SECURITY AGREEMENT
Exhibit
10.5
THIS
SECURITY AGREEMENT (the
“Security
Agreement”) is dated as of the 21st
day of December
2007 by and among XA, Inc., a Nevada Corporation (“XA”),
The
Experiential Agency, Inc., XA Scenes, Inc., XA Interactive, Inc., and Fiori
XA,
Inc. (collectively the with XA, the “Debtor”)
and
Sands Brothers Venture Capital III LLC (the “Secured
Party”).
WITNESSETH
WHEREAS,
pursuant to a
Securities Purchase Agreement, dated as of the date hereof, as may be amended
or
supplemented from time to time (the “SPA”),
the
Debtor is selling to the Secured Party 11% Senior Secured Convertible Promissory
Notes, in the principal amount of $200,000 in 11% Senior Secured Convertible
Promissory Note are being sold on the date hereof, (the “Second
Follow On
Notes”), which is in addition to an aggregate of $3,150,000 in 11%
Senior Secured Convertible Promissory Notes previously sold by the Debtor to
certain parties (the “Prior
Purchasers”) in August, September and October 2006 and June 2007
(the “Prior
Notes”)
and along with the Follow On Notes, each, a “Note”:
and
collectively, the “Notes”)
sold
to certain parties (the “Purchasers”);
and
WHEREAS,
Debtor has agreed,
pursuant to the terms and conditions of the SPA, in connection with the
Financing described therein, to secure the repayment of the Note, as more
specifically provided herein;
NOW,
THEREFORE, in
consideration of the foregoing, Debtor and the Secured Party agree as
follows:
SECTION
1. Definitions.
1.1 Certain
Defined
Terms. The
following terms, as used herein, have the meanings set forth below:
“Accounts”
means all “accounts” (as defined in the UCC) now owned or hereafter created or
acquired by Debtor including all of the following now owned or hereafter created
or acquired by Debtor: (a) accounts receivable, contracts, contract rights,
book debts, notes, drafts and other obligations or indebtedness owing to Debtor
arising from the sale, lease or exchange of goods or other property or the
performance of services; (b) Debtor’s rights in, to and under all purchase
orders for goods, services or other property; (c) Debtor’s rights to any
goods, services or other property represented by any of the foregoing (including
returned or repossessed goods and unpaid sellers’ rights of rescission,
repletion, reclamation and rights to stoppage in transit); (d) monies due
to or to become due to Debtor under all contracts for the sale, lease or
exchange of goods or other property or the performance of services (whether
or
not yet earned by performance on the part of Debtor); and (e) Proceeds of
any of the foregoing and all collateral security and guaranties of any kind
given by any Person with respect to any of the foregoing.
“Collateral”
has the meaning assigned to that term in Section 2.
“Computer
Software”
or
“Software”
means a computer program and any supporting information provided in connection
with a transaction relating to the program.
“Contracts”
means all contracts and agreements (as defined in the UCC).
“Copyrights”
means collectively all of the following now owned or hereafter created or
acquired by Debtor: (a) all literary works, derivative works, works for
hire, compositions, compilations of all or some of the foregoing, whether
published or unpublished, all registrations or recordings thereof, and all
applications in connection therewith including registrations, recordings and
applications in the Copyright Office of the United States, or any other country;
(b) all reissues, extensions or renewals thereof; (c) all income,
royalties, damages and payments now or hereafter due or payable under any of
the
foregoing or with respect to any of the foregoing including damages or payments
for past or future infringements of any of the foregoing; (d) the right to
xxx for past, present and future infringements or any of the foregoing; and
(e) all rights corresponding to any of the foregoing throughout the
world.
“Debtor”
has
the meaning assigned to that term in the introduction to this Security
Agreement.
“Documents”
means all “documents” (as defined in the UCC) or other receipts covering,
evidencing or representing goods now owned or hereafter acquired by
Debtor.
“Equipment”
means all “equipment” (as defined in the UCC) now owned or hereafter acquired by
Debtor including all machinery, motor vehicles, trucks, trailers, vessels,
aircraft and rolling stock and all parts thereof and all additions and
accessions thereto and replacements therefor.
“Event
of
Default” has the meaning assigned to that term in Section 8(a).
“Fixtures”
means all of the following now owned or hereafter acquired by Debtor: plant
fixtures; business fixtures; other fixtures and storage office facilities,
wherever located; and all additions and accessions thereto and replacements
therefor.
“General
Intangibles” means all “general intangibles” (as defined in the
UCC) now owned or hereafter acquired by Debtor including all right, title and
interest of Debtor in and to: (a) all Software of the Debtor, including all
source code and object code thereto; (b) all agreements, leases, licenses
and contracts to which Debtor is or may become a party; (c) all obligations
or indebtedness owing to Debtor (other than Accounts) from whatever source
arising; (d) all tax refunds; (e) Intellectual Property; and
(f) all trade secrets and other confidential information relating to the
business of Debtor.
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“Instruments”
means all “instruments” “chattel paper” or “letters of credit” (each as defined
in the UCC) including promissory notes, drafts, bills of exchange and trade
acceptances, now owned or hereafter acquired by Debtor.
“Intellectual
Property” means collectively all of the following: Copyrights,
Copyright Licenses, Patents, Trademarks and Trademark Licenses.
“Inventory”
means all “inventory” (as defined in the UCC), now owned or hereafter acquired
by Debtor, wherever located including finished goods, raw materials, work in
process and other materials and supplies (including packaging and shipping
materials) used or consumed in the manufacture or production thereof and goods
which are returned to or repossessed by Debtor.
“Permitted
Senior
Indebtedness” shall mean the prior first priority security
interest of LaSalle Bank National Association (“LaSalle”), and/or any other bank
or institutional lending source which shall replace and/or supersede the LaSalle
loan and debt ; provided,
however, that in no case shall the aggregate amount of such Permitted
Senior Indebtedness exceed eight hundred and seventy-five thousand dollars
($875,000).
“Proceeds”
means all proceeds of, and all other profits, rentals or receipts, in whatever
form, arising from the collection, sale, lease, exchange, assignment, licensing
or other disposition of, or realization upon, any Collateral including all
claims of Debtor against third parties for loss of, damage to or destruction
of,
or for proceeds payable under, or unearned premiums with respect to, policies
of
insurance with respect to any Collateral, and any condemnation or requisition
payments with respect to any Collateral, in each case whether now existing
or
hereafter arising.
“Secured
Obligations” has the meaning assigned to that term in Section 3.
“Security
Agreement” means this Security Agreement as it may be amended,
supplemented or otherwise modified from time to time.
“Security
Interests” means the security interest granted pursuant to Section 2,
as well as all other security interests created or assigned as additional
security for the Secured Obligations pursuant to the provisions of this Security
Agreement.
“Subsidiaries”
has the meaning assigned to that term in the introduction to this Security
Agreement.
“Trademarks”
means collectively all of the following now owned or hereafter created or
acquired by Debtor: (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos, domain names and domain name registrations, other business
identifiers, prints and labels on which any of the foregoing have
appeared or appear, all registrations and recordings thereof (to the extent
Debtor can register such corporate, company or business name as a trademark),
and all applications in connection therewith including registrations, recordings
and applications in the 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; (b) all reissues, extensions or renewals thereof;
(c) all income, royalties, damages and payments now or hereafter due or
payable under any of the foregoing or with respect to any of the foregoing
including damages or payments for past or future infringements of any of the
foregoing; (d) the right to xxx for past, present and future infringements
of any of the foregoing; (e) all rights corresponding to any of the
foregoing throughout the world; and (f) all goodwill associated with and
symbolized by any of the foregoing.
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“UCC”
means
the
Uniform Commercial Code as in effect on the date hereof in the State of
Illinois, Nevada, California, New Jersey and New York or such state as property
and/or fixtures may be located, as the case may be, as amended from time to
time, and any successor statute; provided that if
by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the Security Interest in any Collateral is
governed by the Uniform Commercial Code as in effect on or after the date hereof
in any other jurisdiction, “UCC” means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provision hereof relating to such perfection or effect of perfection or
non-perfection.
1.2 Other
Definition
Provisions. References to “Sections”
“subsections,”
“Exhibits”
and
“Schedules”
shall be to Sections, subsections, Exhibits and Schedules, respectively, of
this Security Agreement unless otherwise specifically provided. References
to
the words “including,” “includes” and “include” shall be deemed to be followed
by the words “without limitation;” and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” Any of the
terms defined in subsection 1.1 may, unless the context otherwise requires,
be used in the singular or the plural depending on the reference. All references
to statutes and related regulations shall include any amendments of same and
any
successor statutes and regulations.
SECTION
2. Grant of Security
Interest.
In
order
to secure the payment and performance of the Secured Obligations in accordance
with the terms thereof, except as otherwise specifically provided in this
Security Agreement, the Debtor hereby grants to the Secured Party, a continuing
first priority security interest and lien in and to all right, title and
interest of Debtor in the following property, whether now owned or existing
or
hereafter acquired or arising and regardless of where located, which first
priority security interest shall be pari passu to the first priority security
interest of the Purchasers and the other purchasers who invest during the
offering to which this Security Agreement is a part), and subject only to the
Permitted Senior Indebtedness (all being collectively referred to as the “Collateral”).
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(a) Accounts;
(b) Inventory;
(c) Computer
Software;
(d) General
Intangibles;
(e) Documents;
(f) Instruments;
(g) Equipment;
(h) Fixtures;
(i) Contracts;
(j) All
deposit accounts of Debtor maintained with any bank or financial
institution;
(k) All
books, records, ledger cards, files, correspondence, computer programs, tapes,
disks and related data processing software that at any time evidence or contain
information relating to any of the property described in subparts (a) -
(j) above or are otherwise necessary or helpful in the collection thereof
or realization thereon;
(l) any
and all other assets of the Debtor, whether currently held or hereafter
acquired; and
(m) Proceeds
of all or any of the property described in subparts (a) -
(l) above.
Notwithstanding
the foregoing, so long as no Event of Default has occurred and is continuing,
Debtor shall have the exclusive, non-transferable right and license to use
the
Collateral and the exclusive right to sell, transfer, convey, rent, lease,
and
grant to third parties licenses and sublicenses with respect to the Collateral,
provided that any such sale, transfer, conveyance, rental, lease, license
or
sublicense is effected in the Debtor’s ordinary course of
business. In the event that the Debtor sells any of its inventory in
the ordinary course of business, such shall be transferred without any liens
under the terms of this Security Agreement.
SECTION
3. Security for
Obligations.
This
Security Agreement secures the
payment and performance of all obligations, liabilities, duties and covenants
of
Debtor to the Secured Party with respect to the Notes, plus any and all accrued
(and accruing) but unpaid interest on all such indebtedness (all such debts,
obligations and liabilities of Debtor being collectively called the “Secured
Obligations”).
5
SECTION
4. Debtor Remains
Liable.
Anything
herein to the contrary
notwithstanding: (a) Debtor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to
perform
all of its duties and obligations thereunder to the same extent as if this
Security Agreement had not been executed; (b) the exercise by the Secured
Party of any of the rights hereunder shall not release Debtor from any of
its
duties or obligations under the contracts and agreements included in the
Collateral; and (c) the Secured Party shall not have any obligation or
liability under the contracts and agreements included in the Collateral by
reason of this Security Agreement, nor shall the Secured Party be obligated
to
perform any of the obligations or duties of Debtor thereunder or to take
any
action to collect or enforce any claim for payment assigned
hereunder.
SECTION
5. Representations
and
Warranties. Debtor
represents and
warrants as follows:
5.1. Binding
Obligation;
Authorization. This Security Agreement and the Note are legally
valid and binding obligations of Debtor, enforceable against it in accordance
with their terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally. The execution, delivery and
performance of this Security Agreement and the Note by the Debtor has been
duly
approved by the Board of Directors of the Debtor and all other actions required
to authorize and effect the granting of the Security Interests and the issuance
of the Note has been duly taken and approved by the Debtor.
5.2. Location
of Equipment and
Inventory. All of the Equipment and Inventory is located at the
places specified on Schedule I.
5.3. Ownership
of Collateral;
Outstanding Loans. The Company owns the Collateral free and clear
of any liens, security interests, charges or other encumbrances (collectively,
“Liens”).
No
financing statement or other form of Lien notice covering all or any part
of the
Collateral is on file in any recording office, except for those in favor
of the
Secured Party.
5.4. Office
Locations; Fictitious
Names. The
chief place of
business, the chief executive office and the office where Debtor keeps its
books
and records are located at the places specified on Schedule I.
5.5. Perfection.
This
Security Agreement
creates a valid and perfected security interest in the Collateral, securing
the
payment of the Secured Obligations, and all filings and other actions necessary
or desirable to perfect and protect such security interest have been duly
taken
(or will be taken immediately after the Closing , as defined in the SPA,
by the
Debtor at the request of the Secured Party); provided, nothing
herein constitutes a representation as to actions that must be taken, if
any, to
perfect a security interest in any item of Equipment, the ownership of which
is
evidenced by a certificate of title.
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5.6. Governmental
Authorizations.
No
authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required either
(a) for the grant by Debtor of the Security Interests granted hereby or for
the execution, delivery or performance of this Security Agreement and/or
the
Note by Debtor or (b) for the perfection of or the exercise by the Secured
Party of its rights and remedies hereunder (except as may have been taken
by or
at the direction of Debtor or the Secured Party).
5.7. Accurate
Information. All information heretofore, herein or hereafter
supplied to the Secured Party by or on behalf of Debtor with respect to the
Collateral is and will be accurate and complete in all material
respects.
SECTION
6. Further Assurances;
Covenants.
6.1. Other
Documents and
Actions. Debtor will, from time to time, at its expense,
immediately execute and deliver all further instruments and documents and
take
all further action that may be necessary or desirable, or that the Secured
Party
may request, in order to perfect and protect any security interest granted
or
purported to be granted hereby or to enable the Secured Party to exercise
and
enforce their rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Debtor will immediately
upon
request of the Secured Party: (a) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments
or
notices, as may be necessary or desirable, or as the Secured Party may request,
in order to perfect and preserve the security interests granted or purported
to
be granted hereby (in such jurisdictions and with such officers as the Secured
Party so request); (b) upon demand by the Secured Party exhibit the
Collateral to allow inspection of the Collateral by the Secured Party or
persons
designated by the Secured Party; and (c) upon the Secured Party’s request,
appear in and defend any action or proceeding that may affect Debtor’s title to
or the Secured Party’s security interest in the Collateral.
6.2. Business
Locations. Debtor will keep the Collateral at the locations
specified on Schedule I
hereto.
6.3. Insurance.
At
its sole expense, the
Debtor shall insure the Collateral at all times for the full insurable value
thereof against casualty and theft and against such other risks, in such
form
and with such insurers, as may be satisfactory to the Secured Party from
time to
time. In addition, each such policy shall (i) name the Secured Party as
mortgagee and loss payee as its interest may appear and name the Secured
Party
as an additional insured relating to liability risks, (ii) provide that no
act of omission or commission or misrepresentation or breach of warranty
by the
Debtor shall affect the Secured Party’s rights thereunder, (iii) provide
that the Secured Party shall not be liable for any premiums or other amounts
and
(iv) upon the agreement of the insurer, at the Debtor’s request, provide
that the insurer shall give the Secured Party not less than twenty (20) days’
prior written notice of cancellation or lapse. If the Debtor shall fail at
any
time to maintain such insurance, the Secured Party may obtain such insurance
coverage and the Debtor agrees to reimburse the Secured Party therefor on
demand
with interest thereon at the rate specified in the Note.
The
Debtor shall notify the Secured Party promptly if any loss or casualty relating
to the Collateral occurs.
7
6.4. Taxes
and
Claims. Debtor will pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims against, the Collateral (including claims for labor, materials and
supplies), except to the extent the validity thereof is being contested in
good
faith.
6.5. Use
of
Collateral. Debtor will not use or permit any Collateral to be
used unlawfully or in violation of any provision of this Security Agreement
or
any applicable statute, regulation or ordinance or any policy of insurance
covering any of the Collateral.
6.6. Condition
of
Collateral. The Debtor shall maintain the Collateral in good
condition and operate the Collateral with reasonable care and caution and
the
Debtor hereby indemnifies and holds the Secured Party harmless from any and
all
loss, damage and liability suffered, incurred or asserted by or against the
Secured Party as a result of the use and operation of the
Collateral.
6.7. Records
Relating to
Collateral. The Debtor will keep its records concerning the
Collateral at its address designated on Schedule
I
hereof or at such other place or places of which the Secured Party shall
have
been notified in writing upon no less than ten (10) days’ advance written
notice. The Debtor (a) will hold and preserve such records and will permit
representatives of the Secured Party at any time during normal business hours
without disrupting the Debtor’s business to examine, inspect and to make
abstracts from such records and (b) will furnish to the Secured Party such
information and reports regarding the Collateral as the Secured Party may
from
time to time request.
6.8. Other
Information. Debtor will, promptly upon request, provide to the
Secured Party all information and evidence they may reasonably request
concerning the Collateral, and in particular the Accounts, to enable the
Secured
Party to enforce the provisions of this Security Agreement.
SECTION
7. Transfers and
Other
Liens.
Except
in
the ordinary course of business, Debtor shall not:
(a) Sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant
any
option with respect to, any of the Collateral; or
(b) Create
or suffer to exist any Liens with respect to any of the Collateral to secure
indebtedness of any Person except for (i) the Security Interests created
by this
Security Agreement, (ii) any Liens and/or security interests existing prior
to
the date of this Security Agreement; (iii) any security interests that are
junior and subordinate to the Security Interests created
by this Security Agreement, and (iv) any purchase money security interests
required in connection with Debtor’s purchase or lease of
Equipment.
8
SECTION
8. Events of Default;
Remedies
(a) Each
of the following events shall be an “Event
of
Default” (i) the non-payment of any of the Secured
Obligations; (ii) the failure of the Debtor to observe or perform any other
term, provision or condition of the Transaction Documents (as defined in
the
SPA), or this Security Agreement, after receipt of notice from the Secured
Party
of such failure to observe or perform and the failure of the Debtor to cure
such
non-performance or non-observance within fifteen (15) days after receipt
thereof; (iii) dissolution or termination of existence of, or the
suspension or termination of operations of the Debtor; (iv) the inability
of the Debtor, or the Debtor’s admission that it is unable, to pay its debts as
they become due or any petition in bankruptcy is filed by or against the
Debtor,
or any proceeding in bankruptcy, or under any other laws of any jurisdiction
relating to the relief of debtors is commenced against the Debtor for the
relief
or readjustment of any indebtedness of the Debtor, either through
reorganization, composition, extension or otherwise, (v) the appointment of
a receiver of any property of the Debtor, (vi) the making by the Debtor of
any assignment for the benefit of creditors or the taking advantage of any
insolvency law; (vii) any seizure, vesting, or intervention by or under
authority of a government, by which the management of the Debtor is displaced
or
its authority in the conduct of its business is curtailed; (viii) any
representation or warranty contained the Note or this Security Agreement,
shall
prove to be materially false when made; or (ix) if an event of default shall
occur for whatever reason under the any of the Notes.
(b) If
any Event of Default shall have occurred and be continuing, the Secured Party
may exercise in respect of the Collateral, in addition to all other rights
and
remedies provided for herein or otherwise available to them, all the right
and
remedies of a secured party on default under the UCC (whether or not the
UCC
applies to the affected Collateral) and also may: (a) require Debtor to,
and Debtor hereby agrees that it will, at its expense and upon request of
the
Secured Party forthwith, assemble all or part of the Collateral as directed
by
the Secured Party and make it available to the Secured Party at a place to
be
designated by the Secured Party which is reasonably convenient to the
Debtor; (b) without notice or demand or legal process, enter upon any
premises of Debtor and take possession of the Collateral; and (c) without
notice except as specified below, sell the Collateral or any part thereof
in one
or more parcels at public or private sale, at such time or times, for cash,
on
credit or for future delivery, and at such price or prices and upon such
other
terms as the Secured Party may deem commercially reasonable. Debtor agrees
that,
to the extent notice of sale shall be required by law, at least two (2) days’
notice to Debtor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
At any sale of the Collateral, if permitted by law, the Secured Party may
bid
(which bid may be, in whole or in part, in the form of cancellation of
indebtedness) for the purchase of the Collateral or any portion thereof for
the
account of the Secured Party. The Secured Party shall not be obligated to
make
any sale of Collateral regardless of notice of sale having been given. The
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without
further notice, be made at the time and place to which it was so adjourned.
To
the extent permitted by law, Debtor hereby specifically waives all rights
of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter enacted. All cash proceeds received by the Secured
Party
resulting from the disposition of or collection from the Collateral may be
held
by the Secured Party as collateral for the Secured Obligations and/or then
or at
any time thereafter applied in payment of all or any of the Secured Obligations
in such order as the Secured Party shall elect. The balance of such cash
proceeds held by the Secured Party and remaining after payment in full of
the
Secured Obligations shall be paid over to the Debtor or to the person who
may be
lawfully entitled to such balance. The remedies provided in this Security
Agreement are cumulative and not exclusive of any other remedies provided
by law
including, without limitation, any rights of setoff available to the Secured
Party.
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SECTION
9. Limitation on
Duty of the
Secured Party with Respect to Collateral.
Beyond
the safe custody thereof, the Secured Party shall have no duty with respect
to
any Collateral in their possession or control (or in the possession or control
of the Secured Party or bailee) or with respect to any income thereon or
the
preservation of rights against prior parties or any other rights pertaining
thereto. The Secured Party shall be deemed to have exercised reasonable care
in
the custody and preservation of the Collateral in their possession if the
Collateral is accorded treatment substantially equal to that which they accord
their own property. The Secured Party shall not be liable or responsible
for any
loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by the Secured
Party in good faith.
SECTION
10. Secured Party
Appointed
Attorney-In-Fact.
Debtor
hereby irrevocably appoints the Secured Party as Debtor’s attorney-in-fact, with
full authority in the place and stead of Debtor and in the name of Debtor
to
take any action and to execute any instrument that the Secured Party may
deem
necessary and/or advisable as follows:
(a) to
obtain and adjust insurance required to be paid to the Secured Party if Debtor
has not done so in the ordinary course of its business;
(b) to
ask, demand, collect, xxx for, recover, compound, receive and give receipts
for
moneys due and to become due under or in respect of any of the Collateral
upon
the occurrence of an Event of Default;
(c) to
receive, endorse, and collect any drafts or other instruments, documents
and
chattel paper, in connection with clauses (a) and (b) above upon the
occurrence of an Event of Default;
(d) to
file any claims or take any action or institute any proceedings that the
Secured
Party may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce
the rights of the Secured Party with respect to any of the Collateral if
Debtor
has not done so in the ordinary course of its business;
(e) to
pay or discharge taxes or liens, levied or placed upon or threatened against
the
Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Secured Party in its sole discretion,
and such payments made by the Secured Party to become obligations of Debtor
to
the Secured Party, due and payable immediately without demand if Debtor has
not
done so in the ordinary course of its business;
(f) to
sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, assignments, verifications and notices in
connection with Accounts and other documents relating to the Collateral upon
the
occurrence of an Event of Default;
(g) generally
to sell, transfer, pledge, make any agreement with respect to or otherwise
deal
with any of the Collateral as fully and completely as though the Secured
Party
were the absolute owner thereof for all purposes, and to do, at the Secured
Party’s option and Debtor’s expense, at any time or from time to time, all acts
and things that the Secured Party deems necessary to protect, preserve or
realize on the Collateral upon the occurrence of an Event of Default;
and
(h) to
accomplish the purposes of this Security Agreement if Debtor has not done
so in
the ordinary course of its business.
Neither
the Secured Party nor any person designated by the Secured Party shall be
liable
for any acts or omissions or for any error of judgment or mistake of fact
or
law. This power, being coupled with an interest, is irrevocable so long as
this
Security Agreement shall remain in force.
10
SECTION
11. Expenses.
Debtor
shall pay all insurance expenses and all expenses of protecting, storing,
warehousing, appraising, insuring, handling, maintaining and shipping the
Collateral, all costs, fees and expenses of perfecting, and maintaining the
Security Interest, any and all excise, property, sales and use taxes imposed
by
any state, federal or local authority on any of the Collateral, or with respect
to periodic appraisals and inspections of the Collateral, or with respect
to the
sale or other disposition thereof. If Debtor fails to promptly pay any portion
of the above expenses when due or to perform any other obligation of Debtor
under this Security Agreement, the Secured Party may, at their option, but
shall
not be required to, pay or perform the same and charge Debtor’s account for all
costs and expenses incurred therefor, and Debtor agrees to reimburse the
Secured
Party therefor on demand. All sums so paid or incurred by the Secured Party
for
any of the foregoing, any and all other sums for which Debtor may become
liable
hereunder and all costs and expenses (including reasonable and documented
attorneys’ fees, legal expenses and court costs) incurred by the Secured Party
in enforcing or protecting the Security Interests or any of their
rights or remedies under this Security Agreement, the Notes, the Warrants
and/or other Transaction Documents shall be payable on demand, shall constitute
Secured Obligations and shall be secured by the Collateral.
SECTION
12. Termination of
Security
Interests; Release of Collateral.
Upon
payment in full of all Secured Obligations, including the aggregate principal
amount of the Notes, including all Interest, the Security Interests shall
immediately terminate and all rights to the Collateral shall revert to Debtor
automatically and without the need for further action to be taken on the
part of
the Debtor or the Secured Party. Upon such termination of the Security Interests
or release of any Collateral, the Secured Party will, at the expense of Debtor,
execute and deliver to Debtor such documents as Debtor shall reasonably request
to evidence the termination of the Security Interests or the release of such
Collateral, as the case may be.
SECTION
13. Notices.
All
notices, requests, demands and other communications provided for hereunder
shall
be in writing and directed to the applicable party at the addresses set forth
on
the signature page hereof or, as to each party, at such other address as
shall
be designated by such party in a written notice to the other parties complying
as to delivery with the terms of this Section. Notice to the Secured Party
on
terms designated in this Section
13
shall be deemed proper notice the Secured Party. All such notices, requests,
demands and other communication shall be deemed given upon the earlier to
occur
of (i) the third day following deposit thereof with the United States Postal
Service for mailing via certified or registered mail, return receipt requested,
or (ii) the actual receipt by the party to whom such notice is
directed.
SECTION
14. Waivers, Non-Exclusive
Remedies.
No
failure on the part of the Secured Party to exercise, and no delay in exercising
and no course of dealing with respect to, any right under the Note or this
Security Agreement shall operate as a waiver thereof; nor shall any single
or
partial exercise by the Secured Party of any right under the Note or this
Security Agreement preclude any other or further exercise thereof or the
exercise of any other right. The rights in this Security Agreement and/or
the
Note are cumulative and are not exclusive of any other remedies provided
by
law.
SECTION
15. Successors and
Assigns.
This
Security Agreement is for the benefit of the Secured Party and each of its
successors and assigns, and in no event shall the Debtor without the prior
express written consent of the Secured Party, assign all or any portion of
the
Secured Obligations, the rights hereunder, or the Note. This Security
Agreement shall be binding on Debtor and its successors and all permitted
assigns.
11
SECTION
16. Severability.
If
any
provisions hereof are invalid or unenforceable in any jurisdiction, the other
provisions hereof shall remain in full force and effect in such jurisdiction
and
shall be liberally construed in favor of the Secured Party.
SECTION
17. Changes in
Writing.
No
amendment, modification, termination or waiver of any provision of this Security
Agreement or consent to any departure by Debtor therefrom, shall in any event
be
effective without the written concurrence of the Secured Party, and the
Debtor.
SECTION
18. Applicable Law,
Etc.
This
Security Agreement will be governed by and construed exclusively under the
laws
of the State of New York as applied to agreements among New York
residents entered into and to be performed entirely within
New York. Each of the parties hereto (1) agree that any
legal suit, action or proceeding arising out of or relating to this Agreement
will be instituted exclusively in New York State Supreme Court, County of
New York, or in the United States District Court for the Southern District
of New York, (2) waive any objection which the Company may have now or
hereafter to the venue of any such suit, action or proceeding, and
(3) irrevocably consent to the jurisdiction of the New York State
Supreme Court, County of New York, and the United States District Court for
the Southern District of New York in any such suit, action or
proceeding. Each of the parties hereto further agrees to accept and
acknowledge service of any and all process which may be served in any such
suit,
action or proceeding in the New York State Supreme Court, County of
New York, or in the United States District Court for the Southern District
of New York and agree that service of process upon it mailed by certified
mail to its address will be deemed in every respect effective service of
process
upon it, in any such suit, action or proceeding.
SECTION
19. Actions
by Secured
Party;
Distributions.
Unless
otherwise specifically provided herein, wherever this Security Agreement
provides for actions to be taken by the Secured Party, or any determination
to
be made by the Secured Party, the actions of those Holders representing,
in the
aggregate, more than 50% of the outstanding Notes shall represent the actions
or
agreement of the Secured Party. In addition, whenever the Secured
Party is entitled to the distribution of monies, Collateral or any other
property, pursuant to the terms of this Security Agreement, such monies,
Collateral and/or other property shall be distributed to the Secured Party,
on a
pro-rata basis, based on the outstanding principal amounts under the
Note.
SECTION
20. Headings.
Section and
subsection headings in this Security Agreement are included herein for
convenience of reference only and shall not constitute a part of this Security
Agreement for any other purpose or be given any substantive effect.
12
SECTION
21. Execution.
This
Agreement may be executed simultaneously in two or more counterparts, each
of
which shall be deemed an original but all of which together shall constitute
one
and the same instrument.
SECTION
22. Waiver of Jury
Trial.
DEBTOR
AND SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SECURITY AGREEMENT.
DEBTOR AND SECURED PARTY ALSO WAIVE ANY BOND OR INDEMNITY OR SECURITY UPON
SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF DEBTOR OR THE SECURED
PARTY HERETO. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING
OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. DEBTOR AND SECURED
PARTY ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO
A
BUSINESS RELATIONSHIP THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING
INTO THIS SECURITY AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER
IN THEIR RELATED FUTURE DEALINGS. DEBTOR AND SECURED PARTY FURTHER WARRANT
AND
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND
EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SECURITY
AGREEMENT. IN THE EVENT OF LITIGATION. THIS SECURITY AGREEMENT MAY BE FILED
AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
Signature
Page
Follows
13
WITNESS
the due execution
hereof by the respective duly authorized officers of the
undersigned
as of the day first above written.
DEBTORS:
By: /s/
Xxxxxx
Xxxxxx
Name: Xxxxxx
Xxxxxx
Title: President
and
CEO
XA
Scenes, Inc.
By: /s/
Xxxxxx
Xxxxxx
Name: Xxxxxx
Xxxxxx
Title: President
and
CEO
The
Experiential Agency,
Inc.
By: /s/
Xxxxxx
Xxxxxxxx
Name: Xxxxxx
Xxxxxxxx
Title: President
XA
Interactive,
Inc.
By: /s/
Xxxxxx
Xxxxxx
Name: Xxxxxx
Xxxxxx
Title: President
and
CEO
Fiori
XA, Inc.
By: /s/
Xxxxxx
Xxxxxxxx
Xxxxxx
Xxxxxxxx
President
14
SECURED
PARTY:
Sands
Brothers Venture
Capital III LLC
By: /s/
Xxxxx
Xxxxx
Name:
Xxxxx Xxxxx
Title:
COO
15
SCHEDULE
I TO SECURITY
AGREEMENT
Locations
of Equipment, Inventory, Books and Records, Chief Executive Officer
Locations
of Equipment and
Inventory:
|
●
|
Chicago,
Illinois - Event decor, furniture and
fixtures
|
|
|
○
|
Office
- Xxxx Xxxxxxx Center, 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx 00000 - The Experiential Agency,
Inc.
|
|
|
○
|
Design
Center - 0000 Xxxxx Xxxxxxx, Xxxxxxx, XX 00000 - Fiori, XA,
Inc.
|
|
●
|
Bergen,
New Jersey (warehouse) - Event decor, furniture and
fixtures
|
0000
00xx
Xxxxxx
Xxxxx
Xxxxxx, XX - The Experiential Agency, Inc.
|
●
|
New
York, New York and Manhattan, New York - (office space and
warehouse),- Event decor, furniture and
fixtures
|
|
|
○
|
New
York Office and venue - 000 Xxxx 00xx Xxxxxx, Xxxxx 0, Xxx Xxxx,
XX 00000
- XA Scenes, Inc.
|
● Los
Angeles, California (office equipment)
○ 000
X. Xxxxxxx, Xxxxx 000, Xxx Xxxxxxx, XX 00000
The
Experiential Agency, Inc.
Location
of Books and
Records and Chief Executive Officer:
|
●
|
Xxxx
Xxxxxxx Center, 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx
00000 - The Experiential Agency,
Inc.
|
16
