EXHIBIT 10.40
SENIOR SECURITY AGREEMENT
SECURITY AGREEMENT (the "AGREEMENT"), dated as of January __, 2005, by and
between Warp Technology Holdings, Inc., a Nevada corporation (the "GRANTOR") and
Crestview Capital Master, LLC, a Delaware limited liability company as
collateral agent (in such capacity, the "COLLATERAL AGENT") for the Noteholders
(as defined below).
WITNESSETH:
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, pursuant to a Note and Warrant Purchase Agreement dated as of the
date hereof (as amended, modified, restated or otherwise supplemented from time
to time, the "PURCHASE AGREEMENT") Grantor is issuing certain Senior Secured
Promissory Notes (the "NOTES") to the Purchasers identified in the Purchase
Agreement; and
WHEREAS, it is a condition precedent to the purchasing of the Notes that
Grantor shall have granted a first priority security interest, pledge and lien
on Grantor' assets and properties and the proceeds thereof to Collateral Agent
for the benefit of those Purchasers and their successors, heirs and assigns
("NOTEHOLDERS"); and
WHEREAS, simultaneously with the issuance of the notes, Grantor is issuing
certain other notes ("OTHER NOTES") that have payment terms and collateral that
are subordinate to the Notes; and
WHEREAS, it is also a condition precedent to the purchasing of the Notes
that the Noteholders and the Collateral Agent enter into a Collateral Agency
Agreement (the "COLLATERAL AGENCY AGREEMENT") of this same date pursuant to
which the Noteholders and the holders of the Other Notes appoint Collateral
Agent as their agent with respect to the collateral for, and certain of their
rights and remedies relating to, the Notes and the Other Notes; and
WHEREAS, it is also a condition precedent to the purchasing of the Notes
that the Noteholders, the Collateral Agent and the holders of the Other Notes
enter into an Intercreditor and Subordination Agreement (the "INTERCREDITOR
AGREEMENT") that, among other things, confirms that the Notes, and the
collateral for the Notes, are senior in priority to the Other Notes and the
collateral for the Other Notes.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Purchasers to purchase the Notes, Grantor hereby agrees with Collateral
Agent as follows:
SECTION 1. GRANT OF SECURITY AND PLEDGE. Grantor hereby transfers, grants,
bargains, sells, conveys, hypothecates, assigns, pledges and sets over to
Collateral Agent for its benefit and the ratable benefit of Noteholders, and
hereby grants to Collateral Agent for its benefit and the ratable benefit of
Noteholders a perfected pledge and security interest in, all of Grantor' right,
title and interest in and to the following (the "COLLATERAL"):
(a) all "accounts" as defined in the Uniform Commercial Code as in effect
from time to time in the State of New York, or when the context implies, the
Uniform Commercial Code as in effect from time to time in any other applicable
jurisdiction (the "UCC'), including by way of example and not of limitation, all
present and future accounts, accounts receivable and other rights of Grantor to
payment for goods sold or leased or for services rendered (except those
evidenced by instruments or chattel paper), whether now existing or hereafter
arising and wherever arising, and whether or not they have been earned by
performance (collectively, the "ACCOUNTS");
(b) (i) all "inventory" as defined in the UCC, and (ii) all goods and
merchandise now owned or hereafter acquired by Grantor wherever located, whether
in the possession of Grantor or of a bailee or other person for sale, storage,
transit, processing, use or otherwise consisting of whole goods, components,
supplies, materials, or consigned, returned or repossessed goods which are held
for sale or lease or to be furnished (or have been furnished) under any contract
of service or which are raw materials, work-in-process, finished goods or
materials used or consumed in Grantor's business or processed by or on behalf of
Grantor (regardless of whether characterized as inventory under the UCC)
(collectively, the "INVENTORY");
(c) (i) all "equipment" as defined in the UCC, and (ii) all machinery, all
manufacturing, distribution, selling, data processing and office equipment, all
furniture, furnishings, appliances, fixtures and trade fixtures, tools, tooling,
molds, dies, vehicles, vessels, aircraft and all other goods of every type and
description (other than Inventory), in each instance whether now owned or
hereafter acquired by Grantor and wherever located (collectively, the
"EQUIPMENT");
(d) all "general intangibles" as defined in the UCC, including by way of
example and not of limitation, all rights, interests, choses in action, causes
of action, claims and all other intangible property of Grantor of every kind and
nature (other than Accounts, Trademarks, Patents and Copyrights), in each
instance whether now owned or hereafter acquired by Grantor, including, without
limitation, all general intangibles; all corporate and other business records;
all loans, royalties, and other obligations receivable; all inventions, designs,
trade secrets, computer programs, software, printouts and other computer
materials, goodwill, registrations, copyrights, licenses, franchises, customer
lists, credit files, correspondence, and advertising materials; all customer and
supplier contracts, firm sale orders, rights under license and franchise
agreements (including all license agreements with any other Person (as defined
in the Purchase Agreement) in connection with any of the Patents and Trademarks
or such other Person's names or marks, whether Grantor is a licensor or licensee
under any such license agreement), and other contracts and contract rights; all
interests in partnerships and joint ventures; all tax refunds and tax refund
claims; all right, title and interest under leases, subleases, licenses and
concessions and other agreements to the extent assignable relating to real or
personal property; all payments due or made to Grantor in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of any property
by any person or governmental authority; all credits with and other claims
against carriers and shippers; all rights to indemnification; all reversionary
interests in pension and profit sharing plans and reversionary, beneficial and
residual interest in trusts; all proceeds of insurance of which Grantor is
beneficiary; and all letters of credit, guaranties, liens, security interest and
other security held by or granted to Grantor; and all other intangible property,
whether or not similar to the foregoing (collectively, the "GENERAL
INTANGIBLES");
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(e) all "chattel paper" as defined in the UCC, including by way of example
and not of limitation, all electronic chattel paper, all instruments, all notes
and debt instruments and all payments thereunder and instruments and other
property from time to time delivered in respect thereof or in exchange therefor,
and all bills of lading, warehouse receipts and other documents of title and
documents, in each instance whether now owned or hereafter acquired by Grantor;
(f) all property or interests in property now or hereafter acquired by
Grantor which hereafter may come into the possession, custody or control (within
the meaning of Sections 9-104 through 9-107 of the UCC) of Collateral Agent or
any agent or affiliate of Collateral Agent in any way or for any purpose
(whether for safekeeping, deposit, custody, pledge, transmission, collection or
otherwise), and all rights and interests of Grantor, now existing or hereafter
arising and however and wherever arising, in respect of any and all (i) notes,
drafts, letters of credits, stocks, bonds, and debt and equity securities,
whether or not certificated, and warrants, options, puts and calls and other
rights to acquire or otherwise relating to the same; (ii) money); (iii) proceeds
of loans and notes; and (iv) insurance proceeds and books and records relating
to any of the property covered by this Agreement; together, in each instance,
with all accessions and additions thereto, substitutions therefor, and
replacements, proceeds and products thereof;
(g) all of Grantor's now owned or existing and filed and hereafter
acquired or arising and filed trademarks, service marks, trademark or service
xxxx registrations, trade names, trademark or service xxxx applications, trade
styles, prints and labels on which said trademarks, trade names, trade styles
and service marks have appeared or appear, designs and general intangibles of
like nature, now existing or hereafter adopted or acquired, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof, or any other country or political subdivision thereof (except for
"intent to use" applications for trademark or service xxxx registrations filed
pursuant to Section 1(b) of the Xxxxxx Act, unless and until an Amendment to
Allege Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has
been filed), and including, without limitation, each xxxx, registration, and
application listed on Schedule 3 attached hereto and made a part hereof (as the
same may be amended pursuant hereto from time to time), and (i) renewals
thereof, (ii) all income, royalties, damages and payments now and hereafter due
and/or payable with respect thereto, including, without limitation, damages and
payment for past or future infringements thereof, (iii) the right to xxx for
past, present and future infringements thereof, (iv) all rights corresponding
thereto throughout the world, and (v) together in each case with the good will
of Grantor's business connected with the use of each such trademark, service
xxxx, trade name and trade dress (all of the foregoing being herein referred to
as the "TRADEMARKS");
(h) all of Grantor's now owned or existing and filed and hereafter
acquired or arising and filed patents and patent applications of the United
States and any other country, and all registrations and recordings thereof,
including, without limitation, applications, registrations and recordings in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof or any other country or any political
subdivision thereof, all whether now owned or hereafter acquired by Grantor, and
including without limitation the inventions and improvements described and
claimed therein, and those patents and patent applications listed on Schedule 4
attached hereto and made a part hereof, and (a) all reissues, divisions,
continuations, renewals, extensions and continuations in part thereof, (b) all
income,
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royalties, damages and payments now and hereafter due and/or payable under and
with respect thereto, including, without limitation, damages and payments for
past or future infringements thereof, (c) the right to xxx for past, present and
future infringements thereof, (d) all rights, title and interests corresponding
thereto throughout the world (all of the foregoing patents and applications, and
(e) the goodwill of Assignor's business connected with and symbolized by the
foregoing, together with the items described in clauses (a) (d), are sometimes
hereinafter individually and/or collectively referred to as the "PATENTS");
(i) all of Grantor's now held or hereafter acquired interest in any
written agreement naming Grantor as licensor or licensee (including, without
limitation, those listed on Schedule 4), granting any right under any Patent,
including, without limitation, the grant of rights to manufacture, distribute,
exploit and sell materials derived from any Patent (the "PATENT LICENSES");
(j) all of Grantor's now owned, registered and unregistered, and hereafter
acquired or arising, registered and unregistered, copyrights and copyright
applications of the United States, or any other country, and all registrations
and recordings thereof, including, without limitation, applications,
registrations and recordings in the United States Copyright Office, the Library
of Congress or in any similar office or agency of the United States, any State
thereof, or any other country or political subdivision thereof, including those
listed on Schedule 5 attached hereto and made a part hereof (as the same may be
amended pursuant hereto from time to time), and (i) the renewals thereof, (ii)
all income, royalties, damages and payments now and hereafter due and/or payable
with respect thereto, including damages and payments for past or future
infringements thereof, (iii) the right to xxx for past, present and future
infringements thereof, and (iv) all rights, title, and interests corresponding
thereto throughout the world (all of the foregoing being herein referred to as
the "COPYRIGHTS");
(k) all of Grantor's now held or hereafter acquired interest in any
written agreement naming Grantor as licensor or licensee (including, without
limitation, those listed on Schedule 5), granting any right under any Copyright,
including, without limitation, the grant of rights to manufacture, distribute,
exploit and sell materials derived from any Copyright (the "COPYRIGHT
LICENSES");
(l) all books, records, ledger cards and other property at any time
evidencing or relating to the Accounts, Equipment, General Intangibles,
Trademarks, Patents, Copyrights, Patent License or Copyright Licenses;
(m) all shares of capital stock owned by Grantor, including, without
limitation, all shares of capital stock listed on Schedule 6 hereto (as such
schedule may be amended or supplemented from time to time) of the issuers listed
thereon (individually, an "ISSUER", and collectively, the "ISSUERS") and all
shares of capital stock of any Issuer obtained in the future by Grantor and the
certificates, if any, representing or evidencing such shares and any interest of
Grantor on the books and records of such Issuer or on the books and records of
any securities intermediary pertaining to such shares, and, subject to Section 9
below, all dividends, distributions, cash, warrants, rights, options,
instruments, securities and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in
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exchange for any or all of such shares, and all rights and privileges of Grantor
with respect to such shares (the "PLEDGED SHARES");
(n) all interests in any general partnership, limited partnership, limited
liability partnership or other partnership held by Grantor, including, without
limitation, all partnership interests listed in Schedule 7 hereto (as such
schedule may be amended or supplemented from time to time) of the partnerships
listed thereon (individually, a "PARTNERSHIP", and collectively, the
"PARTNERSHIPS") and all partnership interests in any Partnership obtained in the
future by Grantor and the certificates, if any, representing or evidencing such
interests and any interest of Grantor on the books and records of such
Partnership or on the books and records of any securities intermediary
pertaining to such interest, and, subject to Section 9 below, all dividends,
distributions, cash, warrants, rights, options, instruments, securities and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such interests, and
all rights and privileges of Grantor with respect to such interests (the
"PLEDGED PARTNERSHIP INTERESTS");
(o) all interests in any limited liability company held by Grantor,
including, without limitation, all limited liability company interests listed in
Schedule 8 hereto (as such schedule may be amended or supplemented from time to
time) of the limited liability companies listed thereon (individually, an "LLC",
and collectively, the "LLCS") and all interests in any LLC obtained in the
future by Grantor and the certificates, if any, representing or evidencing such
interests and any interest of Grantor on the books and records of such LLC or on
the books and records of any securities intermediary pertaining to such
interest, and, subject to Section 9 below, all dividends, distributions, cash,
warrants, rights, options, instruments, securities and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such interests, and all rights and
privileges of Grantor with respect to such interests (the "PLEDGED LLC
INTERESTS");
(p) (the Pledged Shares, the Pledged Partnership Interests, the Pledged
LLC Interests being collectively called the "PLEDGED COLLATERAL");
(q) all letter of credit rights, as defined in the UCC (the "LETTER OF
CREDIT RIGHTS";
(r) all other personal property of Grantor, whether tangible or
intangible, and whether now owned or hereafter acquired, including, but not
limited to, all deposit accounts (general or special) with any bank or other
financial institution; and
(s) all proceeds and products of any of the foregoing, in any form,
including, without limitation, any claims against third parties for loss or
damage to or destruction of any or all of the foregoing and, to the extent not
otherwise included, all (i) payments under insurance (whether or not Collateral
Agent is the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect b any of the
foregoing Collateral and (ii) cash.
Notwithstanding anything contained herein to the contrary, the total
amount of shares of capital stock or other ownership interests of any Person
pledged pursuant to this Agreement that is not incorporated or organized in the
United States shall in no event exceed sixty-six percent
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(66%) of the total outstanding shares of capital stock or such other ownership
interests thereof (the "FOREIGN ISSUER LIMIT") if, and so long as, pledging
those shares subjects Grantor to a material tax liability.
For avoidance of doubt, it is expressly understood and agreed that, to the
extent the UCC is revised subsequent to the date hereof such that the definition
of any of the foregoing terms included in the description of Collateral is
changed, the parties hereto desire that any property which is included in such
changed definitions which would not otherwise be included in the foregoing grant
on the date hereof be included in such grant immediately upon the effective date
of such revision. Notwithstanding the immediately preceding sentence, the
foregoing grant is intended to apply immediately on the date hereof to all
Collateral to the fullest extent permitted by applicable law regardless of
whether any particular item of Collateral is currently subject to the UCC.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement and the Collateral
secure the payment of all Obligations (as defined below). "OBLIGATIONS" means
any and all of the following: (i) Grantor's existing and future obligations (of
any kind whatsoever) under the Purchase Agreement, the Notes, the Collateral
Agency Agreement, this Agreement and all other Transaction Documents (as defined
in the Purchase Agreement); and (ii) (a) any amounts that Collateral Agent may
advance or spend for the maintenance or preservation of the Collateral and (b)
any other expenditures that Collateral Agent may make under the provisions of
this Agreement or any other Transaction Document or for the benefit of Grantor;
(iii) all amounts owed under any modifications, renewals, refinancings,
restructurings or extensions of any of the forgoing obligations; or (iv) any of
the foregoing that arises after the filing of a petition by or against Grantor
under the Bankruptcy Code, even if the obligations do not accrue because of the
automatic stay under Section 362 of the Bankruptcy Code or otherwise.
SECTION 3. DELIVERY OF PLEDGED COLLATERAL; OTHER ACTIONS. Upon written
request by Collateral Agent, all certificates or instruments representing or
evidencing the Pledged Collateral shall be delivered to and held by Collateral
Agent pursuant hereto and shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to Collateral Agent. Upon the occurrence and during the continuance
of any Event of Default, Collateral Agent shall have the right (for the ratable
benefit of Noteholders) at any time in its discretion and without notice to
Grantor, to transfer to or to register in the name of Collateral Agent or any of
its nominees any or all of the Pledged Collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants
as follows:
(a) all of the Inventory and/or Equipment (other than motor vehicles and
other immaterial amounts of Inventory and Equipment) is located at the places
specified in Schedule 1 hereto. The jurisdiction of formation, organization or
incorporation, the chief place of business and chief executive offices of
Grantor and the offices where Grantor keeps its records concerning any Accounts
and any Receivables and all originals of all chattel paper which evidence any
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Account are located at the places specified in Schedule 2 hereto. All trade
names under which Grantor have sold and will sell Inventory are listed on
Schedule 3 hereto.
(b) Grantor owns the Collateral free and clear of any lien, security
interest, charge or encumbrance (each, a "LIEN") except for the following:
("Permitted Liens"): security interests created by this Agreement, security
interests in favor of the Other Noteholders that are subordinated (and so long
as they remain subordinated) to the security interests created by this Agreement
pursuant to the terms of the Intercreditor Agreement. No effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any recording office, except such as may have been
filed [(X)] in favor of Collateral Agent relating to this Agreement [AND (Y)
____________________________________].
(c) Grantor owns no Trademarks, Patents or Copyrights or has any material
Trademarks, Patents or Copyrights registered in, or the subject of pending
applications in, the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other country or
any political subdivision thereof, other than those described in Schedules 3, 4
and 5 hereto. The registrations for the Trademarks, Patents and Copyrights
disclosed on such Schedules 3, 4 and 5 hereto are subsisting and have not been
adjudged invalid or unenforceable, in whole or in part, and, to the knowledge of
Grantor, each such Patent, Trademark and Copyright is valid and enforceable.
None of the material Trademarks, Patents or Copyrights has been abandoned or
dedicated.
(d) Grantor is the sole and exclusive owner of the entire right, title and
interest in and to each of its Trademarks, Patents and Copyrights, free and
clear of any liens, charges and encumbrances except for Permitted Liens.
(e) Grantor owns or holds no Pledged Collateral other than that described
in Schedules 6, 7 and 8.
(f) The Pledged Shares have been duly authorized and validly issued and
are fully paid and non-assessable.
(g) Grantor is the record and beneficial owner of the Pledged Collateral
described in Schedules 6, 7 and 8 free and clear of any Lien, security interest,
option or other charge or encumbrance, except for Permitted Liens.
(h) Except as disclosed on Schedule 6 and subject to the Foreign Issuer
Limit, the Pledged Shares constitute all of the issued and outstanding shares of
stock of each of the Issuers and no such Issuer is under any contractual
obligation to issue any additional shares of stock or any other securities,
rights or indebtedness.
(i) Except as disclosed on Schedule 7 and subject to the Foreign Issuer
Limit, the Pledged Partnership Interests, if any, constitute all of the issued
and outstanding interests in each of the Partnerships, if any, and no
Partnership is under any contractual obligation to issue any additional
interests or any other rights or indebtedness.
(j) Except as disclosed on Schedule 8 and subject to the Foreign Issuer
Limit, the Pledged LLC Interests, if any, constitute all of the issued and
outstanding interests in each of the
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LLCs and no LLC is under any contractual obligation to issue any additional
interests or any other rights or indebtedness.
(k) All letters of credit to which Grantor has rights are listed on
Schedule 9 (as amended or supplemented from time to time) hereto.
(l) Grantor owns, or has the rights to, no licenses, contracts, permits,
agreements, contracts, approvals, authorizations or other rights that are
subject to a restriction on pledge or assignment, except as indicated on
Schedule 10.
SECTION 5. FURTHER ASSURANCES.
(a) Grantor agrees that from time to time, at its expense, it will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary, or that Collateral Agent may request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable Collateral Agent to exercise and enforce any of its
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, Grantor file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary, or as Collateral Agent may reasonably request, in order to perfect
and preserve the security interests granted or purported to be granted hereby.
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(b) Grantor agrees that within ten (10) days of the identification of the
existence of a claim in tort belonging to Grantor which has arisen in the course
of Grantor's business (a "COMMERCIAL TORT CLAIM"), Grantor shall (i) notify
Collateral Agent of such Commercial Tort Claim, and provide sufficient
information to enable Collateral Agent to evaluate each such Commercial Tort
Claim, including, but not limited to (v) information regarding the Person(s)
against whom such Commercial Tort Claim may be made, (w) the nature of such
Commercial Tort Claim, (x) the amount of damages claimed by Grantor, (y) the
name and address of counsel representing Grantor with respect to such Commercial
Tort Claim, if any, and (z) such other and further information as Collateral
Agent deems necessary and desirable under the circumstances; (ii) upon request
by Collateral Agent, execute such documentation as Collateral Agent may request,
to assign and to grant to Collateral Agent a senior perfected security interest
in each such Commercial Tort Claim.
(c) Grantor hereby authorizes Collateral Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Grantor where permitted by
law. A carbon, photographic or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof is sufficient as
a financing statement where permitted by law.
(d) Grantor will furnish to Collateral Agent from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Collateral Agent may reasonably
request, all in reasonable detail, in order to perfect and preserve the security
interests granted or purported to be granted hereunder; and such other
information as may reasonably be requested by Collateral Agent from time to time
with respect to the Collateral.
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(e) If requested by Collateral Agent, Grantor will promptly provide
waivers and agreements from Grantor's landlords and from any third-party
possessing or controlling any Collateral, in form and substance satisfactory to
Collateral Agent.
(f) Collateral Agent may, at any time upon two days written notice,
inspect any Collateral, inspect and audit any of Grantor's records, financial
statements and reports (and make copies thereof), and inspect any of Grantors'
premises and any other premises where Collateral or Grantor's records are
located. Grantor agrees to cooperate, and to cause all of its employees,
officers, accountants, bailees and agents, to cooperate fully and promptly with
Collateral Agent and its designees in these matters.
(i) Grantor will advise Collateral Agent in writing at least 10 days prior
to owning any life insurance policy and, if requested by Collateral Agent,
provide to Collateral Agent an assignment of that policy duly acknowledged by
the insurer, in form and substance satisfactory to Collateral Agent.
SECTION 6. AS TO EQUIPMENT AND INVENTORY. Grantor shall:
(a) Keep the Equipment and Inventory (other than Inventory sold in the
ordinary course of business) at the places specified therefor in Schedule 1
hereto or, upon 30 days' prior written notice to Collateral Agent, at other
places in jurisdictions where all action required by Section 5 hereof shall have
been taken to assure the continuation of the perfection of the security interest
of Collateral Agent (for its benefit and the ratable benefit of Noteholders)
with respect to the Equipment and Inventory.
(b) Subject to provisions of the Purchase Agreement, maintain or cause to
be maintained in good repair, working order and condition, excepting ordinary
wear and tear and damage due to casualty, all of the Equipment, and make or
cause to be made all appropriate repairs, renewals and replacements thereof, to
the extent not obsolete and consistent with past practice of Grantor, as quickly
as practicable after the occurrence of any loss or damage thereto which are
necessary or reasonably desirable to such end, except where the failure to do
any of the foregoing would not result in a Material Adverse Effect (as defined
in the Purchase Agreement).
(c) Until satisfaction in full of the Obligations, at any time when an
Event of Default has occurred and is continuing: (i) Grantor will perform any
and all reasonable actions requested by Collateral Agent to enforce Collateral
Agent's security interest in the Inventory and all of Collateral Agent's rights
hereunder, such as leasing warehouses to Collateral Agent or its designee,
placing and maintaining signs, appointing custodians, transferring Inventory to
warehouses, and delivering to Collateral Agent warehouse receipts and documents
of title in Collateral Agent's name; (ii) if any Inventory is in the possession
or control of any of Grantor' agents, contractors or processors or any other
third party, Grantor will notify Collateral Agent thereof and will notify such
agents, contractors or processors or third party of Collateral Agent's security
interest therein and, upon request, instruct them to hold all such Inventory for
Collateral Agent and Grantor's account, as their interests may appear, and
subject to Collateral Agent's instructions; (iii) Collateral Agent shall have
the right to hold all Inventory subject to the security
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interest granted hereunder; and (iv) Collateral Agent shall have the right to
take possession of the Inventory or any part thereof and to maintain such
possession on Grantor's premises or to remove any or all of the Inventory to
such other place or places as Collateral Agent desires in its sole discretion.
If Collateral Agent exercises its right to take possession of the Inventory,
Grantor, upon Collateral Agent's demand, will assemble the Inventory and make it
available to Collateral Agent at Grantor's premises at which it is located.
SECTION 7. AS TO ACCOUNTS
(a) Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Accounts, and
the offices where it keeps all originals of all chattel paper which evidence
Accounts, at the location therefor specified in Section 4(a) hereof or, upon 30
days' prior written notice to Collateral Agent, at such other locations in a
jurisdiction where all actions required by Section 5 hereof shall have been
taken with respect to the Accounts. Grantor will hold and preserve such records
and chattel paper and will permit representatives of Collateral Agent, at any
time during normal business hours, to inspect and make abstracts from such
records and chattel paper.
(b) Except as otherwise provided in this subsection (b), Grantor shall
continue to collect in accordance with its customary practice, at its own
expense, all amounts due or to become due to Grantor under the Accounts and,
prior to the occurrence and continuance of an Event of Default, Grantor shall
have the right to adjust, settle or compromise the amount or payment of any
Account, or release wholly or partly any account debtor or obligor thereof, or
allow any credit or discount thereon, all in accordance with its customary
practices. In connection with such collections, Grantor may, upon the occurrence
and during the continuation of an Event of Default, take (and at the direction
of Collateral Agent shall take) such action as Grantor or Collateral Agent may
reasonably deem necessary or advisable to enforce collection of the Accounts;
provided, that following the occurrence and during the continuation of an Event
of Default, Collateral Agent shall have the right to notify the account debtors
or obligors under any Accounts of the assignment of such Accounts to Collateral
Agent and to direct such account debtors or obligors to make payment of all
amounts due or to become due to Grantor thereunder directly to Collateral Agent
and, upon such notification and at the expense of Grantor, to enforce collection
of any such Accounts, and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as Grantor might have done.
After receipt by Grantor of the notice referred to in the proviso to the
preceding sentence, (i) all amounts and proceeds (including instruments)
received by Grantor in respect of the Accounts shall be received in trust for
the benefit of Collateral Agent (for the ratable benefit of Noteholders)
hereunder, shall be segregated from other funds of Grantor and shall be
forthwith paid over to Collateral Agent in the same form as so received (with
any necessary endorsement) to be held as cash collateral and either (A) released
to Grantor if such Event of Default shall have been cured or waived or (B) if
such Event of Default shall be continuing, applied as provided by Section 15
hereof, and (ii) Grantor shall not adjust, settle or compromise the amount or
payment of any Account, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon.
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SECTION 8. AS TO TRADEMARKS, PATENTS, COPYRIGHTS, PATENT LICENSES AND
COPYRIGHT LICENSES.
(a) Grantor shall, either itself or through licensees, continue to use the
Trademarks as each is currently used in Grantor's business in order to maintain
the Trademarks in full force free from any claim of abandonment for nonuse, and
(ii) with respect to any Trademark constituting Collateral that Grantor has
reasonably determined to be useful and material to the conduct of Grantor's
business, Grantor will not (and will use its commercially reasonable best
efforts not to permit any licensee thereof to) do any act or knowingly omit to
do any act whereby any Trademark may become invalidated, unless, in the cases of
clauses (i) and (ii), such failure to maintain or use a Trademark is not
reasonably likely to have a Material Adverse Effect (as defined in the Purchase
Agreement).
(b) Grantor will not do any act, or omit to do any act, whereby the
Patents or Copyrights may become abandoned or dedicated and Grantor shall notify
Collateral Agent immediately if it knows of any reason or has reason to know
that the application or registration of any of the Patents or Copyrights may
become abandoned or dedicated, unless such abandonment or dedication is not
reasonably likely to have a Material Adverse Effect (as defined in the Purchase
Agreement).
(c) Grantor will not, either itself or through any agent, employee,
licensee or designee, (i) file an application for the registration of any Patent
or Trademark with the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof or
(ii) file any assignment of any Patent or Trademark, which Grantor may acquire
from a third party, with the United States Patent and Trademark Office or any
similar office or agency in any other country or any political subdivision
thereof, unless Grantor shall, within 30 days after the date of such filing,
notify Collateral Agent thereof, and, upon request of Collateral Agent in the
exercise of its business judgment, execute and deliver any and all assignments,
agreements, instruments, documents and papers as Collateral Agent may request to
evidence Collateral Agent's interest in such Patent or Trademark and the
goodwill and general intangibles of Grantor relating thereto or represented
thereby, and Grantor hereby constitutes Collateral Agent its attorney-in- fact
to execute and file all such writings for the foregoing purposes, all lawful
acts of such attorney being hereby ratified and confirmed; such power being
coupled with an interest is irrevocable until the Obligations are paid in full.
(d) Grantor will take all necessary steps in any proceeding before the
United States Patent and Trademark Office, the United States Copyright Office or
any similar office or agency in any other country or any political subdivision
thereof, in order to maintain in all material respects each registered
Trademark, Patent and Copyright, and to pursue each application for registration
of any Trademark, Patent and Copyright not listed on Schedules 3, 4 and 5
hereto, including, without limitation, filing of renewals, payment of
maintenance fees, filing of affidavits of use, filing of affidavits of
incontestability and opposition, and participation in opposition, interference
and cancellation proceedings.
(e) Grantor will perform all acts and execute and deliver all further
instruments and documents, including, without limitation, financing statements
or security agreements in form suitable for filing with the United States Patent
and Trademark Office, and the United States Copyright Office, respectively,
reasonably requested by Collateral Agent at any time to
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evidence, perfect, maintain, record and enforce Collateral Agent's interest in
all Trademarks, Patents and Copyrights or otherwise in furtherance of the
provisions of this Agreement, and Grantor hereby authorizes Collateral Agent to
execute and file one or more accurate financing statements (and similar
documents) or copies thereof or of this Agreement with respect to Patents,
Trademarks and Copyrights signed only by Collateral Agent.
(f) Grantor will, upon acquiring knowledge of any use by any person of any
term or design likely to cause confusion with any Trademark, promptly notify
Collateral Agent of such use, and if requested by Collateral Agent, shall join
with Collateral Agent, at Grantor's expense, in such action as Collateral Agent,
in its reasonable discretion, may deem advisable for the protection of
Collateral Agent's interest in and to the Trademarks.
(g) Grantor agrees that, should it obtain rights to any Patent, Trademark,
Copyright, Patent License or Copyright Licenses which is not now identified on
Schedules 3, 4 and 5, or become entitled to the benefit of any reissue,
division, continuation, renewal, extension, or continuation-in-part of any
Trademark, Patent, Copyright, Patent License or Copyright License, (i) Grantor
shall give prompt written notice thereof to Collateral Agent, (ii) the
provisions of Section 1 of this Agreement shall automatically apply to any such
Trademark, Patent, Copyright, Patent License or Copyright License, and (iii) any
such Trademark, Patent, Copyright, Patent License or Copyright License shall
automatically become part of the Collateral.
(h) If Grantor becomes aware that any Trademark, Patent, Copyright, Patent
License or Copyright License is infringed or misappropriated by a third party,
Grantor shall promptly notify Collateral Agent and shall, if reasonably
requested by Collateral Agent, promptly xxx for infringement or misappropriation
and for recovery of all damages caused by such infringement or misappropriation,
or, with the prior written consent of Collateral Agent, shall take such other
actions as Collateral Agent shall reasonably deem appropriate under the
circumstances to protect such Trademark, Patent, Copyright, Patent License or
Copyright License.
(i) Grantor shall continue to use reasonable and proper statutory notice
in connection with its use of each registered Patent, Trademark and Copyright.
(j) This Agreement is executed for collateral purposes only and upon
payment in full of the Obligations, Collateral Agent shall, at Grantor' expense,
execute and deliver to Grantor all deeds, assignments and other instruments as
may be necessary or proper to re-vest in Grantor full title to the Trademarks,
Patents, Copyrights, Patent License and Copyright Licenses, subject to any
disposition thereof which may have been made by Collateral Agent pursuant
hereto.
SECTION 9. AS TO THE PLEDGED COLLATERAL; VOTING RIGHTS; DIVIDENDS; ETC.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) Grantor shall be entitled to exercise or refrain from exercising
any and all voting and other consensual rights pertaining to the Pledged
Collateral or any part thereof for any purpose not inconsistent with the
terms of this Agreement or the Purchase Agreement;
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(ii) notwithstanding the provisions of Section 1 hereof, Grantor
shall be entitled to receive and retain any and all dividends, interest or
distributions paid in respect of the Pledged Collateral; provided, that
any and all
(A) dividends, interest or distributions paid or payable other
than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral, and
(B) dividends, interest or distributions paid or payable in
cash in respect of any Pledged Collateral in connection with a
partial or total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in-surplus; and
(C) cash paid, payable or otherwise distributed in redemption
of, or in exchange for, any Pledged Collateral;
shall be, and shall be forthwith delivered to Collateral Agent, to hold as
Pledged Collateral and shall, if received by any of Grantor, be received in
trust for the benefit of Collateral Agent, be segregated from the other property
or funds of Grantor, and be forthwith delivered to Collateral Agent as Pledged
Collateral in the same form as so received (with any necessary endorsement); and
(iii) Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to Grantor all such proxies and other instruments
as Grantor may reasonably request for the purpose of enabling Grantor to
exercise the voting and other rights which it is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends which it is
authorized to receive and retain pursuant to paragraph (ii) above;
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) all rights of Grantor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise
pursuant to Section 9(a)(i) and to receive the dividends which it would
otherwise be authorized to receive and retain pursuant to Section 9(a)(ii)
shall cease, and all such rights shall thereupon become vested in
Collateral Agent, who shall thereupon have the sole right to exercise such
voting and other consensual rights and to receive and hold as Pledged
Collateral any such dividends; and
(ii) all dividends which are received by Grantor contrary to the
provisions of paragraph (i) of this Section 9(b) shall be received in
trust for the benefit of Collateral Agent, shall be segregated from other
funds of Grantor and shall be forthwith paid over to Collateral Agent as
Pledged Collateral in tie same form as so received (with any necessary
endorsement).
SECTION 10. INSURANCE. Maintain insurance with insurers in amounts and on
terms, reasonably satisfactory to Collateral Agent including: (i) liability
insurance naming Collateral Agent as additional insured, (ii) casualty and loss
insurance on all Grantor's assets for their full insurable value naming
Collateral Agent as sole loss payee, and (iii) such other insurance as
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Collateral Agent may request. Grantor shall provide original policies and other
evidence of insurance upon request and in any event, at least 10 days prior to
the expiration of any existing policy, satisfactory to Collateral Agent. The
policies of insurance (or the loss payable and additional insured endorsements
delivered to Collateral Agent) shall contain provisions pursuant to which the
insurer agrees to provide 30 days prior written notice to Collateral Agent in
the event of any cancellation, amendment, modification or non-renewal of any
such policy. Collateral Agent shall have the exclusive right to settle and
adjust all insurance claims relating to any casualty or loss and may, in its
sole discretion, apply the proceeds of any casualty and loss insurance against
the Obligations, except as provided in the next sentence. If no Event of Default
is continuing, and a casualty or loss involves Collateral having a value of
$50,000 or less, at Grantor's option those proceeds shall not be required to be
so applied to the Obligations to the extent (I) Grantor delivers a certificate
to Collateral Agent promptly following the casualty or loss stating that Grantor
intends to use those proceeds to replace, restore, repair or rebuild the assets
so destroyed or lost within 60 days of that casualty or loss and (II) those
proceeds are in fact used for that purpose within that period; provided, that if
Grantor shall not have completed that replacement, restoration, repair or
rebuilding within that period, Collateral Agent may, in its discretion, apply
any remaining insurance proceeds to the Obligations. Collateral Agent shall not
be obligated to release any insurance proceeds to Grantor while any Default is
continuing and unless arrangements have been made to assure that the proceeds
are used solely to replace, restore, repair or rebuild the Collateral to
Collateral Agent's satisfaction. To the extent not used to replace, repair,
restore or rebuild the Collateral or to the extent the conditions for Grantor's
use of the proceeds hereunder have not been satisfied, those insurance proceeds
may be applied to the Obligations in Collateral Agent's discretion.
Upon the occurrence and during the continuance of any Event of Default, all
insurance payments in respect of Inventory, Equipment and other Collateral shall
be held, applied and paid to Collateral Agent as specified in Section 15 hereof.
SECTION 11. TRANSFERS TO OTHERS; LIENS; ADDITIONAL SHARES AND INTERESTS.
(a) Grantor shall not sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except, so long as no Event of
Default has occurred and is continuing, for sales of assets that are not
material in the ordinary course of business.
(b) Grantor shall not create or suffer to exist any lien, security
interest or other charge or encumbrance upon or with respect to any of the
Collateral to secure any obligation of any person or entity, except for the
security interest created by this Agreement, for Permitted Liens and source code
escrow arrangements entered into in the ordinary course of business.
(c) Grantor agrees that it will (i) cause each of the Issuers that are
wholly-owned Subsidiaries not to issue any stock or other securities in addition
to or substitution for the Pledged Shares issued by such Issuer, except to
Grantor, and (ii) pledge hereunder, subject to the Foreign Issuer Limit,
immediately upon its acquisition (directly or indirectly) thereof, any and all
such additional shares of stock or other securities of each Issuer.
(d) Grantor agrees that it will (i) cause each of the Partnerships, if
any, that are wholly-owned Subsidiaries not to issue any interests in addition
to or substitution for the Pledged Partnership Interests issued by such Issuer,
except to Grantor, and (ii) pledge hereunder, subject
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to the Foreign Issuer Limit, immediately upon its acquisition (directly or
indirectly) thereof, any and all such additional interests of each Partnership.
(e) Grantor agrees that it will (i) cause each of the LLCs that are
wholly-owned Subsidiaries not to issue any interests in addition to or
substitution for the Pledged LLC Interests issued by such LLC, except to Grantor
and (ii) pledge hereunder, subject to the Foreign Issuer Limit, immediately upon
its acquisition (directly or indirectly) thereof, any and all such additional
interests of each LLC.
SECTION 12. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably appoints Collateral Agent as Grantor's attorney-in-fact (which
appointment shall be irrevocable and deemed coupled with an interest), with full
authority in the place and stead of Grantor and in the name of Grantor or
otherwise, from time to time in Collateral Agent's discretion, upon and during
the occurrence and continuation of an Event of Default, to take any action and
to execute any instrument which Collateral Agent may deem necessary or advisable
to accomplish the purposes of this Agreement, including, without limitation:
(i) to obtain and adjust insurance required to be paid to
Collateral Agent pursuant to Section 10 hereof,
(ii) to ask, demand, collect, xxx for, recover, compound,
receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral,
(iii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(i) or (ii) above,
(iv) to receive, endorse and collect all instruments made
payable to Grantor representing any dividend or other distribution
in respect of the Pledged Collateral or any part thereof and to give
full discharge for the same, and
(v) to file any claims or take any action or institute any
proceedings which Collateral Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce
the rights of Collateral Agent with respect to any of the
Collateral.
SECTION 13. COLLATERAL AGENT MAY PERFORM. If Grantor fails to perform any
agreement contained herein, Collateral Agent may itself perform, or cause
performance of, such agreement, and the expenses of Collateral Agent incurred in
connection therewith shall be payable by Grantor under Section 16(b) hereof.
SECTION 14. EVENTS OF DEFAULT. The occurrence of any of the following
shall be an "EVENT OF DEFAULT":
(a) Any Event of Default (as defined in the Notes);
(b) Any failure by Grantor to observe or perform any of the terms and
conditions of this Security Agreement;
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(c) Any transfer or disposition of any Collateral, except as expressly
permitted by this Security Agreement or any other Transaction Document;
(d) Any attachment, execution or levy on any Collateral having a value in
excess of $25,000 in the aggregate;
(e) Grantor shall fail to comply with, or become subject to any
administrative or judicial proceeding under any federal, state or local (i)
hazardous waste or environmental law, (ii) asset forfeiture or similar law which
can result in the forfeiture of property, or (iii) other law, where
noncompliance may, in Collateral Agent's reasonable judgment, have any adverse
effect on the Collateral or Collateral Agent's rights or remedies with respect
to the Collateral; or
(f) There shall have occurred any default under any of the Other Notes
that would entitle the holders thereof to accelerate any of such Other Notes but
for the restrictions contained in the Intercreditor Agreement or the Collateral
Agency Agreement.
SECTION 15. REMEDIES. If any Event of Default shall have occurred and be
continuing:
(a) Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the UCC
and also may (i) require Grantor to, and Grantor hereby agrees that it will at
its expense and upon request of Collateral Agent forthwith, assemble all or part
of the Collateral as directed by Collateral Agent and make it available to
Collateral Agent at a place to be designated by Collateral Agent which is
reasonably convenient to both parties and (ii) without notice except as
specified in the following sentence, sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any of Collateral Agent's
offices or elsewhere, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as Collateral Agent may deem
commercially reasonable. Grantor agrees that, to the extent notice of such sale
shall be required by law, at least ten days' notice to Grantor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Collateral Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Collateral Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) Collateral Agent may instruct Grantor not to make any further use of
the Patents, Copyrights or Trademarks or any xxxx similar thereto for any
purpose to the extent that such use would be inconsistent with the exercise by
Collateral Agent of any other remedies under this Section.
(c) Collateral Agent may license, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any of the Trademarks,
Patents or Copyrights throughout the world for such term or terms, on such
conditions, and in such manner, as Collateral Agent shall in its sole discretion
determine.
(d) Collateral Agent may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensee or
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sublicensee all rights and remedies of Grantor in, to and under any one or more
license agreements with respect to the Collateral, and take or refrain from
taking any action under any thereof, and Grantor hereby releases Collateral
Agent from, and agrees to hold Collateral Agent free and harmless from and
against any claims arising out of, any action taken or omitted to be taken with
respect to any such license agreement.
(e) In the event of any such license, assignment, sale or other
disposition of the Collateral, or any of it, Grantor shall supply its know-how
and expertise relating to the manufacture and sale of the products bearing or in
connection with the Trademarks, Patents or Copyrights, and its customer lists
and other records relating to the Trademarks, Patents or Copyrights and to the
distribution of said products, to Collateral Agent or its designee.
(f) In order to implement the assignment, sale or other disposal of any of
the Trademarks, Patents or Copyrights, Collateral Agent may, at any time,
pursuant to the authority granted in Section 12 hereof, execute and deliver on
behalf of Grantor, one or more instruments of assignment of the Trademarks,
Patents or Copyrights (or any application of registration thereof), in form
suitable for filing, recording or registration in any country.
(g) All cash proceeds received by Collateral Agent in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
may, in the discretion of Collateral Agent, be held by Collateral Agent as
collateral for, and then or at any time thereafter applied (after payment of any
amounts payable to Collateral Agent pursuant to Section 16 hereof) in whole or
in part against, all or any part of the Obligations in such order as Collateral
Agent shall elect. Any surplus of such cash or cash proceeds held by Collateral
Agent and remaining after payment in full of all the Obligations shall be paid
over to Grantor or to whomsoever may be lawfully entitled to receive such
surplus.
(h) If at any time when Collateral Agent shall determine to exercise its
right to sell all or any part of the Pledged Collateral pursuant to this Section
15, such Pledged Collateral or the part thereof to be sold shall not be
effectively registered under the Securities Act of 1933, as amended, and as from
time to time in effect, and the rules and regulations thereunder (the
"SECURITIES ACT"), Collateral Agent is hereby expressly authorized to sell such
Pledged Collateral or such part thereof by private sale in such manner and under
such circumstances as Collateral Agent may deem necessary or advisable in order
that such sale may legally be effected without such registration. Without
limiting the generality of the foregoing, in any such event Collateral Agent, in
compliance with applicable securities laws, (a) may proceed to make such private
sale notwithstanding that a registration statement for the purpose of
registering such Pledged Collateral or such part thereof shall have been filed
under such Securities Act, (b) may approach and negotiate with a restricted
number of potential purchasers to effect such sale and (c) may restrict such
sale to purchasers as to their number, nature of business and investment
intention including without limitation to purchasers each of whom will represent
and agree to the satisfaction of Collateral Agent that such purchaser is
purchasing for its own account, for investment, and not with a view to the
distribution or sale of such Pledged Collateral, or part thereof, it being
understood that Collateral Agent may cause or require Grantor, and Grantor
hereby agrees upon the written request of Collateral Agent, to cause (i) a
legend or legends to be placed on the certificates to be delivered to such
purchasers to the effect that the Pledged Collateral represented thereby have
not been registered under the Securities Act and setting forth
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or referring to restrictions on the transferability of such securities; and (ii)
the issuance of stop transfer instructions to such Issuer's transfer agent, if
any, with respect to the Pledged Collateral, or, if such Issuer transfers its
own securities, a notation in the appropriate records of such Issuer. In the
event of any such sale, Grantor does hereby consent and agree that Collateral
Agent shall incur no responsibility or liability for selling all or any part of
the Pledged Collateral at a price which Collateral Agent may deem reasonable
under the circumstances, notwithstanding the possibility that a substantially
higher price might be realized if the sale were public and deferred until after
registration as aforesaid.
(i) For the purpose of enabling Collateral Agent to exercise rights and
remedies under this Agreement, (including 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 Collateral Agent shall be
lawfully entitled to exercise those rights and remedies, Grantor hereby grants
to Collateral Agent, an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to Grantor) to use, license or
sublicense any Trademarks, Patents, Copyrights, licenses, names and General
Intangibles of any kind now owned or hereafter acquired by Grantor, 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.
SECTION 16. INDEMNITY AND EXPENSES.
(a) Grantor agrees to indemnify Collateral Agent from and against any and
all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities directly arising from Collateral Agent's own gross
negligence or willful misconduct.
(b) Grantor will upon demand pay to Collateral Agent the amount of any and
all reasonable expenses, including the reasonable fees and disbursements of its
counsel and of any experts and agents, which Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Collateral Agent hereunder or (iv) the failure by any of
Grantor to perform or observe any of the provisions hereof.
(c) Grantor assume all responsibility and liability arising from the use
of the Trademarks, Patents and Copyrights, and Grantor hereby indemnify and hold
Collateral Agent harmless from and against any claim, suit, loss, damage or
expense (including reasonable attorneys' fees) arising out of any alleged defect
in any product manufactured, promoted or sold by any of Grantor in connection
with any Trademark or out of the manufacture, promotion, labeling, sale or
advertisement of any such product by any of Grantor except as the same may have
resulted from the gross negligence or willful misconduct of Collateral Agent.
(d) Grantor agree that Collateral Agent does not assume, and shall have no
responsibility for, the payment of any sums due or to become due under any
agreement or contract included in the Collateral or the performance of any
obligations to be performed under or with respect to any such agreement or
contract by any of Grantor, and except as the same may have resulted from the
gross negligence or willful misconduct of Collateral Agent, Grantor
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hereby agree to indemnify and hold Collateral Agent harmless with respect to any
and all claims by any person relating thereto.
SECTION 17. SECURITY INTEREST ABSOLUTE. All rights of Collateral Agent and
security interests hereunder, and all obligations of Grantor hereunder, shall be
absolute and unconditional, irrespective of any circumstance which might
constitute a defense available to, or a discharge of, any guarantor or other
obligor in respect of the Obligations.
SECTION 18. AMENDMENTS; ETC. No amendment or waiver of any provision of
this Agreement, nor any consent to any departure by any of Grantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the party against whom enforcement is sought, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 19. NOTICES. All notices, consents, requests, and other
communications under this Agreement shall be in writing and shall be effective:
(i) upon delivery by hand; (ii) one day after being deposited with a recognized
overnight delivery service; or (iii) three days after being deposited in the
United States mail, first-class, postage prepaid, registered or certified,
return receipt requested -- in each case addressed to such party as follows (or
to such other address as hereafter may be designated in writing by such party to
the other party):
If to Grantor:
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: 000 000 0000
If to Collateral Agent:
Crestview Capital Funds
00 Xxxxxx Xxxxx, Xxxxx X
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Ph.D
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
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SECTION 20. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Collateral and shall (i) remain in full
force and effect until final and indefeasible payment in full of the
Obligations, (ii) be binding upon Grantor, its successors and assigns and (iii)
inure, together with the rights and remedies of Collateral Agent hereunder, to
the benefit of Collateral Agent and each of Noteholders and their respective
successors, transferees and assigns. Upon the final and indefeasible payment in
full of the Obligations, the security interest granted hereby shall terminate
and all rights to the Collateral shall revert and be deemed reassigned to
Grantor subject to any existing liens, security interests or encumbrances on
such Collateral (other than the liens granted pursuant to this Agreement). Upon
any such termination, Collateral Agent will, at Grantor' request and expense,
execute and deliver to Grantor such documents as Grantor shall reasonably
request to evidence such termination, reversions and/or reassignment, without
recourse, representation or warranty of any kind.
SECTION 21. COLLATERAL AGENT'S DUTIES. The powers conferred on Collateral
Agent hereunder are solely to protect its interest and the interests of
Noteholders in the Collateral and shall not impose any duty upon it to exercise
any such powers. Except for the exercise of reasonable care in the safe custody
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, Collateral Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral, including,
without limitation, ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not Collateral Agent has or is deemed to have
knowledge of such matters.
SECTION 22. GOVERNING LAW; JURISDICTION; JURY TRIAL WAIVER This Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of New York without regard to the choice of law principles thereof. Each
of the parties hereto irrevocably submits to the jurisdiction of the courts of
the State of New York located in New York County and the United States District
Court for the Southern District of New York for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such
suit, action or proceeding may be served on each party hereto anywhere in the
world by the same methods as are specified for the giving of notices under this
Agreement. Each of the parties hereto irrevocably consents to the jurisdiction
of any such court in any such suit, action or proceeding and to the laying of
venue in such court. Each party hereto irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. EACH OF THE
PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION
WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.
SECTION 23. HEADINGS. Section headings used herein are for convenience
only and are not to affect the construction of or be taken into consideration in
interpreting this Agreement.
-20-
IN WITNESS WHEREOF, Grantor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
GRANTOR:
WARP TECHNOLOGY HOLDINGS, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
COLLATERAL AGENT:
CRESTVIEW CAPITAL MASTER, LLC
By:__________________________________
Name:________________________________
Title:_______________________________
[Signature Page To Senior Security Agreement]
SCHEDULES TO SENIOR SECURITY AGREEMENT
WARP TECHNOLOGY HOLDINGS, INC.
SCHEDULE 1
LOCATIONS OF EQUIPMENT AND INVENTORY
NONE
-23-
SCHEDULE 2
JURISDICTION OF FORMATION, LOCATION OF CHIEF EXECUTIVE OFFICE,
CHIEF PLACE OF BUSINESS AND LOCATIONS WHERE RECORDS CONCERNING ACCOUNTS ARE KEPT
Jurisdiction: Nevada
Chief Executive Office: 000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Business & Records: 000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
-24-
SCHEDULE 3
TRADEMARKS
NONE
-25-
SCHEDULE 4
PATENTS
NONE
-26-
SCHEDULE 5
COPYRIGHTS
NONE
-27-
SCHEDULE 6
PLEDGED SHARES
STOCK
SHARES SHARES NUMBER OF CERTIFICATE
NAME JURISDICTION OUTSTANDING OWNED SHARES NUMBER
---- ------------ ----------- ----- ------ ------
Warp Solutions, Inc. Delaware Common 100%
6043577 Canada, Inc. Canada Voting Common
&
(Non-Voting)
Preferred Stock 100%
Spider Software, Inc. Canada 100%
Warp Solutions, Ltd. United Kingdom 100%
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SCHEDULE 7
PLEDGED PARTNERSHIP SHARES
NONE
-29-
SCHEDULE 8
PLEDGED LLC INTERESTS
MEMBERSHIP
UNITS UNITS CERTIFICATE
NAME JURISDICTION OUTSTANDING OWNED NUMBER OF UNITS NUMBER
---- ------------ ----------- ----- --------------- ------
Gupta Technologies, LLC Delaware 100%
-30-
SCHEDULE 9
LETTER OF CREDIT RIGHTS
NONE
-31-
SCHEDULE 10
RESTRICTIONS ON ASSIGNMENT
NONE
-32-
