SECURITY AGREEMENT
This SECURITY AGREEMENT (as amended, supplemented or
otherwise modified from time to time, this "Agreement"), is
entered into as of April 26, 2002, by and among CONCEPTS DIRECT,
INC., a Delaware corporation (the "Company" or the "Grantor") ST.
CLOUD CAPITAL PARTNERS, LP, a Delaware limited partnership ("St.
Cloud"), and XXXXXXX X. XXXXXX and XXXXX X. XXXXXX (collectively,
"Xxxxxx"), individuals, as secured parties hereunder (St. Cloud,
Xxxxxxx X. Xxxxxx and Xxxxx X. Xxxxxx are each referred to herein
as a "Secured Party" and are collectively referred to herein as
the "Secured Parties").
RECITALS:
WHEREAS, pursuant to that certain Note and Warrant
Purchase Agreement, dated as of even date hereof, by and between
the Company and the Secured Parties (the "Purchase Agreement"),
the Secured Parties are purchasing from the Company (a) the
Company's 10.0% Senior Secured Notes in the aggregate principal
amount of Four Million Dollars ($4,000,000.00) (each, a "Note",
and together the "Notes") and (b) Common Stock Purchase Warrants
to purchase an aggregate of 550,000 shares of the common stock,
par value $0.10 per share, of Grantor; and
WHEREAS, in order to induce the Secured Parties to enter
into the Purchase Agreement and the other Transaction Documents
and to induce the Secured Parties to purchase the Notes as
provided for in the Purchase Agreement, Grantor has agreed to
grant the Secured Parties, for the ratable benefit of each of the
Secured Parties, a continuing security interest in the Collateral
(as hereinafter defined) to secure all obligations of Grantor
under the Transaction Documents.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. The following terms shall have the following
respective meanings:
"Accounts" means all of Grantor's now owned or hereafter
acquired or arising accounts, as defined in the UCC, including any
rights to payment for the sale or lease of goods or rendition of
services, whether or not they have been earned by performance, in
each case to the extent (and only to such extent) used or useful
in, arising from or otherwise related to the Colorful Images
Business.
"Affiliate" shall mean, when used with reference to any
specified Person, any other Person directly or indirectly
controlling, controlled by, or under direct or indirect common
control with, such specified Person. For the purposes of this
definition, "control," when used with respect to any specified
Person, means the power to direct or cause the direction of
management or policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing.
"Assigned Contracts" means, collectively, all of Grantor's
rights and remedies under, and all moneys and claims for money due
or to become due to Grantor under those contracts set forth on
Schedule 1.1 hereto, and all other material contracts and
agreements to which Grantor is a party, and any and all
amendments, supplements, extensions, and renewals thereof
including all rights and claims of Grantor now or hereafter
existing: (a) under any insurance, indemnities, warranties, and
guarantees provided for or arising out of or in connection with
any of the foregoing agreements; (b) for any damages arising out
of or for breach or default under or in connection with any of the
foregoing contracts; (c) to all other amounts from time to time
paid or payable under or in connection with any of the foregoing
agreements; or (d) to exercise or enforce any and all covenants,
remedies, powers and privileges thereunder, in each case to the
extent (and only to such extent) used or useful in, arising from
or otherwise related to the Colorful Images Business.
"Chattel Paper" means all of Grantor's now owned or
hereafter acquired chattel paper, as defined in the UCC, including
electronic chattel paper, in each case to the extent (and only to
such extent) used or useful in, arising from or otherwise related
to the Colorful Images Business.
"Colorful Images Business" means the business, revenues
and all assets of the Grantor used or useful in or otherwise
relating to the Colorful Images catalog and all related
businesses, including without limitation, its xxxxxxxxxxxxxx.xxx
domain name.
"Documents" means all documents as such term is defined in
the UCC, including bills of lading, warehouse receipts or other
documents of title, now owned or hereafter acquired by Grantor, in
each case to the extent (and only to such extent) used or useful
in, arising from or otherwise related to the Colorful Images
Business.
"Equipment" means all of Grantor's now owned, leased and
hereafter acquired machinery, equipment, furniture, furnishings,
fixtures, and other tangible personal property (except Inventory),
including embedded software, motor vehicles with respect to which
a certificate of title has been issued, aircraft, dies, tools,
jigs, molds and office equipment, as well as all of such types of
property leased by Grantor and all of Grantor's rights and
interests with respect thereto under such leases (including,
without limitation, options to purchase); together with all
present and future additions and accessions thereto, replacements
therefor, component and auxiliary parts and supplies used or to be
used in connection therewith, and all substitutes for any of the
foregoing, and all manuals, drawings, instructions, warranties and
rights with respect thereto; wherever any of the foregoing is
located, in each case to the extent (and only to such extent) used
or useful in, arising from or otherwise related to the Colorful
Images Business.
"General Intangibles" means all of Grantor's now owned or
hereafter acquired general intangibles, choses in action and
causes of action and all other intangible personal property of
Grantor of every kind and nature (other than Accounts), including,
without limitation, all contract rights, payment intangibles,
Proprietary Rights, corporate or other business records,
inventions, designs, blueprints, plans, specifications, patents,
patent applications, trademarks, service marks, trade names, trade
secrets, goodwill, copyrights, domain names, computer software,
customer lists, registrations, licenses (to the extent used or
useful in connection with the Colorful Images Business),
franchises, tax refund claims, any funds which may become due to
Grantor in connection with the termination of any employee benefit
plan or any rights thereto and any other amounts payable to
Grantor from any employee benefit plan, rights and claims against
carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, property, casualty or
any similar type of insurance and any proceeds thereof, proceeds
of insurance covering the lives of key employees on which Grantor
is beneficiary, rights to receive dividends, distributions, cash,
Instruments and other property in respect of or in exchange for
pledged equity interests or Investment Property and any letter of
credit, guarantee, claim, security interest or other security held
by or granted to Grantor, in each case to the extent (and only to
such extent) used or useful in, arising from or otherwise related
to the Colorful Images Business.
"Instruments" means all instruments as such term
is defined in the UCC, now owned or hereafter acquired by Grantor.
"Inventory" means all of Grantor's now owned and hereafter
acquired inventory, goods and merchandise, wherever located, to be
furnished under any contract of service or held for sale or lease,
all returned goods, raw materials, work-in-process, finished goods
(including embedded software), other materials and supplies of any
kind, nature or description which are used or consumed in
Grantor's business or used in connection with the packing,
shipping, advertising, selling or finishing of such goods,
merchandise, and all documents of title or other Documents
representing them, in each case to the extent (and only to such
extent) used or useful in, arising from or otherwise related to
the Colorful Images Business.
"Investment Property" means all of Grantor's right title
and interest in and to any and all: (a) securities whether
certificated or uncertificated, (b) securities entitlements, (c)
securities accounts, (d) commodity contracts, or (e) commodity
accounts, in each case to the extent (and only to such extent)
used or useful in, arising from or otherwise related to the
Colorful Images Business.
"Mortgages" means any and all mortgages, deeds of trust or
other real property encumbrances that secure the Obligations.
"Proprietary Rights" means all of Grantor's now owned and
hereafter arising or acquired: licenses, franchises, permits,
patents, patent rights, copyrights, works which are the subject
matter of copyrights, trademarks (including, without limitation
all Colorful Images trademarks), service marks, trade names, trade
styles, patent, trademark and service xxxx applications, and all
licenses and rights related to any of the foregoing, and all other
rights under any of the foregoing, all extensions, renewals,
reissues, divisions, continuations, and continuations-in-part of
any of the foregoing, and all rights to xxx for past, present and
future infringement of any of the foregoing, in each case to the
extent (and only to such extent) used or useful in, arising from
or otherwise related to the Colorful Images Business.
"Real Estate" means the property subject
to the Mortgages.
"Supporting Obligations" means all supporting obligations
as such term is defined in the UCC, in each case to the extent
(and only to such extent) used or useful in, arising from or
otherwise related to the Colorful Images Business.
"UCC" means the Uniform Commercial Code, as in effect from
time to time, of the State of California or of any other state the
laws of which are required as a result thereof to be applied in
connection with the issue of perfection of security interests.
All other capitalized terms used but not otherwise defined
herein have the meanings given to them in the Purchase Agreement.
All other undefined terms contained in this Agreement, unless the
context indicates otherwise, have the meanings provided for by the
UCC to the extent the same are used or defined therein.
2. GRANT OF LIEN.
(a) Grantor, as security for all Obligations of Grantor
under the Transaction Documents, hereby grants to each Secured
Party, for the ratable benefit of the Secured Parties, a
continuing security interest in, lien on, assignment of and right
of set-off against, all of the following property and assets of
Grantor, whether now owned or existing or hereafter acquired or
arising, regardless of where located:
(i) all Accounts;
(ii) all Inventory;
(iii) all contract rights, in each case to the extent (and
only to such extent) used or useful in, arising from or otherwise
related to the Colorful Images Business, including Assigned
Contracts;
(iv) all Chattel Paper
(v) all Documents;
(vi) all Instruments;
(vii) all Supporting Obligations;
(viii) all General Intangibles;
(ix) all Equipment;
(x) all Investment Property;
(xi) all money, cash, cash equivalents, securities and
other property of any kind of such Grantor held directly or
indirectly by any of the Secured Parties, in each case to the
extent (and only to such extent) used or useful in, arising from
or otherwise related to the Colorful Images Business;
(xii) all of Grantor's deposit accounts, credits, and
balances with and other claims against any of the Secured Parties
or any of their Affiliates or any financial institution with which
Grantor maintains deposits, in each case to the extent (and only
to such extent) used or useful in, arising from or otherwise
related to the Colorful Images Business;
(xiii) all books, records and other property related to or
referring to any of the foregoing, including books, records,
account ledgers, data processing records, computer software and
other property and General Intangibles at any time evidencing or
relating to any of the foregoing, in each case to the extent (and
only to such extent) used or useful in, arising from or otherwise
related to the Colorful Images Business; and
(xv) all accessions to, substitutions for and
replacements, products and proceeds of any of the foregoing,
including, but not limited to, proceeds of any insurance policies,
claims against third parties, and condemnation or requisition
payments with respect to all or any of the foregoing.
All of the foregoing, together with all other property of
Grantor in which any of the Secured Parties may at any time be
granted a Lien as collateral for the Obligations, is herein
collectively referred to as the "Collateral."
(b) All of the Obligations of Grantor under the
Transaction Documents shall be secured by all of the Collateral of
Grantor.
3. PERFECTION AND PROTECTION OF SECURITY INTEREST.
(a) Grantor shall, at its expense, perform all steps
reasonably requested by any Secured Party at any time to perfect,
maintain, protect, and enforce such Secured Party's Liens,
including: (i) executing and filing financing or continuation
statements, and amendments thereof, in form and substance
reasonably satisfactory to such Secured Party; (ii) at the Secured
Parties request, delivering to the Secured Parties the originals
of all Instruments, Documents, and Chattel Paper, and all other
Collateral of which the Secured Parties reasonably determine they
should have physical possession in order to perfect and protect
the Secured Parties' security interest therein, duly pledged,
endorsed or assigned to the Secured Parties without restriction;
(iii) delivering to the Secured Parties warehouse receipts
covering any portion of the Collateral located in warehouses and
for which warehouse receipts are issued and certificates of title
covering any portion of the collateral for which certificates of
title have been issued; (iv) at the request of the Secured Parties
when a Event of Default has occurred and is continuing,
transferring Inventory to warehouses or other locations designated
by the Secured Parties (or such Secured Party); (v) placing
notations on Grantor's books of account to disclose the Secured
Parties' security interest; (vi) obtaining control agreements in
favor of the Secured Parties from securities intermediaries with
respect to financial assets in the possession of securities
intermediaries; (vii) at the request of the Secured Parties,
assigning and delivering to the Secured Parties all Supporting
Obligations, including letters of credit on which Grantor is named
beneficiary with the written consent of the issuer thereof; and
(viii) taking such other steps as are reasonably deemed necessary
or desirable by any Secured Party to maintain and protect such
Secured Party's Liens. To the extent permitted by applicable law,
any Secured Party may file, without Grantor's signature, one or
more financing statements disclosing such Secured Party's Liens.
Grantor agrees that a carbon, photographic, photostatic, or other
reproduction of this Agreement or of a financing statement is
sufficient as a financing statement.
(b) If any Collateral is at any time in the possession
or control at any third party warehouse or agent, then Grantor
shall notify each Secured Party thereof and shall obtain a letter
from such third party acknowledging the Secured Parties security
interest in such Collateral. If at any time any Collateral is
located in any operating facility of any Grantor that is leased by
any Grantor, then such Grantor shall obtain written landlord lien
waivers or subordinations, in form and substance reasonably
satisfactory to the Secured Parties, that waives or subordinates
all present and future Liens which the owner or lessor of such
premises may be entitled to assert against the Collateral.
(c) So long as the Purchase Agreement is in effect and
until all Obligations have been fully satisfied, each Secured
Party's Liens shall continue in full force and effect in all
Collateral.
(d) The exercise of remedies with respect to the
Collateral described in this Section 3 is subject to the
provisions of Section 26.
4. LOCATION OF COLLATERAL. Grantor represents and warrants
to the Secured Parties that: (a) Schedule I is a correct and
complete list of Grantor's chief executive office, the location of
its books and records, the locations of the Collateral, and the
locations of all of its other places of business; and (b) Schedule
I correctly identifies any of such facilities and locations that
are not owned by Grantor and sets forth the names of the owners
and lessors or sublessors of such facilities and locations.
Grantor covenants and agrees that it will not (i) maintain any
Collateral at any location other than those locations listed for
Grantor on Schedule I attached hereto, (ii) otherwise change or
add to any of such locations, or (iii) change the location of its
chief executive office from the location identified in Schedule I,
unless it gives each Secured Party at least thirty (30) days'
prior written notice thereof and executes any and all financing
statements and other documents that any Secured Party reasonably
requests in connection therewith. Without limiting the foregoing,
Grantor represents that all of its Inventory (other than Inventory
not yet received) is, and covenants that all of its Inventory will
be, located either (a) on premises owned by Grantor, (b) on
premises leased by Grantor, provided that the Secured Parties have
received an executed landlord waiver from the landlord of such
premises in form and substance satisfactory to the Secured
Parties, or (c) in a warehouse or with a bailee, provided that the
Secured Parties have received an executed bailee letter from the
applicable Person in form and substance satisfactory to the
Secured Parties.
5. JURISDICTION OF ORGANIZATION. Schedule II attached
hereto identifies the jurisdiction in which Grantor is
incorporated or organized.
6. TITLE TO, LIENS ON, AND SALE AND USE OF COLLATERAL.
Grantor represents and warrants to the Secured Parties and agrees
with the Secured Parties that: (a) all of the Collateral is and
will continue to be owned by Grantor free and clear of all Liens
whatsoever, except for Permitted Liens and sales in the ordinary
course and any sale required under Section 26; (b) the Secured
Parties Liens in the Collateral will not be subject to any prior
Lien; and (c) Grantor will use, store, and maintain the Collateral
with all reasonable care and will use such Collateral for lawful
purposes only.
7. APPRAISALS. Upon the request of the Secured Parties
whenever a default or Event of Default has occurred and is
continuing, Grantor shall, at its expense, provide each Secured
Party with appraisals of any or all of the Collateral from an
appraiser, and prepared on a basis, satisfactory to the Secured
Parties.
8. ACCESS AND EXAMINATION. Any Secured Party may at all
reasonable times during regular business hours (and at any time
when a default or Event of Default exists and is continuing) have
access to, examine, audit, make extracts from or copies of and
inspect any or all of Grantor's records, files, and books of
account and the Collateral, and discuss Grantor's affairs with
Grantor's officers and management. Grantor will deliver to the
Secured Parties any instrument necessary for the Secured Parties
to obtain records from any service bureau maintaining records for
Grantor. Upon the request of the Secured Parties when an Event of
Default has occurred and is continuing, the Secured Parties (or
such Secured Party) may, at the Grantor' expense, make copies of
all of Grantor's books and records, or require Grantor to deliver
such copies to the Secured Parties (or such Secured Party). The
Secured Parties may, without expense to any Secured Party, use
such of Grantor's respective personnel, supplies, and Real Estate
as may be reasonably necessary for maintaining or enforcing each
Secured Party's Liens. The Secured Parties shall have the right,
at any time, in such Secured Party's name or in the name of a
nominee of such Secured Party, to verify the validity, amount or
any other matter relating to the Accounts, Inventory, or other
Collateral, by mail, telephone, or otherwise.
9. [INTENTIONALLY OMITTED.]
10. [INTENTIONALLY OMITTED.]
11. [INTENTIONALLY OMITTED.]
12. INVENTORY.
(a) Grantor represents and warrants to the Secured Parties
and agrees with the Secured Parties that all of the Inventory
owned by Grantor is and will be held for sale or lease, or to be
furnished in connection with the rendition of services, in the
ordinary course of Grantor's business, and is and will be fit for
such purposes. Grantor will keep its Inventory in good and
marketable condition, except for damaged or defective goods
arising in the ordinary course of Grantor's business. Grantor
agrees that all Inventory produced by Grantor in the United States
of America will be produced in accordance with the Federal Fair
Labor Standards Act of 1938, as amended, and all rules,
regulations, and orders thereunder. Grantor will conduct a
physical count of the Inventory at the Secured Parties request
after an Event of Default. Grantor will not, without the Secured
Parties' written consent, sell any Inventory on a xxxx-and-hold,
guaranteed sale, sale and return or sale on approval.
(b) In connection with all Inventory financed by Letters
of Credit, Grantor will, at the Secured Parties' request, instruct
all suppliers, carriers, forwarders, customs brokers, warehouses
or others receiving or holding cash, checks, Inventory, Documents
or Instruments in which the Secured Parties hold a security
interest to deliver them to the Secured Parties and/or subject to
the Secured Parties' order, and if they shall come into Grantor's
possession, to deliver them, upon request, to the Secured Parties
in their original form. Grantor shall also, at the Secured
Parties' request, designate the Secured Parties as the consignee
on all bills of lading and other negotiable and non-negotiable
documents.
13. EQUIPMENT.
(a) Grantor represents and warrants to the Secured Parties
and agrees with the Secured Parties that all of the Equipment
owned by Grantor is and will be used or held for use in Grantor's
business, and is and will be fit for such purposes. Grantor shall
keep and maintain its Equipment in good operating condition and
repair (ordinary wear and tear excepted) and shall make all
necessary replacements thereof.
(b) Grantor shall promptly inform the Secured Parties of
any material additions to or deletions from the Equipment. Grantor
shall not permit any Equipment to become a fixture with respect to
real property or to become an accession with respect to other
personal property with respect to which real or personal property
the Secured Parties do not have a Lien. Grantor will not, without
the Secured Parties' prior written consent, alter or remove any
identifying symbol or number on Grantor's Equipment constituting
Collateral.
(c) Except as otherwise permitted under the Purchase
Agreement, Grantor will not, without the Secured Parties' prior
written consent, sell, lease as a lessor, or otherwise dispose of
any of Grantor's Equipment.
14. ASSIGNED CONTRACTS. Grantor shall fully perform all of
its obligations under each of the Assigned Contracts, and shall
enforce all of its rights and remedies thereunder, in each case,
as it deems appropriate in its business judgment; provided,
however, that except after and during the continuance of an Event
of Default Grantor shall have full power to amend, modify or
terminate any such contract it deems appropriate in its business
judgment, and that after and during the continuance of an Event of
Default but subject to the provisions of Section 26 that Grantor
shall not take any action or fail to take any action with respect
to its Assigned Contracts which would cause the termination of a
material Assigned Contract. Without limiting the generality of the
foregoing, after and during the continuance of an Event of
Default, but subject to the provisions of Section 26, Grantor
shall take all action necessary or appropriate to permit, and
shall not take any action which would have any materially adverse
effect upon, the full enforcement of all indemnification rights
under its Assigned Contracts. Except as otherwise provided in the
first sentence, and subject to Section 26, Grantor shall notify
the Secured Parties in writing, promptly after Grantor becomes
aware thereof, of any event or fact which could give rise to a
material claim by it for indemnification under any of its Assigned
Contracts, and shall diligently pursue such right and report to
the Secured Parties on all further developments with respect
thereto. Except as otherwise provided in the first sentence, and
subject to Section 16, Grantor shall fail after the Secured
Parties' demand to pursue diligently any right under its Assigned
Contracts, or if an Event of Default then exists, the Secured
Parties may, directly enforce such right in their own or the
Grantor's name and may enter into such settlements or other
agreements with respect thereto as the Secured Parties shall
determine. In any suit, proceeding or action brought by the
Secured Parties under a ny Assigned Contract for any sum owing
thereunder or to enforce any provision thereof, the Grantor shall
indemnify and hold the Secured Parties harmless from and against
all expense, loss or damage suffered by reason of any defense,
setoff, counterclaims, recoupment, or reduction of liability
whatsoever of the obligor thereunder arising out of a breach by
Grantor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing from
Grantor to or in favor of such obligor or its successors except,
with respect to any Secured Party, for such expenses, losses or
damages that are attributable solely to the gross negligence or
willful misconduct of such Secured Party as finally determined by
a court of competent jurisdiction. All such obligations of
Grantor shall be and remain enforceable only against the Grantor
and shall not be enforceable against any of the Secured Parties.
Notwithstanding any provision hereof to the contrary, Grantor
shall at all times remain liable to observe and perform all of its
duties and obligations under its Assigned Contracts, and the
Secured Parties' exercise of any of their respective rights with
respect to the Collateral shall not release Grantor from any of
such duties and obligations. No Secured Party shall be obligated
to perform or fulfill any of Grantor's duties or obligations under
its Assigned Contracts or to make any payment thereunder, or to
make any inquiry as to the nature or sufficiency of any payment or
property received by it thereunder or the sufficiency of
performance by any party thereunder, or to present or file any
claim, or to take any action to collect or enforce any
performance, any payment of any amounts, or any delivery of any
property.
15. DOCUMENTS, INSTRUMENTS, AND CHATTEL PAPER. Grantor
represents and warrants to the Secured Parties that (a) all
Documents, Instruments, and Chattel Paper describing, evidencing,
or constituting Collateral, and all signatures and endorsements
thereon, are and will be complete, valid, and genuine, and (b) all
goods evidenced by such Documents, Instruments, and Chattel Paper
are and will be owned by Grantor, free and clear of all Liens
other than Permitted Liens.
16. RIGHT TO CURE. The Secured Parties may, in their
discretion (but shall have not obligation to), pay any amount or
do any act required of Grantor hereunder or under any other
Transaction Document in order to preserve, protect, maintain or
enforce the Obligations, the Collateral or the Secured Parties'
Liens therein, and which Grantor fails to pay or do, including
payment of any judgment against Grantor, any insurance premium,
any warehouse charge, any finishing or processing charge, any
landlord's or bailee's claim, and any other Lien upon or with
respect to the Collateral. All reasonable payments that any
Secured Party makes under this Section 16 and all reasonable
out-of-pocket costs and expenses that any Secured Party pays or
incurs in connection with any action taken by it hereunder shall
be subject to reimbursement by the Company. Any payment made or
other action taken by any Secured Party under this Section 16
shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed thereafter as herein provided.
17. POWER OF ATTORNEY. Grantor hereby appoints each Secured
Party (subject to Section 26) or its designee as Grantor's
attorney, with power: (a) to endorse Grantor's name on any
checks, notes, acceptances, money orders, or other forms of
payment or security that come into any of the Secured Parties'
possession; (b) to sign Grantor's name on any invoice, xxxx of
lading, warehouse receipt or other negotiable or non-negotiable
Document constituting Collateral, on drafts against customers, on
assignments of Accounts, on notices of assignment, financing
statements and other public records and to file any such financing
statements by electronic means with or without a signature as
authorized or required by applicable law or filing procedure; (c)
so long as any Event of Default has occurred and is continuing, to
notify the post office authorities to change the address for
delivery of Grantor's mail to an address designated by the Secured
Parties and to receive, open and dispose of all mail addressed to
Grantor; (d) to send requests for verification of Accounts to
customers; (e) to complete in Grantor's name or such Secured
Party's (or designee's) name, any order, sale or transaction,
obtain the necessary Documents in connection therewith, and
collect the proceeds thereof; (f) to clear Inventory through
customs in Grantor's name, or such Secured Party's (or designee's)
name and to sign and deliver to customs officials powers of
attorney in Grantor's name for such purpose; and (g) to do all
things necessary to carry out the Purchase Agreement and this
Agreement and the other Transaction Documents. Grantor ratifies
and approves all acts of such attorney. None of the Secured
Parties nor their attorneys will be liable for any acts or
omissions or for any error of judgment or mistake of fact or law
except for their willful misconduct. This power, being coupled
with an interest, is irrevocable until the Purchase Agreement has
been terminated and the Obligations have been fully satisfied.
18. CERTAIN RIGHTS, DUTIES AND LIABILITIES OF THE SECURED
PARTIES. (a) Grantor assumes all responsibility and liability
arising from or relating to the use, sale or other disposition of
the Collateral. The Obligations shall not be affected by any
failure of any of the Secured Parties to take any steps to perfect
any Secured Party's Liens or to collect or realize upon the
Collateral, nor shall loss of or damage to the Collateral release
Grantor from any of the Obligations. Following the occurrence and
during the continuation of an Event of Default, the Secured
Parties may (but shall not be required to), without notice to or
consent from Grantor, xxx upon or otherwise collect, extend the
time for payment of, modify or amend the terms of, compromise or
settle for cash, credit, or otherwise upon any terms, grant other
indulgences, extensions, renewals, compositions, or releases, and
take or omit to take any other action with respect to the
Collateral, any security therefor, any agreement relating thereto,
any insurance applicable thereto, or any Person liable directly or
indirectly in connection with any of the foregoing, without
discharging or otherwise affecting the liability of Grantor for
the Obligations or under the Purchase Agreement or any other
Transaction Document or any other agreement now or hereafter
existing between the Secured Parties and/or any of the Secured
Parties and Grantor.
19. PATENT, TRADEMARK AND COPYRIGHT COLLATERAL.
(a) As of the date hereof, Grantor has no other interest
in, or title to, any patent, trademark or copyright included in
the Collateral except as set forth in Schedule III hereto. This
Agreement is effective to create a valid and continuing Lien on
and, perfected Liens in favor of the Secured Parties on Grantor's
patents, trademarks and copyrights included in the Collateral and
such perfected Liens are enforceable as such as against any and
all creditors of and purchasers from Grantor. All action necessary
or desirable to protect and perfect the Secured Parties' Liens on
Grantor's patents, trademarks or copyrights included in the
Collateral shall have been duly taken.
(b) Grantor shall notify the Secured Parties immediately if
it knows or has reason to know that any application or
registration relating to any patent, trademark or copyright (now
or hereafter existing) included in the Collateral may become
abandoned or dedicated, 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, the United States Copyright
Office or any court) regarding Grantor's ownership of any patent,
trademark or copyright included in the Collateral, its right to
register the same, or to keep and maintain the same.
(c) In no event shall Grantor, either directly or through any
agent, employee, licensee or designee, file an application for the
registration of any patent, trademark or copyright included in the
Collateral with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency
without giving the Secured Parties prior written notice thereof,
(d) Grantor shall take all actions necessary or requested by
the Secured Parties to maintain and pursue each application, to
obtain the relevant registration and to maintain the registration
of each of the patents, trademarks and copyrights (now or
hereafter existing) included in the Collateral, including the
filing of applications for renewal, affidavits of use, affidavits
of noncontestability and opposition and interference and
cancellation proceedings.
(e) In the event that any of patent, trademark or
copyright included in the Collateral is infringed upon, or
misappropriated or diluted by a third party, the Company shall
notify the Secured Parties promptly after the Company learns
thereof. Grantor shall, unless it shall reasonably determine that
such patent, trademark or copyright is in no way material to the
conduct of its business or operations, promptly xxx for
infringement, misappropriation or dilution and to recover any and
all damages for such infringement, misappropriation or dilution,
and shall take such other actions as the Secured Parties shall
deem appropriate under the circumstances to protect such patent,
trademark or copyright.
20. INDEMNIFICATION. In any suit, proceeding or action
brought by any Secured Party relating to any Account, Chattel
Paper, Contract, Document, General Intangible or Instrument for
any sum owing thereunder or to enforce any provision of any
Account, Chattel Paper, Contract, Document, General Intangible or
Instrument, Grantor will save, indemnify and keep the Secured
Parties and the Secured Parties harmless from and against all
expense (including reasonable attorneys' fees and expenses), loss
or damage suffered by reason of any defense, setoff, counterclaim,
recoupment or reduction of liability whatsoever of the obligor
thereunder, arising out of a breach by Grantor of any obligation
thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to, or in favor of, such obligor or
its successors from Grantor, except in the case of any of the
Secured Parties, to the extent such expense, loss, or damage is
attributable solely to the gross negligence or willful misconduct
of such Secured Party as finally determined by a court of
competent jurisdiction.
21. LIMITATION ON LIENS ON COLLATERAL. Grantor will not
create, permit or suffer to exist, and will defend the Collateral
against, and take such other action as is necessary to remove, any
Lien on the Collateral except Permitted Liens, and will defend the
right, title and interests of each of the Secured Parties in and
to any of Grantor's rights under the Collateral against the claims
and demands of all Persons whomsoever.
22. NOTICE REGARDING COLLATERAL. Grantor will advise the
Secured Parties promptly, in reasonable detail, (i) of any Lien
(other than Permitted Liens) or claim made or asserted against any
of the Collateral, and (ii) of the occurrence of any other event
which could have a Material Adverse Effect.
23. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted
to it under this Agreement, the Purchase Agreement, the other
Transaction Documents and under any other instrument or agreement
securing, evidencing or relating to any of the Obligations, if any
Event of Default shall have occurred and be continuing, the
Secured Parties may exercise all rights and remedies of a secured
party under the UCC. Without limiting the generality of the
foregoing, Grantor expressly agrees that in any such event the
Secured Parties, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified
below of time and place of public or private sale) to or upon
Grantor or any other Person (all and each of which demands,
advertisements and notices are hereby expressly waived to the
maximum extent permitted by the UCC and other applicable law), may
forthwith enter upon the premises of Grantor where any Collateral
is located through selfhelp, without judicial process, without
first obtaining a final judgment or giving Grantor or any other
Person notice and opportunity for a hearing on the Secured
Parties' claim or action and may collect, receive, assemble,
process, appropriate and realize upon the Collateral, or any part
thereof, and may forthwith sell, lease, assign, give an option or
options to purchase, or sell or otherwise dispose of and deliver
said Collateral (or contract to do so), or any part thereof, in
one or more parcels at a public or private sale or sales, at any
exchange at such prices as it may deem acceptable, for cash or on
credit or for future delivery without assumption of any credit
risk. The Secured Parties shall have the right upon any such
public sale or sales and, to the extent permitted by law, upon any
such private sale or sales, to purchase for the benefit of the
Secured Parties, the whole or any part of said Collateral so sold,
free of any right or equity of redemption, which equity of
redemption Grantor hereby releases. Such sales may be adjourned
and continued from time to time with or without notice. The
Secured Parties shall have the right to conduct such sales on
Grantor's premises or elsewhere and shall have the right to use
Grantor's premises without charge for such time or times as the
Secured Parties deems necessary or advisable.
(b) Grantor further agrees, at the Secured Parties'
request, to assemble the Collateral and make it available to the
Secured Parties at places which the Secured Parties shall select,
whether at Grantor's premises or elsewhere. Until the Secured
Parties are able to effect a sale, lease, or other disposition of
Collateral, the Secured Parties shall have the right to hold or
use Collateral, or any part thereof, to the extent that deemed
appropriate by the Secured Parties for the purpose of preserving
Collateral or its value or for any other purpose deemed
appropriate by the Secured Parties. The Secured Parties shall
have no obligation to Grantor to maintain or preserve the rights
of Grantor as against third parties with respect to Collateral
while Collateral is in the possession of the Secured Parties. The
Secured Parties may, if they so elect, seek the appointment of a
receiver or keeper to take possession of Collateral and to enforce
any of the Secured Parties' remedies (for the benefit of the
Secured Parties), with respect to such appointment without prior
notice or hearing as to such appointment. The Secured Parties
shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale ratably to the
Obligations as provided in the Purchase Agreement, and only after
so paying over such net proceeds, and after the payment by the
Secured Parties of any other amount required by any provision of
law, need the Secured Parties account for the surplus, if any, to
Grantor. To the maximum extent permitted by applicable law,
Grantor waives all claims, damages, and demands against any of the
Secured Parties arising out of the repossession, retention or sale
of the Collateral except such as arise solely out of the gross
negligence or willful misconduct of the Secured Parties or any of
the Secured Parties as finally determined by a court of competent
jurisdiction. Grantor agrees that ten (10) days prior notice by
the Secured Parties of the time and place of any public sale or of
the time after which a private sale may take place is reasonable
notification of such matters. Grantor shall remain liable for any
deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay all Obligations, including any
attorneys' fees or other expenses incurred by any of the Secured
Parties to collect such deficiency.
(c) Except as otherwise specifically provided herein,
Grantor hereby waives presentment, demand, protest or any notice
(to the maximum extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral.
(d) The provisions of this Section are subject
to the provisions of Section 26.
24. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY. For the
purpose of enabling the Secured Parties to exercise rights and
remedies under Section 23 hereof (including, without limiting the
terms of Section 23 hereof, in order to take possession of, hold,
preserve, process, assemble, prepare for sale, market for sale,
sell or otherwise dispose of Collateral) at such time as the
Secured Parties shall be lawfully entitled to exercise such rights
and remedies, Grantor hereby grants to the Secured Parties, for
the benefit of the Secured Parties, an irrevocable, nonexclusive
license (exercisable without payment of royalty or other
compensation to Grantor) to use, license or sublicense any
Intellectual Property now owned or hereafter acquired by Grantor
(in the cases of licenses from third parties, to the extent
permitted under the terms of such licenses), and wherever the same
may be located, and including in such license access to all media
in which any of the licensed items may be recorded or stored and
to all computer software and programs used for the compilation or
printout thereof. In the event that any third party consent is
required to effectuate the foregoing, Grantor shall use its
reasonable efforts to obtain any such consent.
25. LIMITATION ON SECURED PARTY'S DUTY IN RESPECT OF
COLLATERAL. Each of the Secured Parties shall use reasonable care
with respect to the Collateral in its possession or under its
control. No Secured Parties shall have any other duty as to any
Collateral in its possession or control or in the possession or
control of any agent or nominee of any Secured Party, or any
income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto.
26. LIMITATION OF REMEDIES AS TO CERTAIN COLLATERAL;
INTERCREDITOR PROVISIONS.
(a) Notwithstanding any contrary provision of this
Agreement or any other Transaction Document, and as long as a
petition of voluntary or involuntary bankruptcy (in the case of
any such involuntary petition, that has not been withdrawn or
removed within ten (10) days after demand by any Secured Party)
has not been filed against the Company, the Secured Parties agree
that their rights under this Agreement with respect to all of the
Collateral hereunder (but not including the Real Estate) shall be
subject to the following:
(1) Upon receipt by the Company of a notice of an Event of
Default (a "Default Notice") by a Secured Party, which
default is not cured within the applicable grace period,
if any, under the Transaction Documents, the Company
shall, within 10 days of receipt of such notice, provide
the Secured Parties a list of three (3) investment banks
with recognized expertise in the direct marketing and/or
catalog retailing business that the Company wishes to
hire, at its own expense, to sell the Colorful Images
Business as a going concern or otherwise in a transaction
intended to maximize the return from such a sale in a
timely manner to all creditors and equityholders of the
Company (the "CIB Sale"). The Secured Parties shall have
five (5) days in which to agree to one of the three
investment banks. In the event that the Secured Parties
are unable to agree on any one of the three, St. Cloud
may designate one of the three and, if it does not do so
within 10 Business Days, the Company shall select one of
the three within 5 Business Days. Upon selection of an
investment bank in accordance with the foregoing, the
Company shall promptly (and in any event within 10
Business Days) retain such investment bank at Company's
expense to effect the CIB Sale.
(2) For a period of six (6) months from receipt of the
Default Notice, the Secured Parties agree, so long as no
petition for voluntary or involuntary bankruptcy has been
filed (in the case of any such involuntary petition, that
has not been withdrawn or removed within ten (10) days
after demand by any Secured Party), not to exercise any
of their remedies under Section 23 with respect to any
Collateral other than the Real Estate pursuant to this
Agreement or any of the Transaction Documents so as to
allow the investment bank retained (the "Investment
Bank") to find a credit worthy party to enter into an
agreement with the Company to purchase the Colorful
Images Business. The Company shall provide each of the
Secured Parties regular reports on the Investment Bank's
progress and the Secured Parties shall be authorized to
communicate directly with the Investment Bank with
respect to all matters relating to the Collateral and the
sale thereof.
(3) St. Cloud may exercise any of its rights and remedies at
any time with respect to the Real Estate after receipt by
the Company of a Default Notice that is not cured within
the applicable grace period, if any, under the
Transaction Documents. The parties agree that all
proceeds realized with respect to the Real Estate shall
first be applied to the costs and expenses (including
attorney's fees) of realizing on such Collateral, then
towards the Obligations owed to St. Cloud under the
Purchase Agreement, the Notes and the other Transaction
Documents and thereafter to amounts owed to Xxxxxx.
(4) In the event that (i) the Company has not retained an
investment bank as required under clause (1) above, (ii)
the Secured Parties have not received, within 10 days
after retention of the Investment Bank, a written opinion
from the Investment Bank that the CIB Sale can be
effected at no less than the Minimum Price (as defined
below) within the time frame required hereunder, (ii) the
Company has not entered into a definitive agreement with
a creditworthy purchaser within six (6) months after
receipt of a Default Notice for the CIB Sale at or above
the price that will result, after payment of all
expenses, in the Secured Parties receiving in cash all
amounts due to them under the Notes and the Note Purchase
Agreement (less, with respect to any Secured Party, any
proceeds received by such Secured Party in respect of
such amounts from the sale of the Real Estate) (the
"Minimum Price"), (iv) the Investment Bank informs the
Company that it believes it will be unable to identify
for the Company a purchaser willing to pay the Minimum
Price in a CIB Sale or (v) the Investment Bank is not
making a commercially reasonable effort to effectuate the
CIB Sale at or above the Minimum Price, each of the
Secured Parties that has not been paid in full may
exercise any and all rights and remedies of the Secured
Parties under this Agreement and the Transaction
Documents.
(5) In the event that Company has entered into a definitive
agreement with a creditworthy purchaser for the CIB Sale
at or above the Minimum Price within six (6) months of
receipt of a Default Notice, the Company shall have sixty
(60) days in which to close the transaction contemplated
therein and shall disburse the proceeds received pursuant
to Section 26(d) immediately upon receipt so as to pay in
full the Secured Parties. In the event the Company fails
to close the transaction within sixty (60) days, each of
the Secured Parties may exercise any and all rights and
remedies of the Secured Parties under this Agreement and
the Transaction Documents.
(6) The Secured Parties agree to consent to any CIB Sale that
results in the Minimum Price or higher and to release,
upon receipt by the Secured Parties of indefeasible
payment in full in cash of all Obligations owing to the
Secured Parties, all security interests granted under
this Agreement and the Transaction Documents so as to
effectuate such sale.
(7) Until a Secured Party has the right under paragraph (4)
or (5) of this Section 26(a) to exercise rights and
remedies under this Agreement or the Transaction
Documents, Grantor shall have the right to deal with the
Assigned Contracts, and all other Collateral other than
the Real Estate as though no Event of Default has
occurred or is continuing but shall do so only in the
ordinary course of business and in accordance with past
practices.
(b) Whenever an Event of Default has occurred or is
continuing, Xxxxxxx X. Xxxxxx and/or Xxxxx X. Xxxxxx shall have
the right to purchase from St. Cloud all of its Notes upon payment
in full in cash of all Obligations owing to St. Cloud; such
payment to be made in cash within five (5) Business Days after
receipt by St. Cloud of written notice (which shall be
irrevocable) of the exercise of such right, whereupon St. Cloud
shall have no further rights under the Note or this Agreement
except with respect to any amounts owed to it for expenses
required to be paid to it under the Note or this Agreement.
(c) Except as set forth in Section 26(a), notwithstanding
anything to the contrary contained in this Agreement or any other
Transaction Document and irrespective of:
(1) the time, order or method of attachment or perfection of
the security interests created by any Security Document,
(2) the time or order of filing or recording of financing
statements or other documents filed or recorded to
perfect security interests in any Collateral,
(3) anything contained in any filing or agreement to which
any Secured Party now or hereafter may be a party and
(4) the rules for determining priority under the Uniform
Commercial Code or any other law governing the relative
priorities of secured creditors,
the security interests of the Secured Parties in the Collateral
other than the Real Estate as provided in Section 26(a) shall be
of equal priority.
(d) Any money, property or securities realized upon the
sale, disposition or other realization upon all or any part of the
Collateral (other than with respect to the Real Estate, which
shall be governed by Section 26(a)(3) above), shall be applied in
the following order:
(1) First, to the payment in full of all costs and expenses
(including, without limitation, reasonable attorneys'
fees and disbursements) paid or incurred by the
Investment Bank and each Secured Party in connection with
such realization on the Collateral or the protection of
their rights and interests therein;
(2) Second, to the Secured Parties, ratably, in payment of
all Obligations until such Obligations are paid in full;
(3) Third, to the Company, or its representative or as a
court of competent jurisdiction may direct, any surplus
then remaining.
In furtherance of the foregoing, each Secured Party agrees that if
it receives any payment in respect of the Obligations in excess of
its ratable share of all such payments received by all Secured
Parties (other than amounts received by St. Cloud in respect of
the Real Estate as set forth herein), such Secured Party shall
immediately pay to the other Secured Parties such amount as is
necessary so that all Secured Parties have received their ratable
share of all such payments and, in the event of any such payment
by a Secured Party, Grantor agrees that the Obligations owing to
such Secured Party shall be reinstated to the extent of such
payment.
(e) Any dispute among the Secured Parties under this
Section 26 shall be settled by arbitration in accordance with the
then current CPR Rules for Non-Administered Arbitration by three
arbitrators, of whom St. Cloud shall select one, Xxxxxxx X. Xxxxxx
and Xxxxx X. Xxxxxx collectively shall select one and such two
arbitrators shall select the third arbitrator. The arbitration
shall be governed by the Federal Arbitration Act, 9 U.S.C.
1-16, and judgment upon the award rendered by the arbitrator(s)
may be entered by any court having jurisdiction thereof. The place
of arbitration shall be Los Angeles, California.
27. MISCELLANEOUS.
(a) Reinstatement. This Agreement shall remain in full
force and effect and continue to be effective should any petition
be filed by or against Grantor for liquidation or reorganization,
should Grantor become insolvent or make an assignment for the
benefit of any creditor or creditors or should a receiver or
trustee be appointed for all or any significant part of Grantor's
assets, and shall continue to be effective or be reinstated, as
the case may be, if at any time payment and performance of the
Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Obligations, whether as a "voidable
preference," "fraudulent conveyance," or otherwise, all as though
such payment or performance had not been made. In the event that
any payment, or any part thereof, is rescinded, reduced, restored
or returned, the Obligations shall be reinstated and deemed
reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
(b) Notices. Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request,
consent, approval, declaration or other communication shall or may
be given to or served upon any of the parties by any other party,
or whenever any of the parties desires to give and serve upon any
other party any communication with respect to this Agreement, each
such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be given in the
manner, and deemed received, as provided for in the Purchase
Agreement.
(c) Severability. Whenever possible, each provision of
this Agreement shall be interpreted in a manner as to be effective
and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement. This
Agreement is to be read, construed and applied together with the
Purchase Agreement and the other Transaction Documents which,
taken together, set forth the complete understanding and agreement
of the Secured Parties and the Grantor with respect to the matters
referred to herein and therein.
(d) No Waiver; Cumulative Remedies. No Secured Party
shall by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies hereunder, and no waiver
shall be valid unless in writing, signed by the Secured Parties
and then only to the extent therein set forth. A waiver by the
Secured Parties of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy
which the Secured Parties would otherwise have had on any future
occasion. No failure to exercise nor any delay in exercising on
the part of any of the Secured Parties, any right, power or
privilege hereunder, shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege
hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and
remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and
remedies provided by law. None of the terms or provisions of this
Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Secured Parties and
the Company.
(e) Limitation by Law. All rights, remedies and powers
provided in this Agreement may be exercised only to the extent
that the exercise thereof does not violate any applicable
provision of law, and all the provisions of this Agreement are
intended to be subject to all applicable mandatory provisions of
law that may be controlling and to be limited to the extent
necessary so that they shall not render this Agreement invalid,
unenforceable, in whole or in part, or not entitled to be
recorded, registered or filed under the provisions of any
applicable law.
(f) Termination of this Agreement. Subject to Section 27(a)
hereof, this Agreement shall terminate upon the payment in full of
all Obligations (other than indemnification Obligations as to
which no claim has been asserted).
(g) Successors and Assigns. This Agreement and all
obligations of Grantor hereunder shall be binding upon the
successors and assigns of Grantor (including any
debtor-in-possession on behalf of Grantor) and shall, together
with the rights and remedies of the Secured Parties hereunder,
inure to the benefit of the Secured Parties, all future holders of
any instrument evidencing any of the Obligations and their
respective successors and assigns. No sales of participations,
other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Obligations or
any portion thereof or interest therein shall in any manner affect
the Lien granted to the Secured Parties hereunder. Grantor may
not assign, sell, hypothecate or otherwise transfer any interest
in or obligation under this Agreement.
(h) Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which shall collectively
and separately constitute one and the same agreement.
(i) Governing Law. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
IN ANY OF THE TRANSACTION DOCUMENTS, IN ALL RESPECTS, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
SECURITY AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED
STATES OF AMERICA. GRANTOR HEREBY CONSENTS AND AGREES THAT THE
STATE OR FEDERAL COURTS LOCATED IN LOS ANGELES COUNTY, CITY OF LOS
ANGELES, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
ANY CLAIMS OR DISPUTES BETWEEN GRANTOR AND THE SECURED PARTIES
PERTAINING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING
TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER TRANSACTION
DOCUMENTS, PROVIDED, THAT THE SECURED PARTIES AND GRANTOR
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF LOS ANGELES COUNTY, CITY OF
LOS ANGELES, AND, PROVIDED, FURTHER, NOTHING IN THIS SECURITY
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE ANY SECURED PARTY
FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY
FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER
IN FAVOR OF THE SECURED PARTIES. GRANTOR EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND GRANTOR HEREBY WAIVES ANY
OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT. GRANTOR HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY
SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL ADDRESS ED TO GRANTOR AT THE ADDRESS SET FORTH IN
SECTION 11.12 OF THE PURCHASE AGREEMENT AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE ACTUAL RECEIPT THEREOF.
(j) Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY
AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND
THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES EXCEPT AS EXPRESSLY SET FORTH IN
SECTION 26), THE PARTIES DESIRE THAT DISPUTES ARISING HEREUNDER OR
RELATING HERETO (EXCEPT AS EXPRESSLY SET FORTH IN SECTION 26) BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE,
AMONG THE SECURED PARTIES (OR ANY SECURED PARTY) AND GRANTOR
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY
AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO.
(k) Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content
of any kind whatsoever and are not a part of the agreement between
the parties hereto.
(l) No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue
of the authorship of any provisions of this Agreement.
(m) Advice of Counsel. Each of the parties represents to
each other party hereto that it has discussed this Agreement and,
specifically, the provisions of Section 27(i) and Section 27(j),
with its counsel.
(n) Benefit of the Secured Parties. All Liens granted or
contemplated hereby shall be for the benefit of the Secured
Parties, and all proceeds or payments realized from Collateral in
accordance herewith shall be applied to the Obligations in
accordance with the terms of the Purchase Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Security Agreement to be executed and delivered by its duly
authorized officer as of the date first set forth above.
CONCEPTS DIRECT, INC.,
as a Grantor
By:/s/Xxxx X. XxXxxxxxxx
Xxxx X. XxXxxxxxxx
Chief Financial Officer
ST. CLOUD CAPITAL PARTNERS, LP,
as a Secured Party
By:
Name:
Title:
XXXXXXX X. XXXXXX,
as a Secured Party
By:/s/Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
XXXXX X. XXXXXX,
as a Secured Party
By:/s/Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
SCHEDULE I
LOCATION OF COLLATERAL
A. Location of Chief Executive Office
B. Location of Books and Records
C. Location of Collateral
D. Location of all other places of business
E. Location of leased facilities and name of lessor/sublessor
SCHEDULE II
JURISDICTION OF ORGANIZATION
SCHEDULE III
PATENTS, TRADEMARKS AND COPYRIGHTS
