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SECURITY AGREEMENT dated as of
August 29, 2001, among EXCHANGE APPLICATIONS,
INC., a Delaware corporation (the "Exchange"),
EXSTATIC SOFTWARE, INC.(f/k/a/ Xxxx Xxxxxxx,
Inc.), a Washington corporation ("eXstatic",
together with the Exchange, the "Grantors"), and
INSIGHT VENTURE PARTNERS IV (COLLATERAL AGENT),
LLC (not in its individual capacity but solely as
the "Collateral Agent") under the Collateral
Agency and Intercreditor Agreement for the benefit
of the New Secured Parties.
Reference is made to the (i) Securities Purchase Agreement, dated as of
August 29, 2001, among the Grantors and the New Secured Parties, as defined
below (the "Purchase Agreement"), (ii) U.S. $15,500,000 million principal amount
12% Senior Secured Convertible Debentures issued by the Grantors to the New
Secured Parties (collectively, the "New Debentures"), and (iii) the Collateral
Agency and Intercreditor Agreement.
The New Secured Parties have agreed to lend U.S. $15,500,000 in cash to
the Grantors, pursuant to, and upon the terms and subject to the conditions
specified in, the New Debenture Documents. The obligations of the New Secured
Parties to consummate the transactions contemplated by the New Debenture
Documents are conditioned upon, among other things, the execution and delivery
by the Grantors of an agreement in the form hereof to secure (A) the due and
punctual payment by the Grantors of (i) the principal of and premium, if any,
and interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the New Debentures, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each other amount required to be paid by the Grantors under
the New Debentures, when and as due, including payments in respect of
reimbursement of disbursements and interest thereon and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Grantors to the New Secured Parties under
the New Debentures (the monetary and New Debenture Obligations in (i), (ii) and
(iii) collectively, the "Debenture Payment Obligations") and (B) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Grantors under or pursuant to the New Debenture Documents and the
Collateral Agency and Intercreditor Agreement (the "New Debenture Obligations".
The rights and priorities with respect to the Collateral are subject to the
Subordination Agreement and the Collateral Agency and Intercreditor Agreement
(as defined below).
Accordingly, each of the Grantors and the Collateral Agent for the
benefit of the New Secured Parties (and each of their respective successors or
assigns), hereby agree as follows:
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ARTICLE I
DEFINITIONS
1.1 DEFINITION OF TERMS USED HEREIN.
Unless the context otherwise requires, all capitalized terms used but
not defined herein shall have the meanings set forth in the Collateral Agency
and Intercreditor Agreement.
1.2 DEFINITION OF CERTAIN TERMS USED HEREIN.
As used herein, the following terms shall have the following meanings:
"Account Debtor" shall mean any Person who is or who may
become obligated to any Grantor under, with respect to or on account of an
Account.
"Accounts" shall mean any and all right, title and interest of
the Grantors to payment for goods and services sold or leased, including any
such right evidenced by chattel paper, whether due or to become due, whether or
not it has been earned by performance, and whether now or hereafter acquired or
arising in the future, including accounts receivable from Affiliates of the
Grantors.
"Accounts Receivable" shall mean all Accounts and all right,
title and interest in any returned or repossessed goods, together with all
rights, titles, securities and guarantees with respect thereto, including any
rights to stoppage in transit, replevin, reclamation and resales, and all
related security interests, liens and pledges, whether voluntary or involuntary,
in each case whether now existing or owned or hereafter arising or acquired.
"Affiliate" shall mean, with respect to any Person, any
director, officer, parent or subsidiary of such Person, or any Person
controlling, controlled by or under common control with such Person.
"Collateral" shall mean all (a) Accounts Receivable, (b)
Documents, (c) Equipment, (d) General Intangibles, (e) Inventory, (f) cash and
cash accounts, (g) Investment Property, (h) Instruments (as defined in the UCC),
and (i) Proceeds. The Collateral Agent for the benefit of the New Secured
Parties may place a "hold" on any Deposit Account pledged as collateral during
the continuance of an Event of Default (as defined in the New Debentures). In
anticipation of the possible application, in one or more jurisdictions to the
transactions contemplated hereby, of the revised Article 9 of the Uniform
Commercial Code in the form approved by the American Law Institute and the
National Conference of Commissioners on Uniform State Law and contained in the
1999 Official Text of the Uniform Commercial Code ("Revised Article 9"), it is
hereby agreed that applying the law of any jurisdiction which Revised Article 9
is in effect, the Collateral is all personal property and assets of the
Grantors, whether or not within the scope of Revised Article 9. The collateral
shall include, without limitation, the following categories of assets as defined
in Revised Article 9: goods (including inventory, equipment and any accessions
thereto), instruments (including promissory notes), documents, accounts
(including health-care-insurance receivables, and license fees), chattel paper
(whether tangible or electronic), deposit accounts, letter-of-credit rights
(whether or not the letter of credit
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is evidenced by a writing), commercial tort claims, securities and all other
investment property, general intangibles (including payment intangibles and
software, but excluding Intellectual Property), supporting obligations and any
and all proceeds of any thereof, wherever located, whether now owned or
hereafter acquired. If the Grantors shall at any time, whether or not Revised
Article 9 is in effect in any particular jurisdiction, acquire a commercial tort
claim, as defined in Revised Article 9, the Grantors shall promptly notify the
Collateral Agent in a writing signed by the Grantors of the brief details
thereof and grant to the Collateral Agent for the benefit of the New Secured
Parties in such writing a security interest therein and in the proceeds thereof,
all upon the terms of this Agreement, with such writing to be in form and
substance satisfactory to the Collateral Agent.
"Collateral Agent" shall have the meaning assigned to such
term in the Preamble to this Agreement.
"Collateral Agency and Intercreditor Agreement" means the
Collateral Agency and Intercreditor Agreement dated of the date hereof among the
Grantors, the Collateral Agent, the New Secured Parties and the Existing
Investors, as amended, modified, supplemented, restated or replaced from time to
time.
"Commodity Account" shall mean an account maintained by a
Commodity Intermediary in which a Commodity Contract is carried out for a
Commodity Customer.
"Commodity Contract" shall mean a commodity futures contract,
an option on a commodity futures contract, a commodity option or any other
contract that, in each case, is (a) traded on or subject to the rules of a board
of trade that has been designated as a contract market for such a contract
pursuant to the federal commodities laws or (b) traded on a foreign commodity
board of trade, exchange or market, and is carried on the books of a Commodity
Intermediary for a Commodity Customer.
"Commodity Customer" shall mean a Person for whom a Commodity
Intermediary carries a Commodity Contract on its books.
"Commodity Intermediary" shall mean (a) a Person who is
registered as a futures commission merchant under the federal commodities laws
or (b) a Person who in the ordinary course of its business provides clearance or
settlement services for a board of trade that has been designated as a contract
market pursuant to federal commodities laws.
"Copyright License" shall mean any written agreement, now or
hereafter in effect, granting any right to any third party under any Copyright
now or hereafter owned by the Grantors or which the Grantors otherwise has the
right to license, or granting any right to the Grantors under any Copyright now
or hereafter owned by any third party, and all rights of the Grantors under any
such agreement.
"Copyrights" shall mean all of the following now owned or
hereafter acquired by the Grantors: (a) all copyright rights in any work subject
to the copyright laws of the United States, whether as author, assignee,
transferee or otherwise, and (b) all registrations and applications for
registration of any such copyright in the United States, including
registrations,
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recordings, supplemental registrations and pending applications for registration
in the United States Copyright Office.
"Deposit Account" has the meaning set forth in Section 9-102
of the UCC.
"Documents" shall mean all instruments, files, records, ledger
sheets and documents (including documents as defined in the UCC) covering or
relating to any of the Collateral.
"Entitlement Holder" shall mean a Person identified in the
records of a Securities Intermediary as the Person having a Security Entitlement
against the Securities Intermediary. If a Person acquires a Security Entitlement
by virtue of Section 8-501(b)(2) or (3) of the UCC, such Person is the
Entitlement Holder.
"Equipment" shall mean all equipment, furniture, furnishings,
machinery, molds, machine tools, motors, fixtures, trade fixtures, motor
vehicles, dyes, jigs, goods and other tangible personal property (other than
Inventory) of every kind and description used in the Grantors' operations or
owned by the Grantors and any interest in any of the foregoing, including tools,
parts and supplies of every kind and description, and all attachments,
accessories, improvements, accessions, replacements, substitutions, additions or
appurtenances thereto, that are now or hereafter owned by the Grantors.
"Exchange" shall have the meaning assigned to such term in the
Preamble to this Agreement.
"Exim Agreement" is that certain Export-Import Bank Loan and
Security Agreement dated as of April 25, 2001, by and between the Grantors and
SVB and all documents, instruments and agreements executed in conjunction
therewith, each as may be amended from time to time.
"Financial Asset" shall mean (a) a Security, (b) an obligation
of a Person or a share, participation or other interest in a Person or in
property or an enterprise of a Person, which is, or is of a type, dealt with in
or traded on financial markets, or which is recognized in any area in which it
is issued or dealt in as a medium for investment or (c) any property that is
held by a Securities Intermediary for another Person in a Securities Account if
the Securities Intermediary has expressly agreed with the other Person that the
property is to be treated as a Financial Asset under Article 8 of the UCC. As
the context requires, the term Financial Asset shall mean either the interest
itself or the means by which a Person's claim to it is evidenced, including a
certificated or uncertificated Security, a certificate representing a Security
or a Security Entitlement.
"General Intangibles" shall mean all choses in action and
causes of action and all other assignable intangible personal property of the
Grantors of every kind and nature (other than Accounts Receivable) now owned or
hereafter acquired by the Grantors, including corporate or other business
records, Deposit Accounts, indemnification claims, contract rights (including
rights under leases, whether entered into as lessor or lessee, and other
agreements), Intellectual Property, drawings, blueprints, customer lists,
security and other deposits, goodwill, registrations, franchises, tax refund
claims and any letter of credit, guarantee, claim, security
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interest or other security held by or granted to the Grantors to secure payment
by an Account Debtor of any of the Accounts Receivable, rights in all litigation
presently or hereafter pending for any cause or claim (whether in contract, tort
or otherwise), and all judgments now or hereafter arising therefrom, all claims
of Grantors against Collateral Agent, rights to purchase or sell real or
personal property, rights as a licensor or licensee of any kind, royalties,
telephone numbers, purchase orders, and all insurance policies and claims
(including without limitation life insurance, key man insurance, credit
insurance, liability insurance, property insurance and other insurance).
"Grantors" shall have the meaning assigned to such term in the
Preamble of this Agreement.
"Intellectual Property" shall mean all intellectual and
similar property of the Grantors of every kind and nature now owned or hereafter
acquired by the Grantors, including inventions, designs, Patents, Copyrights,
Licenses, Trademarks, trade secrets, confidential or proprietary technical and
business information, know-how, show-how or other data or information, software
and databases and all embodiments or fixations thereof and related documentation
and registrations, and all additions, improvements and accessions to, and books
and records describing or used in connection with, any of the foregoing, to the
extent a security interest has been granted to SVB pursuant to the SVB Security
Interest.
"Inventory" shall mean all goods of the Grantors, whether now
owned or hereafter acquired, held for sale or lease, or furnished or to be
furnished by the Grantors under contracts of service, or consumed in the
Grantors' business, including raw materials, intermediates, work in process,
goods in transit, packaging materials, finished goods, semi-finished inventory,
scrap inventory, manufacturing supplies and spare parts, all materials and
supplies of every kind, nature and description which are or might be used or
consumed in the Grantors' business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods, merchandise
or other personal property, all such goods that have been returned to or
repossessed by or on behalf of the Grantors, and all warehouse receipts,
documents of title and other documents representing any of the foregoing.
"Investment Property" shall mean all Securities (whether
certificated or uncertificated), Security Entitlements, Securities Accounts,
Commodity Contracts and Commodity Accounts of the Grantors, whether now owned or
hereafter acquired by the Grantors.
"License" shall mean any Patent License, Trademark License,
Copyright License or other franchise agreement, license or sublicense to which
any Grantor is a party.
"Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the business, operations, assets, conditions
(financial or otherwise), operating results, liabilities or prospects of such
Person and its Subsidiaries, taken as a whole.
"New Debentures" shall have the meaning assigned to such term
in the Preamble of this Agreement.
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"New Debenture Documents" shall mean each of the Purchase
Agreement and the New Debentures dated as of the date hereof.
"New Debenture Obligations" shall have the meaning assigned to
such term in the preliminary statement of this Agreement.
"New Debenture Security Interest" shall have the meaning
assigned to such term in Section 2.1.
"New Investors" means the Persons listed on Schedule I hereto.
"New Secured Parties" shall mean the New Investors and the
Collateral Agent, in each case, together with their heirs, successors and
permitted assigns.
"Patent License" shall mean any written agreement, now or
hereafter in effect, granting to any third party any right to make, use or sell
any invention on which a Patent, now or hereafter owned by the Grantors or which
the Grantors otherwise has the right to license, is in existence, or granting to
the Grantors any right to make, use or sell any invention on which a Patent, now
or hereafter owned by any third party, is in existence, and all rights of the
Grantors under any such agreement.
"Patents" shall mean all of the following now owned or
hereafter acquired by the Grantors: (a) all letters patent of the United States,
all registrations and recordings thereof, and all applications for letters
patent of the United States, including registrations, recordings and pending
applications in the United States Patent and Trademark Office, and (b) all
reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof, and the inventions disclosed or claimed therein, including
the right to make, use and/or sell the inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate
substantially in the form of Annex 1 hereto, completed and supplemented with the
schedules and attachments contemplated thereby, and duly executed by a Financial
Officer and the chief legal officer of the Grantors.
"Permitted Liens" shall mean the following: (i) purchase money
security interests (including, without limitation, any leases which may be
deemed purchase money security interests) in specific items of Equipment; (ii)
leases of specific items of Equipment; (iii) liens for taxes not yet payable;
(iv) additional security interests and liens consented to in writing by the
Collateral Agent for the benefit of the New Secured Parties, which consent shall
not be unreasonably withheld; (v) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business and
securing obligations which are not delinquent; (vi) liens incurred in connection
with the extension, renewal or refinancing of the indebtedness secured by liens
of the type described above in clauses (i) or (ii) above, provided that any
extension, renewal or replacement lien is limited to the property encumbered by
the existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; (vii) liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with
the importation of goods; (viii) the SVB Security Interest; (ix) liens arising
from the Exim Agreement; and (x) liens securing the Existing Secured Obligations
or created in connection with the Existing Debenture Documents. The Collateral
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Agent, for the benefit of the New Secured Parties, will have the right to
require, as a condition to its consent under subsection (iv) above, that the
holder of the additional security interest or lien sign intercreditor and
subordination agreements satisfactory to the Collateral Agent and the Required
Investors in their sole and absolute judgement.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, government, or any agency or political division thereof, or any
other entity.
"Proceeds" shall mean any consideration received from the
sale, exchange, license, lease or other disposition of any asset or property
that constitutes Collateral, any value received as a consequence of the
possession of any Collateral and any payment received from any insurer or other
person or entity as a result of the destruction, loss, theft, damage or other
involuntary conversion of whatever nature of any asset or property which
constitutes Collateral, and shall include, (a) any claim of the Grantors against
any third party for (and the right to xxx and recover for and the rights to
damages or profits due or accrued arising out of or in connection with) (i)
past, present or future infringement of any Patent now or hereafter owned by the
Grantors, or licensed under a Patent License, (ii) past, present or future
infringement or dilution of any Trademark now or hereafter owned by the Grantors
or licensed under a Trademark License or injury to the goodwill associated with
or symbolized by any Trademark now or hereafter owned by the Grantors, (iii)
past, present or future breach of any License and (iv) past, present or future
infringement of any Copyright now or hereafter owned by any Grantor or licensed
under a Copyright License and (b) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
"Purchase Agreement" shall have the meaning assigned to such
term in the Preamble to this Agreement.
"Required Investors" has the meaning ascribed to it in the
Collateral Agency and Intercreditor Agreement.
"Securities" shall mean any obligations of an issuer or any
shares, participations or other interests in an issuer or in property or an
enterprise of an issuer which (a) are represented by a certificate representing
a security in bearer or registered form, or the transfer of which may be
registered upon books maintained for that purpose by or on behalf of the issuer,
(b) are one of a class or series or by its terms is divisible into a class or
series of shares, participations, interests or obligations and (c)(i) are, or
are of a type, dealt with or traded on securities exchanges or securities
markets or (ii) are a medium for investment and by their terms expressly provide
that they are a security governed by Article 8 of the UCC.
"Securities Account" shall mean an account to which a
Financial Asset is or may be credited in accordance with an agreement under
which the Person maintaining the account undertakes to treat the Person for whom
the account is maintained as entitled to exercise rights that comprise the
Financial Asset.
"Security Entitlements" shall mean the rights and property
interests of an Entitlement Holder with respect to a Financial Asset.
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"Security Intermediary" shall mean (a) a clearing corporation
or (b) a Person, including a bank or broker, that in the ordinary course of its
business maintains securities accounts for others and is acting in that
capacity.
"Subordination Agreement" means the Subordination Agreement
among the New Secured Parties and SVB, dated as of the date hereof, as such
agreement may be amended from time to time.
"SVB" shall mean Silicon Valley Bank.
"SVB Facility" shall mean the Loan and Security Agreement,
dated April 25, 2001, among the Company, SVB and the other party named therein,
as such agreement may be amended, supplemented or replaced from time to time.
"SVB Security Interest" shall mean the security interest
granted by the Grantors to SVB in connection with the SVB Facility.
"Trademark License" shall mean any written agreement, now or
hereafter in effect, granting to any third party any right to use any Trademark
now or hereafter owned by any Grantor or which any Grantor otherwise has the
right to license, or granting to the Grantors any right to use any Trademark now
or hereafter owned by any third party, and all rights of any Grantor under any
such agreement.
"Trademarks" shall mean all of the following now owned or
hereafter acquired by the Grantors: (a) all trademarks, service marks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, trade dress, logos, other source or business identifiers,
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith, including
registrations and registration applications in the United States Patent and
Trademark Office, any State of the United States, and all extensions or renewals
thereof, (b) all goodwill associated therewith or symbolized thereby and (c) all
other assets, rights and interests that uniquely reflect or embody such
goodwill.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of New York.
1.3 RULES OF CONSTRUCTION.
The rules of construction specified in Section 1.2 of the Purchase
Agreement shall be applicable to this Agreement.
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ARTICLE II
SECURITY INTEREST
2.1 SECURITY INTEREST.
As security for the payment or performance, as the case may be, in full
of the New Debenture Obligations (including, without limitation, obligations
owing to the Collateral Agent under the Collateral Agency and Intercreditor
Agreement), each Grantor hereby bargains, sells, conveys, assigns, sets over,
mortgages, pledges, hypothecates and transfers to the Collateral Agent, its
successors and assigns, for the ratable benefit of the New Secured Parties, and
hereby grants to the Collateral Agent, its successors and assigns, for the
ratable benefit of the New Secured Parties, a security interest in, all of such
Grantor's right, title and interest in, to and under the Collateral (the "New
Debenture Security Interest"). Without limiting the foregoing, the Collateral
Agent for the benefit of the New Secured Parties is hereby authorized to file
one or more financing statements, continuation statements, filings with the
United States Patent and Trademark Office or United States Copyright Office (or
any successor office) or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the New Debenture Security
Interest granted by the Grantors, without the signature of the Grantors, and
naming the Grantors as debtors and the Collateral Agent for the benefit of the
New Secured Parties as secured party.
2.2 NO ASSUMPTION OF LIABILITY.
The New Debenture Security Interest is granted as security only and
shall not subject the Collateral Agent or any other New Secured Party to, or in
any way alter or modify, any obligation or liability of the Grantors with
respect to or arising out of the Collateral.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Grantor represents and warrants to the Collateral Agent and the
other New Secured Parties that:
3.1 NAME; TRADE NAMES AND STYLES; STATE OF INCORPORATION.
The name of each Grantor and state of incorporation set forth in the
Preamble to this Agreement is its correct name and state of incorporation.
Listed on the Schedule are all prior names of each Grantor and all of such
Grantor's present and prior trade names. Each Grantor shall give Collateral
Agent 30 days' prior written notice before changing its name or doing business
under any other name. Each Grantor has complied, and will in the future comply,
with all laws relating to the conduct of business under a fictitious business
name.
3.2 PLACE OF BUSINESS; LOCATION OF COLLATERAL.
The address set forth in the Notice Section of the Purchase Agreement
is each Grantor's chief executive office. In addition, each Grantor has places
of business and Collateral is located
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only at the locations set forth on the Schedule. Each Grantor will give the
Collateral Agent at least 30 days' prior written notice before opening any
additional place of business, changing its chief executive office, changing its
state of formation or moving any of the Collateral to a location other than each
Grantor's address or the present address of such Collateral.
3.3 TITLE AND AUTHORITY.
Each Grantor has good and valid rights in and title to the Collateral
with respect to which it has purported to grant the New Debenture Security
Interest hereunder and has full power and authority to grant to the Collateral
Agent New Debenture Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person other than
any consent or approval which has been obtained or the failure of which to
obtain could not reasonably be expected to have a Material Adverse Effect.
3.4 VALIDITY OF SECURITY INTEREST.
New Debenture Security Interest constitutes (a) a legal and valid
security interest in all the Collateral securing the payment and performance of
the New Debenture Obligations, (b) subject to the filings described in Section
2.1, a perfected security interest in all Collateral in which a security
interest may be perfected by filing, recording or registering a financing
statement or analogous document in the United States (or any political
subdivision thereof) pursuant to the Uniform Commercial Code or other applicable
law in such jurisdictions. New Debenture Security Interest is and shall be prior
to any other Lien on any of the Collateral, other than the Permitted Liens
described in clauses (i) and (viii) of the definition thereof or as may arise
nonconsensually by, and have priority solely by operation of applicable laws.
3.5 MAINTENANCE OF COLLATERAL.
Each Grantor will maintain the Collateral in good working condition,
and each Grantor will not use the Collateral for any unlawful purpose. Each
Grantor will immediately advise the Collateral Agent in writing of any material
loss or damage to the Collateral.
3.6 COMPLIANCE WITH LAW.
Each Grantor has complied, and will comply, in all material respects,
with all provisions of all foreign, federal, state and local laws and
regulations relating to the Collateral, including, but not limited to, those
relating to such Grantor's ownership of real or personal property, the conduct
and licensing of such Grantor's business, and all environmental matters.
3.7 ABSENCE OF OTHER LIENS.
The Collateral is owned by the Grantors free and clear of any Lien,
except for Permitted Liens. No Grantor has filed nor consented to the filing of
(a) any financing statement or analogous document under the UCC or any other
applicable laws covering any Collateral, (b) any assignment in which any Grantor
assigns any Collateral or any security agreement or similar instrument covering
any Collateral in the United States Patent and Trademark Office or the United
States Copyright Office or (c) any assignment in which any Grantor assigns any
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Collateral or any security agreement or similar instrument covering any
Collateral with any foreign governmental, municipal or other office, which
financing statement or analogous document is still in effect, except, in each
(a), (b) and (c) above, for filings in connection with Permitted Liens.
ARTICLE IV
COVENANTS
4.1 RECORDS.
Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which such Grantor is engaged, but in any event to include complete
accounting records indicating all payments and proceeds received with respect to
any part of the Collateral, and, at such time or times as the Collateral Agent
may reasonably request, promptly to prepare and deliver to the Collateral Agent
a duly certified schedule or schedules in form and detail reasonably
satisfactory to the Collateral Agent showing the identity, amount and location
of any and all Collateral.
4.2 PROTECTION OF SECURITY.
Each Grantor shall, at its own cost and expense, take any and all
actions necessary to defend title to the Collateral against all persons and to
defend the New Debenture Security Interest of the Collateral Agent, for the
benefit of the New Secured Parties, in the Collateral and the priority thereof
against any Lien which is not a Permitted Lien.
4.3 FURTHER ASSURANCES.
Each Grantor agrees, at its own expense, to execute, acknowledge,
deliver and cause to be duly filed all such further instruments and documents
and take all such actions as the Collateral Agent may from time to time
reasonably request to better assure, preserve, protect and perfect the New
Debenture Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements or other documents in connection
herewith or therewith. If any amount payable under or in connection with any of
the Collateral shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall be immediately pledged and delivered
to the Collateral Agent for the benefit of the New Secured Parties, duly
endorsed in a manner satisfactory to the Collateral Agent.
4.4 TAXES; ENCUMBRANCES.
At its option, the Collateral Agent for the benefit of the New Secured
Parties may discharge past due taxes, assessments, charges, fees, Liens,
security interests or other encumbrances at any time levied or placed on the
Collateral other than Permitted Liens, and may pay for the maintenance and
preservation of the Collateral to the extent the Grantors fail to do so
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as required this Agreement, and the Grantors jointly and severally agree to
reimburse the Collateral Agent on demand for any payment made or any expense
incurred by the Collateral Agent pursuant to the foregoing authorization;
provided, however, that nothing in this Section 4.4 shall be interpreted as
excusing the Grantors from the performance of, or imposing any obligation on the
Collateral Agent to cure or perform, any covenants or other promises of the
Grantors with respect to taxes, assessments, charges, fees, liens, security
interests or other encumbrances and maintenance as set forth herein or in the
New Debenture Documents.
4.5 ASSIGNMENT OF SECURITY INTEREST.
If at any time the Grantors shall take a security interest in any
property of an Account Debtor or any other Person to secure payment and
performance of an Account, the Grantors shall promptly assign such security
interest to the Collateral Agent for the benefit of the Secured Parties subject
only to Permitted Liens. Such assignment need not be filed of public record
unless necessary to continue the perfected status of the security interest
against creditors of and transferees from the Account Debtor or other Person
granting the security interest.
4.6 CONTINUING OBLIGATIONS OF THE GRANTORS.
The Grantors shall remain liable to observe and perform all the
conditions and obligations to be observed and performed by it under each
contract, agreement or instrument relating to the Collateral, all in accordance
with the terms and conditions thereof, and each Grantor agrees to indemnify and
hold harmless the Collateral Agent from and against any and all liability for
such performance.
4.7 LIMITATION ON MODIFICATION OF ACCOUNTS.
During the continuation of an Event of Default, no Grantor shall
without the Collateral Agent's prior written consent, grant any extension of the
time of payment of any of the Accounts Receivable, compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partly, any Person liable for the payment thereof or allow any credit or
discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its current practices and in accordance with such prudent
and standard practices used in industries that are the same as or similar to
those in which such Grantor is engaged.
4.8 LEGEND.
Each Grantor shall legend, in form and manner reasonably satisfactory
to the Collateral Agent, its Accounts Receivable and its books, records and
documents evidencing or pertaining thereto with an appropriate reference to the
fact that such Accounts Receivable have been assigned to the Collateral Agent
for the benefit of the New Secured Parties and that the Collateral Agent has a
security interest therein.
4.9 USE AND DISPOSITION OF COLLATERAL.
No Grantor shall make or permit to be made an assignment, pledge or
hypothecation of the Collateral or shall grant any other Lien in respect of the
Collateral, except for Permitted
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Liens. Unless and until the Collateral Agent for the benefit of the New Secured
Parties, shall notify the Grantors that (i) an Event of Default (as defined in
the New Debentures) shall have occurred and be continuing and (ii) during the
continuance thereof no Grantor shall sell, convey, lease, assign, transfer or
otherwise dispose of any Collateral (which notice may be given by telephone if
promptly confirmed in writing), each Grantor may use and dispose of the
Collateral in any lawful manner not inconsistent with the provisions of this
Agreement, the New Debentures or any other Financing Document. Without limiting
the generality of the foregoing, each Grantor agrees that it shall not permit
any Collateral to be in the possession or control of any warehouseman, bailee,
agent or processor at any time, other than Collateral that is in transit by any
means, unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and each Grantor shall have obtained therefrom
a written agreement in form and substance reasonably satisfactory to the
Collateral Agent and the Required Investors to hold the Grantor subject to the
New Debenture Security Interest and the instructions of the Collateral Agent and
to waive and release any Lien held by it with respect to such Collateral,
whether arising by operation of law or otherwise.
4.10 COVENANTS REGARDING PATENT, TRADEMARK AND COPYRIGHT COLLATERAL.
(a) Each Grantor agrees that it will not, nor will it permit any
of its licensees to, do any act, or omit to do any act, whereby any Patent which
is material to the conduct of such Grantor's business may become invalidated or
dedicated to the public, and agrees, to the extent practicable, that it shall
continue to xxxx any products covered by a Patent with the relevant patent
number as necessary and sufficient to establish and preserve its maximum rights
under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark, (iii) display such Trademark with notice
of Federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(c) Each Grantor (either itself or through licensees) will, for
each work covered by a material Copyright, continue to publish, reproduce,
display, adopt and distribute the work with appropriate copyright notice as
necessary and sufficient to establish and preserve its maximum rights under
applicable copyright laws.
(d) Each Grantor shall notify the Collateral Agent promptly if it
knows that any Patent, Trademark or Copyright material to the conduct of its
business may become abandoned, lost or dedicated to the public, or of any
adverse determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office or United States Copyright Office) regarding such Grantor's
ownership of any Patent, Trademark or Copyright, its right to register the same,
or to keep and maintain the same.
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(e) In no event shall any Grantor, either itself or through any
agent, employee, licensee or designee, file an application for any Patent,
Trademark or Copyright (or for the registration of any Trademark or Copyright)
with the United States Patent and Trademark Office, United States Copyright
Office or any office or agency in any political subdivision of the United
States, unless it promptly informs the Collateral Agent, and, upon request of
the Collateral Agent, executes and delivers any and all agreements, instruments,
documents and papers as the Collateral Agent may request to evidence the
Collateral Agent' security interest in such Patent, Trademark or Copyright, and
each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to
execute and file such writings for the foregoing purposes (and, prior to the
occurrence of any Event of Default or Default (as defined in the New
Debentures), such Grantors shall be notified of such filing), all acts of such
attorney being hereby ratified and confirmed; such power, being coupled with an
interest, is irrevocable.
(f) Each Grantor will take all necessary steps that are consistent
with the practice in any proceeding before the United States Patent and
Trademark Office, United States Copyright Office or any office or agency in any
political subdivision of the United States, to maintain and pursue each material
application relating to the Patents, Trademarks and/or Copyrights (and to obtain
the relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct of
any Grantors' business, including timely filings of applications for renewal,
affidavits of use, affidavits of incontestability and payment of maintenance
fees, and, if consistent with good business judgment, to initiate opposition,
interference and cancellation proceedings against third parties.
(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantors' business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantors promptly shall notify
the Collateral Agent and shall, if consistent with good business judgment,
promptly xxx for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.
(h) Upon and during the continuance of an Event of Default (as
defined in the New Debentures), each Grantor shall use its reasonable commercial
efforts to obtain all requisite consents or approvals by the licensor of each
Copyright License, Patent License or Trademark License to effect the assignment
of all of such Grantor's right, title and interest thereunder to the Collateral
Agent or its designees.
ARTICLE V
POWER OF ATTORNEY
Each Grantor irrevocably makes, constitutes and appoints the Collateral
Agent for the benefit of the New Secured Parties (and all officers, employees or
agents designated by the Collateral Agent) as such Grantor's true and lawful
agent and attorney-in-fact, and in such capacity the Collateral Agent shall have
the right, with power of substitution for each Grantor and in each Grantor's
name or otherwise, for the use and benefit of the Collateral Agent for the
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benefit of the New Secured Parties, upon the occurrence and during the
continuance of an Event of Default (as defined in the New Debentures) (a) to
receive, endorse, assign and/or deliver any and all notes, acceptances, checks,
drafts, money orders or other evidences of payment relating to the Collateral or
any part thereof; (b) to demand, collect, receive payment of, give receipt for
and give discharges and releases of all or any of the Collateral; (c) to sign
the name of any Grantor on any invoice or xxxx of lading relating to any of the
Collateral; (d) to send verifications of Accounts Receivable to any Account
Debtor; (e) to commence and prosecute any and all suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect or
otherwise realize on all or any of the Collateral or to enforce any rights in
respect of any Collateral; (f) to settle, compromise, compound, adjust or defend
any actions, suits or proceedings relating to all or any of the Collateral; (g)
to notify, or to require any Grantor to notify, Account Debtors to make payment
directly to the Collateral Agent for the benefit of the New Secured Parties; and
(h) to use, sell, assign, transfer, pledge, make any agreement with respect to
or otherwise deal with all or any of the Collateral, and to do all other acts
and things necessary to carry out the purposes of this Agreement, as fully and
completely as though the Collateral Agent for the benefit of the New Secured
Parties, were the absolute owner of the Collateral for all purposes; provided,
however, that nothing herein contained shall be construed as requiring or
obligating the Collateral Agent to make any commitment or to make any inquiry as
to the nature or sufficiency of any payment received by the Collateral Agent, or
to present or file any claim or notice, or to take any action with respect to
the Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken or omitted to be
taken by the Collateral Agent with respect to the Collateral or any part thereof
shall give rise to any defense, counterclaim or offset in favor of any Grantor
or (unless such action is the result of gross negligence or willful misconduct)
to any claim or action against the Collateral Agent. It is understood and agreed
that the appointment of the Collateral Agent as the agent and attorney-in-fact
of the Grantors for the purposes set forth above is coupled with an interest and
is irrevocable. The provisions of this Section shall in no event relieve any
Grantor of any of its obligations hereunder or under any other New Debenture
Documents with respect to the Collateral or any part thereof or impose any
obligation on the Collateral Agent to proceed in any particular manner with
respect to the Collateral or any part thereof, or in any way limit the exercise
by the Collateral Agent of any other or further right which it may have on the
date of this Agreement or hereafter, whether hereunder, under any New
Debentures, by law or otherwise.
ARTICLE VI
REMEDIES
6.1 REMEDIES UPON DEFAULT.
(a) Upon the occurrence and during the continuance of an Event of
Default (as defined in the New Debentures), each Grantor agrees to deliver each
item of Collateral to the Collateral Agent for the benefit of the New Secured
Parties on demand, and it is agreed that the Collateral Agent for the benefit of
the New Secured Parties shall have the right to take any of or all the following
actions at the same or different times: (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the New Debenture
Security Interest to become an assignment, transfer and conveyance of any of or
all such Collateral by the applicable
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Grantors to the Collateral Agent for the benefit of the New Secured Parties, or
to license or sublicense, whether general, special or otherwise, and whether on
an exclusive or non-exclusive basis, any such Collateral throughout the world on
such terms and conditions and in such manner as the Collateral Agent shall
determine (other than in violation of any then-existing licensing or contractual
arrangements to the extent that waivers cannot be obtained), and (b) with or
without legal process and with or without prior notice or demand for
performance, to take possession of the Collateral and without liability for
trespass to enter any premises where the Collateral may be located for the
purpose of taking possession of or removing the Collateral and, generally, to
exercise any and all rights afforded to a secured party under the UCC or other
applicable law. Without limiting the generality of the foregoing, each Grantor
agrees that the Collateral Agent shall have the right, subject to the mandatory
requirements of applicable law, to sell or otherwise dispose of all or any part
of the Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of any Grantor, and each Grantor hereby waives
(to the extent permitted by law) all rights of redemption, stay and appraisal
which such Grantor now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted.
(b) The Collateral Agent shall give the Grantors 10 days' prior
written notice (which each Grantor agrees is reasonable notice within the
meaning of Section 9-611 of the UCC or its equivalent in other jurisdictions) of
the Collateral Agent's intention to make any sale of Collateral. Such notice, in
the case of a public sale, shall state the time and place for such sale and, in
the case of a sale at a broker's board or on a securities exchange, shall state
the board or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent may
fix and state in the notice (if any) of such sale. At any such sale, the
Collateral, or portion thereof, to be sold may be sold in one lot as an entirety
or in separate parcels, as the Collateral Agent may (in its sole and absolute
discretion) determine. The Collateral Agent shall not be obligated to make any
sale of any Collateral if it shall determine not to do so, regardless of the
fact that notice of sale of such Collateral shall have been given. The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. In case any
sale of all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Collateral Agent until
the sale price is paid by the purchaser or purchasers thereof, but the
Collateral Agent shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may be sold again upon like notice. At any
public (or, to the extent permitted by law, private) sale made pursuant to this
Section, any Collateral Agent for the benefit of the New Secured Parties may bid
for or purchase, free (to the extent
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permitted by law) from any right of redemption, stay, valuation or appraisal on
the part of any Grantor (all said rights being also hereby waived and released
to the extent permitted by law), the Collateral or any part thereof offered for
sale and may make payment on account thereof by using any claim then due and
payable to such Collateral Agent from any Grantor as a credit against the
purchase price, and such Collateral Agent may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to any Grantor therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof; the
Collateral Agent shall be free to carry out such sale pursuant to such agreement
and no Grantor shall be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Collateral
Agent shall have entered into such an agreement all Events of Default (or
defined in the New Debentures) shall have been remedied and the New Debenture
Obligations paid in full. As an alternative to exercising the power of sale
herein conferred upon it, the Collateral Agent may proceed by a suit or suits at
law or in equity to foreclose this Agreement and to sell the Collateral or any
portion thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver.
6.2 APPLICATION OF PROCEEDS.
The Collateral Agent shall apply the proceeds of any collection or sale
of the Collateral, as well as any Collateral consisting of cash, as required
pursuant to the terms of the Collateral Agency and Intercreditor Agreement.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement and the Collateral Agency and Intercreditor Agreement. Upon any sale
of the Collateral by the Collateral Agent (including pursuant to a power of sale
granted by statute or under a judicial proceeding), the receipt of the
Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Collateral Agent, Secured Parties,
or such officer or be answerable in any way for the misapplication thereof.
6.3 GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY.
For the purpose of enabling the Collateral Agent to exercise rights and
remedies under this Article at such time as the Collateral Agent shall be
lawfully entitled to exercise such rights and remedies, each Grantor hereby
grants to the Collateral Agent for the benefit of the Secured Parties an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to the Grantors) to the extent that such license does not
violate any then existing licensing arrangements (to the extent that waivers
cannot be obtained) to use, license or sub-license any of the Collateral
consisting of Intellectual Property now owned or hereafter acquired by such
Grantor, and wherever the same may be located, and 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 software and programs used for the
compilation or printout thereof and sufficient rights of quality control in
favor of Grantor to avoid the invalidation of the Trademarks subject to the
license. The use of such license by the Collateral Agent shall be exercised, at
the option of
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the Collateral Agent upon the occurrence and during the continuation of an Event
of Default (as defined in the New Debentures); provided that any license,
sub-license or other transaction entered into by the Collateral Agent in
accordance herewith shall be binding upon the Grantors notwithstanding any
subsequent cure of an Event of Default (as defined in the New Debentures).
ARTICLE VII
MISCELLANEOUS
7.1 NOTICES.
All communications and notices hereunder shall (except as otherwise
expressly permitted herein) be in writing and given as provided in Section 8.3
of the Purchase Agreement. Any notice properly delivered to the Borrower shall
be deemed notice properly delivered to eXstatic.
7.2 SECURITY INTEREST ABSOLUTE.
All rights of the Collateral Agent hereunder, the New Debenture
Security Interest and all obligations of the Grantors hereunder shall be
absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the New Debentures, any New Debentures Document, any agreement
with respect to any of the New Debenture Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the New Debenture
Obligations, or any other amendment or waiver of or any consent to any departure
from the New Debentures, any New Debentures Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the New
Debenture Obligations, or (d) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Grantors in respect of
the New Debenture Obligations or this Agreement (other than payment in full of
the New Debenture Obligations or the conversion of all (and not part) of the New
Debentures into common stock of Exchange in accordance with the terms hereof).
7.3 SURVIVAL OF AGREEMENT.
All covenants, agreements, representations and warranties made by the
Grantors herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement shall be considered
to have been relied upon by the Collateral Agent and the New Secured Parties and
shall survive the consummation of the transactions contemplated by the New
Debenture Documents, and the execution and delivery to the New Secured Parties
of the New Debentures, regardless of any investigation made by the Collateral
Agent or on their behalf, and shall continue in full force and effect until this
Agreement shall terminate.
7.4 BINDING EFFECT ASSIGNMENT.
This Agreement shall be binding upon the Grantors and the Collateral
Agent for the benefit of the New Secured Parties and their respective successors
and assigns, and shall inure to the benefit of the Grantors, the Collateral
Agent for the benefit of the New Secured Parties and
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their respective successors and assigns, except that no Grantor shall have the
right to assign or transfer its rights or obligations hereunder or any interest
herein or in the Collateral (and any such assignment or transfer shall be void)
except as expressly contemplated by this Agreement or the other New Debenture
Documents.
7.5 SUCCESSORS AND ASSIGNS.
Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party; and all covenants, promises and agreements by or on behalf of the
Grantors or the Collateral Agent for the benefit of the New Secured Parties that
are contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
7.6 COLLATERAL AGENT' EXPENSES; INDEMNIFICATION.
(a) The Grantors agree to pay upon demand to the Collateral Agent
the amount of any and all reasonable expenses, including the reasonable fees,
disbursements and other charges of its counsel and of any experts or agents,
which the Collateral Agent may incur in connection with (i) the administration
of this Agreement, (ii) the custody or preservation of, or the sale of,
collection from or other realization upon any of the Collateral, (iii) the
exercise, enforcement or protection of any of the rights of the Collateral Agent
hereunder or (iv) the failure of the Grantors to perform or observe any of the
provisions hereof.
(b) Without limitation of its indemnification obligations under
the New Debenture Documents, the Grantors jointly and severally agrees to
indemnify the Collateral Agent against, and hold each of them harmless from, any
and all losses, claims, damages, liabilities and related expenses, including
reasonable fees, disbursements and other charges of counsel, incurred by or
asserted against any of them arising out of, in any way connected with, or as a
result of, the execution, delivery or performance of this Agreement or any
claim, litigation, investigation or proceeding relating hereto or to the
Collateral is a party thereto; provided that such indemnity shall not, as to the
Collateral Agent, be available to the extent that such losses, claims, damages,
liabilities or related expenses have resulted from the gross negligence or
willful misconduct of the Collateral Agent.
(c) Any such amounts payable as provided hereunder or under the
Collateral Agency or Intercreditor Agreement shall be additional New Debenture
Obligations secured hereby and by the New Debenture Documents. The provisions of
this Section 7.6 shall remain operative and in full force and effect regardless
of the termination of this Agreement or any other New Debentures, the
consummation of the transactions contemplated hereby, the repayment of any of
the New Debentures, the invalidity or unenforceability of any term or provision
of this Agreement or any New Debentures, or any investigation made by or on
behalf of the Collateral Agent. All amounts due under this Section 7.6 shall be
payable on written demand therefor.
7.7 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
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7.8 WAIVERS; AMENDMENT.
(a) No failure or delay of the Collateral Agent in exercising any
power or right hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Collateral Agent hereunder and of the New Secured Parties,
under the New Debenture Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provisions
of this Agreement or any New Debentures Document or consent to any departure by
the Grantors therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Grantors in any case shall entitle the Grantors to
any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and the Grantors with respect to which such
waiver, amendment or modification is to apply.
7.9 WAIVER OF JURY TRIAL.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE NEW DEBENTURE DOCUMENTS. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE NEW DEBENTURE DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.9.
7.10 SEVERABILITY.
In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
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7.11 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute but one contract. Delivery of an executed signature page to this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.
7.12 HEADINGS.
Article and Section headings used herein are for the purpose of
reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
7.13 JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) Each Grantor hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or the New Debenture Documents, or
for recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Collateral Agent may otherwise have to bring any action or
proceeding relating to this Agreement or the New Debenture Documents against the
Grantors or its properties in the courts of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the New Debenture
Documents in any New York State court or Federal court of the United States of
America sitting in New York City. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 7.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
7.14 TERMINATION.
This Agreement and the New Debenture Security Interest shall terminate
when all the New Debenture Obligations have been indefeasibly paid in full or
all (and not part) of the New Debentures have been converted into common stock
of Exchange, at which time the Collateral Agent shall execute and deliver to
each Grantor, at each Grantor's expense, all UCC termination statements and
similar documents which the Grantors shall reasonably request to evidence such
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termination. Any execution and delivery of termination statements or documents
pursuant to this Section 7.14 shall be without recourse to or warranty by the
Collateral Agent.
7.15 RIGHT OF SET-OFF.
Each Grantor hereby grants to the Collateral Agent for the benefit of
the New Secured Parties a lien, security interest and right of setoff as
security for all New Debenture Obligations to the New Secured Parties, whether
now existing or hereafter arising upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of the Collateral Agent or any entity under the control
of the Collateral Agent. At any time after the occurrence and during the
continuance of an Event of Default (as defined in the New Debentures), without
demand or notice, the Collateral Agent may set off the same or any part thereof
and apply the same to any liability or obligation of the Grantors and any
guarantor even though unmatured and regardless of the adequacy of any other
collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE THE COLLATERAL AGENT
TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE GRANTORS OR ANY GUARANTOR, ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
7.16 COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT CONTROLS.
Notwithstanding anything contrary herein or in the New Debenture
Documents, the rights, benefits, priorities and interests of the Collateral
Agent and the New Secured Parties (including, without limitation, with respect
to the Collateral, the Proceeds thereof and exercise of rights, powers and
remedies) shall be subject in all respects to the provisions of the Collateral
Agency and Intercreditor Agreement. Each of the New Secured Parties, by its
acceptance of the benefits hereof, (a) agrees to the terms and provisions hereof
and of the Collateral Agency and Intercreditor Agreement, and (b) together with
each Grantor, hereby acknowledges and agrees that the Collateral Agent (i) is
acting for the benefit and at the direction of the New Secured Parties and, to
the extent provided in the Collateral Agency and Intercreditor Agreement, the
Existing Investors pursuant to the Collateral Agency and Intercreditor Agreement
and (ii) shall have no liabilities or obligations hereunder except as expressly
provided in the Collateral Agency and Intercreditor Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
GRANTORS:
EXCHANGE APPLICATIONS, INC.,
By: /s/ F. Xxxxxx Xxxxx
-------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
EXSTATIC SOFTWARE, INC.
By: /s/ F. Xxxxxx Xxxxx
-------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
COLLATERAL AGENT:
INSIGHT VENTURE PARTNERS IV
(Collateral Agent), LLC
By: /s/ Xxxxx Xxxxxx
-------------------------------
Name: Xxxxx Xxxxxx
Title: Managing Member
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Annex 1 to the
Security Agreement
[Form Of]
PERFECTION CERTIFICATE
Reference is made to the Securities Purchase Agreement dated as of
August 29, 2001, (as amended, supplemented or otherwise modified from time to
time, the "Purchase Agreement"), among EXCHANGE APPLICATIONS, INC., a Delaware
corporation (the "Borrower"), EXSTATIC SOFTWARE, INC., a Washington corporation
("eXstatic", together with the Borrower, the "Grantors") and the secured parties
(each a "Secured Party" and together, the "Secured Parties") identified on the
signature page hereto. Capitalized terms used herein and not defined herein
shall have meanings assigned to such terms in the Purchase Agreement.
The undersigned, a Financial Officer and a Legal Officer, respectively,
of each Grantor, hereby certify to the Secured Parties and each other Secured
Parties:
1. Names. (a) The exact corporate name of each Grantor, as such name
appears in its respective certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name each Grantor
has had in the past five years, together with the date of the relevant
change:
(c) Except as set forth in Schedule 1 hereto, no Grantor has
changed its identity or corporate structure in any way within the past
five years. Changes in identity or corporate structure would include
mergers, consolidations and acquisitions, as well as any change in the
form, nature or jurisdiction of corporate organization. If any such
change has occurred, include in Schedule 1 the information required by
Sections 1 and 2 of this certificate as to each acquiree or constituent
party to a merger or consolidation.
(d) The following is a list of all other names (including
trade names or similar appellations) used by each Grantor or any of its
divisions or other business units in connection with the conduct of its
business or the ownership of its properties at any time during the past
five years:
(e) Set forth below is the Federal Taxpayer Identification
Number of each Grantor:
2. Current Locations. (a) The chief executive office of each Grantor is
located at the address set forth opposite its name below:
Grantor Mailing Address County State
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(b) Set forth below opposite the name of each Grantor are all
locations where such Grantor maintains any books or records relating to
any Accounts Receivable (with each location at which chattel paper, if
any, is kept being indicated by an "*"):
Grantor Mailing Address County State
(c) Set forth below opposite the name of each Grantor are all
the material places of business of such Grantor not identified in
paragraph (a) or (b) above:
Grantor Mailing Address County State
(d) Set forth below opposite the name of each Grantor are all
the locations where such Grantor maintains any Collateral not
identified above:
Grantor Mailing Address County State
(e) Set forth below opposite the name of each Grantor are the
names and addresses of all Persons other than such Grantor that have
possession of any of the Collateral of such Grantor:
Grantor Mailing Address County State
3. Unusual Transactions. All Accounts Receivable have been originated
by the Grantors and all Inventory has been acquired by the Grantors in the
ordinary course of business.
4. UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing in the
Uniform Commercial Code filing office in each jurisdiction where any Grantor is
domicile.
5. Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings described in Section 5 above, each
filing and the filing office in which such filing is to be made.
6. [INTENTIONALLY OMITTED].
7. Stock Ownership. Attached hereto as Schedule 8 is a true and correct
list of all the duly authorized, issued and outstanding stock of each Subsidiary
and the record and beneficial
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owners of such stock. Also set forth on Schedule 8 is each Subsidiary that
represents 50% or less of the equity of the entity in which such investment was
made.
8. Notes. Attached hereto as Schedule 9 is a true and correct list of
all notes held by each Subsidiary and all intercompany notes between each
Grantor and each Subsidiary of such Grantor and between each Subsidiary of such
Grantor and each other such Subsidiary.
9. Advances. Attached hereto as Schedule 10 is (a) a true and correct
list of all advances made by each Grantor to any Subsidiary of such Grantor or
made by any Subsidiary of such Grantors to such Grantor or any other Subsidiary
of such Grantor, which advances will be on and after the date hereof evidenced
by one or more intercompany notes pledged to the Secured Parties, and (b) a true
and correct list of all unpaid intercompany transfers of goods sold and
delivered by or to any Grantor or any Subsidiary of such Grantor.
10. Mortgage Filings. Attached hereto as Schedule 11 is a schedule
setting forth, with respect to each Mortgaged Property, (i) the exact corporate
name of the corporation that owns such property as such name appears in its
certificate of incorporation, (ii) if different from the name identified
pursuant to clause (i), the exact name of the current record owner of such
property reflected in the records of the filing office for such property
identified pursuant to the following clause and (iii) the filing office in which
a Mortgage with respect to such property must be filed or recorded in order for
the Secured Parties to obtain a perfected security interest therein.
* * * * *
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IN WITNESS WHEREOF, the undersigned have duly executed this certificate
on this 29th day of August, 2001.
GRANTORS:
EXCHANGE APPLICATIONS, INC.,
By:
--------------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
EXSTATIC SOFTWARE, INC.
By:
--------------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
COLLATERAL AGENT:
INSIGHT VENTURE PARTNERS IV
(COLLATERAL AGENT), LLC
By:
--------------------------------------
Name: Xxxxx Xxxxxx
Title: Managing Member
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SCHEDULE I
INSIGHT VENTURE PARTNERS IV, L.P.
INSIGHT VENTURE PARTNERS (CAYMAN) IV, L.P.
INSIGHT VENTURE PARTNERS IV (FUND B), L.P.
INSIGHT VENTURE PARTNERS IV (CO-INVESTORS), L.P.
SKP INVESTMENTS LLC
THK PRIVATE EQUITIES
XXXXXX FAMILY FOUNDATION
BOSTON PIPES, LLC
XXXXX XXXXXXXX
v
