SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made and entered into as of
August 18, 2000 by MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC., a Nevada
corporation (the "Borrower" or the "Grantor"), in favor of the Holders (as set
forth in Schedule 2) of the Notes (each a "Secured Party" and collectively the
"Secured Parties"). All capitalized terms used but not otherwise defined herein
shall have the respective meanings assigned thereto in the Purchase Agreement
(as defined below):
W I T N E S S E T H :
WHEREAS, the Borrower and the Secured Parties have entered into that
certain Note and Warrant Purchase Agreement dated as of August 18, 2000 (as from
time to time amended, supplemented or otherwise modified, the "Purchase
Agreement"); and
WHEREAS, as collateral security for payment and performance of its
obligations under the Purchase Agreement, the Notes and the Related Documents
the Borrower is willing to grant to the Secured Parties a security interest in
certain of its personal property and assets; and
NOW, THEREFORE, in order to induce the Secured Parties to enter into the
Purchase Agreement and the Related Documents and in consideration of the
premises and the mutual covenants contained herein, the parties hereto hereby
agree follows:
1. GRANT OF SECURITY INTEREST. As collateral security for the payment
and satisfaction of all of the Borrower's Obligations under the Purchase
Agreement, the Notes and the Related Documents (collectively, the "Secured
Obligations"), the Grantor hereby affirms, grants, pledges and assigns, or
reaffirms, regrants and continues its pledge and collateral assignment, as the
case may be, to the Secured Parties and continues and grants to the Secured
Parties a continuing first priority security interest in and to all of the
following property of Grantor, whether now owned or existing or hereafter
acquired or arising and wheresoever located:
(a) All accounts, accounts receivable, contracts, notes, bills,
acceptances, chooses in action, chattel paper, instruments, documents and other
forms of obligations at any time owing to the Grantor arising out of goods sold
or leased or for services rendered by Grantor, the proceeds thereof and all of
Grantor's rights with respect to any goods represented thereby, whether or not
delivered, goods returned by customers and all rights as an unpaid vendor or
lienor, including rights of stoppage in transit and of recovering possession by
proceedings including replevin and reclamation, together with all customer
lists, books and records, ledger and account cards, computer tapes, software,
disks, printouts and records, whether now in existence or hereafter created,
relating thereto (collectively referred to
hereinafter as "Accounts");
(b) All inventory of the Grantor, including without limitation, all
goods manufactured or acquired for sale or lease, and any piece goods, raw
materials, work in process and finished merchandise, findings or component
materials, and all supplies, goods, incidentals, office supplies, packaging
materials and any and all items used or consumed in the operation of the
business of Grantor or which may contribute to the finished product or to the
sale, promotion and shipment thereof, in which Grantor now or at any time
hereafter may have an interest, whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of Grantor or is held
by Grantor or by others for Grantor's account (collectively referred to
hereinafter as "Inventory");
(c) All goods of the Grantor, including without limitation, all
machinery, equipment, parts, supplies, apparatus, appliances, tools, patterns,
molds, dies, blueprints, fittings, furniture, furnishings, fixtures and articles
of tangible personal property of every description now or hereafter owned by the
Grantor or in which Grantor may have or may hereafter acquire any interest, at
any location (collectively referred to hereinafter as "Equipment");
(d) All general intangibles of the Grantor in which the Grantor now has
or hereafter acquires any rights, including but not limited to, causes of
action, corporate or business records, inventions, designs, patents, patent
applications, trademarks, trademark registrations and applications therefor,
goodwill, trade names, trade secrets, trade processes, copyrights, copyright
registrations and applications therefor, licenses, permits, franchises, customer
lists, computer programs, all claims under guaranties, tax refund claims, rights
and claims against carriers and shippers, leases, claims under insurance
policies, all rights to indemnification and all other intangible personal
property and intellectual property of every kind and nature (collectively
referred to hereinafter as "General Intangibles");
(e) All rights now or hereafter accruing to the Grantor under
contracts, leases, agreements or other instruments to perform services, to hold
and use land and facilities, and to enforce all rights thereunder (collectively
referred to hereinafter as "Contract Rights");
(f) All books and records relating to any of the Collateral (as
hereinafter defined) (including without limitation, customer data, credit files,
computer programs, printouts, and other computer materials and records of the
Grantor pertaining to any of the foregoing); and
(g) All accessions to, substitutions for and all replacements, products
and proceeds of the foregoing, including without limitation proceeds of
insurance policies insuring the Collateral (as hereinafter defined).
All of the property and interests in property described in subsections (a)
through (g) and all other property and interests in personal property which
shall, from time to time, secure the Secured Obligations are herein collectively
referred to as the "Collateral."
2. FINANCING STATEMENTS. At the time of execution of this Agreement,
the Grantor shall have furnished the Secured Parties with properly executed
financing statements, amendments and assignments as prescribed by the Uniform
Commercial Code or the British Columbia Personal Property Security Act, as the
case may be, as presently in effect in the states and provinces where the
Collateral is located, prepared and approved by the Secured Parties in form and
number sufficient for filing wherever required with respect to the Collateral,
in order that the Secured Parties have a duly perfected security interest of
record in the Collateral, to the extent a security interest in such Collateral
can be perfected by filing a financing statement, following the filing of such
financing statements with the appropriate local and state governmental
authorities, subject only to Permitted Liens. The Grantor shall execute as
reasonably required by the Secured Parties any additional financing statements
or other documents to effect the same, together with any necessary continuation
statements so long as this Agreement remains in effect.
3. MAINTENANCE OF SECURITY INTEREST. The Grantor will, from time to
time, upon the request of the Secured Parties, deliver specific assignments of
Collateral, together with such other instruments and documents, financing
statements, amendments thereto, assignments or other writings as the Secured
Parties may reasonably request to carry out the terms of this Agreement or to
protect or enforce the Secured Parties' security interest in the Collateral.
With respect to any and all Collateral to be secured and conveyed under
this Agreement, the Grantor agrees to do and cause to be done all things
necessary to perfect and keep in full force the security interest granted in
favor of the Secured Parties, including, but not limited to, the prompt payment
of all fees and expenses incurred in connection with any filings made to perfect
or continue a security interest in the Collateral in favor of the Secured
Parties.
The Grantor agrees to make appropriate entries upon its financial
statements and books and records disclosing the Secured Parties' security
interest granted hereunder.
4. RECEIPT OF PAYMENT. In the event an Event of Default (as hereinafter
defined) shall occur and be continuing and the Grantor (or any of its
affiliates, subsidiaries, stockholders, directors, officers, employees or
agents) shall receive any proceeds of Collateral, including without limitation
monies, checks, notes, drafts or any other items of payment, the Grantor shall
hold all such items of payment in trust for the Secured Parties, and as the
property of the Secured Parties, separate from the funds of the Grantor, and no
later than the first Business Day following the receipt thereof, the Grantor
shall cause the same to be forwarded to the Secured Parties for its custody and
possession as additional Collateral.
5. COLLECTIONS. The Grantor hereby authorizes the Secured Parties, at all
times after the occurrence and during the continuation of an Event of Default
(a) to open Grantor's mail and collect any and all amounts due to the Grantor
from Persons obligated on any Accounts ("Account Debtors"); and (b) to take over
the Grantor's post office boxes or make other arrangements as the Secured
Parties deem necessary to receive the Grantor's mail, including notifying the
post
office authorities to change the address for delivery of the Grantor's mail
to such address as the Secured Parties may designate.
6. ASSIGNMENTS OF ACCOUNTS; NOTICE TO ACCOUNT DEBTORS. Simultaneously
with the execution hereof, Grantor shall have executed and delivered to the
Secured Parties (i) an Assignment of Collateral substantially in the form of
Exhibit "A" attached hereto ("Assignment"), and (ii) sufficient copies of a
Notice of Assignment and Irrevocable Authority substantially in the form of
Exhibit "B" attached hereto ("Notice of Assignment"), which shall be retained by
the Secured Parties for use upon the occurrence of an Event of Default.
Upon the occurrence of an Event of Default or in the event of a "Change in
Control" (as hereinafter defined), Grantor shall be deemed to have assigned the
Collateral to the Secured Parties pursuant to the Assignment and the Borrower
shall irrevocably instruct all account debtors to make payment of all monies
payable pursuant to the respective Accounts to the Secured Parties. In this
respect, Grantor shall notify each Account Debtor of the assignment of such
proceeds to the Secured Parties hereunder pursuant to the Notices of Assignment,
which, in such event, the Secured Parties are expressly authorized by the
Grantor to deliver to each such Account Debtor. For purposes of this Agreement,
"Change in Control" shall mean any one or more of the following: (i) a sale,
transfer or other disposition of all or substantially all of the capital stock
of the Grantor; (ii) a sale, transfer or other disposition of all or
substantially all of the assets of the Grantor; or (iii) any merger,
consolidation or other combination that includes the Borrower, whether or not
the Grantor is the surviving entity of any such transaction. For purposes of
this Agreement, the Grantor hereby appoints the Secured Parties as Grantor's
attorney-in-fact with full power of substitution to execute and deliver on
behalf of Grantor the Assignment and Notice of Assignment herein described upon
the occurrence of an Event of Default or in the event of a Change in Control,
which power of attorney is coupled with an interest and is irrevocable.
7. COVENANTS. The Grantor covenants with the Secured Parties that from
and after the date of this Agreement until termination hereof in accordance with
Section 28 hereof:
(a) INSPECTION. Upon the occurrence of an Event of Default or an event
that with the giving of notice or the passage of time would be deemed an Event
of Default, the Secured Parties (by any of their officers, employees and agents)
shall have the right upon its request and prior notice, and at any reasonable
times during the Grantor's usual business hours, to inspect the Collateral, all
records related thereto (and to make extracts or copies from such records), and
the premises upon which any of the Collateral is located, to discuss the
Grantor's affairs and finances with any Person (other than Account Debtors) and
to verify with any Person other than Account Debtors the amount, quality,
quantity, value and condition of, or any other matter relating to, the
Collateral and, if an Event of Default has occurred and is continuing, to
discuss Grantor's affairs and finances with the Grantor's Account Debtors and to
verify the amount, quality, value and condition of, or any other matter relating
to, the Collateral and such Account Debtors. Upon or after the occurrence and
during the continuation of an Event of Default, the Secured Parties may at any
time and from time to time employ and maintain on the Grantor's premises a
custodian selected by the
Secured Parties who shall have full authority to do all acts necessary to
protect the Secured Parties interest. All expenses incurred by the Secured
Parties by reason of the employment of such custodian shall be paid by the
Grantor, added to the Secured Obligations and secured by the Collateral.
(b) ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS. The Grantor shall
keep accurate and complete records of its Accounts ("Account Records") and from
time to time at intervals designated by the Secured Parties the Grantor shall
provide the Secured Parties with a schedule of Accounts in form and substance
acceptable to the Secured Parties describing all Accounts created or acquired by
the Grantor ("Schedule of Accounts"); provided, however, that the Grantor's
failure to execute and deliver any such Schedule of Accounts shall not affect or
limit the Secured Parties' security interest or other rights in and to any
Accounts. If requested by the Secured Parties, the Grantor shall furnish the
Secured Parties with copies of proof of delivery and other documents relating to
the Accounts so scheduled, including without limitation repayment histories and
present status reports (collectively, "Account Documents") and such other matter
and information relating to the status of then existing Accounts as the Secured
Parties shall request. The Grantor shall not remove any Account Records or
Account Documents or change its chief executive offices from Suite 000-0000
Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0 (the "Chief Executive
Office") hereto without 30 days prior written notice to the Secured Parties as
provided in Section 21 hereof and delivery to the Secured Parties by the
applicable Grantor prior to such removal of executed financing statements,
amendments and other documents necessary to maintain the security interests
granted hereunder.
(c) NOTICE REGARDING DISPUTED ACCOUNTS. In the event any amounts due
and owing in excess of $10,000 are in dispute between any Account Debtor and the
Grantor (which shall include without limitation any dispute in which an offset
claim or counterclaim may result), the Grantor shall provide the Secured Parties
with written notice thereof as soon as practicable, explaining in detail the
reason for the dispute, all claims related thereto and the amount in
controversy.
(d) VERIFICATION OF ACCOUNTS. If an Event of Default has occurred and
is continuing, each of the Secured Parties' officers, employees or agents shall
have the right, at any reasonable time or times hereafter, to verify with
Account Debtors the validity, amount or any other matter relating to any
Accounts and, whether or not an Event of Default has occurred, each of the
Secured Parties' officers, employees or agents shall have the right to verify
the same with the Grantor.
(e) CHANGE OF TRADE STYLES. Grantor shall not change, amend, alter,
terminate, or cease using its material trade names or styles under which it
sells Inventory as of the date of this Agreement ("Trade Styles"), or use
additional Trade Styles, without giving the Secured Parties at least 30 days'
prior written notice and delivery to the Secured Parties by the applicable
Grantor prior to such removal, change, amendment, alteration, or use, of
executed financing
statements, amendments and other documents necessary to maintain the
security interests granted hereunder.
(f) SAFEKEEPING OF INVENTORY. The Grantor shall be responsible for the
safekeeping of its Inventory, and, subject to Section 16 hereof, in no event
shall the Secured Parties have any responsibility for:
(i) Any loss or damage to Inventory or destruction thereof occurring or
arising in any manner or fashion from any cause;
(ii) Any diminution in the value of Inventory; or
(iii) Any act or default of any carrier, warehouseman, bailee or forwarding
agency thereof or other Person in any way dealing with or handling Inventory.
(g) LOCATION, RECORDS AND SCHEDULES OF INVENTORY. The Grantor shall
keep correct and accurate records itemizing and describing the kind, type,
location and quantity of Inventory, its cost therefor and the selling price of
Inventory held for sale, and the daily withdrawals therefrom and additions
thereto, and shall furnish to the Secured Parties from time to time at
reasonable intervals designated by the Secured Parties, a current schedule of
Inventory ("Schedule of Inventory") based upon its most recent physical
inventory and its daily inventory records. The Grantor shall conduct a physical
inventory, no less than annually, and shall furnish to the Secured Parties such
other documents and reports thereof as the Secured Parties shall reasonably
request with respect to the Inventory. Subject to compliance at all times with
Sections 10(c), (d) and (e), the Grantor shall not, other than in the ordinary
course of business, remove any material amount of Inventory from the Chief
Executive Office without 30 days prior written notice to the Secured Parties as
provided in Section 21 hereof and delivery to the Secured Parties by the Grantor
prior to such removal of executed financing statements, amendments and other
documents necessary to maintain the security interests granted hereunder.
(h) RETURNS OF INVENTORY. If any Account Debtor returns any Inventory
to the Grantor after shipment thereof, and such return generates a credit in
excess of $10,000 in the aggregate on any Account or Accounts of such Account
Debtor, the Grantor shall notify the Secured Parties of the same as soon as
practicable.
(i) EVIDENCE OF OWNERSHIP OF EQUIPMENT. The Grantor, as soon as
practicable following a request therefor by the Secured Parties, shall deliver
to the Secured Parties any and all evidence of ownership of any of the Equipment
(including without limitation certificates of title and applications for title).
(j) LOCATION, RECORDS AND SCHEDULES OF EQUIPMENT. The Grantor shall
maintain accurate, itemized records itemizing and describing the kind, type,
quality,
quantity and value of its Equipment and shall furnish the Secured Parties
upon request with a current schedule containing the foregoing information, but,
other than during the continuance of an Event of Default, not more often than
once per fiscal quarter. The Grantor shall not remove any material portion of
the Equipment from the Chief Executive Office without at least 30 days' prior
written notice to the Secured Parties as provided in Section 21 hereof and
delivery to the Secured Parties by the Grantor prior to such removal of executed
financing statements, amendments and other documents necessary to maintain the
security interests granted hereunder.
(k) SALE OR MORTGAGE OF EQUIPMENT. Other than in the ordinary course
of business with respect to disposition of obsolescent Equipment or replacement
of Equipment with other Equipment performing similar functions and having
similar or better utility and value, and except as permitted by the Purchase
Agreement prior to the occurrence and continuance of an Event of Default, the
Grantor shall not sell, exchange, lease, mortgage, encumber, pledge or otherwise
dispose of or transfer any of the Equipment or any part thereof without the
prior written consent of the Secured Parties.
(l) MAINTENANCE OF EQUIPMENT. The Grantor shall keep and maintain its
Equipment in good operating condition and repair, ordinary wear and tear
excepted. The Grantor shall not permit any such items to become a fixture to
real property (unless Grantor has granted the Secured Parties a lien on such
real property) or accessions to other personal property.
8. GENERAL WARRANTIES AND REPRESENTATIONS
(a) The Grantor warrants and represents that it is and, except as
permitted by the Purchase Agreement, will continue to be the owner of the
Collateral hereunder, now owned and upon the acquisition of the same, free and
clear of all Liens, claims (other than those claims set forth in Schedule 3.9 to
the Purchase Agreement), encumbrances and security interests other than the
security interest in favor of the Secured Parties hereunder and Permitted Liens,
and that it will defend such Collateral and any products and proceeds thereof
against all claims and demands of all Persons (other than holders of Permitted
Liens) at any time claiming the same or any interest therein adverse to the
Secured Parties.
(b) The Grantor has the full legal right and power and all authority
and approval required to enter into, execute and deliver this Agreement and to
perform fully each of its respective obligations hereunder. This Agreement has
been duly executed and delivered and constitutes the valid and binding
obligation of the Grantor enforceable in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to creditor's rights generally. No
approval or consent of any foreign, federal, state, country, local or other
governmental or regulatory body, and no approval or consent of any other person
is required in connection with the execution and delivery by the Grantor of this
Agreement, and the consummation and performance by each of the undersigned of
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated under this
Agreement will not conflict with or result in the breach or violation of any
of the terms or conditions of, or constitute (or with notice or lapse of
time or both would constitute) a default under any instrument, contract or other
agreement to which either the Grantor is a party or by or to which it or its
assets or properties are bound or subject or any statute or any regulation,
order, judgment or decree of any court or governmental or regulatory body.
9. ACCOUNT WARRANTIES AND REPRESENTATIONS. With respect to its
Accounts, the Grantor warrants and represents to the Secured Parties that the
Secured Parties may rely on all statements or representations made by Grantor on
or with respect to any Schedule of Accounts prepared and delivered by it and
that:
(a) All Account Records and Account Documents are located only at the
Chief Executive Office;
(b) The Accounts are genuine, are in all respects what they purport to
be, are not evidenced by an instrument or document or, if evidenced by an
instrument or document, are only evidenced by one original instrument or
document;
(c) The Accounts cover bona fide sales and deliveries of Inventory
usually dealt in by Grantor, or the rendition by Grantor of services, to an
Account Debtor in the ordinary course of business or as permitted by the
Purchase Agreement;
(d) The amounts of the face value shown on any Schedule of Accounts or
invoice statement delivered to the Secured Parties with respect to any Account,
are actually owing to Grantor and are not contingent for any reason; and there
are no setoffs, discounts, allowances, claims, counterclaims or disputes of any
kind or description in an amount greater than $10,000 in the aggregate for all
Account Debtors, or greater than $2,500 individually, existing or asserted with
respect thereto and Grantor has not made any agreement with any Account Debtor
thereunder for any deduction therefrom, except as may be stated in the Schedule
of Accounts and reflected in the calculation of the face value of each
respective invoice related thereto;
(e) Except for conditions generally applicable to Grantor's industry
and markets, there are no facts, events, or occurrences known to Grantor
pertaining particularly to any Accounts which are reasonably expected to
materially impair in any way the validity, collectibility or enforcement of
Accounts that would reasonably be likely, in the aggregate, to be of material
economic value, or in the aggregate materially reduce the amount payable
thereunder from the amount of the invoice face value shown on any Schedule of
Accounts, and on all contracts, invoices and statements delivered to the Secured
Parties, with respect thereto;
(f) The goods or services giving rise thereto are not, and were not at
the time of the sale or performance thereof, subject to any Lien, claim,
encumbrance or security interest, except those of the Secured Parties and those
removed or terminated prior to the date hereof and Permitted Liens;
(g) The Accounts have not been pledged to any Person other than to the
Secured Parties under this Agreement and will be owned by Grantor free and clear
of any Liens, claims, encumbrances or security interests except Permitted Liens;
(h) The Secured Parties' security interest therein will not be subject
to any offset, deduction, counterclaim, Lien or other adverse condition, other
than Permitted Liens; and
(i) The Grantor shall deliver to the Secured Parties written notice not
less than 30 days prior to any change of the location of the Chief Executive
Office or status of places of business or residency.
10. INVENTORY WARRANTIES AND REPRESENTATIONS. With respect to its
Inventory, the Grantor warrants and represents to the Secured Parties that the
Secured Parties may rely on all statements or representations made by the
Grantor on or with respect to any Inventory and that:
(a) All Inventory is located only at the locations set forth on
Schedule 1 hereto;
(b) None of its Inventory is or will be subject to any Lien, claim
(other than those claims set forth in Schedule 3.9 to the Purchase Agreement),
encumbrance or security interest whatsoever, except for the security interest of
the Secured Parties hereunder and Permitted Liens;
(c) No Inventory of the Grantor that would reasonably be likely, in the
aggregate with the Inventory of all other Account Debtors, to be of value in
excess of $10,000 is, and shall not at any time or times hereafter be, stored
with a bailee, warehouseman, or similar party without the Secured Parties' prior
written consent and, if the Secured Parties give such consent, Grantor will
concurrently therewith cause any such bailee, warehouseman, or similar party to
issue and deliver to the Secured Parties upon their request therefor, in form
and substance reasonably acceptable to the Secured Parties, warehouse receipts
therefor in the Secured Parties' name and take such other action and be party to
such document as deemed necessary or prudent by the Secured Parties to maintain
the security interest of the Secured Parties in such Inventory;
(d) No Inventory is, and shall not at any time or times hereafter be,
under consignment to any Person, the value of which, when aggregated with all
other Inventory under consignment of the Grantor, would exceed $10,000; and
(e) No Inventory is at or shall be kept at any location that is leased
by the Grantor from any other Person with contractual, statutory or other rights
to obtain a lien or security interest, or other right in any Inventory which may
take priority over the lien or security interest of the Secured Parties, unless
such lessor waives its rights with respect to such Inventory in form and
substance acceptable to the Secured Parties and delivered in writing to the
Secured Parties prior to such amount of Inventory being at such one or more
locations.
11. EQUIPMENT REPRESENTATIONS AND WARRANTIES. With respect to its
Equipment, the Grantor warrants and represents to the Secured Parties that the
Secured Parties may rely on all statements or representations made by Grantor on
or with respect to any Equipment and that:
(a) All Equipment (except for any aircraft of the Grantor) is located
only at the locations set forth in Schedule 1 hereto;
(b) None of its Equipment is or will be subject to any Lien, claim
(other than those claims set forth in Schedule 3.9 to the Purchase Agreement),
encumbrance or security interest whatsoever, except for the security interest of
the Secured Parties, hereunder and Permitted Liens;
(c) No Equipment of Grantor is at or shall be kept at any location that
is leased by Grantor from any other Person with contractual, statutory or other
rights to obtain a lien or security interest, or other right in any Equipment
which may take priority over the lien or security interest of the Secured
Parties, unless such lessor waives its rights with respect to such Equipment in
form and substance acceptable to the Secured Parties and delivered in writing to
the Secured Parties prior to such amount of Equipment being at such one or more
locations.
12. CASUALTY AND LIABILITY INSURANCE REQUIRED.
(a) The Grantor will keep the Collateral continuously insured against
such risks as are customarily insured against by businesses of like size and
type engaged in the same or similar operations including, without limiting the
generality of any other covenant herein contained:
(i) casualty insurance on the Inventory and the Equipment in an amount not
less than the full insurable value thereof, against loss or damage by theft,
fire and lightning and other hazards ordinarily included under uniform broad
form standard extended coverage policies, limited only as may be provided in the
standard broad form of extended coverage endorsement at the time in use in the
states in which the Collateral is located;
(ii) comprehensive general liability insurance against claims for bodily
injury, death or property damage occurring with or about such Collateral (such
coverage to include provisions waiving subrogation against the Secured Parties),
with the Secured Parties as additional insured parties and as loss payees, in
amounts as shall be reasonably satisfactory to the Secured Parties;
(iii) liability insurance with respect to the operation of its facilities
under the workers' compensation laws of the states in which such Collateral is
located; and
(iv) business interruption insurance.
(b) Each insurance policy obtained in satisfaction of the requirements
of Section 12(a) hereof:
(i) may be provided by blanket policies now or hereafter maintained by the
Grantor;
(ii) shall be issued by such insurer (or insurers) as shall be financially
responsible, of recognized standing and reasonably acceptable to the Secured
Parties;
(iii) shall be in such form and have such provisions (including without
limitation the loss payable clause, the waiver of subrogation clause, the
deductible amount, if any, and the standard mortgagee endorsement clause), as
are generally considered standard provisions for the type of insurance involved
and are reasonably acceptable in all respects to the Secured Parties;
(iv) shall prohibit cancellation or substantial modification, termination or
lapse in coverage by the insurer without at least 30 days' prior written notice
to the Secured Parties, except for non-payment of premium, in which case such
policies shall provide ten (10) days' prior written notice;
(v) without limiting the generality of the foregoing, all insurance policies
where applicable under Section 12(a)(i) carried on the Collateral shall name the
Secured Parties, as loss payees and the Secured Parties as insured parties
thereunder.
(c) Prior to the expiration of any such policy, the Grantor shall
furnish the Secured Parties with evidence satisfactory to the Secured Parties
that the policy or certificate has been renewed or replaced or is no longer
required by this Agreement.
(d) The Grantor hereby irrevocably makes, constitutes and appoints the
Secured Parties (and all officers, employees or agents designated by the Secured
Parties) effective upon the occurrence and during the continuance of an Event of
Default, as the Grantor's true and lawful attorney (and agent-in-fact) for the
purpose of making, settling and adjusting claims under such policies of
insurance, endorsing the name of the Grantor on any check, draft, instrument or
other item or payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect to such policies of
insurance.
(e) In the event the Grantor shall fail to maintain, or fail to cause
to be maintained, the full insurance coverage required hereunder or shall fail
to keep any of its Collateral in good repair and good operating condition, the
Secured Parties may (but shall be under no obligation to), without waiving or
releasing any Secured Obligation or Event of Default by Grantor hereunder,
contract for the required policies of insurance and pay the premiums on the same
or make any required repairs, renewals and replacements; and all sums so
disbursed by the Secured Parties, including reasonable attorneys' fees, court
costs, expenses and other charges related thereto, shall be payable on demand by
Grantor to the Secured Parties and shall be additional Secured Obligations
secured by the Collateral.
(f) The Grantor agrees that to the extent that it shall not carry
insurance required by Section 12(a) hereof, it shall in the event of any loss or
casualty pay promptly to the Secured Parties, for application in accordance with
the provisions of Section 12(h) hereof, such amount as would have been received
as Net Proceeds (as hereinafter defined) by the Secured Parties, under the
provisions of Section 12(h) hereof had such insurance been carried to the extent
required.
(g) The Net Proceeds of the insurance carried pursuant to the
provisions of Sections 12(a)(ii) and 12(a)(iii) hereof shall be applied by
Grantor toward extinguishment of the defect or claim or satisfaction of the
liability with respect to which such insurance proceeds may be paid.
(h) The Net Proceeds of the insurance carried with respect to the
Collateral pursuant to the provisions of Section 12(a)(i) hereof shall be paid
to Grantor and held by Grantor in a separate account and applied as follows: (i)
as long as no Event of Default shall have occurred and be continuing, after any
loss under any such insurance and payment of the proceeds of such insurance, the
Grantor shall have a period of 30 days after payment of the insurance proceeds
with respect to such loss to elect to either (x) repair or replace the
Collateral so damaged, (y) deliver such Net Proceeds to the Secured Parties, as
additional Collateral or (z) apply such Net Proceeds to the acquisition of
tangible assets used or useful in the conduct of the business of the Grantor,
subject to the provisions of this Agreement. If the Grantor elects to repair or
replace the Collateral so damaged, Grantor agrees the Collateral shall be
repaired to a condition substantially similar to its condition prior to damage
or replaced with Collateral in a condition substantially similar to the
condition of the Collateral so replaced prior to damage; and (ii) at all times
during which an Event of Default shall have occurred and be continuing, after
any loss under such insurance and payment of the proceeds of such insurance,
Grantor shall immediately deliver such Net Proceeds to the Secured Parties, as
additional Collateral.
(i) "Net Proceeds" when used with respect to any insurance proceeds
shall mean the gross proceeds from such proceeds, award or other amount, less
all taxes, fees and expenses (including attorneys' fees) incurred in the
realization thereof.
(j) In case of any material damage to or destruction of all or any part
of the Collateral pledged hereunder by the Grantor, Grantor shall give prompt
notice thereof to the Secured
Parties. Each such notice shall describe generally the nature and extent
of such damage, destruction, taking, loss, proceeding or negotiations. The
Grantor is hereby authorized and empowered to adjust or compromise any loss
under any such insurance.
13. EVENTS OF DEFAULT. It is understood and agreed that the occurrence
of any one or more of the following shall constitute an "Event of Default"
hereunder and shall entitle the Secured Parties to take such actions as are
elsewhere provided in this Agreement in respect of Events of Default: (a) an
"Event of Default" as defined in the Note shall have occurred and be continuing;
or (b) Grantor shall have failed to pay the Secured Parties all of the Secured
Obligations owed to it in accordance with the Purchase Agreement and Related
Documents on the Business Day on which the Secured Parties have demanded such
payment; or (c) any representation or warranty made by Grantor herein, in the
Purchase Agreement in or in any other existing or future agreement with any of
the Secured Parties (including the Related Documents) shall prove to have been
false in any material respect when made; or (d) any covenant made by Grantor
herein (other than those covenants contained in Sections 7(a) hereof) is
breached, violated, or not complied with and not cured within 30 days after
notice thereof from the Secured Parties; provided, however, that any breach,
violation or non-compliance with any covenant contained in Section 7(a) hereof
shall immediately result in an Event of Default; or (e) any covenant made by
Grantor in any other Related Document or any future agreement with the Secured
Parties is breached, violated, or not complied with and not cured within any
grace period applicable thereto, or if no grace period is applicable and default
thereunder does not result immediately from such noncompliance, then not cured
within 30 days after notice thereof from the Secured Parties, and results in a
material adverse change to the Collateral taken as a whole or its value taken as
a whole; or (f) any material uninsured damage to or loss, theft or destruction
of any of the Collateral shall occur.
14. RIGHTS AND REMEDIES UPON AN EVENT OF DEFAULT. Upon and after an
Event of Default, the Secured Parties shall have the following rights and
remedies in addition to any rights and remedies set forth elsewhere in this
Agreement, all of which may be exercised with or, if allowed by law, without
notice to Grantor:
(a) All of the rights and remedies of a secured party under the Uniform
Commercial Code of the state where such rights and remedies are asserted, or
under other applicable law, all of which rights and remedies shall be
cumulative, and none of which shall be exclusive, to the extent permitted by
law, in addition to any other rights and remedies contained in this Agreement,
or any other Related Document;
(b) The right to foreclose the Liens and security instruments created
under this Agreement by any available judicial procedure or without judicial
process;
(c) The right to (i) enter upon the premises of Grantor through self-
help and without judicial process, without first obtaining a final judgment or
giving Grantor notice and opportunity for a hearing on the validity of the
Secured Parties' claim and without any obligation to pay rent to Grantor, or any
other place or places where any Collateral is located and kept, and
remove the Collateral therefrom to the premises of the Secured Parties or
any agent of the Secured Parties, for such time as the Secured Parties may
desire, in order effectively to collect or liquidate the Collateral, and/or (ii)
require Grantor to assemble the Collateral and make it available to the Secured
Parties at a place to be designated by the Secured Parties that is reasonably
convenient to both parties;
(d) The right to (i) demand payment of the Accounts; (ii) enforce
payment of the Accounts, by legal proceedings or otherwise; (iii) exercise all
of the Grantor's rights and remedies with respect to the collection of the
Accounts; (iv) settle, adjust, compromise, extend or renew the Accounts; (v)
settle, adjust or compromise any legal proceedings brought to collect the
Accounts; (vi) if permitted by applicable law, sell or assign the Accounts upon
such terms, for such amounts and at such time or times as the Secured Parties
deem advisable; (vii) discharge and release the Accounts; (viii) take control,
in any manner, of any item of payment or proceeds referred to in Section 4
above; (ix) prepare, file and sign Grantor's name on a Proof of Claim in
bankruptcy or similar document against any Account Debtor; (x) prepare, file and
sign Grantor's name on any notice of Lien, assignment or satisfaction of Lien or
similar document in connection with the Accounts; (xi) endorse the name of
Grantor upon any chattel paper, document, instrument, invoice, freight xxxx,
xxxx of lading or similar document or agreement relating to the Accounts or
Inventory; (xii) use Grantor's stationery for verifications of the Accounts and
notices thereof to Account Debtors; (xiii) use the information recorded on or
contained in any data processing equipment and computer hardware and software
relating to any Collateral to which Grantor has access; and (xiv) do all acts
and things and execute all documents necessary, in the Secured Parties' sole
discretion, to collect the Accounts; and
(e) The right to sell, assign, lease or to otherwise dispose of all or
any Collateral in its then existing condition, or after any further
manufacturing or processing thereof, at public or private sale or sales, with
such notice as may be required by law, in lots or in bulk, for cash or on credit
with or without representations and warranties, all as the Secured Parties, in
their sole discretion, may deem advisable. The Secured Parties shall have the
right to conduct such sales on Grantor's premises or elsewhere and shall have
the right to use Grantor's premises without charge for such sales for such time
or times as the Secured Parties may see fit. The Secured Parties may, if they
deem it reasonable, postpone or adjourn any sale of the Collateral from time to
time by an announcement at the time and place of such postponed or adjourned
sale, and such sale may, without further notice, be made at the time and place
to which it was so adjourned. The Grantor agrees that the Secured Parties
have no obligation to preserve rights to the Collateral against prior parties
or to xxxxxxxx any Collateral for the benefit of any Person. The Secured Parties
are hereby granted a license or other right to use, without charge, Grantor's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks and advertising matter, or any property of a similar nature,
as it pertains to the Collateral, in completing production of, advertising for
sale and selling any Collateral and Grantor's rights under any license and any
franchise agreement shall inure to the Secured Parties' benefit. If any of the
Collateral shall require repairs, maintenance, preparation or the like, or is in
process or other unfinished state, the Secured Parties shall have the right, but
shall not be obligated, to perform such repairs, maintenance, preparation,
processing or completion of
manufacturing for the purpose of putting the same in such saleable form as
the Secured Parties shall deem appropriate, but the Secured Parties shall have
the right to sell or dispose of the Collateral without such processing. In
addition, Grantor agrees that in the event notice is necessary under applicable
law, written notice mailed to Grantor in the manner specified herein seven (7)
days prior to the date of public sale of any of the Collateral or prior to the
date after which any private sale or other disposition of the Collateral will be
made shall constitute commercially reasonable notice to Grantor. All notice is
hereby waived with respect to any of the Collateral which threatens to decline
speedily in value or is of a type customarily sold on a recognized market. The
Secured Parties may purchase all or any part of the Collateral at public or, if
permitted by law, private sale, free from any right of redemption which is
hereby expressly waived by Grantor and, in lieu of actual payment of such
purchase price, may set off the amount of such price against the Secured
Obligations. The net cash proceeds resulting from the collection, liquidation,
sale, lease or other disposition of the Collateral shall be applied first to the
expenses (including all attorneys' fees) of retaking, holding, storing,
processing and preparing for sale, selling, collecting, liquidating and the
like, and then to the satisfaction of all Secured Obligations. Any sale or
other disposition of the Collateral and the possession thereof by the Secured
Parties shall be in compliance with all provisions of applicable law (including
applicable provisions of the Uniform Commercial Code). The Grantor shall be
liable to the Secured Parties, and shall pay to the Secured Parties, on demand
any deficiency which may remain after such sale, disposition, collection or
liquidation of the Collateral. The Secured Parties shall remit to Grantor or
other Person entitled thereto any surplus remaining after this Agreement has
been terminated in accordance with Section 28 hereof.
15. ANTI-MARSHALLING PROVISIONS. The right is hereby given by Grantor
to the Secured Parties, to make releases (whether in whole or in part) of all or
any part of the Collateral agreeable to the Secured Parties without notice to,
or the consent, approval or agreement of other parties and interests, including
junior lienors, which releases shall not impair in any manner the validity of or
priority of the Liens and security interests in the remaining Collateral
conferred under such documents, nor release Grantor from personal liability for
the Secured Obligations hereby secured. Notwithstanding the existence of any
other security interest in the Collateral held by the Secured Parties, the
Secured Parties shall have the right to determine the order in which any or all
of the Collateral shall be subjected to the remedies provided in this Agreement.
The proceeds realized upon the exercise of the remedies provided herein shall be
applied by the Secured Parties, in the manner herein provided. Grantor hereby
waives any and all right to require the marshalling of assets in connection with
the exercise of any of the remedies permitted by applicable law or provided
herein.
16. APPOINTMENT OF THE SECURED PARTIES AS GRANTOR'S LAWFUL ATTORNEY.
Without limitation of any other provision of this Agreement, upon and after an
Event of Default, Grantor irrevocably designates, makes, constitutes and
appoints the Secured Parties (and all Persons designated by the Secured
Parties), as Grantor's true and lawful attorney (and agent-in-fact) to take all
actions and to do all things required to be taken or done by Grantor under this
Agreement. All acts of the Secured Parties or their designees taken pursuant to
this Section 16 are hereby ratified and confirmed and the Secured Parties or its
designees shall not be liable for any
acts of omission or commission nor for any error of judgment or mistake of
fact or law, other than as a result of its gross negligence or willful
misconduct. This power, being coupled with an interest, is irrevocable by
Grantor until this Agreement has been terminated in accordance with Section 28
hereof.
17. RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC. The enumeration
of the rights and remedies of the Secured Parties, set forth in this Agreement
is not intended to be exhaustive and the exercise by the Secured Party of any
right or remedy shall not preclude the exercise of any other rights or remedies,
all of which shall be cumulative, and shall be in addition to any other right or
remedy given hereunder, or under any other agreement between Grantor and the
Secured Party or which may now or hereafter exist in law or in equity or by suit
or otherwise. No delay or failure to take action on the part of the Secured
Party in exercising any right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude other or further exercise thereof or the exercise of any
other right, power or privilege or shall be construed to be a waiver of any
Event of Default. No waiver by a party hereunder shall be effective unless it
is in writing and signed by the party making such waiver, and then only to the
extent specifically stated in such writing. No course of dealing between
Grantor and the Secured Parties or the Secured Parties' agents or employees
shall be effective to change, modify or discharge any provision of this
Agreement or to constitute a waiver of any Event of Default. The Secured
Parties shall not have any liability for any error, omission or delay of any
kind occurring in the handling or liquidation of the Collateral or for any
damages resulting therefrom, other than as a result of its gross negligence or
willful misconduct.
18. SUPPLEMENTAL DOCUMENTATION. At the Secured Parties' request, the
Grantor shall execute and deliver to the Secured Parties, at any time or times
hereafter, all documents, instruments and other written matter that the Secured
Parties may request to perfect and maintain perfected the Secured Parties'
security interest in the Collateral, in form and substance acceptable to the
Secured Parties, and pay all charges, expenses and fees the Secured Parties may
reasonably incur in filing any of such documents, and all taxes relating
thereto. Grantor agrees that a carbon, photographic,photostatic, or other
reproduction of this Agreement or a financing statement is sufficient as a
financing statement and may be filed by the Secured Parties in any filing
office.
19. WAIVERS. In addition to the other waivers contained herein,
Grantor hereby expressly waives, to the extent permitted by law: presentment for
payment, demand, protest, notice of demand, notice of protest, notice of default
or dishonor, notice of payments and nonpayments and all other notices and
consents to any action taken by the Secured Parties unless expressly required by
this Agreement.
20. TRADE NAMES. Grantor represents that it has no trade names or
styles.
21. NOTICE. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective on the day on which delivered to
such party (against receipt therefor) at the address set forth below or such
other address as such party shall specify to the other parties
in writing (or, in the case of telephonic notice or notice by telecopy
(where the receipt of such message is verified by return) expressly provided for
hereunder, when received at such telephone or telecopy number as may from time
to time be specified in written notice to the other parties hereto or otherwise
received), or if sent prepaid by certified or registered mail return receipt
requested on the third Business Day after the day on which mailed, or if sent
prepaid by a national overnight courier service, on the first Business Day after
the day on which delivered to such service against receipt therefor, addressed
to such party at said address:
(a) if to Grantor:
Merlin Software Technologies International, Inc.
Xxxxx 000-0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxxx Xxxxxx
Telephone: (000) 000-0000
Telefacsimile: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxx
HSBC Building, 000-000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx VGC 3H1
Telephone: (000) 000-0000
Telefacsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Esq.
(b) if to the Secured Parties:
Narragansett Asset Management, LLC
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Managing Director
Telephone: (000) 000-0000
Telefacsimile: (000) 000-0000
with a copy to:
Xxxx Xxxxxxx, P.C.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telefacsimile: (000) 000-0000
or to such other address as each party may designate for itself by like notice
given in accordance with this Section 21.
22. DEFINITIONS. All terms used herein and not defined in the Purchase
Agreement shall be defined in accordance with the appropriate definitions
appearing in the Uniform Commercial
Code as in effect in New York, and such definitions are hereby incorporated
herein by reference and made a part hereof.
23. ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and other Related Documents, constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings, inducements,
commitments or conditions, express or implied, oral or written, except as herein
contained. The express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the terms hereof.
Neither this Agreement nor any portion or provision hereof may be changed,
altered, modified, supplemented, discharged, canceled, terminated, or amended
orally or in any manner other than by an agreement, in writing signed by the
parties hereto.
24. LEASE ASSIGNMENT AND LANDLORD WAIVER. If at any time Grantor moves
a significant portion of its Inventory from any location identified in Schedule
1 hereto to a leased or rented building, warehouse or other facility of whatever
description not identified in Schedule 1 (each a "New Leased Facility"), Grantor
hereby agrees that it will execute and deliver to the Secured Parties, an
assignment of the Grantor's interest in the lease with respect to each such New
Leased Facility to the extent that such landlord has any, as applicable, in form
and substance satisfactory to the Secured Parties. The Grantor further agrees
that at such time, and as applicable, it will deliver or cause to be delivered
to the Secured Parties, a landlord's waiver executed by the owner, or any other
Person serving as landlord, of such New Leased Facility, to the extent that any
such landlord has any contractual, statutory or other rights to obtain a lien or
security interest, or other right in any Inventory which may take priority over
the lien or security interest of the Secured Parties, in form and substance
reasonably satisfactory to the Secured Parties.
25. SEVERABILITY. The provisions of this Agreement are independent of
and separable from each other. If any provision hereof shall for any reason be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision hereof, but this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein.
26. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of the Grantor, and the rights, remedies, powers, and
privileges of the Secured Parties hereunder shall inure to the benefit of the
successors and assigns of the Secured Parties; provided, however, that Grantor
shall not make any assignment hereof without the prior written consent of the
Secured Parties.
27. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
28. TERMINATION; RELEASE. Upon the indefeasible payment in full of all
Obligations, this Agreement and all obligations of the Grantor hereunder shall
terminate without
delivery of any instrument or performance of any act by any party, and the
Collateral shall automatically be released from the Liens created by this
Agreement and all rights to such Collateral shall automatically revert to
Grantor. Notwithstanding the immediately preceding sentence, upon such
termination of this Agreement, the Secured Parties shall reassign and redeliver
such Collateral then held by or for the Secured Parties and execute and deliver
to the Grantor such documents as the Grantor shall reasonably request to
evidence such termination.
29. GOVERNING LAW.
(A) This agreement shall be governed by, and construed in accordance
with, the laws of the state of Nevada applicable to contracts executed, and to
be fully performed, in such state.
(B) Each party hereby expressly and irrevocably agrees and consents
that any suit, action or proceeding arising out of or relating to this agreement
and the transactions contemplated herein may be instituted in any state or
federal court sitting in the county of New York, state of New York, United
States of America and, by the execution and delivery of this agreement, each
party expressly waives any objection that it may have now or hereafter to the
laying of the venue or to the jurisdiction of any such suit, action or
proceeding, and irrevocably submits generally and unconditionally to the
jurisdiction of any such court in any such suit, action or proceeding.
(C) Each party agrees that service of process may be made by personal
service of a copy of the summons and complaint or other legal process in any
such suit, action or proceeding, or by registered or certified mail (postage
prepaid) to the address of such party provided by section 21 hereof, or by any
other method of service provided for under the applicable laws in effect in the
state of new york.
(D) Nothing contained in subsections (b) or (c) hereof shall preclude
any party from bringing any suit, action or proceeding arising out of or
relating to this agreement or the other loan documents in the courts of any
place where any party or any of such party's property or assets may be found or
located. To the extent permitted by the applicable laws of any such
jurisdiction, each party hereby irrevocably submits to the jurisdiction of any
such court and expressly waives, in respect of any such suit, action or
proceeding, the jurisdiction of any other court or courts which now or
hereafter, by reason of its present or future domicile, or otherwise, may be
available to it.
(E) In any action or proceeding to enforce or defend any rights or
remedies under or related to this agreement or any amendment, instrument,
document or agreement delivered or that may in the future be delivered in
connection with the foregoing, each party hereby agrees, to the extent permitted
by applicable law, that any such action or proceeding shall be tried before a
court and not before a jury and each party hereby waives, to the extent
permitted by applicable law, any objection that it may have that each action or
proceeding has been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties have duly executed this Security Agreement
on the day and year first written above.
MERLIN SOFTWARE TECHNOLOGIES
INTERNATIONAL, INC.
By: /s/ Xxxxxx Xxxxxx
-------------------
Name: Xxxxxx Xxxxxx
Title: President
PROVINCE OF BRITISH COLUMBIA )
)ss.
CANADA )
Before me, the undersigned, a Notary Public in and for the county aforesaid
on this 21st day of August, 2000, personally appeared Xxxxxx Xxxxxx to me known
personally, and who, being by me duly sworn, deposes and says that he is the
President of Merlin Software Technologies International, Inc., and that
foregoing instrument was signed on behalf of said corporation by authority of
its Board of Directors, and said Xxxxxx Xxxxxx acknowledged said instrument to
be the free act and deed of said corporation.
/s/ Xxxxxx X. Xxxx
---------------------
Notary Public
My commission expires: N/A
Xxxxxx X. Xxxx
Barrister and Solicitor
000 - 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Telephone: (000) 000-0000
SIGNATURE PAGE 1 OF 2
SECURED PARTIES:
NARRAGANSETT I, L.P.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Managing Member
NARRAGANSETT OFFSHORE, L.P.
by its Investment Manager,
Xxx Holding, L.L.C.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxxx
Title: Managing Member
PEQUOT SCOUT FUND, L.P.
by its Investment Advisor,
Pequot Capital Management, Inc.
By: /s/ Xxxxx X. Xxxxx
---------------------
Name: Xxxxx X. Xxxxx
Title: Chief Accounting Officer
SDS MERCHANT FUND, L.P.
by its Managing Member,
SDS Capital Partners, L.L.C.
By: /s/ Xxxxxx Xxxxx
------------------
Name: Xxxxxx Xxxxx
Title: Managing Member
SIGNATURE PAGE 2 OF 2
SCHEDULE 1
Canadian Office: Suite 420 - 0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx Xxxxxxxx Xxxxxx X0X 0X0
SCHEDULE 2
HOLDERS
Narragansett I, L.P.
Narragansett Offshore Ltd.
Pequot Scout Fund, L.P.
SDS Merchant Fund, L.P.
EXHIBIT A
ASSIGNMENT OF COLLATERAL
This ASSIGNMENT is made by Merlin Software Technologies International,
Inc., as of the ________________ 2000, as follows:
1. ASSIGNMENT: For good and valuable consideration, receipt of which
is hereby acknowledged, the undersigned Merlin Software Technologies
International, Inc. ("Assignor") does hereby assign to Narragansett I and L.P.,
Narragansett Offshore Ltd., Pequot Scout Fund, L.P. and SDS Merchant Fund,
L.P., (the "Assignees") and its successors and assigns forever, for security
purposes pursuant to that certain Security Agreement between Assignor and
Assignees dated as of August ___, 2000 ("Security Agreement") all of Assignor's
right, title and interest in and to the Collateral (as defined in the Security
Agreement).
2. WARRANTIES. Assignor represents and warrants to the Assignees that
(i) Assignor owns all rights in and to the Collateral; (ii) Assignor has not
assigned, licensed or in any other manner encumbered, diminished or impaired or
disposed of any rights in respect of the Collateral which it acquired at any
time; (iii) Assignor has the right to enter into and perform this Agreement;
(iv) all sums due and payable to date by Assignor in connection with the
Collateral have been paid; and (v) there are no liens on the Collateral imposed
by third parties which would conflict with or interfere with Assignor's rights
thereto or Assignees' rights hereunder.
3. PERFECTION. Concurrently with the execution and delivery of this
Assignment, Assignor will deliver to Assignees the following documents (each
satisfactory in form and substance to the Assignees):
(a) UCC-1 filing certificates from all appropriate jurisdictions (each
satisfactory in form and substance to the Assignees) confirming and perfecting
Assignor's right, title and interest in and to the Collateral; and
(b) executed UCC Assignments for filing by the Assignees in all
appropriate jurisdictions for purposes of perfecting the security interest
granted to the Assignees hereunder.
4. NO PERFORMANCE REQUIRED BY ASSIGNEE: The Assignees do not and shall
not at any time have any obligation in respect of the Collateral by reason or
arising out of this Assignment or any document or action relating thereto, nor
shall the Assignees be required or obligated in any manner to perform any
obligation of Assignor or to present or file any claim, or take any other action
to collect or enforce the payment of any amounts in respect of the Collateral
which may have been assigned to the Assignees or to which the Assignees are or
may be entitled to hereunder.
5. FURTHER ASSURANCES: Assignor hereby agrees, promptly upon
Assignees' request, to execute such further documents and other instruments as
shall be required by the Assignees from time to time.
MERLIN SOFTWARE TECHNOLOGIES
INTERNATIONAL, INC.
By: /s/ Xxxxxx Xxxxxx
-------------------
Name: Xxxxxx Xxxxxx
Title: President
PROVINCE OF BRITISH COLUMBIA )
)ss.
CANADA )
Before me, the undersigned, a Notary Public in and for the county aforesaid
on this 21st day of August, 2000, personally appeared Xxxxxx Xxxxxx to me known
personally, and who, being by me duly sworn, deposes and says that he is the
President of Merlin Software Technologies International, Inc., and that
foregoing instrument was signed on behalf of said corporation by authority of
its Board of Directors, and said Xxxxxx Xxxxxx acknowledged said instrument to
be the free act and deed of said corporation.
/s/ Xxxxxx X. Xxxx
---------------------
Notary Public
My commission expires: N/A
Xxxxxx X. Xxxx
Barrister and Solicitor
000 - 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Telephone: (000) 000-0000
EXHIBIT "B"
NOTICE OF ASSIGNMENT
AND
IRREVOCABLE AUTHORITY
From:
To:
Date: _____________________
Ladies and Gentlemen:
Reference is hereby made to those certain payment obligations between us as
set forth in Schedule 1 attached hereto, (the "Obligations") relating, among
other things, to the __________________________________.
We have assigned the benefit and proceeds of said Obligations to
Narragansett I, L.P., Narragansett Offshore Ltd., Pequot Scout Fund, L.P. and
SDS Merchant Fund, L.P., (the "Secured Parties") and this will constitute our
irrevocable authority and instruction to you to pay to the Secured Parties all
monies from time to time owing or to become due from you to us with respect to
the Obligations.
The monies are to be sent by telegraphic transfer to:
This authority and instruction is coupled with an interest and may not be
revoked or altered without the prior consent in writing of the Secured Parties.
Please sign the acknowledgment and confirmation as enclosed herewith and
return it as soon as possible to the Secured Parties at the address indicated on
such acknowledgment, including your confirmation of the amounts to become due in
accordance with said Obligations:
By:_____________________________
Name:
Title:
