SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), is entered into and made
effective as of March 30, 2005, by and between NEOMEDIA TECHNOLOGIES, INC., a
Delaware corporation, with headquarters located at 0000 Xxxxxx Xxxxxx, Xxxxx
000, Xxxx Xxxxx, Xxxxxxx 00000 (the "Company"), and CORNELL CAPITAL PARTNERS, LP
(the "Secured Party").
WHEREAS, the Company shall issue to the Secured Party, a secured
promissory note in the principal amount of Ten Million Dollars ($10,000,000)
(the "Note") which shall be funded within five (5) business day following the
date hereof (the "Closing"); and
WHEREAS, to induce the Secured Party to enter into the Note, the Company
hereby grants to the Secured Party a security interest in and to the pledged
property identified on Exhibit A hereto until the satisfaction of the
Obligations, as defined herein below.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, and for other good and valuable consideration, the adequacy
and receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATIONS
Section 1.1. Recitals.
The above recitals are true and correct and are incorporated herein, in
their entirety, by this reference.
Section 1.2. Interpretations.
Nothing herein expressed or implied is intended or shall be construed to
confer upon any person other than the Secured Party any right, remedy or claim
under or by reason hereof.
Section 1.3. Obligations Secured.
The obligations secured hereby are any and all obligations of the Company
now existing or hereinafter incurred to the Secured Party, whether oral or
written and whether arising before, on or after the date hereof including,
without limitation, those obligations of the Company to the Secured Party under
the Note and any other amounts now or hereafter owed to the Secured Party by the
Company thereunder or hereunder (collectively, the "Obligations"). This
Agreement, the Pledge and Escrow Agreement, and the Note are collectively
referred to herein as the "Transaction Documents."
Section 1.4. Closing Date.
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The Closing of the issuance of the Note shall take place at 10:00 a.m.
Eastern Standard Time on the fifth (5th ) business day following the date
hereof, subject to notification of the conditions to the Closing set forth in
Section 8 and 9 below (or such other date as is mutually agreed to by the
Company and the Secured Party). The Closing shall occur at the offices of
Yorkville Advisors, LLC, 000 Xxxxxx Xxxxxx, Xxxxxx Xxxx, XX or such other place
as is mutually agreed to by the Company and the Secured Party.
ARTICLE 2.
PLEDGED PROPERTY, ADMINISTRATION OF COLLATERAL
AND TERMINATION OF SECURITY INTEREST
Section 2.1. Pledged Property.
(a) Company hereby pledges to the Secured Party, and creates in the
Secured Party for its benefit, a security interest in and to all of the property
of the Company as set forth in Exhibit A attached hereto and the products
thereof and the proceeds of all such items (collectively, the "Pledged
Property") for such time until the Obligations are paid in full.
(b) The security interest in the Pledged Property created in this
Agreement is secured by and relates back to the security interest granted to the
Secured Party as evidenced by those certain UCC-1 Financing Statements filed
with the Florida Secured Transaction Registry on January 23, 2004 (file number
200405986767) and the Delaware Department of State on February 9, 2004 (file
number 20840540). In addition, simultaneously with the execution and delivery of
this Agreement, the Company shall make, execute, acknowledge, file, record and
deliver to the Secured Party any documents reasonably requested by the Secured
Party to perfect its security interest in the Pledged Property in both Delaware
and Florida. Simultaneously with the execution and delivery of this Agreement,
the Company shall make, execute, acknowledge and deliver to the Secured Party
such documents and instruments, including, without limitation, financing
statements, certificates, affidavits and forms as may, in the Secured Party's
reasonable judgment, be necessary to effectuate, complete or perfect, or to
continue and preserve, the security interest of the Secured Party in the Pledged
Property, and the Secured Party shall hold such documents and instruments as
secured party, subject to the terms and conditions contained herein.
Section 2.2. Rights; Interests; Etc.
(a) So long as no Event of Default (as hereinafter defined) shall
have occurred and be continuing:
(i) the Company shall be entitled to exercise any and all
rights pertaining to the Pledged Property or any part thereof for any purpose
not inconsistent with the terms hereof; and
(ii) the Company shall be entitled to receive and retain any
and all payments paid or made in respect of the Pledged Property.
(b) Upon the occurrence and during the continuance of an Event of
Default:
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(i) All rights of the Company to exercise the rights which it
would otherwise be entitled to exercise pursuant to Section 2.2(a)(i) hereof and
to receive payments which it would otherwise be authorized to receive and retain
pursuant to Section 2.2(a)(ii) hereof shall be suspended, and all such rights
shall thereupon become vested in the Secured Party who shall thereupon have the
sole right to exercise such rights and to receive and hold as Pledged Property
such payments; provided, however, that if the Secured Party shall become
entitled and shall elect to exercise its right to realize on the Pledged
Property pursuant to Article 5 hereof, then all cash sums received by the
Secured Party, or held by Company for the benefit of the Secured Party and paid
over pursuant to Section 2.2(b)(ii) hereof, shall be applied against any
outstanding Obligations; and
(ii) All interest, dividends, income and other payments and
distributions which are received by the Company contrary to the provisions of
Section 2.2(b)(i) hereof shall be received in trust for the benefit of the
Secured Party, shall be segregated from other property of the Company and shall
be forthwith paid over to the Secured Party; or
(iii) The Secured Party in its sole discretion shall be
authorized to sell any or all of the Pledged Property at public or private sale
in order to recoup the entire outstanding principal plus accrued interest owed
pursuant to the Note as described herein.
(c) Each of the following events shall constitute a default under
this Agreement (each an "Event of Default"):
t 18 0 (i) any default, whether in whole or in part, shall occur in the
payment to the Secured Party of principal, interest or other item comprising the
Obligations as and when due or with respect to any other debt or obligation of
the Company to a party other than the Secured Party;
(ii) any default, whether in whole or in part, shall occur in
the due observance or performance of any obligations or other covenants, terms
or provisions to be performed by the Company under this Agreement or the Note;
(iii) the Company shall: (1) make a general assignment for the
benefit of its creditors; (2) apply for or consent to the appointment of a
receiver, trustee, assignee, custodian, sequestrator, liquidator or similar
official for itself or any of its assets and properties; (3) commence a
voluntary case for relief as a debtor under the United States Bankruptcy Code;
(4) file with or otherwise submit to any governmental authority any petition,
answer or other document seeking: (A) reorganization, (B) an arrangement with
creditors or (C) to take advantage of any other present or future applicable law
respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief
of debtors, dissolution or liquidation; (5) file or otherwise submit any answer
or other document admitting or failing to contest the material allegations of a
petition or other document filed or otherwise submitted against it in any
proceeding under any such applicable law, or (6) be adjudicated a bankrupt or
insolvent by a court of competent jurisdiction; or
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(iv) any case, proceeding or other action shall be commenced
against the Company for the purpose of effecting, or an order, judgment or
decree shall be entered by any court of competent jurisdiction approving (in
whole or in part) anything specified in Section 2.2(c)(iii) hereof, or any
receiver, trustee, assignee, custodian, sequestrator, liquidator or other
official shall be appointed with respect to the Company, or shall be appointed
to take or shall otherwise acquire possession or control of all or a substantial
part of the assets and properties of the Company, and any of the foregoing shall
continue unstayed and in effect for any period of thirty (30) days.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
Section 3.1. Secured Party Appointed Attorney-In-Fact.
Upon the occurrence of an Event of Default, the Company hereby appoints
the Secured Party as its attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company or otherwise, from time to
time in the Secured Party's discretion to take any action and to execute any
instrument which the Secured Party may reasonably deem necessary to accomplish
the purposes of this Agreement, including, without limitation, to receive and
collect all instruments made payable to the Company representing any payments in
respect of the Pledged Property or any part thereof and to give full discharge
for the same. The Secured Party may demand, collect, receipt for, settle,
compromise, adjust, xxx for, foreclose, or realize on the Pledged Property as
and when the Secured Party may determine. To facilitate collection, the Secured
Party may notify account debtors and obligors on any Pledged Property to make
payments directly to the Secured Party.
Section 3.2. Secured Party May Perform.
If the Company fails to perform any agreement contained herein, the
Secured Party, at its option, may itself perform, or cause performance of, such
agreement, and the expenses of the Secured Party incurred in connection
therewith shall be included in the Obligations secured hereby and payable by the
Company under Section 10.3.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Secured Party that, except as
set forth in the SEC Documents (as defined herein), the following
representations and warranties are true and correct as of the date hereof.
Section 4.1. Organization and Qualification
The Company and its subsidiaries are corporations duly organized and
validly existing in good standing under the laws of the jurisdiction in which
they are incorporated, and have the requisite corporate power to own their
properties and to carry on their business as now being conducted. Each of the
Company and its subsidiaries is duly qualified as a foreign corporation to do
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business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries taken as a whole.
Section 4.2. Authorization, Enforcement, Compliance with Other Instruments
The Company has the requisite corporate power and authority to enter into
and perform the this Agreement, the Note and any related agreements in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
the this Agreement and the Note by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Note have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders, (iii) this Agreement and the Note
have been duly executed and delivered by the Company, (iv) this Agreement and
the Note constitute the valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies. The authorized officer of the Company executing this Agreement and the
Note knows of no reason why the Company cannot perform the Company's obligations
under this Agreement and the Note.
Section 4.3. Capitalization.
The authorized capital stock of the Company consists of 1,000,000,000
shares of common stock, par value $0.01 per share (the "Common Stock") and
25,000,000 shares of Preferred Stock. As of the date hereof, the Company has
441,151,029 shares of Common Stock issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. Except as disclosed in the SEC Documents (as defined in Section
4.5), no shares of Common Stock are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company. Except as disclosed in the SEC Documents, as of the date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, (ii) there are no outstanding debt securities and (iii) there are
no agreements or arrangements under which the Company or any of its subsidiaries
is obligated to register the sale of any of their securities under the
Securities Act and (iv) there are no outstanding registration statements and
there are no outstanding comment letters from the SEC or any other regulatory
agency. There are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Note as
described in this Agreement. The Company has furnished to the Secured Party true
and correct copies of the Company's Certificate of Incorporation, as amended and
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as in effect on the date hereof (the "Certificate of Incorporation"), and the
Company's By-laws, as in effect on the date hereof (the "By-laws"), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto other than stock
options issued to employees and consultants.
Section 4.4. No Conflicts
Except as disclosed in the SEC Documents, the execution, delivery and
performance of This Agreement and the Note by the Company and the consummation
by the Company of the transactions contemplated hereby will not (i) result in a
violation of the Certificate of Incorporation, any certificate of designations
of any outstanding series of preferred stock of the Company or the By-laws or
(ii) conflict with or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of The National Association of
Securities Dealers Inc.'s OTC Bulletin Board on which the Common Stock is
quoted) applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or
affected. Except as disclosed in the SEC Documents, neither the Company nor its
subsidiaries is in violation of any term of or in default under its Certificate
of Incorporation or By-laws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries. The business of the
Company and its subsidiaries is not being conducted, and shall not be conducted
in violation of any law, ordinance, or regulation of any governmental entity
which would have a material adverse effect on the Company. Except as
specifically contemplated by this Agreement and as required under the Securities
Act and any applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement in accordance with the terms hereof or thereof. Except as disclosed in
the SEC Documents, all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company and its subsidiaries are unaware of any facts or circumstance, which
might give rise to any of the foregoing.
Section 4.5. SEC Documents: Financial Statements
Since January 1, 2003, the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
under of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(all of the foregoing filed prior to the date hereof or amended after the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein, being hereinafter
referred to as the "SEC Documents"). The Company has delivered to the Secured
Party or its representatives, or made available through the SEC's website at
xxxx://xxx.xxx.xxx., true and complete copies of the SEC Documents. As of their
respective dates, the financial statements of the Company disclosed in the SEC
Documents (the "Financial Statements") complied as to form in all material
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respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such Financial Statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such Financial Statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and, fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Secured Party which is not included in the SEC Documents, including, without
limitation, information referred to in this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
Section 4.6. 10(b)-5.
The SEC Documents do not include any untrue statements of material fact,
nor do they omit to state any material fact required to be stated therein
necessary to make the statements made, in light of the circumstances under which
they were made, not misleading.
Section 4.7. Absence of Litigation
Except as disclosed in the SEC Documents, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending against or
affecting the Company, the Common Stock or any of the Company's subsidiaries,
wherein an unfavorable decision, ruling or finding would (i) have a material
adverse effect on the transactions contemplated hereby (ii) adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a material adverse effect on the business, operations,
properties, financial condition or results of operations of the Company and its
subsidiaries taken as a whole.
Section 4.8. Acknowledgment Regarding Secured Party's Acceptance of the
Note
The Company acknowledges and agrees that the Secured Party is acting
solely in the capacity of an arm's length lender with respect to this Agreement
and the transactions contemplated hereby. The Company further acknowledges that
the Secured Party is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by the Secured Party or
any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Secured Party's acceptance of the Note. The Company further represents to the
Secured Party that the Company's decision to enter into this Agreement has been
based solely on an independent evaluation by the Company and its
representatives.
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Section 4.9. Intellectual Property Rights
The Company and its subsidiaries own or possess adequate rights or
licenses to use all trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and rights
necessary to conduct their respective businesses as now conducted. The Company
and its subsidiaries do not have any knowledge of any infringement by the
Company or its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
xxxx registrations, trade secret or other similar rights of others, and, to the
knowledge of the Company there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
xxxx registrations, trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.
Section 4.10. Environmental Laws
The Company and its subsidiaries are (i) in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval.
Section 4.11. Title.
Any real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
Section 4.12. Insurance.
The Company and each of its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its subsidiaries are engaged. Neither the
Company nor any such subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a whole.
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Section 4.13. Regulatory Permits
The Company and its subsidiaries possess all material certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
Section 4.14. Internal Accounting Controls
The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, and (iii) the
recorded amounts for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
Section 4.15. No Material Adverse Breaches, etc
Except as set forth in the SEC Documents, neither the Company nor any of
its subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
material adverse effect on the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
subsidiaries. Except as set forth in the SEC Documents, neither the Company nor
any of its subsidiaries is in breach of any contract or agreement which breach,
in the judgment of the Company's officers, has or is expected to have a material
adverse effect on the business, properties, operations, financial condition,
results of operations or prospects of the Company or its subsidiaries.
Section 4.16. Tax Status
Except as set forth in the SEC Documents, the Company and each of its
subsidiaries has made and filed all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject and (unless and only to the extent that the Company and each of its
subsidiaries has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
Section 4.17. Certain Transactions
Except as set forth in the SEC Documents, and except for arm's length
transactions pursuant to which the Company makes payments in the ordinary course
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of business upon terms no less favorable than the Company could obtain from
third parties and other than the grant of stock options disclosed in the SEC
Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
Section 4.18. Ownership of Pledged Property.
The Company warrants and represents that it is the legal and beneficial
owner of the Pledged Property free and clear of any lien, security interest,
option or other charge or encumbrance except for the security interest created
by this Agreement.
Section 4.19. Employee Relations
Neither the Company nor any of its subsidiaries is involved in any labor
dispute nor, to the knowledge of the Company or any of its subsidiaries, is any
such dispute threatened. None of the Company's or its subsidiaries' employees is
a member of a union and the Company and its subsidiaries believe that their
relations with their employees are good.
ARTICLE 5.
DEFAULT; REMEDIES
Section 5.1. Default and Remedies.
(a) If an Event of Default described in Section 2.2(c)(i) and (ii)
occurs, then in each such case the Secured Party may declare the Obligations to
be due and payable immediately, by a notice in writing to the Company, and upon
any such declaration, the Obligations shall become immediately due and payable
and the Secured Party can immediately exercise any of its rights and remedies
pursuant to this Agreement and the Note or under any applicable law. If an Event
of Default described in Sections 2.2(c)(iii) or (iv) occurs and is continuing
for the period set forth therein, then the Obligations shall automatically
become immediately due and payable without declaration or other act on the part
of the Secured Party and the Secured Party can immediately exercise any of its
rights and remedies pursuant to this Agreement and the Note and under any
applicable law.
(b) Upon the occurrence of an Event of Default, the Secured Party
shall: (i) be entitled to receive all distributions with respect to the Pledged
Property, (ii) to cause the Pledged Property to be transferred into the name of
the Secured Party or its nominee, (iii) to dispose of the Pledged Property, (iv)
to realize upon any and all rights in the Pledged Property then held by the
Secured Party, and (v) exercise any of its rights and remedies pursuant to this
Agreement and the Note and any applicable law.
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Section 5.2. Method of Realizing Upon the Pledged Property: Other
Remedies.
Upon the occurrence of an Event of Default, in addition to any rights and
remedies available at law or in equity, the following provisions shall govern
the Secured Party's right to realize upon the Pledged Property:
(a) Any item of the Pledged Property may be sold for cash or other
value in any number of lots at brokers board, public auction or private sale and
may be sold without demand, advertisement or notice (except that the Secured
Party shall give the Company ten (10) days' prior written notice of the time and
place or of the time after which a private sale may be made (the "Sale
Notice")), which notice period is hereby agreed to be commercially reasonable.
At any sale or sales of the Pledged Property, the Company may bid for and
purchase the whole or any part of the Pledged Property and, upon compliance with
the terms of such sale, may hold, exploit and dispose of the same without
further accountability to the Secured Party. The Company will execute and
deliver, or cause to be executed and delivered, such instruments, documents,
assignments, waivers, certificates, and affidavits and supply or cause to be
supplied such further information and take such further action as the Secured
Party reasonably shall require in connection with any such sale.
(b) Any cash being held by the Secured Party as Pledged Property and
all cash proceeds received by the Secured Party in respect of, sale of,
collection from, or other realization upon all or any part of the Pledged
Property shall be applied as follows:
(i) to the payment of all amounts due the Secured Party for
the expenses reimbursable to it hereunder or owed to it pursuant to Section 10.3
hereof;
(ii) to the payment of the Obligations then due and unpaid.
(iii) the balance, if any, to the person or persons entitled
thereto, including, without limitation, the Company.
(c) In addition to all of the rights and remedies which the Secured
Party may have pursuant to this Agreement, the Secured Party shall have all of
the rights and remedies provided by law, including, without limitation, those
under the Uniform Commercial Code.
(i) If the Company fails to pay such amounts due upon the
occurrence of an Event of Default which is continuing, then the Secured Party
may institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company and collect the monies adjudged or decreed
to be payable in the manner provided by law out of the property of Company,
wherever situated.
(ii) The Company agrees that it shall be liable for any
reasonable fees, expenses and costs incurred by the Secured Party in connection
with enforcement, collection and preservation of this Agreement and the Note,
including, without limitation, reasonable legal fees and expenses, and such
amounts shall be deemed included as Obligations secured hereby and payable as
set forth in Section 10.3 hereof.
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Section 5.3. Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relating to the Company or the property of the Company
or of such other obligor or its creditors, the Secured Party (irrespective of
whether the Obligations shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Secured Party shall
have made any demand on the Company for the payment of the Obligations), subject
to the rights of Previous Security Holders, shall be entitled and empowered, by
intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of the
Obligations and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Secured Party (including any claim
for the reasonable legal fees and expenses and other expenses paid or incurred
by the Secured Party permitted hereunder and of the Secured Party allowed in
such judicial proceeding), and
(ii) to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by the
Secured Party to make such payments to the Secured Party and, in the event that
the Secured Party shall consent to the making of such payments directed to the
Secured Party, to pay to the Secured Party any amounts for expenses due it
hereunder.
Section 5.4. Duties Regarding Pledged Property.
The Secured Party shall have no duty as to the collection or protection of
the Pledged Property or any income thereon or as to the preservation of any
rights pertaining thereto, beyond the safe custody and reasonable care of any of
the Pledged Property actually in the Secured Party's possession.
ARTICLE 6.
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless the Secured Party shall
consent otherwise in writing (as provided in Section 8.4 hereof):
Section 6.1. Existence, Properties, Etc.
(a) The Company shall do, or cause to be done, all things, or
proceed with due diligence with any actions or courses of action, that may be
reasonably necessary (i) to maintain Company's due organization, valid existence
and good standing under the laws of its state of incorporation, and (ii) to
preserve and keep in full force and effect all qualifications, licenses and
registrations in those jurisdictions in which the failure to do so could have a
Material Adverse Effect (as defined below); and (b) the Company shall not do, or
cause to be done, any act impairing the Company's corporate power or authority
12
(i) to carry on the Company's business as now conducted, and (ii) to execute or
deliver this Agreement or any other document delivered in connection herewith,
including, without limitation, any UCC-1 Financing Statements required by the
Secured Party to which it is or will be a party, or perform any of its
obligations hereunder or thereunder. For purpose of this Agreement, the term
"Material Adverse Effect" shall mean any material and adverse affect as
determined by Secured Party in its sole discretion, whether individually or in
the aggregate, upon (a) the Company's assets, business, operations, properties
or condition, financial or otherwise; (b) the Company's to make payment as and
when due of all or any part of the Obligations; or (c) the Pledged Property.
Section 6.2. Financial Statements and Reports.
Upon request by the Secured Party the Company shall furnish to the Secured
Party, financial data that the Secured Party may reasonably request, within a
reasonable time after such request, including, without limitation the following
financial data:
(a) The balance sheet of the Company as of the close of each fiscal
year, the statement of earnings and retained earnings of the Company as of the
close of such fiscal year, and statement of cash flows for the Company for such
fiscal year, all in reasonable detail, prepared in accordance with generally
accepted accounting principles consistently applied, certified by the chief
executive and chief financial officers of the Company as being true and correct
and accompanied by a certificate of the chief executive and chief financial
officers of the Company, stating that the Company has kept, observed, performed
and fulfilled each covenant, term and condition of this Agreement during such
fiscal year and that no Event of Default hereunder has occurred and is
continuing, or if an Event of Default has occurred and is continuing, specifying
the nature of same, the period of existence of same and the action the Company
proposes to take in connection therewith;
(b) A balance sheet of the Company as of the close of each month,
and statement of earnings and retained earnings of the Company as of the close
of such month, all in reasonable detail, and prepared substantially in
accordance with generally accepted accounting principles consistently applied,
certified by the chief executive and chief financial officers of the Company as
being true and correct; and
(c) Copies of all accountants' reports and accompanying financial
reports submitted to the Company by independent accountants in connection with
each annual examination of the Company.
Section 6.3. Accounts and Reports.
The Company shall maintain a standard system of accounting in accordance
with generally accepted accounting principles consistently applied and provide,
at its sole expense, to the Secured Party the following:
(a) as soon as available, a copy of any notice or other
communication alleging any nonpayment or other material breach or default, or
any foreclosure or other action respecting any material portion of its assets
and properties, received respecting any of the indebtedness of the Company in
excess of $15,000 (other than the Obligations), or any demand or other request
13
for payment under any guaranty, assumption, purchase agreement or similar
agreement or arrangement respecting the indebtedness or obligations of others in
excess of $15,000, including any received from any person acting on behalf of
the Secured Party or beneficiary thereof; and
(b) within fifteen (15) days after the making of each submission or
filing, a copy of any report, financial statement, notice or other document,
whether periodic or otherwise, submitted to the shareholders of the Company, or
submitted to or filed by the Company with any governmental authority involving
or affecting (i) the Company that could have a Material Adverse Effect; (ii) the
Obligations; (iii) any part of the Pledged Property; or (iv) any of the
transactions contemplated in this Agreement or the Loan Instruments.
Section 6.4. Maintenance of Books and Records; Inspection.
The Company shall maintain its books, accounts and records in accordance
with generally accepted accounting principles consistently applied, and permit
the Secured Party, its officers and employees and any professionals designated
by the Secured Party in writing, at any time to visit and inspect any of its
properties (including but not limited to the collateral security described in
this Agreement and the Note and/or the Loan Instruments), corporate books and
financial records, and to discuss its accounts, affairs and finances with any
employee, officer or director thereof.
Section 6.5. Maintenance and Insurance.
(a) The Company shall maintain or cause to be maintained, at its own
expense, all of its assets and properties in good working order and condition,
making all necessary repairs thereto and renewals and replacements thereof.
(b) The Company shall maintain or cause to be maintained, at its own
expense, insurance in form, substance and amounts (including deductibles), which
the Company deems reasonably necessary to the Company's business, (i) adequate
to insure all assets and properties of the Company, which assets and properties
are of a character usually insured by persons engaged in the same or similar
business against loss or damage resulting from fire or other risks included in
an extended coverage policy; (ii) against public liability and other tort claims
that may be incurred by the Company; (iii) as may be required by this Agreement
and the Note and/or applicable law and (iv) as may be reasonably requested by
Secured Party, all with adequate, financially sound and reputable insurers.
Section 6.6. Contracts and Other Collateral.
The Company shall perform all of its obligations under or with respect to
each instrument, receivable, contract and other intangible included in the
Pledged Property to which the Company is now or hereafter will be party on a
timely basis and in the manner therein required, including, without limitation,
this Agreement.
Section 6.7. Defense of Collateral, Etc.
The Company shall defend and enforce its right, title and interest in and
to any part of: (a) the Pledged Property; and (b) if not included within the
Pledged Property, those assets and properties whose loss could have a Material
Adverse Effect, the Company shall defend the Secured Party's right, title and
14
interest in and to each and every part of the Pledged Property, each against all
manner of claims and demands on a timely basis to the full extent permitted by
applicable law.
Section 6.8. Payment of Debts, Taxes, Etc.
The Company shall pay, or cause to be paid, all of its indebtedness and
other liabilities and perform, or cause to be performed, all of its obligations
in accordance with the respective terms thereof, and pay and discharge, or cause
to be paid or discharged, all taxes, assessments and other governmental charges
and levies imposed upon it, upon any of its assets and properties on or before
the last day on which the same may be paid without penalty, as well as pay all
other lawful claims (whether for services, labor, materials, supplies or
otherwise) as and when due.
Section 6.9. Taxes and Assessments; Tax Indemnity.
The Company shall (a) file all tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Company, upon its income and profits or upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or levies
that, if unpaid, might become a lien or charge upon any of its properties;
provided, however, that the Company in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves are maintained with respect thereto.
Section 6.10. Compliance with Law and Other Agreements.
The Company shall maintain its business operations and property owned or
used in connection therewith in compliance with (a) all applicable federal,
state and local laws, regulations and ordinances governing such business
operations and the use and ownership of such property, and (b) all agreements,
licenses, franchises, indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound. Without limiting the
foregoing, the Company shall pay all of its indebtedness promptly in accordance
with the terms thereof.
Section 6.11. Notice of Default.
The Company shall give written notice to the Secured Party of the
occurrence of any default or Event of Default under this Agreement or the Note
or any other Loan Instrument or any other agreement of Company for the payment
of money, promptly upon the occurrence thereof.
Section 6.12. Notice of Litigation.
The Company shall give notice, in writing, to the Secured Party of (a) any
actions, suits or proceedings wherein the amount at issue is in excess of
$50,000, instituted by any persons against the Company, or affecting any of the
assets of the Company, and (b) any dispute, not resolved within fifteen (15)
days of the commencement thereof, between the Company on the one hand and any
15
governmental or regulatory body on the other hand, which might reasonably be
expected to have a Material Adverse Effect on the business operations or
financial condition of the Company.
Section 6.13. Reporting Status
Until the date on which the entire outstanding principal and interest of
the Note has been satisfied, the Company shall file in a timely manner all
reports required to be filed with the SEC pursuant to the Exchange Act and the
regulations of the SEC thereunder, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would otherwise permit such
termination.
Section 6.14. Listings or Quotation
The Company shall maintain the listing or quotation of the Common Stock
upon each national securities exchange, automated quotation system or The
National Association of Securities Dealers Inc.'s Over-The-Counter Bulletin
Board ("OTCBB") or other market, if any, upon which shares of Common Stock are
then listed or quoted (subject to official notice of issuance). The Company
shall maintain the Common Stock's authorization for quotation on the OTCBB.
Section 6.15. Corporate Existence
So long as any portion of the Note is outstanding, the Company shall not
directly or indirectly consummate any merger (other than the contemplated merger
with BSD Software, Inc.), reorganization, restructuring, reverse stock split
consolidation, sale of all or substantially all of the Company's assets or any
similar transaction or related transactions (each such transaction, an
"Organizational Change") unless, prior to the consummation an Organizational
Change, the Company obtains the written consent of the Secured Party. In any
such case, the Company will make appropriate provision with respect to such
holders' rights and interests to insure that the provisions of this Section 6.15
will thereafter be applicable to the Note.
Section 6.16. Transactions With Affiliates
So long as any portion of the Note is outstanding, the Company shall not,
and shall cause each of its subsidiaries not to, enter into, amend, modify or
supplement, or permit any subsidiary to enter into, amend, modify or supplement
any agreement, transaction, commitment, or arrangement with any of its or any
subsidiary's officers, directors, person who were officers or directors at any
time during the previous two (2) years, stockholders who beneficially own five
percent (5%) or more of the Common Stock, or Affiliates (as defined below) or
with any individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual owns a five
percent (5%) or more beneficial interest (each a "Related Party"), except for
(a) customary employment arrangements and benefit programs on reasonable terms,
(b) any investment in an Affiliate of the Company, (c) any agreement,
transaction, commitment, or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a person other than
such Related Party, (d) any agreement transaction, commitment, or arrangement
which is approved by a majority of the disinterested directors of the Company,
for purposes hereof, any director who is also an officer of the Company or any
16
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement. "Affiliate" for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. "Control" or "controls"
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.
Section 6.17. Restriction on Issuance of the Capital Stock
So long as any portion of the Note is outstanding, the Company shall not,
without the prior written consent of the Secured Party, (i) issue or sell shares
of Common Stock or Preferred Stock without consideration or for a consideration
per share less than the Common Stock's value determined immediately prior to
it's issuance, (ii) issue any warrant, option, right, contract, call, or other
security instrument granting the holder thereof, the right to acquire Common
Stock without consideration or for a consideration less than such Common Stock's
value determined immediately prior to it's issuance, (iii) enter into any
security instrument granting the holder a security interest in any and all
assets of the Company, or (iv) file any registration statement on Form S-8.
Section 6.18. Transfer Agent
In the event that the Company's agency relationship with the transfer
agent is terminated for any reason prior to a date which is two (2) years after
the Closing Date, the Company shall immediately appoint a new transfer agent.
Section 6.21. Use of Proceeds
The Company shall use the proceeds from the Note for general corporate and
working capital purposes.
Section 6.22. Best Efforts.
Each party shall use its best efforts timely to satisfy each of the
conditions to be satisfied by it as provided in Sections 8 and 9 of this
Agreement.
Section 6.23. Fees and Expenses.
Each of the Company and the Secured Party shall pay all costs and expenses
incurred by such party in connection with the negotiation, investigation,
preparation, execution and delivery of this Agreement and the Note.
17
ARTICLE 7.
NEGATIVE COVENANTS
The Company covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Company shall not, unless
the Secured Party shall consent otherwise in writing:
Section 7.1. Indebtedness.
Except for indebtedness incurred in the ordinary course of business and
indebtedness in excess of $250,000 individually or $750,000 in the aggregate,
the Company shall not directly or indirectly permit, create, incur, assume,
permit to exist, increase, renew or extend on or after the date hereof any
indebtedness on its part, including commitments, contingencies and credit
availabilities, or apply for or offer or agree to do any of the foregoing.
Section 7.2. Liens and Encumbrances.
The Company shall not directly or indirectly make, create, incur, assume
or permit to exist any assignment, transfer, pledge, mortgage, security interest
or other lien or encumbrance of any nature in, to or against any part of the
Pledged Property or of the Company's capital stock, or offer or agree to do so,
or own or acquire or agree to acquire any asset or property of any character
subject to any of the foregoing encumbrances (including any conditional sale
contract or other title retention agreement), or assign, pledge or in any way
transfer or encumber its right to receive any income or other distribution or
proceeds from any part of the Pledged Property or the Company's capital stock;
or enter into any sale-leaseback financing respecting any part of the Pledged
Property as lessee, or cause or assist the inception or continuation of any of
the foregoing.
Section 7.3. Certificate of Incorporation, By-Laws, Mergers,
Consolidations, Acquisitions and Sales.
Without the prior express written consent of the Secured Party, the
Company shall not: (a) Amend its Certificate of Incorporation or By-Laws; (b) be
a party to any merger (other than the contemplated merger with BSD Software,
Inc.), consolidation or corporate reorganization; (c) sell, transfer, convey,
grant a security interest in or lease all or any substantial part of its assets,
nor (d) nor convey any of its assets to any subsidiary.
Section 7.4. Management, Ownership.
The Company shall not materially change its ownership, executive staff or
management without the prior written consent of the Secured Party. The
ownership, executive staff and management of the Company are material factors in
the Secured Party's willingness to institute and maintain a lending relationship
with the Company.
18
Section 7.5. Dividends, Etc.
The Company shall not declare or pay any dividend of any kind, in cash or
in property, on any class of its capital stock, nor purchase, redeem, retire or
otherwise acquire for value any shares of such stock, nor make any distribution
of any kind in respect thereof, nor make any return of capital to shareholders,
nor make any payments in respect of any pension, profit sharing, retirement,
stock option, stock bonus, incentive compensation or similar plan (except as
required or permitted hereunder), without the prior written consent of the
Secured Party.
Section 7.6. Guaranties; Loans.
The Company shall not guarantee nor be liable in any manner, whether
directly or indirectly, or become contingently liable after the date of this
Agreement in connection with the obligations or indebtedness of any person or
persons, except for (i) the indebtedness currently secured by the liens
identified on the Pledged Property identified on Exhibit A hereto and (ii) the
endorsement of negotiable instruments payable to the Company for deposit or
collection in the ordinary course of business. The Company shall not make any
loan, advance or extension of credit to any person other than in the normal
course of its business.
Section 7.7. Debt.
The Company shall not create, incur, assume or suffer to exist any
additional indebtedness of any description whatsoever in an aggregate amount in
excess of $250,000 (excluding any indebtedness of the Company to the Secured
Party, trade accounts payable and accrued expenses incurred in the ordinary
course of business and the endorsement of negotiable instruments payable to the
Company, respectively for deposit or collection in the ordinary course of
business).
Section 7.8. Conduct of Business.
The Company will continue to engage, in an efficient and economical
manner, in a business of the same general type as conducted by it on the date of
this Agreement.
Section 7.9. Places of Business.
The Company shall not change the location of its chief place of business,
chief executive office or any place of business disclosed to the Secured Party
or move any of the Pledged Property from its current location without thirty
(30) days' prior written notice to the Secured Party in each instance.
ARTICLE 8.
CONDITIONS TO THE COMPANIES OBLIGATIONS
The obligation of the Company hereunder to issue the Notes to the Secured
Party at the Closings is subject to the satisfaction, at or before the Closing,
19
of each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
Section 8.1. The Secured Party shall have executed this Agreement and the
Note and delivered them to the Company.
ARTICLE 9.
CONDITIONS TO THE SECURED PARTY'S OBLIGATIONS
The obligation of the Secured Party hereunder to fund the Note at the
Closing is subject to the satisfaction, at or before the Closing, of each of the
following conditions:
a) The Company shall have executed this Agreement and the Note and
delivered the same to the Secured Party.
b) The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing as though
made at that time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at or
prior to the First Closing. If requested by the Secured Party, the Secured Party
shall have received a certificate, executed by the Chief Executive Officer and
Chief Financial Officer of the Company, dated as of the First Closing, to the
foregoing effect and as to such other matters as may be reasonably requested by
the Secured Party including, without limitation an update as of the First
Closing regarding the representation contained in Section 4.3 above.
c) The Company shall have executed and delivered to the Secured
Party the Note in the amount of Ten Million Dollars ($10,000,000).
d) The Company shall have provided to the Secured Party a
certificate of good standing from the secretary of state from the state in which
the Company is incorporated.
e) The Company shall have filed a form UCC-1 or such other forms as
may be required to perfect the Secured Party's interest in the Pledged Property
as detailed in this Agreement and provided proof of such filings to the Secured
Party.
20
ARTICLE 10.
MISCELLANEOUS
Section 10.1. Notices.
All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as duly
given on: (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five (5) days after mailing if
mailed from within the continental United States by certified mail, return
receipt requested to the party entitled to receive the same:
If to the Secured Party: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx-Xxxxx 0000
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxx
Portfolio Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxx Xxxxx, Esq.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
And if to the Company: Neomedia Technologies, Inc.
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx - Xxxxx 0000
Xxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Any party may change its address by giving notice to the other party
stating its new address. Commencing on the tenth (10th) day after the giving of
such notice, such newly designated address shall be such party's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.
21
Section 10.2. Severability.
If any provision of this Agreement shall be held invalid or unenforceable,
such invalidity or unenforceability shall attach only to such provision and
shall not in any manner affect or render invalid or unenforceable any other
severable provision of this Agreement, and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein.
Section 10.3. Expenses.
In the event of an Event of Default, the Company will pay to the Secured
Party the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel, which the Secured Party may incur in
connection with: (i) the custody or preservation of, or the sale, collection
from, or other realization upon, any of the Pledged Property; (ii) the exercise
or enforcement of any of the rights of the Secured Party hereunder or (iii) the
failure by the Company to perform or observe any of the provisions hereof.
Section 10.4. Waivers, Amendments, Etc.
The Secured Party's delay or failure at any time or times hereafter to
require strict performance by Company of any undertakings, agreements or
covenants shall not waiver, affect, or diminish any right of the Secured Party
under this Agreement to demand strict compliance and performance herewith. Any
waiver by the Secured Party of any Event of Default shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type. None of the undertakings,
agreements and covenants of the Company contained in this Agreement, and no
Event of Default, shall be deemed to have been waived by the Secured Party, nor
may this Agreement be amended, changed or modified, unless such waiver,
amendment, change or modification is evidenced by an instrument in writing
specifying such waiver, amendment, change or modification and signed by the
Secured Party.
Section 10.5. Continuing Security Interest.
This Agreement shall create a continuing security interest in the Pledged
Property and shall: (i) remain in full force and effect until payment in full of
the Obligations; and (ii) be binding upon the Company and its successors and
heirs and (iii) inure to the benefit of the Secured Party and its successors and
assigns. Upon the payment or satisfaction in full of the Obligations, the
Company shall be entitled to the return, at its expense, of such of the Pledged
Property as shall not have been sold in accordance with Section 5.2 hereof or
otherwise applied pursuant to the terms hereof.
Section 10.6. Independent Representation.
Each party hereto acknowledges and agrees that it has received or has had
the opportunity to receive independent legal counsel of its own choice and that
it has been sufficiently apprised of its rights and responsibilities with regard
to the substance of this Agreement.
22
Section 10.7. Applicable Law: Jurisdiction.
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New Jersey without regard to the principles of conflict of
laws. The parties further agree that any action between them shall be heard in
Xxxxxx County, New Jersey, and expressly consent to the jurisdiction and venue
of the Superior Court of New Jersey, sitting in Xxxxxx County and the United
States District Court for the District of New Jersey sitting in Newark, New
Jersey for the adjudication of any civil action asserted pursuant to this
Paragraph.
Section 10.8. Waiver of Jury Trial.
AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT
AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO
THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.
Section 10.9. Entire Agreement.
This Agreement constitutes the entire agreement among the parties and
supersedes any prior agreement or understanding among them with respect to the
subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.
NEOMEDIA TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: President and CEO
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: Portfolio Manager
24
EXHIBIT A
DEFINITION OF PLEDGED PROPERTY
For the purpose of securing prompt and complete payment and performance by
the Company of all of the Obligations, the Company unconditionally and
irrevocably hereby grants to the Secured Party a continuing security interest in
and to, and lien upon, the following Pledged Property of the Company:
(a) all goods of the Company, including, without limitation,
machinery, equipment, furniture, furnishings, fixtures, signs, lights, tools,
parts, supplies and motor vehicles of every kind and description, now or
hereafter owned by the Company or in which the Company may have or may hereafter
acquire any interest, and all replacements, additions, accessions, substitutions
and proceeds thereof, arising from the sale or disposition thereof, and where
applicable, the proceeds of insurance and of any tort claims involving any of
the foregoing;
(b) all inventory of the Company, including, but not limited to, all
goods, wares, merchandise, parts, supplies, finished products, other tangible
personal property, including such inventory as is temporarily out of Company's
custody or possession and including any returns upon any accounts or other
proceeds, including insurance proceeds, resulting from the sale or disposition
of any of the foregoing;
(c) all contract rights and general intangibles of the Company,
(with the exception of patents and patent applications) including, without
limitation, goodwill, trademarks, trade styles, trade names, leasehold
interests, partnership or joint venture interests, copyrights, deposit accounts
whether now owned or hereafter created;
(d) all documents, warehouse receipts, instruments and chattel paper
of the Company whether now owned or hereafter created;
(e) all accounts and other receivables, instruments or other forms
of obligations and rights to payment of the Company (herein collectively
referred to as "Accounts"), together with the proceeds thereof, all goods
represented by such Accounts and all such goods that may be returned by the
Company's customers, and all proceeds of any insurance thereon, and all
guarantees, securities and liens which the Company may hold for the payment of
any such Accounts including, without limitation, all rights of stoppage in
transit, replevin and reclamation and as an unpaid vendor and/or lienor, all of
which the Company represents and warrants will be bona fide and existing
obligations of its respective customers, arising out of the sale of goods by the
Company in the ordinary course of business;
(f) to the extent assignable, all of the Company's rights under all
present and future authorizations, permits, licenses and franchises issued or
granted in connection with the operations of any of its facilities;
(g) all products and proceeds (including, without limitation,
insurance proceeds) from the above-described Pledged Property.
