instruments, or both, to the Secured Parties, pro-rata in proportion to
their
respective then-currently outstanding principal amount of Debentures for
application to the satisfaction of the Obligations (and if any Debenture
is not
outstanding, pro-rata in proportion to the initial purchases of the remaining
Debentures).
(b) If
any
Debtor shall become entitled to receive or shall receive any securities or
other
property (including, without limitation, shares of Pledged Securities or
instruments representing Pledged Securities acquired after the date hereof,
or
any options, warrants, rights or other similar property or certificates
representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its
direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as
an
addition to, in substitution of, or in exchange for, such Pledged Securities
or
otherwise), such Debtor agrees to (i) accept the same as the agent of the
Secured Parties; (ii) hold the same in trust on behalf of and for the benefit
of
the Secured Parties; and (iii) to deliver any and all certificates or
instruments evidencing the same to Agent on or before the close of business
on
the fifth business day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be held
by
Agent subject to the terms of this Agreement as Collateral.
8. Rights
and Remedies Upon Default.
15
(a) Upon
the
occurrence of any Event of Default and at any time thereafter, the Secured
Parties, acting through the Agent, shall have the right to exercise all of
the
remedies conferred hereunder and under the Debentures, and the Secured Parties
shall have all the rights and remedies of a secured party under the UCC. Without
limitation, the Agent, for the benefit of the Secured Parties, shall have the
following rights and powers:
(i) The
Agent
shall have the right to take possession of the Collateral and, for that purpose,
enter, with the aid and assistance of any person, any premises where the
Collateral, or any part thereof, is or may be placed and remove the same,
and
each Debtor shall assemble the Collateral and make it available to the Agent
at
places which the Agent shall reasonably select, whether at such Debtor's
premises or elsewhere, and make available to the Agent, without rent, all
of
such Debtor’s respective premises and facilities for the purpose of the Agent
taking possession of, removing or putting the Collateral in saleable or
disposable form.
(ii) Upon
notice to the Debtors by Agent, all rights of each Debtor to exercise the
voting
and other consensual rights which it would otherwise be entitled to exercise
and
all rights of each Debtor to receive the dividends and interest which it
would
otherwise be authorized to receive and retain, shall cease. Upon such notice,
Agent shall have the right to receive, for the benefit of the Secured Parties,
any interest, cash dividends or other payments on the Collateral and, at
the
option of Agent, to exercise in such Agent’s discretion all voting rights
pertaining thereto. Without limiting the generality of the foregoing, Agent
shall have the right (but not the obligation) to exercise all rights with
respect to the Collateral as it were the sole and absolute owner thereof,
including, without limitation, to vote and/or to exchange, at its sole
discretion, any or all of the Collateral in connection with a merger,
reorganization, consolidation, recapitalization or other readjustment concerning
or involving the Collateral or any Debtor or any of its direct or indirect
subsidiaries.
(iii) The
Agent
shall have the right to operate the business of each Debtor using the Collateral
and shall have the right to assign, sell, lease or otherwise dispose of and
deliver all or any part of the Collateral, at public or private sale or
otherwise, either with or without special conditions or stipulations, for
cash
or on credit or for future delivery, in such parcel or parcels and at such
time
or times and at such place or places, and upon such terms and conditions
as the
Agent may deem commercially reasonable, all without (except as shall be required
by applicable statute and cannot be waived) advertisement or demand upon
or
notice to any Debtor or right of redemption of a Debtor, which are hereby
expressly waived. Upon each such sale, lease, assignment or other transfer
of
Collateral, the Agent, for the benefit of the Secured Parties, may, unless
prohibited by applicable law which cannot be waived, purchase all or any
part of
the Collateral being sold, free from and discharged of all trusts, claims,
right
of redemption and equities of any Debtor, which are hereby waived and
released.
16
(iv) The
Agent
shall have the right (but not the obligation) to notify any account debtors
and
any obligors under instruments or accounts to make payments directly to the
Agent, on behalf of the Secured Parties, and to enforce the Debtors’ rights
against such account debtors and obligors.
(v) The
Agent, for the benefit of the Secured Parties, may (but is not obligated
to)
direct any financial intermediary or any other person or entity holding any
investment property to transfer the same to the Agent, on behalf of the Secured
Parties, or its designee.
(vi) The
Agent
may (but is not obligated to) transfer any or all Intellectual Property
registered in the name of any Debtor at the United States Patent and Trademark
Office and/or Copyright Office into the name of the Secured Parties or any
designee or any purchaser of any Collateral.
(b) The
Agent
shall comply with any applicable law in connection with a disposition of
Collateral and such compliance will not be considered adversely to affect
the
commercial reasonableness of any sale of the Collateral. The Agent may sell
the
Collateral without giving any warranties and may specifically disclaim such
warranties. If the Agent sells any of the Collateral on credit, the Debtors
will
only be credited with payments actually made by the purchaser. In addition,
each
Debtor waives any and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the Agent’s rights and remedies hereunder,
including, without limitation, its right following an Event of Default to
take
immediate possession of the Collateral and to exercise its rights and remedies
with respect thereto.
(c) For
the
purpose of enabling the Agent to further exercise rights and remedies under
this
Section 8 or elsewhere provided by agreement or applicable law, each Debtor
hereby grants to the Agent, for the benefit of the Agent and the Secured
Parties, an irrevocable, nonexclusive license (exercisable without payment
of
royalty or other compensation to such Debtor) to use, license or sublicense
following an Event of Default, any Intellectual Property now owned or hereafter
acquired by such Debtor, and wherever the same may be located, and including
in
such license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof.
17
9. Applications
of Proceeds.
The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy insuring
any
portion of the Collateral shall be applied first, to the expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like
(including, without limitation, any taxes, fees and other costs incurred in
connection therewith) of the Collateral, to the reasonable attorneys’ fees and
expenses incurred by the Agent in enforcing the Secured Parties’ rights
hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the
Secured Parties (based on then-outstanding principal amounts of Debentures
at
the time of any such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Parties shall pay to the
applicable Debtor any surplus proceeds. If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay
all
amounts to which the Secured Parties are legally entitled, the Debtors will
be
liable for the deficiency, together with interest thereon, at the rate of 18%
per annum or the lesser amount permitted by applicable law (the “Default Rate”),
and the reasonable fees of any attorneys employed by the Secured Parties to
collect such deficiency. To the extent permitted by applicable law, each Debtor
waives all claims, damages and demands against the Secured Parties arising
out
of the repossession, removal, retention or sale of the Collateral, unless due
solely to the gross negligence or willful misconduct of the Secured Parties
as
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction.
10. Securities
Law Provision.
Each
Debtor recognizes that Agent may be limited in its ability to effect a sale
to
the public of all or part of the Pledged Securities by reason of certain
prohibitions in the Securities Act of 1933, as amended, or other federal
or
state securities laws (collectively, the “Securities
Laws”),
and
may be compelled to resort to one or more sales to a restricted group of
purchasers who may be required to agree to acquire the Pledged Securities
for
their own account, for investment and not with a view to the distribution
or
resale thereof. Each Debtor agrees that sales so made may be at prices and
on
terms less favorable than if the Pledged Securities were sold to the public,
and
that Agent has no obligation to delay the sale of any Pledged Securities
for the
period of time necessary to register the Pledged Securities for sale to the
public under the Securities Laws. Each Debtor shall cooperate with Agent
in its
attempt to satisfy any requirements under the Securities Laws (including,
without limitation, registration thereunder if requested by Agent) applicable
to
the sale of the Pledged Securities by Agent.
11. Costs
and Expenses.
Each
Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
incurred in connection with any filing required hereunder, including without
limitation, any financing statements pursuant to the UCC, continuation
statements, partial releases and/or termination statements related thereto
or
any expenses of any searches reasonably required by the Agent. The Debtors
shall
also pay all other claims and charges which in the reasonable opinion of
the
Agent is reasonably likely to prejudice, imperil or otherwise affect the
Collateral or the Security Interests therein. The Debtors will also, upon
demand, pay to the Agent the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts
and
agents, which the Agent, for the benefit of the Secured Parties, may incur
in
connection with (i) the enforcement of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon,
any
of the Collateral, or
18
(iii)
the
exercise or enforcement of any of the rights of the Secured Parties under the
Debentures. Until so paid, any fees payable hereunder shall be added to the
principal amount of the Debentures and shall bear interest at the Default
Rate.
12. Responsibility
for Collateral.
The
Debtors assume all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or diminished
by
reason of the loss, destruction, damage or theft of any of the Collateral
or its
unavailability for any reason. Without limiting the generality of the foregoing,
(a) neither the Agent nor any Secured Party (i) has any duty (either before
or
after an Event of Default) to collect any amounts in respect of the Collateral
or to preserve any rights relating to the Collateral, or (ii) has any obligation
to clean-up or otherwise prepare the Collateral for sale, and (b) each Debtor
shall remain obligated and liable under each contract or agreement included
in
the Collateral to be observed or performed by such Debtor thereunder. Neither
the Agent nor any Secured Party shall have any obligation or liability under
any
such contract or agreement by reason of or arising out of this Agreement
or the
receipt by the Agent or any Secured Party of any payment relating to any
of the
Collateral, nor shall the Agent or any Secured Party be obligated in any
manner
to perform any of the obligations of any Debtor under or pursuant to any
such
contract or agreement, to make inquiry as to the nature or sufficiency of
any
payment received by the Agent or any Secured Party in respect of the Collateral
or as to the sufficiency of any performance by any party under any such contract
or agreement, to present or file any claim, to take any action to enforce
any
performance or to collect the payment of any amounts which may have been
assigned to the Agent or to which the Agent or any Secured Party may be entitled
at any time or times.
13. Security
Interests Absolute.
All
rights of the Secured Parties and all obligations of the Debtors hereunder,
shall be absolute and unconditional, irrespective of: (a) any lack of validity
or enforceability of this Agreement, the Debentures or any agreement entered
into in connection with the foregoing, or any portion hereof or thereof;
(b) any
change in the time, manner or place of payment or performance of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Debentures or any other agreement
entered into in connection with the foregoing; (c) any exchange, release
or
nonperfection of any of the Collateral, or any release or amendment or waiver
of
or consent to departure from any other collateral for, or any guarantee,
or any
other security, for all or any of the Obligations; (d) any action by the
Secured
Parties to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the Collateral;
or (e) any other circumstance which might otherwise constitute any legal
or
equitable defense available to a Debtor, or a discharge of all or any part
of
the Security Interests granted hereby. Until the Obligations shall have been
paid and performed in full, the rights of the Secured Parties shall continue
even if the Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or bankruptcy. Each
Debtor
expressly waives presentment, protest, notice of protest, demand, notice
of
nonpayment and demand for performance.
19
In
the
event that at any time any transfer of any Collateral or any payment received
by
the Secured Parties hereunder shall be deemed by final order of a court of
competent jurisdiction to have been a voidable preference or fraudulent
conveyance under the bankruptcy or insolvency laws of the United States,
or
shall be deemed to be otherwise due to any party other than the Secured Parties,
then, in any such event, each Debtor’s obligations hereunder shall survive
cancellation of this Agreement, and shall not be discharged or satisfied
by any
prior payment thereof and/or cancellation of this Agreement, but shall remain
a
valid and binding obligation enforceable in accordance with the terms and
provisions hereof. Each Debtor waives all right to require the Secured Parties
to proceed against any other person or entity
or
to
apply
any Collateral which the Secured Parties may hold at any time, or to marshal
assets, or to pursue any other remedy. Each Debtor waives any defense arising
by
reason of the application of the statute of limitations to any obligation
secured hereby.
14. Term
of Agreement.
This
Agreement and the Security Interests shall terminate on the date on which
all
payments under the Debentures have been indefeasibly paid in full and all
other
Obligations have been paid or discharged; provided, however, that all
indemnities of the Debtors contained in this Agreement (including, without
limitation, Annex B hereto) shall survive and remain operative and in full
force
and effect regardless of the termination of this Agreement.
15.
Power
of Attorney; Further Assurances.
(a)
Each
Debtor authorizes the Agent, and does hereby make, constitute and appoint
the
Agent and its officers, agents, successors or assigns with full power of
substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in
the name of the Agent or such Debtor, to, after the occurrence and during
the
continuance of an Event of Default, (i) endorse any note, checks, drafts,
money
orders or other instruments of payment (including payments payable under
or in
respect of any policy of insurance) in respect of the Collateral that may
come
into possession of the Agent; (ii) to sign and endorse any financing statement
pursuant to the UCC or any invoice, freight or express xxxx, xxxx of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other documents
relating to the Collateral; (iii) to pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened
against the Collateral; (iv) to demand, collect, receipt for, compromise,
settle
and xxx for monies due in respect of the Collateral; (v) to transfer any
Intellectual Property or provide licenses respecting any Intellectual Property;
and (vi) generally, at the option of the Agent, and at the expense of the
Debtors, at any time, or from time to time, to execute and deliver any and
all
documents and instruments and to do all acts and things which the Agent deems
necessary to protect, preserve and realize upon the Collateral and the Security
Interests granted therein in order to effect the intent of this Agreement
and
the Debentures all as fully and effectually as the Debtors might or could
do;
and each Debtor hereby ratifies all that said attorney shall lawfully do
or
cause to be done by virtue hereof. This power of attorney is coupled with
an
interest and shall be irrevocable for the term of this Agreement and thereafter
as long as any of the Obligations shall be outstanding.
20
The
designation set forth herein shall be deemed to amend and supersede any
inconsistent provision in the Organizational Documents or other documents or
agreements to which any Debtor is subject or to which any Debtor is a party.
Without
limiting the generality of the foregoing, after the occurrence and during the
continuance of an Event of Default, each Secured Party is specifically
authorized to execute and file any applications for or instruments of transfer
and assignment of any patents, trademarks, copyrights or other Intellectual
Property with the United States Patent and Trademark Office and the United
States Copyright Office.
(b)
On
a
continuing basis, each Debtor will make, execute, acknowledge, deliver, file
and
record, as the case may be, with the proper filing and recording agencies in
any
jurisdiction, including, without limitation, the jurisdictions indicated on
Schedule
C
attached
hereto, all such instruments, and take all such action as may reasonably be
deemed necessary or advisable, or as reasonably requested by the Agent, to
perfect the Security Interests granted hereunder and otherwise to carry out
the
intent and purposes of this Agreement, or for assuring and confirming to the
Agent the grant or perfection of a perfected security interest in all the
Collateral under the UCC.
(c)
Each
Debtor hereby irrevocably appoints the Agent as such Debtor’s attorney-in-fact,
with full authority in the place and instead of such Debtor and in the name
of
such Debtor, from time to time in the Agent’s discretion, to take any action and
to execute any instrument which the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including the filing, in its sole
discretion, of one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of such Debtor
where permitted by law, which financing statements may (but need not) describe
the Collateral as “all assets” or “all personal property” or words of like
import, and ratifies all such actions taken by the Agent. This power of attorney
is coupled with an interest and shall be irrevocable for the term of this
Agreement and thereafter as long as any of the Obligations shall be
outstanding.
16. Notices.
All
notices, requests, demands and other communications hereunder shall be subject
to the notice provision of the Purchase Agreement (as such term is defined
in
the Debentures).
17. Other
Security.
To the
extent that the Obligations are now or hereafter secured by property other
than
the Collateral or by the guarantee, endorsement or property of any other
person,
firm, corporation or other entity, then the Agent shall have the right, in
its
sole discretion, to pursue, relinquish, subordinate, modify or take any other
action with respect thereto, without in any way modifying or affecting any
of
the Secured Parties’ rights and remedies hereunder.
21
18. Appointment
of Agent.
The
Secured Parties hereby appoint CAMOFI Master, LDC to act as their agent
(“CAMOFI”
or
“Agent”)
for
purposes of exercising any and all rights and remedies of the Secured Parties
hereunder. Such appointment shall continue until revoked in writing by a
Majority
in Interest, at which time a Majority in Interest
shall
appoint a new Agent, provided that CAMOFI may not be removed as Agent unless
CAMOFI shall then hold less than $625,000 in principal amount of
Debentures;
provided,
further,
that
such removal may occur only if each of the other Secured Parties shall then
hold
not less than an aggregate of $625,000 in principal amount of Debentures.
The
Agent
shall have the rights, responsibilities and immunities set forth in Annex
B
hereto.
19. Miscellaneous.
(a) No
course
of dealing between the Debtors and the Secured Parties, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Parties,
any
right, power or privilege hereunder or under the Debentures shall operate as
a
waiver thereof; nor shall any single or partial exercise of any right, power
or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
(b) All
of
the rights and remedies of the Secured Parties with respect to the Collateral,
whether established hereby or by the Debentures or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised
singly or concurrently.
(c) This
Agreement,
together with the exhibits and schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into this
Agreement and the exhibits and schedules hereto.
No
provision of this Agreement may be waived, modified, supplemented or amended
except in a written instrument signed, in the case of an amendment, by the
Debtors and the Secured Parties or, in the case of a waiver, by the party
against whom enforcement of any such waived provision is sought.
(d) If
any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
22
(e) No
waiver
of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise
any
right hereunder in any manner impair the exercise of any such
right.
(f)
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company and the Guarantors may
not
assign this Agreement or any rights or obligations hereunder without the
prior
written consent of each Secured Party (other than by merger). Any Secured
Party
may assign any or all of its rights under this Agreement to any Person to
whom
such Secured Party assigns or transfers any Securities, provided such transferee
agrees in writing to be bound, with respect to the transferred Securities,
by
the provisions of this Agreement that apply to the “Secured
Parties.”
(g) Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
(h) All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each Debtor agrees that all proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and the Debentures (whether brought against
a
party hereto or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced exclusively in the
state and federal courts sitting in the City of New York, Borough of Manhattan.
Each Debtor hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or
with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such proceeding by mailing
a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to
it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If any party shall commence a proceeding to enforce any
provisions of this Agreement, then the prevailing party in such proceeding
shall
be reimbursed by the other party for its reasonable attorney’s fees and other
costs and expenses incurred with the investigation, preparation and prosecution
of such proceeding.
23
(i) This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(j) All
Debtors shall jointly and severally be liable for the obligations of each Debtor
to the Secured Parties hereunder.
(k) Each
Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
Parties and their respective partners, members, shareholders, officers,
directors, employees and agents (and any other persons with other titles that
have similar functions) (collectively, “Indemnitees”)
from
and against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the
cost
of investigating and defending any of the foregoing) imposed on, incurred by
or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from the gross negligence or willful misconduct of the Indemnitee as determined
by a final, nonappealable decision of a court of competent jurisdiction. This
indemnification provision is in addition to, and not in limitation of, any
other
indemnification provision in the Debentures, the Purchase Agreement (as such
term is defined in the Debentures) or any other agreement, instrument or other
document executed or delivered in connection herewith or therewith.
(l) Nothing
in this Agreement shall be construed to subject Agent or any Secured Party
to
liability as a partner in any Debtor or any if its direct or indirect
subsidiaries that is a partnership or as a member in any Debtor or any of
its
direct or indirect subsidiaries that is a limited liability company, nor
shall
Agent or any Secured Party be deemed to have assumed any obligations under
any
partnership agreement or limited liability company agreement, as applicable,
of
any such Debtor or any if its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be substituted
for such Debtor as a partner or member, as applicable, pursuant
hereto.
(m)
To
the
extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of
any
partner or member, as applicable, of any Debtor or any direct or indirect
subsidiary of any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby grant such consent and approval
and
waive any such noncompliance with the terms of said
documents.
[SIGNATURE
PAGES FOLLOW]
24
IN
WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above
written.
|
VIKING
SYSTEMS, INC.
|
|
By:__________________________________________
Name:
Title:
|
|
[INSERT
NAMES OF SUBSIDIARIES]
|
|
By:__________________________________________
Name:
Title:
|
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
25
[SIGNATURE
PAGE OF HOLDERS TO VKSY SA]
Name
of
Investing Entity: __________________________
Signature
of Authorized Signatory of Investing entity:
_________________________
Name
of
Authorized Signatory: _________________________
Title
of
Authorized Signatory: __________________________
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
26
SCHEDULE
A
Principal
Place of Business of Debtors:
Locations
Where Collateral is Located or Stored:
SCHEDULE
B
SCHEDULE
C
SCHEDULE
D
Legal
Names and Organizational Identification Numbers
SCHEDULE
E
Names;
Mergers and Acquisitions
SCHEDULE
F
Intellectual
Property
SCHEDULE
G
Account
Debtors
SCHEDULE
H
Pledged
Securities
27
ANNEX
A
to
SECURITY
AGREEMENT
FORM
OF ADDITIONAL DEBTOR JOINDER
Security
Agreement dated as of February 23, 2007 made by
Viking
Systems, Inc. and its subsidiaries party thereto from time to time, as
Debtors
to and
in favor of
the
Secured Parties identified therein (the “Security
Agreement”)
Reference
is made to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in, or by reference in, the Security Agreement.
The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
to the Secured Parties referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the
same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein as of the
date
of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
IN
THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL
PROVISIONS SET FORTH THEREIN.
Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement,
as applicable.
An
executed copy of this Joinder shall be delivered to the Secured Parties, and
the
Secured Parties may rely on the matters set forth herein on or after the date
hereof. This Joinder shall not be modified, amended or terminated without the
prior written consent of the Secured Parties.
28
IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the
name and on behalf of the undersigned.
[Name
of
Additional Debtor]
By:
________________________________
Name:
_____________________________
Title:
______________________________
Address:
___________________________
Dated:
______________________________
29
ANNEX
B
to
SECURITY
AGREEMENT
THE
AGENT
1.
Appointment. The
Secured Parties (all capitalized terms used herein and not otherwise defined
shall have the respective meanings provided in the Security Agreement to which
this Annex B is attached (the "Agreement")),
by
their acceptance of the benefits of the Agreement, hereby designate CAMOFI
Master, LDC (“CAMOFI” or “Agent”)
as the
Agent to act as specified herein and in the Agreement. Each Secured Party shall
be deemed irrevocably to authorize the Agent to take such action on its behalf
under the provisions of the Agreement and any other Transaction Document (as
such term is defined in the Debentures) and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated
to or
required of the Agent by the terms hereof and thereof and such other powers
as
are reasonably incidental thereto. The Agent may perform any of its duties
hereunder by or through its agents or employees.
2.
Nature
of Duties.
The
Agent shall have no duties or responsibilities except those expressly set forth
in the Agreement. Neither the Agent nor any of its partners, members,
shareholders, officers, directors, employees or agents shall be liable for
any
action taken or omitted by it as such under the Agreement or hereunder or in
connection herewith or therewith, be responsible for the consequence of any
oversight or error of judgment or answerable for any loss, unless caused solely
by its or their gross negligence or willful misconduct as determined by a final
judgment (not subject to further appeal) of a court of competent jurisdiction.
The duties of the Agent shall be mechanical and administrative in nature; the
Agent shall not have by reason of the Agreement or any other Transaction
Document a fiduciary relationship in respect of any Debtor or any Secured Party;
and nothing in the Agreement or any other Transaction Document, expressed or
implied, is intended to or shall be so construed as to impose upon the Agent
any
obligations in respect of the Agreement or any other Transaction Document except
as expressly set forth herein and therein.
3.
Lack
of Reliance on the Agent.
Independently and without reliance upon the Agent, each Secured Party, to the
extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the Company
and its subsidiaries in connection with such Secured Party’s investment in the
Debtors, the creation and continuance of the Obligations, the transactions
contemplated by the Transaction Documents, and the taking or not taking of
any
action in connection therewith, and (ii) its own appraisal of the
creditworthiness of the Company and its subsidiaries, and of the value of the
Collateral from time to time, and the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at
any
time or times thereafter.
The
Agent
shall not be responsible to the Debtors or any Secured Party for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith, or
for
the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of the Agreement or any other
Transaction Document, or for the financial condition of the Debtors or the
value
of any of the Collateral, or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions
of
the Agreement or any other Transaction Document, or the financial condition
of
the Debtors, or the value of any of the Collateral, or the existence or possible
existence of any default or Event of Default under the Agreement, the Debentures
or any of the other Transaction Documents.
4.
Certain
Rights of the Agent.
The
Agent shall have the right to take any action with respect to the Collateral,
on
behalf of all of the Secured Parties. To the extent practical, the Agent shall
request instructions from the Secured Parties with respect to any material
act
or action (including failure to act) in connection with the Agreement or any
other Transaction Document, and shall be entitled to act or refrain from acting
in accordance with the instructions of Secured Parties holding a majority in
principal amount of Debentures (based on then-outstanding principal amounts
of
Debentures at the time of any such determination); if such instructions are
not
provided despite the Agent’s request therefor, the Agent shall be entitled to
refrain from such act or taking such action, and if such action is taken, shall
be entitled to appropriate indemnification from the Secured Parties in respect
of actions to be taken by the Agent; and the Agent shall not incur liability
to
any person or entity by reason of so refraining. Without limiting the foregoing,
(a) no Secured Party shall have any right of action whatsoever against the
Agent
as a result of the Agent acting or refraining from acting hereunder in
accordance with the terms of the Agreement or any other Transaction Document,
and the Debtors shall have no right to question or challenge the authority
of,
or the instructions given to, the Agent pursuant to the foregoing and (b) the
Agent shall not be required to take any action which the Agent believes (i)
could reasonably be expected to expose it to personal liability or (ii) is
contrary to this Agreement, the Transaction Documents or applicable
law.
5.
Reliance.
The
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, radiogram, order or other document or telephone
message signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to the Agreement and the other Transaction
Documents and its duties thereunder, upon advice of counsel selected by it
and
upon all other matters pertaining to this Agreement and the other Transaction
Documents and its duties thereunder, upon advice of other experts selected
by
it. Anything to the contrary notwithstanding, the Agent shall have no obligation
whatsoever to any Secured Party to assure that the Collateral exists or is
owned
by the Debtors or is cared for, protected or insured or that the liens granted
pursuant to the Agreement have been properly or sufficiently or lawfully
created, perfected, or enforced or are entitled to any particular
priority.
30
6.
Indemnification.
To the
extent that the Agent is not reimbursed and indemnified by the Debtors, the
Secured Parties will jointly and severally reimburse and indemnify the Agent,
in
proportion to their initially purchased respective principal amounts of
Debentures, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in performing its duties hereunder or under the
Agreement or any other Transaction Document, or in any way relating to or
arising out of the Agreement or any other Transaction Document except for those
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction to have resulted solely from the Agent's own gross
negligence or willful misconduct. Prior to taking any action hereunder as Agent,
the Agent may require each Secured Party to deposit with it sufficient sums
as
it determines in good faith is necessary to protect the Agent for costs and
expenses associated with taking such action.
7.
Resignation
by the Agent.
(a)
The
Agent
may resign from the performance of all its functions and duties under the
Agreement and the other Transaction Documents at any time by giving 30 days'
prior written notice (as provided in the Agreement) to the Debtors and the
Secured Parties. Such resignation shall take effect upon the appointment of
a
successor Agent pursuant to clauses (b) and (c) below.
(b)
Upon
any
such notice of resignation, the Secured Parties, acting by a Majority
in Interest,
shall
appoint a successor Agent hereunder.
(c)
If
a
successor Agent shall not have been so appointed within said 30-day period,
the
Agent shall then appoint a successor Agent who shall serve as Agent until such
time, if any, as the Secured Parties appoint a successor Agent as provided
above. If a successor Agent has not been appointed within such 30-day period,
the Agent may petition any court of competent jurisdiction or may interplead
the
Debtors and the Secured Parties in a proceeding for the appointment of a
successor Agent, and all fees, including, but not limited to, extraordinary
fees
associated with the filing of interpleader and expenses associated therewith,
shall be payable by the Debtors on demand.
8.
Rights
with respect to Collateral.
Each
Secured Party agrees with all other Secured Parties and the Agent (i) that
it
shall not, and shall not attempt to, exercise any rights with respect to its
security interest in the Collateral, whether pursuant to any other agreement
or
otherwise (other than pursuant to this Agreement), or take or institute any
action against the Agent or any of the other Secured Parties in respect of
the
Collateral or its rights hereunder (other than any such action arising from
the
breach of this Agreement) and (ii) that such Secured Party has no other rights
with respect to the Collateral other than as set forth in this Agreement and
the
other Transaction Documents.
31
Upon
the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and the retiring
Agent shall be discharged from its duties and obligations under the
Agreement. After any retiring Agent’s resignation or removal hereunder as
Agent, the provisions of the Agreement including this Annex B shall inure to
its
benefit as to any actions taken or omitted to be taken by it while it was
Agent.
32
