PLEDGE AND SECURITY AGREEMENT
Exhibit
10.6
EXECUTION
VERSION
PLEDGE
AND SECURITY AGREEMENT,
dated as of December ___, 2007 (this "Agreement") made by EnterConnect
Inc., a Nevada
corporation ("ECI") and
each other Subsidiary of ECI hereafter becoming party hereto (each such other
Subsidiary, together with ECI each a "Grantor" and, collectively,
the "Grantors"), in
favor of The Bank of New
York, in its capacity as collateral agent (in such capacity, the "Collateral Agent") for the
"Buyers" (as defined below) party to the Securities Purchase Agreement, dated
as
of even date herewith (as amended, restated or otherwise modified from time
to
time, the "Securities Purchase
Agreement").
W
I
T
NE
S
S
E
T
H:
WHEREAS,
ECI and each party listed as a "Buyer" Schedule of Buyers attached thereto
(collectively, the "Buyers") are parties to
the
Securities Purchase Agreement, pursuant to which ECI shall be required to sell,
and the Buyers shall purchase or have the right to purchase, the "Notes" (as
defined therein);
WHEREAS,
it is a condition precedent to the Buyers entering into the Securities Purchase
Agreement that ECI shall have executed and delivered to the Collateral Agent
this Agreement providing for the grant to the Collateral Agent for the benefit
of the Buyers of a security interest in all personal property of ECI to secure
all of ECI's obligations under the Securities Purchase Agreement and the "Notes"
(as defined therein) issued pursuant thereto (as such Notes may be amended,
restated, replaced or otherwise modified from time to time in accordance with
the terms thereof, collectively, the "Notes");
WHEREAS,
ECI and each other Grantor are or will be mutually dependent on each other
in
the conduct of their respective businesses as an integrated operation, with
the
credit needed from time to time by one often being provided through financing
obtained by the other and the ability to obtain such financing being dependent
on the successful operations of ECI and each other Grantor;
WHEREAS,
Each Grantor has determined that the execution, delivery and performance of
this
Agreement and the Guaranty directly benefits, and are in the best interest
of
ECI; and
NOW,
THEREFORE, in consideration of the premises and the agreements herein and in
order to induce the Buyers to perform under the Securities Purchase Agreement,
each Grantor agrees with the Collateral Agent, for the benefit of the Buyers,
as
follows:
SECTION
1. Definitions.
(a)
Reference is hereby made to the Securities Purchase Agreement and the Notes
for
a statement of the terms thereof. All terms used in this Agreement and the
recitals hereto which are defined in the Securities Purchase Agreement, the
Notes or in Articles 8 or 9 of the Uniform Commercial Code (the "UCC") as in effect from
time
to time in the State of New York, and which are not otherwise defined herein
shall have the same meanings herein as set forth therein; provided that terms
used herein which are defined in the UCC as in effect in the State of New York
on the date hereof shall continue to have the same meaning notwithstanding
any
replacement or amendment of such statute.
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(b)
The following terms shall have the respective meanings provided for in the
UCC:
"Accounts", "Cash Proceeds", "Chattel Paper", "Commercial Tort Claim",
"Commodity Account", "Commodity Contracts", "Deposit Account", "Documents",
"Equipment", "Fixtures", "General Intangibles", "Goods", "Instruments",
"Inventory", "Investment Property", "Letter-of-Credit Rights", "Noncash
Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes", "Security",
"Record", "Security Account", "Software", and "Supporting
Obligations".
(c)
As used in this Agreement, the following terms shall have the respective
meanings indicated below, such meanings to be applicable equally to both the
singular and plural forms of such terms:
"Copyright
Licenses" means all
licenses, contracts or other agreements, whether written or oral, naming any
Grantor as licensee or licensor and providing for the grant of any right to
use
or sell any works covered by any copyright (including, without limitation,
all
Copyright Licenses set forth in Schedule II
hereto).
"Copyrights"
means all domestic
and foreign copyrights, whether registered or not, including, without
limitation, all copyright rights throughout the universe (whether now or
hereafter arising) in any and all media (whether now or hereafter developed),
in
and to all original works of authorship fixed in any tangible medium of
expression, acquired or used by any Grantor (including, without limitation,
all
copyrights described in Schedule II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or
any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.
"Event
ofDefault" shall have
the
meaning set forth in the Notes.
"Guaranty"
shall have the
meaning as set forth in Section 5(m)
hereto.
"Insolvency
Proceeding" means
any proceeding commenced by or against any Person under any provision of the
Bankruptcy Code (Chapter 11 of Title 11 of the United States Code) or under
any other bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, or extensions generally
with creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"Intellectual
Property" means
the Copyrights, Trademarks and Patents.
"Licenses"
means the Copyright
Licenses, the Trademark Licenses and the Patent Licenses.
"Lien"
means any mortgage, deed
of trust, pledge, lien (statutory or otherwise), security interest, charge
or
other encumbrance or security or preferential arrangement of any nature,
including, without limitation, any conditional sale or title retention
arrangement, any capitalized lease and any assignment, deposit arrangement
or
financing lease intended as, or having the effect of, security.
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"Majority
Buyers" means the
action, consent or vote of Buyers holding [__%] or more of the
outstanding principal amount of the Notes, or the action, consent or vote of
the
Collateral Agent at the direction of such Buyers..
"Patent
Licenses" means all
licenses, contracts or other agreements, whether written or oral, naming any
Grantor as licensee or licensor and providing for the grant of any right to
manufacture, use or sell any invention covered by any Patent (including, without
limitation, all Patent Licenses set forth in Schedule II
hereto).
"Patents"
means all domestic
and foreign letters patent, design patents, utility patents, industrial designs,
inventions, trade secrets, ideas, concepts, methods, techniques, processes,
proprietary information, technology, know-how, formulae, rights of publicity
and
other general intangibles of like nature, now existing or hereafter acquired
(including, without limitation, all domestic and foreign letters patent, design
patents, utility patents, industrial designs, inventions, trade secrets, ideas,
concepts, methods, techniques, processes, proprietary information, technology,
know-how and formulae described in Schedule II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office, or in any similar office or agency of the United
States or any other country or any political subdivision thereof), and all
reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.
"Trademark
Licenses" means all
licenses, contracts or other agreements, whether written or oral, naming any
Grantor as licensor or licensee and providing for the grant of any right
concerning any Trademark, together with any goodwill connected with and
symbolized by any such trademark licenses, contracts or agreements and the
right
to prepare for sale or lease and sell or lease any and all Inventory now or
hereafter owned by any Grantor and now or hereafter covered by such licenses
(including, without limitation, all Trademark Licenses described in Schedule II
hereto).
"Trademarks"
means all domestic
and foreign trademarks, service marks, collective marks, certification marks,
trade names, business names, d/b/a's, Internet domain names, trade styles,
designs, logos and other source or business identifiers and all general
intangibles of like nature, now or hereafter owned, adopted, acquired or used
by
any Grantor (including, without limitation, all domestic and foreign trademarks,
service marks, collective marks, certification marks, trade names, business
names, d/b/a's, Internet domain names, trade styles, designs, logos and other
source or business identifiers described in Schedule II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any state thereof or any other country or any political subdivision
thereof), and all reissues, extensions or renewals thereof, together with all
goodwill of the business symbolized by such marks and all customer lists,
formulae and other Records of any Grantor relating to the distribution of
products and services in connection with which any of such marks are
used.
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SECTION
2. Grant of Security Interest. As collateral security for all
of the "Obligations" (as defined in Section 3 hereof), each Grantor hereby
pledges and assigns to the Collateral Agent for the benefit of the Buyers,
and
grants to the Collateral Agent for the benefit of the Buyers a continuing
security interest in, all personal property of such Grantor, wherever located
and whether now or hereafter existing and whether now owned or hereafter
acquired, of every kind and description, tangible or intangible (collectively,
the "Collateral"),
including, without limitation, the following:
(a)
all Accounts;
(b)
all Chattel Paper (whether tangible or electronic);
(c)
the Commercial Tort Claims specified on Schedule VI
hereto;
(d)
all Deposit Accounts (including, without limitation, all cash, and all other
property from time to time deposited therein and the monies and property in
the
possession or under the control of the Collateral Agent or any Buyer or any
affiliate, representative, agent or correspondent of the Collateral Agent or
any
Buyer;
(e)
all Documents;
(f)
all Equipment;
(g)
all Fixtures;
(h)
all General Intangibles (including, without limitation, all Payment
Intangibles);
(i)
all Goods;
(j)
all Instruments (including, without limitation, Promissory Notes and each
certificated Security);
(k)
all Inventory;
(l)
all Investment Property;
(m)
all Copyrights, Patents and Trademarks, and all Licenses;
(n)
all Letter-of-Credit Rights;
(o)
all Supporting Obligations;
(p)
all other tangible and intangible personal property of such Grantor (whether
or
not subject to the UCC), including, without limitation, all bank and other
accounts and all cash and all investments therein, all proceeds, products,
offspring, accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of such Grantor described in the
preceding clauses of this Section 2 (including,
without limitation, any proceeds of insurance thereon and all causes of action,
claims and warranties now or hereafter held by such Grantor in respect of any
of
the items listed above), and all books, correspondence, files and other Records,
including, without limitation, all tapes, desks, cards, Software, data and
computer programs in the possession or under the control of such Grantor or
any
other Person from time to time acting for such Grantor that at any time evidence
or contain information relating to any of the property described in the
preceding clauses of this Section 2 or are
otherwise necessary or helpful in the collection or realization thereof;
and
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(q)
all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products
of
any and all of the foregoing Collateral;
in
each
case howsoever such Grantor's interest therein may arise or appear (whether
by
ownership, security interest, claim or otherwise).
SECTION
3. Security for Obligations. The security interest created
hereby in the Collateral constitutes continuing collateral security for all
of
the following obligations, whether now existing or hereafter incurred
(collectively, the "Obligations"):
(a)
(i) the payment by ECI, as and when due and payable (by scheduled maturity,
required prepayment, acceleration, demand or otherwise), of all amounts from
time to time owing by it in respect of the Securities Purchase Agreement, the
Notes and the other "Transaction Documents" (as
defined in the Securities Purchase Agreement), and (ii) the payment by each
Grantor other than ECI as and when due and payable of all "Guaranteed Obligations" under
(as defined in) the Guaranty, including, without limitation, (A) all principal
of and interest on the Notes (including, without limitation, all interest that
accrues after the commencement of any Insolvency Proceeding of any Grantor,
whether or not the payment of such interest is unenforceable or is not allowable
due to the existence of such Insolvency Proceeding), and (B) all fees,
commissions, expense reimbursements, indemnifications and all other amounts
due
or to become due under any of the Transaction Documents; and
(b)
the due performance and observance by each Grantor of all of its other
obligations from time to time existing in respect of any of the Transaction
Documents for so long as the Notes are outstanding.
SECTION
4. Representations and Warranties. Each Grantor represents and
warrants as follows:
(a)
Schedule I
hereto sets forth (i) the exact legal name of such Grantor, and (ii) the
organizational identification number of such Grantor or states that no such
organizational identification number exists.
(b)
There is no pending or written notice threatening any action, suit, proceeding
or claim affecting such Grantor before any governmental authority or any
arbitrator, or any order, judgment or award by any governmental authority or
arbitrator, that may adversely affect the grant by such Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral, or the exercise by the Collateral Agent of any of its rights or
remedies hereunder.
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(c)
All Federal, state and local tax returns and other reports required by
applicable law to be filed by such Grantor have been filed, or extensions have
been obtained, and all taxes, assessments and other governmental charges imposed
upon such Grantor or any property of such Grantor (including, without
limitation, all federal income and social security taxes on employees' wages)
and which have become due and payable on or prior to the date hereof have been
paid, except to the extent contested in good faith by proper proceedings which
stay the imposition of any penalty, fine or Lien resulting from the non-payment
thereof and with respect to which adequate reserves have been set aside for
the
payment thereof in accordance with generally accepted accounting principles
consistently applied ("GAAP").
(d)
All Equipment, Fixtures, Goods and Inventory of such Grantor now existing are,
and all Equipment, Fixtures, Goods and Inventory of such Grantor hereafter
existing will be, located and/or based at the addresses specified therefor
in
Schedule III
hereto, except that such Grantor will give the Collateral Agent not less than
30
days' prior written notice of any change of the location of any such Collateral,
other than to locations set forth on Schedule III and with
respect to which the Buyers or the Collateral Agent have filed UCC financing
statements and otherwise fully perfected the Collateral Agent’s Liens
thereon. Such Grantor's chief place of business and chief executive
office, the place where such Grantor keeps its Records concerning Accounts
and
all originals of all Chattel Paper are located at the addresses specified
therefor in Schedule
III hereto. None of the Accounts is evidenced by Promissory
Notes or other Instruments. Set forth in Schedule IV hereto is
a complete and accurate list, as of the date of this Agreement, of (i) each
Promissory Note, Security and other Instrument owned by each Grantor and (ii)
each Deposit Account, Securities Account and Commodities Account of each
Grantor, together with the name and address of each institution at which each
such Account is maintained, the account number for each such Account and a
description of the purpose of each such Account. Set forth in Schedule II hereto is
a complete and correct list of each trade name used by each Grantor and the
name
of, and each trade name used by, each person from which such Grantor has
acquired any substantial part of the Collateral. Not withstanding anything to
the
contrary contained herein, the Collateral Agent shall have no responsibility
for
preparing, recording, filing, re-recording, or re-filing of any financing
statement, continuation statement, mortgage or other instrument in any public
office with respect to any Collateral or otherwise.
(e)
Such Grantor has delivered to the Collateral Agent complete and correct copies
of each License described in Schedule II hereto,
including all schedules and exhibits thereto, which represents all of the
Licenses existing on the date of this Agreement. Each such License
sets forth the entire agreement and understanding of the parties thereto
relating to the subject matter thereof, and there are no other agreements,
arrangements or understandings, written or oral, relating to the matters covered
thereby or the rights of such Grantor or any of its affiliates in respect
thereof. Each material License now existing is, and any material
License entered into in the future will be, the legal, valid and binding
obligation of the parties thereto, enforceable against such parties in
accordance with its terms. No default under any material License by
any such party has occurred, nor does any defense, offset, deduction or
counterclaim exist thereunder in favor of any such party.
(f)
Such Grantor owns and controls, or otherwise possesses adequate rights to use,
all Trademarks, Patents and Copyrights, which are the only trademarks, patents,
copyrights, inventions, trade secrets, proprietary information and technology,
know-how, formulae, rights of publicity necessary to conduct its business in
substantially the same manner as conducted as of the date hereof. Schedule II hereto
sets forth a true and complete list of all registered copyrights, issued
patents, Trademarks, and Licenses annually owned or used by such Grantor as
of
the date hereof. To the best knowledge of each Grantor, all such
Intellectual Property of such Grantor is subsisting and in full force and
effect, has not been adjudged invalid or unenforceable, is valid and enforceable
and has not been abandoned in whole or in part. Except as set forth
in Schedule II, no such Intellectual Property is the subject of any licensing
or
franchising agreement. Such Grantor has no knowledge of any conflict
with the rights of others to any Intellectual Property and, to the best
knowledge of such Grantor, such Grantor is not now infringing or in conflict
with any such rights of others in any material respect, and to the best
knowledge of such Grantor, no other Person is now infringing or in conflict
in
any material respect with any such properties, assets and rights owned or used
by such Grantor. Such Grantor has not received any notice that it is
violating or has violated the trademarks, patents, copyrights, inventions,
trade
secrets, proprietary information and technology, know-how, formulae, rights
of
publicity or other intellectual property rights of any third party.
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(g)
Such Grantor is and will be at all times the sole and exclusive owner of, or
otherwise has and will have adequate rights in, the Collateral free and clear
of
any Liens, except for Permitted Liens on any Collateral. No effective UCC
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording or filing office except
such
as may have been filed in favor of the Collateral Agent relating to this
Agreement.
(h)
The exercise by the Collateral Agent of any of its rights and remedies hereunder
will not contravene any law or any contractual restriction binding on or
otherwise affecting such Grantor or any of its properties and will not result
in
or require the creation of any Lien, upon or with respect to any of its
properties.
(i)
No authorization or approval or other action by, and no notice to or filing
with, any governmental authority or other regulatory body, or any other Person,
is required for (i) the grant by such Grantor, or the perfection, of the
security interest purported to be created hereby in the Collateral, or
(ii) the exercise by the Collateral Agent of any of its rights and remedies
hereunder, except (A) for the filing under the UCC as in effect in the
applicable jurisdiction of the UCC financing statements, all of which UCC
financing statements, have been duly filed and are in full force and effect,
(B) with respect to the recordation and/or perfection of the security
interests created hereby in the Intellectual Property, for the recording of
the
appropriate Assignment for Security substantially in the form of Exhibit A hereto,
as
applicable, in the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, and (C) with respect to the
perfection of the security interest created hereby in foreign Intellectual
Property and Licenses, for registrations and filings in jurisdictions located
outside of the United States and covering rights in such jurisdictions relating
to the Intellectual Property and Licenses.
(j)
This Agreement creates in favor of the Collateral Agent a legal, valid and
enforceable security interest in the Collateral, as security for the
Obligations. The Collateral Agent's having possession of or control over all
Instruments, Investment Property and cash constituting Collateral from time
to
time, the recording of the appropriate Assignment for Security executed pursuant
hereto in the United States Patent and Trademark Office and the United States
Copyright Office, as applicable, and the filing of the UCC financing statements
and the other filings and recordings, as applicable, described in Schedule V hereto
and, with respect to the Intellectual Property hereafter existing and not
covered by an appropriate Assignment for Security, the recording in the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, of appropriate instruments of assignment, result in the perfection
of such security interests. Such security interests are, or in the
case of Collateral in which such Grantor obtains rights after the date hereof,
will be, perfected, first priority security interests, subject only to Permitted
Liens and the recording of such instruments of assignment. Such
recordings and filings and all other action necessary or desirable to perfect
and protect such security interest have been duly taken, except for the
Collateral Agent's having possession of or control over all Instruments,
Investment Property and cash constituting Collateral after the date hereof
and
the other filings and recordations described in Section 4(l)
hereof.
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(k)
As of the date hereof, such Grantor does not hold any Commercial Tort Claims
nor
is aware of any such pending claims, except for such claims described in Schedule
VI.
(l)
As of the date hereof, ECI does not have any Subsidiaries.
SECTION
5. Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding, unless the Collateral Agent shall
otherwise consent in writing:
(a)
Further
Assurances. Each Grantor will at its expense, at any time and
from time to time, promptly execute and deliver all further instruments and
documents and take all further action that the Majority Buyers may reasonably
request in order to: (i) perfect and protect the security
interest purported to be created hereby; (ii) enable the Collateral Agent
to exercise and enforce its rights and remedies hereunder in respect of the
Collateral; or (iii) otherwise effect the purposes of this Agreement,
including, without limitation: (A) marking conspicuously all
Chattel Paper and each License and, at the request of the Collateral Agent,
each
of its Records pertaining to the Collateral with a legend, in form and substance
satisfactory to the Majority Buyers, indicating that such Chattel Paper, License
or Collateral is subject to the security interest created hereby,
(B) delivering possession of and pledging (or granting control over in
favor of) to the Collateral Agent hereunder each Promissory Note, Security,
Chattel Paper or other Instrument, now or hereafter owned by such Grantor,
duly
endorsed and accompanied by executed instruments of transfer or assignment,
all
in form and substance satisfactory to the Majority Buyers, (C) executing
and filing (to the extent, if any, that such Grantor's signature is required
thereon) or authenticating the filing of, such financing or continuation
statements, or amendments thereto, as may be required by applicable law or
may
be necessary or desirable or that the Majority Buyers may request in order
to
perfect and preserve the security interest purported to be created hereby,
(D) furnishing to the Collateral Agent from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral in each case as the Majority Buyers
may reasonably request, all in reasonable detail, (E) if any Collateral
shall be in the possession of a third party, notifying such Person of the
Collateral Agent's security interest created hereby and obtaining a written
acknowledgment from such Person that such Person holds possession of the
Collateral for the benefit of the Collateral Agent, which such written
acknowledgement shall be in form and substance satisfactory to the Majority
Buyers, (F) if at any time after the date hereof, such Grantor acquires or
holds any Commercial Tort Claim, promptly notifying the Collateral Agent in
a
writing signed by such Grantor setting forth a brief description of such
Commercial Tort Claim and granting to the Collateral Agent a security interest
therein and in the proceeds thereof, which writing shall incorporate the
provisions hereof and shall be in form and substance satisfactory to the
Majority Buyers, (G) upon the acquisition after the date hereof by such
Grantor of any motor vehicle or other Equipment subject to a certificate of
title or ownership (other than a Motor Vehicle or Equipment that is subject
to a
purchase money security interest), causing the Collateral Agent to be listed
as
the lienholder on such certificate of title or ownership and delivering evidence
of the same to the Collateral Agent in accordance with the Securities Purchase
Agreement; and (H) taking all actions required by any earlier versions of
the UCC or by other law, as applicable, in any relevant UCC jurisdiction, or
by
other law as applicable in any foreign jurisdiction.
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(b)
Location of Equipment
and Inventory. Each Grantor will keep the Equipment and
Inventory at the locations specified therefor in Section 4(d)
hereof or, upon not less than thirty (30) days' prior written notice to the
Collateral Agent accompanied by a new Schedule III hereto
indicating each new location of the Equipment and Inventory, at such other
locations in the United States.
(c)
Condition of
Equipment. Each Grantor will maintain or cause the Equipment
(necessary or useful to its business) to be maintained and preserved in good
condition, repair and working order, ordinary wear and tear excepted, and will
forthwith, or in the case of any loss or damage to any Equipment of such
Guarantor within a commercially reasonable time after the occurrence thereof,
make or cause to be made all repairs, replacements and other improvements in
connection therewith which are necessary or desirable, consistent with past
practice, or which the Majority Buyers may request to such end. Such
Grantor will promptly furnish to the Collateral Agent a statement describing
in
reasonable detail any such loss or damage in excess of $250,000 to any
Equipment.
(d)
Taxes,
Etc. Each Grantor agrees to pay promptly when due all property
and other taxes, assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies) against,
the
Equipment and Inventory, except to the extent the validity thereof is being
contested in good faith by proper proceedings which stay the imposition of
any
penalty, fine or Lien resulting from the non-payment thereof and with respect
to
which adequate reserves in accordance with GAAP have been set aside for the
payment thereof.
(e)
Insurance.
(i)
Each Grantor will, at its own expense, maintain insurance (including, without
limitation, commercial general liability and property insurance) with respect
to
the Equipment and Inventory in such amounts, against such risks, in such form
and with responsible and reputable insurance companies or associations as is
required by any governmental authority having jurisdiction with respect thereto
or as is otherwise carried generally in accordance with sound business practice
by companies in similar businesses similarly situated and in any event, in
amount, adequacy and scope reasonably satisfactory to the Majority Buyers.
Each
such policy for liability insurance shall provide for all losses to be paid
on
behalf of the Collateral Agent and such Grantor as their respective interests
may appear, and each policy for property damage insurance shall provide that,
during the continuance of an Event of Default, all losses shall be adjusted
with, and paid directly to, the Collateral Agent. Each such policy shall in
addition (A) name the Collateral Agent as an additional insured party thereunder
(without any representation or warranty by or obligation upon the Collateral
Agent) as their interests may appear, (B) contain an agreement by the insurer
that any loss thereunder shall be payable to the Collateral Agent on its own
account during the continuance of an Event of Default, notwithstanding any
action, inaction or breach of representation or warranty by such Grantor, (C)
provide that there shall be no recourse against the Collateral Agent for payment
of premiums or other amounts with respect thereto, and (D) provide that at
least
30 days' prior written notice of cancellation, lapse, expiration or other
adverse change shall be given to the Collateral Agent by the insurer. Such
Grantor will, if so requested by the Collateral Agent, deliver to the Collateral
Agent original or duplicate policies of such insurance and, as often as the
Collateral Agent or the Majority Buyers may reasonably request, a report of
a
reputable insurance broker with respect to such insurance. Such Grantor will
also, at the request of the Collateral Agent, execute and deliver instruments
of
assignments of such insurance policies and cause the respective insurers to
acknowledge notice of such assignment.
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(ii)
Reimbursement under any liability insurance maintained by a Grantor pursuant
to
this Section
5(e) may be paid directly to the Person who shall have incurred liability
covered by such insurance. In the case of any loss involving damage
to Equipment or Inventory, only during the continuance of an Event of Default,
any proceeds of insurance maintained by a Grantor pursuant to this Section 5(e) shall be
paid to the Collateral Agent (except as to which paragraph (iii) of this Section 5(e) is not
applicable), such Grantor will make or cause to be made the necessary repairs
to
or replacements of such Equipment or Inventory, and any proceeds of insurance
maintained by such Grantor pursuant to this Section 5(e) shall be
paid by the Collateral Agent to such Grantor as reimbursement for the costs
of
such repairs or replacements.
(iii)
Only during the continuance of an Event of Default, all insurance payments
in
respect of such Equipment or Inventory shall be paid to the Collateral Agent
and
applied as specified in Section 7(b)
hereof.
(f)
Provisions Concerning
the Accounts and the Licenses.
(i)
Each Grantor will (A) give the Collateral Agent at least 30 days' prior written
notice of any change in such Grantor's name, identity or organizational
structure, (B) maintain its jurisdiction of incorporation as set forth in Section 4(b) hereto,
(C) immediately notify the Collateral Agent upon obtaining an organizational
identification number, if on the date hereof such Grantor did not have such
identification number, and (D) keep adequate records concerning the Accounts
and
Chattel Paper and permit representatives of the Collateral Agent or the Buyers
during normal business hours on reasonable notice to such Grantor, to inspect
and make abstracts from such Records and Chattel Paper.
-10-
(ii)
Each Grantor will, except as otherwise provided in this subsection (f),
continue to collect, at its own expense, all amounts due or to become due under
the Accounts. In connection with such collections during the
continuance of an Event of Default, such Grantor may (and, at the Collateral
Agent's direction, will) take such action as such Grantor or the Majority Buyers
may deem necessary or advisable to enforce collection or performance of the
Accounts; provided, however,
that the
Collateral Agent shall have the right at any time, upon the occurrence and
during the continuance of an Event of Default, to notify the account debtors
or
obligors under any Accounts of the assignment of such Accounts to the Collateral
Agent and to direct such account debtors or obligors to make payment of all
amounts due or to become due to such Grantor thereunder directly to the
Collateral Agent or its designated agent and, upon such notification and at
the
expense of such Grantor and to the extent permitted by law, to enforce
collection of any such Accounts and to adjust, settle or compromise the amount
or payment thereof, in the same manner and to the same extent as such Grantor
might have done. After receipt by a Grantor of a notice from the
Collateral Agent that the Collateral Agent has notified, intends to notify,
or
has enforced or intends to enforce a Grantor's rights against the account
debtors or obligors under any Accounts as referred to in the proviso to the
immediately preceding sentence, (A) all amounts and proceeds (including
Instruments) received by such Grantor in respect of the Accounts shall be
received in trust for the benefit of the Collateral Agent hereunder, shall
be
segregated from other funds of such Grantor and shall be forthwith paid over
to
the Collateral Agent in the same form as so received (with any necessary
endorsement) to be held as cash collateral and applied as specified in Section 7(b) hereof,
and (B) such Grantor will not adjust, settle or compromise the amount or payment
of any Account or release wholly or partly any account debtor or obligor thereof
or allow any credit or discount thereon. In addition, upon the
occurrence and during the continuance of an Event of Default, the Collateral
Agent may (acting at the direction of the Majority Buyers, in their sole and
absolute discretion) direct any or all of the banks and financial institutions
with which such Grantor either maintains a Deposit Account or a lockbox or
deposits the proceeds of any Accounts to send immediately to the Collateral
Agent by wire transfer (to such account as the Collateral Agent shall specify,
or in such other manner as the Collateral Agent shall direct) all or a portion
of such securities, cash, investments and other items held by such
institution. Any such securities, cash, investments and other items
so received by the Collateral Agent shall (acting at the direction of the
Majority Buyers, in their sole and absolute discretion) be held as additional
Collateral for the Obligations or distributed in accordance with Section 7
hereof.
(iii)
Upon the occurrence and during the continuance of any breach or default under
any material License referred to in Schedule II hereto by
any party thereto other than a Grantor, the Grantor party thereto will, promptly
after obtaining knowledge thereof, give the Collateral Agent written notice
of
the nature and duration thereof, specifying what action, if any, it has taken
and proposes to take with respect thereto and thereafter will take reasonable
steps to protect and preserve its rights and remedies in respect of such breach
or default, or will obtain or acquire an appropriate substitute
License.
(iv)
Each Grantor will, at its expense, promptly deliver to the Collateral Agent
a
copy of each notice or other communication received by it by which any other
party to any material License referred to in Schedule II hereto
purports to exercise any of its rights or affect any of its obligations
thereunder, together with a copy of any reply by such Grantor
thereto.
-11-
(v)
Each Grantor will exercise promptly and diligently each and every right which
it
may have under each material License (other than any right of termination)
and
will duly perform and observe in all respects all of its obligations under
each
material License and will take all action reasonably necessary to maintain
such
Licenses in full force and effect. No Grantor will, without the prior written
consent of the Majority Buyer, cancel, terminate, materially amend or otherwise
materially modify in any respect, or waive any provision of, any material
License referred to in Schedule II
hereto.
(g)
Transfers and Other
Liens.
(i)
No Grantor will sell, assign (by operation of law or otherwise), lease, license,
exchange or otherwise transfer or dispose of any of the Collateral, except
(A)
Inventory in the ordinary course of business, and (B) worn-out or obsolete
assets not necessary to the business.
(ii)
No Grantor will create, suffer to exist or grant any Lien upon or with respect
to any Collateral, other than Permitted Liens.
(h)
Intellectual
Property.
(i)
If applicable, each Grantor shall, upon the Collateral Agent's written request,
duly execute and deliver the applicable Assignment for Security in the form
attached hereto as Exhibit
A. Each Grantor (either itself or through licensees) will, and
will cause each licensee thereof to, take all action necessary to maintain
all
of the Intellectual Property in full force and effect, including, without
limitation, using the proper statutory notices and markings and using the
Trademarks on each applicable trademark class of goods in order to so maintain
the Trademarks in full force and free from any claim of abandonment for non-use,
and such Grantor will not (nor permit any licensee thereof to) do any act or
knowingly omit to do any act whereby any Intellectual Property may become
invalidated; provided, however,
that so long
as no Event of Default has occurred and is continuing, such Grantor shall not
have an obligation to use or to maintain any Intellectual Property (A) that
relates solely to any product or work, that has been, or is in the process
of
being, discontinued, abandoned or terminated, (B) that is being replaced with
Intellectual Property substantially similar to the Intellectual Property that
may be abandoned or otherwise become invalid, so long as the failure to use
or
maintain such Intellectual Property does not materially adversely affect the
validity of such replacement Intellectual Property and so long as such
replacement Intellectual Property is subject to the Lien created by this
Agreement or (C) that is substantially the same as another Intellectual Property
that is in full force, so long as the failure to use or maintain such
Intellectual Property does not materially adversely affect the validity of
such
replacement Intellectual Property and so long as such other Intellectual
Property is subject to the Lien and security interest created by this
Agreement. Each Grantor will cause to be taken all necessary steps in
any proceeding before the United States Patent and Trademark Office and the
United States Copyright Office or any similar office or agency in any other
country or political subdivision thereof to maintain each registration of the
Intellectual Property (other than the Intellectual Property described in the
proviso to the immediately preceding sentence), including, without limitation,
filing of renewals, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings and payment of maintenance
fees, filing fees, taxes or other governmental fees. If any
Intellectual Property (other than Intellectual Property described in the proviso
to the first sentence of subsection (i) of this clause (h)) is infringed,
misappropriated, diluted or otherwise violated in any material respect by a
third party, such Grantor shall (x) upon learning of such infringement,
misappropriation, dilution or other violation, promptly notify the Collateral
Agent and (y) to the extent such Grantor shall deem appropriate under the
circumstances, promptly xxx for infringement, misappropriation, dilution or
other violation, seek injunctive relief where appropriate and recover any and
all damages for such infringement, misappropriation, dilution or other
violation, or take such other actions as such Grantor shall deem appropriate
under the circumstances to protect such Intellectual Property. Each
Grantor shall furnish to the Collateral Agent from time to time upon its request
statements and schedules further identifying and describing the Intellectual
Property and Licenses and such other reports in connection with the Intellectual
Property and Licenses as the Majority Buyers may reasonably request, all in
reasonable detail and promptly upon request of the Majority Buyers, following
receipt by the Collateral Agent of any such statements, schedules or reports,
such Grantor shall modify this Agreement by amending Schedule II hereto,
as the case may be, to include any Intellectual Property and License, as the
case may be, which becomes part of the Collateral under this Agreement and
shall
execute and authenticate such documents and do such acts as shall be necessary
or, in the judgment of the Majority Buyers, desirable to subject such
Intellectual Property and Licenses to the Lien and security interest created
by
this Agreement. Notwithstanding anything herein to the contrary, upon
the occurrence and during the continuance of an Event of Default, such Grantor
may not abandon or otherwise permit any Intellectual Property to become invalid
without the prior written consent of the Collateral Agent, and if any
Intellectual Property is infringed, misappropriated, diluted or otherwise
violated in any material respect by a third party, such Grantor will take such
action as the Majority Buyers shall deem appropriate under the circumstances
to
protect such Intellectual Property.
-12-
(ii)
In no event shall a Grantor, either itself or through any agent, employee,
licensee or designee, file an application for the registration of any Trademark
or Copyright or the issuance of any Patent with the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, or in
any
similar office or agency of the United States or any country or any political
subdivision thereof unless it gives the Collateral Agent prompt written notice
before or after the occurrence thereof. Each Grantor shall execute, authenticate
and deliver any and all assignments, agreements, instruments, documents and
papers as the Majority Buyers may reasonably request to evidence the Collateral
Agent's security interest hereunder in such Intellectual Property and the
General Intangibles of such Grantor relating thereto or represented thereby,
and
such Grantor hereby appoints the Collateral Agent its attorney-in-fact to
execute and/or authenticate and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed, and
such power (being coupled with an interest) shall be irrevocable until (A)
the
earliest to occur of (x) the indefeasible payment in full in cash of all of
the
Obligations, or (y) the indefeasible conversion of all the Notes in full to
Common Stock, or (z) the indefeasible payment in cash of the Obligations in
part
and the indefeasible conversion of all then outstanding balance of the Notes
in
full to Common Stock, and (B) the termination of each of the Transaction
Documents.
(i)
Deposit, Commodities
and Securities Accounts. Each Grantor shall cause each bank
and other financial institution with an account referred to in Schedule IV hereto to
execute and deliver to the Collateral Agent a control agreement, in form and
substance in form and substance satisfactory to the Collateral Agent,1
duly executed by such Grantor and such bank or
financial institution, or enter into other arrangements in form and substance
satisfactory to the Majority Buyers, pursuant to which such institution shall
irrevocably agree, interalia,
that
(i) it will comply at any time with the instructions originated by the
Collateral Agent to such bank or financial institution directing the disposition
of cash, Commodity Contracts, securities, Investment Property and other items
from time to time credited to such account, without further consent of such
Grantor, which instructions the Collateral Agent will not give to such bank
or
other financial institution in the absence of a continuing Event of Default,
(ii) all cash, Commodity Contracts, securities, Investment Property and
other items of such Grantor deposited with such institution shall be subject
to
a perfected, first priority security interest in favor of the Collateral Agent,
(iii) any right of set off, banker's Lien or other similar Lien, security
interest or encumbrance shall be fully waived as against the Collateral Agent,
and (iv) upon receipt of written notice from the Collateral Agent during
the continuance of an Event of Default, such bank or financial institution
shall
immediately send to the Collateral Agent by wire transfer (to such account
as
the Collateral Agent shall specify, or in such other manner as the Collateral
Agent shall direct) all such cash, the value of any Commodity Contracts,
securities, Investment Property and other items held by it. Without
the prior written consent of the Collateral Agent, such Grantor shall not make
or maintain any Deposit Account, Commodity Account or Securities Account except
for the accounts set forth in Schedule IV
hereto. The provisions of this paragraph 5(i) shall not apply to (i)
Deposit Accounts for which the Collateral Agent is the depositary and (ii)
Deposit Accounts specially and exclusively used for payroll, payroll taxes
and
other employee wage and benefit payments to or for the benefit of a Grantor's
salaried employees.
-13-
(j)
Motor
Vehicles.
(i)
Upon the Collateral Agent's written request (at the direction of the Majority
Buyers), each Grantor shall deliver to the Collateral Agent originals of the
certificates of title or ownership for all motor vehicles owned by it with
the
Collateral Agent listed as lienholder, for the benefit of the
Buyers.
(ii)
Each Grantor hereby appoints the Collateral Agent as its attorney-in-fact,
effective the date hereof and terminating upon the termination of this Agreement
(at the direction of the Majority Buyers), for the purpose of (A) executing
on
behalf of such Grantor title or ownership applications for filing with
appropriate state agencies to enable motor vehicles now owned or hereafter
acquired by such Grantor to be re-titled and the Collateral Agent listed as
lienholder thereof, (B) filing such applications with such state agencies,
and
(C) executing such other documents and instruments on behalf of, and taking
such
other action in the name of, such Grantor as the Majority Buyers may deem
necessary or advisable to accomplish the purposes hereof (including, without
limitation, for the purpose of creating in favor of the Collateral Agent a
perfected Lien on the motor vehicles and exercising the rights and remedies
of
the Collateral Agent hereunder). This appointment as attorney-in-fact is coupled
with an interest and is irrevocable until all of the Obligations are
indefeasibly paid in full in cash and after all Transaction Documents have
been
terminated.
|
1
|
Please
note that Collateral Agent will not indemnify any third party financial
institution in connection with such
agreement.),
|
-14-
(iii)
Any certificates of title or ownership delivered pursuant to the terms hereof
shall be accompanied by odometer statements for each motor vehicle covered
thereby.
(iv)
So long as no Event of Default shall have occurred and be continuing, upon
the
request of such Grantor, the Collateral Agent shall execute and deliver to
such
Grantor such instruments as such Grantor shall reasonably request to remove
the
notation of the Collateral Agent as lienholder on any certificate of title
for
any motor vehicle; provided, however,
that any
such instruments shall be delivered, and the release effective, only upon
receipt by the Collateral Agent of a certificate from such Grantor stating
that
such motor vehicle is to be sold or has suffered a casualty loss (with title
thereto passing to the casualty insurance company therefor in settlement of
the
claim for such loss) and the amount that such Grantor will receive as sale
proceeds or insurance proceeds. Any proceeds of such sale or casualty
loss shall be paid to the Collateral Agent hereunder immediately upon receipt,
to be applied to the Obligations then outstanding.
(k)
Control. Each
Grantor hereby agrees to take any or all action that may be necessary or
desirable or that the Majority Buyers may request in order for the Collateral
Agent to obtain control in accordance with Sections 9-105 – 9-107 of the UCC
with respect to the following Collateral: (i) Electronic Chattel
Paper, (ii) Investment Property, and (iii) Letter-of-Credit Rights.
(l)
Inspection and
Reporting. Each Grantor shall permit the Collateral Agent, the
Buyers or any agent or representatives thereof or such professionals or other
Persons as the Collateral Agent may designate, not more than one time a year
in
the absence of an Event of Default, (i) to examine and make copies of and
abstracts from such Grantor's records and books of account, (ii) to visit and
inspect its properties, (iii) to verify materials, leases, Instruments,
Accounts, Inventory and other assets of such Grantor from time to time, and
(iii) to conduct audits, physical counts, appraisals and/or valuations,
examinations at the locations of such Grantor. Each Grantor shall
also permit the Collateral Agent, the Buyers or any agent or representatives
thereof or such professionals or other Persons as the Collateral Agent may
designate to discuss such Grantor's affairs, finances and accounts with any
of
its directors, officers, managerial employees, independent accountants or any
of
its other representatives.
(m)
Future
Subsidiaries. ECI and each other Grantor hereby agrees if ECI
or such other Grantor shall hereafter own, create or acquire any Subsidiary
that
is not a Grantor hereunder or a party to the Grantor, then, ECI or such other
Grantor shall promptly notify the Collateral Agent thereof and, simultaneously
therewith, ECI or such other such Grantor shall cause such Subsidiary to become
a party to the Guaranty, in the form attached hereto as Exhibit B hereto (as
amended, restated or otherwise modified from time to time, the "Guaranty"), as a "Guarantor"
thereunder, and to
this Agreement as an additional "Grantor" hereunder, and to
duly execute and/or deliver such opinions of counsel and other documents, in
form and substance acceptable to the Majority Buyers, as the Majority Buyers
shall reasonably request with respect thereto.
-15-
SECTION
6. Additional Provisions Concerning the
Collateral.
(a)
Each Grantor hereby (i) authorizes the Buyers or the Collateral Agent to
file one or more UCC financing or continuation statements, and amendments
thereto, relating to the Collateral and (ii) ratifies such authorization to
the extent that the Buyers or the Collateral Agent has filed any such financing
or continuation statements, or amendments thereto, prior to the date
hereof. A photocopy or other reproduction of this Agreement or any
UCC financing statement covering the Collateral or any part thereof shall be
sufficient as a UCC financing statement where permitted by law.
(b)
Each Grantor hereby irrevocably appoints the Collateral Agent as its
attorney-in-fact and proxy, with full authority in the place and stead of such
Grantor and in the name of such Grantor or otherwise, from time to time in
the
Majority Buyers' reasonable discretion, so long as an Event of Default shall
have occurred and is continuing, to take any action and to execute any
instrument which the Majority Buyers may reasonably deem necessary or advisable
to accomplish the purposes of this Agreement (subject to the rights of such
Grantor under Section
5 hereof), including, without limitation, (i) to obtain and adjust
insurance required to be paid to the Collateral Agent pursuant to Section 5(e) hereof,
(ii) to ask, demand, collect, xxx for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect
of
any Collateral, (iii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) or (ii)
above, (iv) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the collection
of
any Collateral or otherwise to enforce the rights of the Collateral Agent and
the Buyers with respect to any Collateral, and (v) to execute assignments,
licenses and other documents to enforce the rights of the Collateral Agent
and
the Buyers with respect to any Collateral. This power is coupled with
an interest and is irrevocable until the earliest to occur of (x) the
indefeasible payment in full in cash of all of the Obligations, or (y) the
indefeasible conversion of all the Notes in full to Common Stock, or (z) the
indefeasible payment in cash of the Obligations in part and the indefeasible
conversion of all then outstanding balance of the Notes in full to Common
Stock.
(c)
For the purpose of enabling the Collateral Agent to exercise rights and remedies
hereunder, at such time as the Collateral Agent shall be lawfully entitled
to
exercise such rights and remedies, and for no other purpose, each Grantor hereby
grants to the Collateral Agent, to the extent assignable, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to such Grantor) to use, assign, license or sublicense any
Intellectual Property now owned or hereafter acquired by such Grantor, wherever
the same may be located, including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout thereof. Notwithstanding
anything contained herein to the contrary, but subject to the provisions of
the
Securities Purchase Agreement that limit the right of such Grantor to dispose
of
its property and Section 5(h) hereof,
so long as no Event of Default shall have occurred and be continuing, such
Grantor may exploit, use, enjoy, protect, license, sublicense, assign, sell,
dispose of or take other actions with respect to the Intellectual Property
in
the ordinary course of its business. In furtherance of the foregoing,
unless an Event of Default shall have occurred and be continuing, the Collateral
Agent shall from time to time, upon the request of a Grantor, execute and
deliver any instruments, certificates or other documents, in the form so
requested, which such Grantor shall have certified are appropriate (in such
Grantor's judgment) to allow it to take any action permitted above (including
relinquishment of the license provided pursuant to this clause (c) as to any
Intellectual Property). Further, upon the earliest to occur of (x)
the indefeasible payment in full in cash of all of the Obligations, or (y)
the
indefeasible conversion of all the Notes in full to Common Stock, or (z) the
indefeasible payment in cash of the Obligations in part and the indefeasible
conversion of all then outstanding balance of the Notes in full to Common Stock,
the Collateral Agent (subject to Section 10(e) hereof)
shall release and reassign to such Grantor all of the Collateral Agent's right,
title and interest in and to the Intellectual Property, and the Licenses, all
without recourse, representation or warranty whatsoever. The exercise
of rights and remedies hereunder by the Collateral Agent shall not terminate
the
rights of the holders of any licenses or sublicenses theretofore granted by
such
Grantor in accordance with the second sentence of this clause
(c). Each Grantor hereby releases the Collateral Agent from any
claims, causes of action and demands at any time arising out of or with respect
to any actions taken or omitted to be taken by the Collateral Agent under the
powers of attorney granted herein other than actions taken or omitted to be
taken through the Collateral Agent's gross negligence or willful misconduct,
as
determined by a final determination of a court of competent
jurisdiction.
-16-
(d)
If a Grantor fails to perform any agreement contained herein, the Collateral
Agent may (but shall not be obligated to) itself perform, or cause performance
of, such agreement or obligation, in the name of such Grantor or the Collateral
Agent, and the expenses of the Collateral Agent incurred in connection therewith
shall be payable by such Grantor pursuant to Section 8 hereof and
shall be secured by the Collateral.
(e)
The powers conferred on the Collateral Agent hereunder are solely to protect
its
interest in the Collateral and shall not impose any duty upon it to exercise
any
such powers. Except for the safe custody of any Collateral in its possession
and
the accounting for moneys actually received by it hereunder, the Collateral
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
(f)
Anything herein to the contrary notwithstanding (i) each Grantor shall
remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed,
(ii) the exercise by the Collateral Agent of any of its rights hereunder
shall not release such Grantor from any of its obligations under the Licenses
or
otherwise in respect of the Collateral, and (iii) the Collateral Agent
shall not have any obligation or liability by reason of this Agreement under
the
Licenses or with respect to any of the other Collateral, nor shall the
Collateral Agent be obligated to perform any of the obligations or duties of
such Grantor thereunder or to take any action to collect or enforce any claim
for payment assigned hereunder.
SECTION
7. Remedies Upon Event of Default. If any Event of Default
shall have occurred and be continuing:
-17-
(a)
The Collateral Agent may (at the direction of the Majority Buyers) exercise
in
respect of the Collateral, in addition to any other rights and remedies provided
for herein or otherwise available to it, all of the rights and remedies of
a
secured party upon default under the UCC (whether or not the UCC applies to
the
affected Collateral), and also may (i) take absolute control of the
Collateral, including, without limitation, transfer into the Collateral Agent's
name or into the name of its nominee or nominees (to the extent the Collateral
Agent has not theretofore done so) and thereafter receive, for the benefit
of
the Collateral Agent, all payments made thereon, give all consents, waivers
and
ratifications in respect thereof and otherwise act with respect thereto as
though it were the outright owner thereof, (ii) require each Grantor to,
and each Grantor hereby agrees that it will at its expense and upon request
of
the Collateral Agent forthwith, assemble all or part of its respective
Collateral as directed by the Collateral Agent and make it available to the
Collateral Agent at a place or places to be designated by the Collateral Agent
that is reasonably convenient to both parties, and the Collateral Agent may
enter into and occupy any premises owned or leased by such Grantor where the
Collateral or any part thereof is located or assembled for a reasonable period
in order to effectuate the Collateral Agent's rights and remedies hereunder
or
under law, without obligation to such Grantor in respect of such occupation,
and
(iii) without notice except as specified below and without any obligation
to prepare or process the Collateral for sale, (A) sell the Collateral or
any part thereof in one or more parcels at public or private sale, at any of
the
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the
Collateral Agent may deem commercially reasonable and/or (B) lease, license
or dispose of the Collateral or any part thereof upon such terms as the
Collateral Agent may deem commercially reasonable. Each Grantor
agrees that, to the extent notice of sale or any other disposition of its
respective Collateral shall be required by law, at least ten (10) days' notice
to such Grantor of the time and place of any public sale or the time after
which
any private sale or other disposition of its respective Collateral is to be
made
shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale or other disposition of any Collateral
regardless of notice of sale having been given. The Collateral Agent
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. Each Grantor
hereby waives any claims against the Collateral Agent and the Buyers arising
by
reason of the fact that the price at which its respective Collateral may have
been sold at a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Collateral Agent accepts the first offer received
and
does not offer such Collateral to more than one offeree, and waives all rights
that such Grantor may have to require that all or any part of such Collateral
be
marshalled upon any sale (public or private) thereof. Each Grantor
hereby acknowledges that (i) any such sale of its respective Collateral by
the Collateral Agent shall be made without warranty, (ii) the Collateral
Agent may specifically disclaim any warranties of title, possession, quiet
enjoyment or the like, and (iii) such actions set forth in clauses (i)
and (ii) above shall not adversely affect the commercial reasonableness of
any
such sale of Collateral. In addition to the foregoing, (1) upon
written notice to any Grantor from the Collateral Agent, such Grantor shall
cease any use of the Intellectual Property or any trademark, patent or copyright
similar thereto for any purpose described in such notice; (2) the Collateral
Agent may, at any time and from time to time, upon 10 days' prior notice to
such
Grantor, license, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any of the Intellectual Property, throughout
the universe for such term or terms, on such conditions, and in such manner,
as
the Collateral Agent shall in its sole discretion determine; and (3) the
Collateral Agent may, at any time, pursuant to the authority granted in Section 6 hereof
(such authority being effective upon the occurrence and during the continuance
of an Event of Default), execute and deliver on behalf of such Grantor, one
or
more instruments of assignment of the Intellectual Property (or any application
or registration thereof), in form suitable for filing, recording or registration
in any country.
-18-
(b)
Any cash held by the Collateral Agent as Collateral and all Cash Proceeds
received by the Collateral Agent in respect of any sale of or collection from,
or other realization upon, all or any part of the Collateral may, in the
reasonable discretion of the Collateral Agent, be held by the Collateral Agent
as collateral for, and/or then or at any time thereafter applied (after payment
of any amounts payable to the Collateral Agent pursuant to Section 8 hereof)
in
whole or in part by the Collateral Agent against, all or any part of the
Obligations in such order as the Collateral Agent shall elect, consistent with
the provisions of the Securities Purchase Agreement. Any surplus of
such cash or Cash Proceeds held by the Collateral Agent and remaining after
the
earliest to occur of (x) the indefeasible payment in full in cash of all of
the
Obligations, or (y) the indefeasible conversion of all the Notes in full to
Common Stock, or (z) the indefeasible payment in cash of the Obligations in
part
and the indefeasible conversion of all then outstanding balance of the Notes
in
full to Common Stock, shall be paid over to whomsoever shall be lawfully
entitled to receive the same or as a court of competent jurisdiction shall
direct.
(c)
In the event that the proceeds of any such sale, collection or realization
are
insufficient to pay all amounts to which the Collateral Agent and the Buyers
are
legally entitled, each Grantor shall be liable for the deficiency, together
with
interest thereon at the highest rate specified in any of the applicable
Transaction Documents for interest on overdue principal thereof or such other
rate as shall be fixed by applicable law, together with the costs of collection
and the reasonable fees, costs, expenses and other client charges of any
attorneys employed by the Collateral Agent to collect such
deficiency.
(d)
Each Grantor hereby acknowledges that if the Collateral Agent complies with
any
applicable state, provincial, or federal law requirements in connection with
a
disposition of the Collateral, such compliance will not adversely affect the
commercial reasonableness of any sale or other disposition of the
Collateral.
(e)
The Collateral Agent shall not be required to marshal any present or future
collateral security (including, but not limited to, this Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any
of
them or to resort to such collateral security or other assurances of payment
in
any particular order, and all of the Collateral Agent's rights hereunder and
in
respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or arising.
To
the extent that each Grantor lawfully may, such Grantor hereby agrees that
it
will not invoke any law relating to the marshalling of collateral which might
cause delay in or impede the enforcement of the Collateral Agent's rights under
this Agreement or under any other instrument creating or evidencing any of
the
Obligations or under which any of the Obligations is outstanding or by which
any
of the Obligations is secured or payment thereof is otherwise assured, and,
to
the extent that it lawfully may, such Grantor hereby irrevocably waives the
benefits of all such laws.
-19-
SECTION
8. Indemnity and Expenses.
(a)
Each Grantor agrees, jointly and severally, to defend, protect, indemnify and
hold the Collateral Agent and each of the Buyers, jointly and severally,
harmless from and against any and all claims, damages, losses, liabilities,
obligations, penalties, fees, costs and expenses (including, without limitation,
reasonable legal fees, costs, expenses, and disbursements of such Person's
counsel) to the extent that they arise out of or otherwise result from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from such Person's
gross negligence or willful misconduct, as determined by a final judgment of
a
court of competent jurisdiction.
(b)
Each Grantor agrees, jointly and severally, to upon demand pay to the Collateral
Agent the amount of any and all costs and expenses, including the reasonable
fees, costs, expenses and disbursements of counsel for the Collateral Agent
and
of any experts and agents (including, without limitation, any collateral trustee
which may act as agent of the Collateral Agent), which the Collateral Agent
may
incur in connection with (i) the preparation, negotiation, execution,
delivery, recordation, administration, amendment, waiver or other modification
or termination of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Collateral, (iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder, or (iv) the failure by any Grantor to perform
or observe any of the provisions hereof.
SECTION
9. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed (by certified mail,
postage prepaid and return receipt requested), telecopied or delivered, if
to a
Grantor at its address specified below and if to the Collateral Agent to it,
at
its address specified below; or as to any such Person, at such other address
as
shall be designated by such Person in a written notice to such other Person
complying as to delivery with the terms of this Section 9. All such notices
and
other communications shall be effective (a) if sent by certified mail,
return receipt requested, when received or three days after deposited in the
mails, whichever occurs first, (b) if telecopied, when transmitted (during
normal business hours) and confirmation is received, otherwise, the day after
the notice was transmitted if confirmation is received, or (c) if
delivered, upon delivery.
SECTION
10. Miscellaneous.
(a)
No amendment of any provision of this Agreement shall be effective unless it
is
in writing and signed by each Grantor and the Collateral Agent, and no waiver
of
any provision of this Agreement, and no consent to any departure by a Grantor
therefrom, shall be effective unless it is in writing and signed by the
Collateral Agent, and then such waiver or consent shall be effective only in
the
specific instance and for the specific purpose for which given.
(b)
No failure on the part of the Collateral Agent to exercise, and no delay in
exercising, any right hereunder or under any of the other Transaction Documents
shall operate as a waiver thereof; nor shall any single or partial exercise
of
any such right preclude any other or further exercise thereof or the exercise
of
any other right. The rights and remedies of the Collateral Agent or any Buyer
provided herein and in the other Transaction Documents are cumulative and are
in
addition to, and not exclusive of, any rights or remedies provided by law.
The
rights of the Collateral Agent or any Buyer under any of the other Transaction
Documents against any party thereto are not conditional or contingent on any
attempt by such Person to exercise any of its rights under any of the other
Transaction Documents against such party or against any other Person, including
but not limited to, any Grantor.
-20-
(c)
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(d)
This Agreement shall create a continuing security interest in the Collateral
and
shall (i) remain in full force and effect until the earliest to occur of (x)
the
indefeasible payment in full in cash of all of the Obligations, or (y) the
indefeasible conversion of all the Notes in full to Common Stock, or (z) the
indefeasible payment in cash of the Obligations in part and the indefeasible
conversion of all then outstanding balance of the Notes in full to Common Stock,
and (ii) be binding on each Grantor and all other Persons who become bound
as
debtor to this Agreement in accordance with Section 9-203(d) of the UCC and
shall inure, together with all rights and remedies of the Collateral Agent
and
the Buyers hereunder, to the benefit of the Collateral Agent and the Buyers
and
their respective permitted successors, transferees and assigns. Without limiting
the generality of clause (ii) of the immediately preceding sentence, without
notice to any Grantor, the Collateral Agent and the Buyers may assign or
otherwise transfer their rights and obligations under this Agreement and any
of
the other Transaction Documents, to any other Person and such other Person
shall
thereupon become vested with all of the benefits in respect thereof granted
to
the Collateral Agent and the Buyers herein or otherwise. Upon any such
assignment or transfer, all references in this Agreement to the Collateral
Agent
or any such Buyer shall mean the assignee of the Collateral Agent or such Buyer.
None of the rights or obligations of any Grantor hereunder may be assigned
or
otherwise transferred without the prior written consent of the Collateral Agent,
and any such assignment or transfer without the consent of the Collateral Agent
shall be null and void.
(e)
Upon the earliest of written notice to the Collateral Agent from the Buyers
of
(x) the indefeasible payment in full in cash of all of the Obligations, or
(y)
the indefeasible conversion of all the Notes in full to Common Stock, or (z)
the
indefeasible payment in cash of the Obligations in part and the indefeasible
conversion of all then outstanding balance of the Notes in full to Common Stock,
(A) this Agreement and the security interests created hereby shall terminate
and
all rights to the Collateral shall revert to the respective Grantor that granted
such security interests hereunder, and (B) the Collateral Agent will, upon
such
Grantor's request and at such Grantor's expense, (1) return to such Grantor
such
of the Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof, and (2) promptly execute and deliver
to
such Grantor such documents as such Grantor shall reasonably request to evidence
such termination, all without any representation, warranty or recourse
whatsoever.
(f)
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION
OR
THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY
INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF
NEW
YORK.
-21-
(g)
ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
DOCUMENT RELATED THERETO MAY BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX
IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF
THE
AFORESAID COURTS. EACH PARTY HERETO HEREBY EXPRESSLY AND IRREVOCABLY WAIVES,
TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUMNONCONVENIENS,
WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION, SUIT OR PROCEEDING
IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE GRANTING OF SUCH LEGAL
OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
(h)
EACH GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE
COLLATERAL AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF
ANY
LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE OTHER TRANSACTION DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE
OF
DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES
HERETO.
(i)
Each Grantor irrevocably consents to the service of process of any of the
aforesaid courts in any such action, suit or proceeding by the mailing of copies
thereof by registered or certified mail (or any substantially similar form
of
mail), postage prepaid, to such Grantor at its address provided herein, such
service to become effective 10 days after such mailing.
(j)
Nothing contained herein shall affect the right of the Collateral Agent to
serve
process in any other manner permitted by law or commence legal proceedings
or
otherwise proceed against any Grantor or any property of such Grantor in any
other jurisdiction.
(k)
Each Grantor irrevocably and unconditionally waives any right it may have to
claim or recover in any legal action, suit or proceeding referred to in this
Section any special, exemplary, punitive or consequential damages.
(l)
Section headings herein are included for convenience of reference only and
shall
not constitute a part of this Agreement for any other purpose.
-22-
(m)
This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which shall be deemed to be
an
original, but all of which taken together constitute one in the same
Agreement.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
-23-
IN
WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first above
written.
| ENTERCONNECT INC. | ||
| By: | ||
| Name: | ||
|
|
Title: | |
|
Address:
|
000
Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxx
Xxxx, XX 00000-0000
|
ACCEPTED
BY:
THE
BANK OF NEW YORK,
as
Collateral Agent
|
By:
|
||
|
Name
|
||
|
Title:
|
||
|
Address:
|
000
Xxxxxxx Xxxxxx
|
||
|
Xxxxx
0X
|
|||
|
Xxx
Xxxx, Xxx Xxxx 00000
|
|||
|
Attn:
Corporate Finance Group
|
SCHEDULE
I
LEGAL
NAMES; ORGANIZATIONAL
IDENTIFICATION NUMBERS; STATES OR JURISDICTION OF
ORGANIZATION
|
Legal
Name
|
Organizational
Identification
Number
|
State
of Incorporation
|
|
|
E0833882006-1
|
Nevada
|
Sched.
I-1
SCHEDULE
II
INTELLECTUAL
PROPERTY AND
LICENSES
Registered
Trademarks
|
Grantor
|
Country
|
Trademark
|
Registration
Number
|
|
|
U.S.
|
ENTERCONNECT
|
2792541
|
Sched.
II-1
SCHEDULE
III
LOCATIONS
OF
GRANTOR
|
Grantor
|
Location
|
Description
|
|
|
000
Xxxxxxx Xxxxxx Xxxxx,
Xxxxx
000
Xxx
Xxxx, Xxxxxxxxxx 00000-0000
|
Chief
executive office, chief place of business and location of
records
|
Sched.
III-1
SCHEDULE
IV
PROMISSORY
NOTES,
SECURITIES, DEPOSIT ACCOUNTS,
SECURITIES
ACCOUNTS AND COMMODITIES ACCOUNTS
Promissory
Notes:
None.
Securities
and Other
Instruments:
None.
|
Grantor
|
Name
and Address of Institution Maintaining
Account
|
Account
Number
|
Type
of Account
|
|
|
SunTrust
Bank
Mail
Code GA-ATL - 0503
0000
Xxxx Xxxx Xxxx
Xxxxxxx,
XX 00000
|
1000054655096
|
Checking
|
|
|
SunTrust
Bank
Mail
Code GA-ATL-0503
0000
Xxxx Xxxx Xxxx
Xxxxxxx,
XX 00000
|
1000057566209
|
Savings
|
Sched.
IV-1
SCHEDULE
V
UCC-1
FINANCING
STATEMENTS
|
Grantor
|
Jurisdiction
|
|
|
Secretary
of State of the State of Nevada
|
Sched.
V-1
SCHEDULE
VI
COMMERCIAL
TORT
CLAIMS
None.
Sched.
VI-1
EXHIBIT
A
ASSIGNMENT
FOR
SECURITY
[TRADEMARKS]
[PATENTS]
[COPYRIGHTS]
WHEREAS,
____________________.(the
"Assignor")
[has adopted, used and is using, and holds all right, title and interest in
and
to, the trademarks and service marks listed on the annexed Schedule 1A,
which trademarks and service marks are registered or applied for in the United
States Patent and Trademark Office (the "Trademarks")] [holds
all right, title and interest in the letter patents, design patents and utility
patents listed on the annexed Schedule 1A,
which patents are issued or applied for in the United States Patent and
Trademark Office (the "Patents")] [holds
all
right, title and interest in the copyrights listed on the annexed Schedule 1A, which
copyrights are registered in the United States Copyright Office (the "Copyrights")];
WHEREAS,
the Assignor has entered into a Security Agreement, dated as of
________________, 2007 (as amended, restated or otherwise modified from time
to
time the "Security
Agreement"), in favor of The Bank of New York, as collateral agent for
certain purchasers (the "Assignee");
WHEREAS,
pursuant to the Security Agreement, the Assignor has assigned to the Assignee
and granted to the Assignee for the benefit of the Buyers (as defined in the
Security Agreement) a continuing security interest in all right, title and
interest of the Assignor in, to and under the [Trademarks, together with, among
other things, the good-will of the business symbolized by the Trademarks]
[Patents] [Copyrights] and the applications and registrations thereof, and
all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof and any and all damages
arising from past, present and future violations thereof (the "Collateral"), to
secure the payment, performance and observance of the "Obligations" (as defined
in the Security Agreement);
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the Assignor does hereby pledge, convey, sell,
assign, transfer and set over unto the Assignee and grants to the Assignee
for
the benefit of the Buyers a continuing security interest in the Collateral
to
secure the prompt payment, performance and for the benefit of the Buyers
observance of the Obligations.
The
Assignor does hereby further acknowledge and affirm that the rights and remedies
of the Assignee with respect to the Collateral are more fully set forth in
the
Security Agreement, the terms and provisions of which are hereby incorporated
herein by reference as if fully set forth herein.
Exh.
A-1
IN
WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed
by
its officer thereunto duly authorized as of _____________, 20__
|
|
[GRANTOR]
|
|
By:
|
||
|
Name:
|
||
|
Title:
|
STATE
OF
____________
ss.:
COUNTY
OF
__________
On
this
____ day of _______________, 20__, before me personally came ________________,
to me known to be the person who executed the foregoing instrument, and who,
being duly sworn by me, did depose and say that s/he is the ________________
of
_______________________________________, a ____________________, and that s/he
executed the foregoing instrument in the firm name of
_______________________________________, and that s/he had authority to sign
the
same, and s/he acknowledged to me that he executed the same as the act and
deed
of said firm for the uses and purposes therein mentioned.
Exh.
A-3
SCHEDULE
1A TO ASSIGNMENT
FOR SECURITY
[Trademarks
and Trademark Applications]
[Patent
and Patent Applications]
[Copyright
and Copyright Applications]
Owned
by
______________________________
EXHIBIT
B
FORM
OF
GUARANTY
Sched.
VI-1
