SECURITY AGREEMENT
EXHIBIT
10.28
THIS
SECURITY AGREEMENT (this "Agreement") is made and entered into as of
February 4, 2008, between PureDepth, Inc., a Delaware corporation (the
"Debtor"), and K One W One Limited (the "Purchaser"). Capitalized terms used in
this Agreement and not otherwise defined herein shall have the meanings set
forth in the Note(s) (as defined below).
RECITALS
WHEREAS,
pursuant to a convertible note purchase agreement ("Note Purchase Agreement"),
of even date herewith, Debtor will issue to the Purchaser one or more secured
convertible promissory notes (individually a "Note," collectively the "Notes")
in an aggregate principal amount up to $3,000,000, and the parties wish to enter
into this Agreement (along with the entry into the NZ Security Documents by the
Debtor's subsidiaries) to secure Debtor's obligations under the
Note(s).
NOW, THEREFORE, Debtor and the
Purchaser hereby agree as follows:
AGREEMENT
1. Grant of Security
Interest.
(a) Security Interest. As
security for the payment and performance of the Obligations (as defined below),
Debtor hereby grants to the Purchaser a continuing security interest in all of
Debtor's right title and interest in and to in the property described in Exhibit A hereto (the
"Collateral"). Notwithstanding the foregoing, the security interest granted
herein does not extend to and the term "Collateral" does not extend to (i)
property that is nonassignable by its terms without the consent of the licensor
thereof or another party (but only to the extent such prohibition on transfer is
enforceable under applicable law), or (ii) property as to which the granting of
a security interest therein is contrary to applicable law, provided that upon
the cessation of any such restriction or prohibition, such property shall
automatically become part of the Collateral and the proceeds
thereof.
(b) Obligations Secured. The
security interest granted hereunder secures payment and performance of all
obligations of Debtor to the Purchaser under this Agreement and all obligations
of Debtor to the Purchaser under the Note(s), including all unpaid principal of
the Note(s), all interest accrued thereon, and all other amounts payable by
Debtor to the Purchaser under the Note(s), whether due or to become due,
absolute or contingent, liquidated or unliquidated, determined or undetermined,
including any interest that accrues after the commencement of an insolvency
proceeding (collectively, the "Obligations").
(c) Authorization to File
Financing Statement. Debtor authorizes the Purchaser to file one or more
financing statements describing the Collateral and/or otherwise record this
Agreement or a short form thereof memorializing the terms herein with the
Secretary of State of the State of California and/or Delaware, as applicable,
the U.S. Patent and Trademark Office, the U.S. Copyright Office, and in any
other agency or equivalent authority required for perfection of the security
interest granted herein. At Purchaser's request, Debtor will prepare financing
statements consistent with this Agreement for Purchaser's review, approval and
filing, and Debtor agrees that it will do such further reasonable acts and
things and timely execute and deliver to Purchaser, at Debtor's expense, such
additional conveyances, assignments, agreements, and instruments as Purchaser
may reasonably require or deem advisable to carry into effect the purpose of
this Agreement or to better assure and confirm unto Purchaser its rights,
powers, and remedies hereunder.
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2. Covenants. So long as
the Obligations remain outstanding (other than contingent indemnification
obligations) to the Purchaser, Debtor covenants to the Purchaser that it
will:
(a) Protection
of Collateral. Take
reasonable efforts to keep the Collateral consisting of tangible personal
property in good condition and repair, maintain, preserve, defend and protect
the Collateral from loss, damage or deterioration (ordinary wear and tear
excepted), and provided that, with respect to its patent, trademark and
copyrights, Debtor is entitled to discontinue, not renew, abandon or otherwise
not pursue any such patents, trademark and copyrights, applications or claims in
the event that it, in its reasonable opinion, does not believe that such
applications are commercially appropriate or reasonable to pursue or
prosecute.
(b) Clear Title. Not
grant any security interest in any of the Collateral, other than Permitted
Liens.
(c) Inspection. Upon
reasonable prior written notice, provide a representative of the Purchaser with
access to the Collateral and all books and records relating thereto for the
purpose of conducting an annual inspection and audit of the Collateral, at the
Purchaser's sole cost and expense, at reasonable times during regular business
hours.
(d) Insurance. Carry and
maintain in full force and effect, at its own expense and with reputable
insurance companies, insurance with respect to the Collateral in such amounts,
with such deductibles and covering such risks as is consistent with the
insurance currently carried by the Debtor or as reasonably determined by its
Board of Directors or executive officers.
3. Events of Default; Remedies.
The occurrence of any of the following shall constitute an "Event of
Default" under this Agreement:
(a) Voluntary
Bankruptcy or
Insolvency Proceedings. The Debtor shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian of itself or of all
or a substantial part of its property, (ii) be unable, or admit in writing its
inability, to pay its debts generally as they mature, (iii) make a general
assignment for the benefit of its or any of its creditors, (iv) be dissolved or
liquidated in full or in part, (v) become insolvent (as such term may be defined
or interpreted under any applicable statute), (vi) commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vii) take any
action for the purpose of effecting any of the foregoing.
(b) Involuntary
Bankruptcy or
Insolvency Proceedings. Proceedings for
the appointment of a receiver, trustee, liquidator or custodian of Debtor or of
all or a substantial part of the property thereof, or an involuntary case or
other proceedings seeking liquidation, reorganization or other relief with
respect to Debtor or the debts thereof under any bankruptcy, insolvency or other
similar law or hereafter in effect shall be commenced and an order for relief
entered or such proceeding shall not be dismissed or discharged within
forty-five (45) days of commencement.
(c) Failure to Pay or Perform
the Note Purchase Agreement, the Note(s) and the
Warrant. The Debtor fails to pay any amount, or perform any obligation
(after being provided written notice by Holder of its failure to so perform and
a 7-day period to cure such failure), due under or in connection with any of the
Note Purchase Agreement, the Note(s) and the Warrant.
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4. Rights of Holder Upon
Default. Upon the occurrence or existence of any Event of Default and at
any time thereafter during the continuance of such Event of Default, Holder may
declare all outstanding Obligations payable by the Debtor under the Note(s) to
be immediately due and payable without presentment, demand, protest or any other
notice of any kind, ail of which are hereby expressly waived. In addition to the
foregoing remedies, upon the occurrence or existence of any Event of Default,
Holder may exercise any other right, power or remedy granted to it or otherwise
permitted to it by law, either by suit in equity or by action at law, or
both.
Upon the
occurrence and during the continuance of any Event of Default, the Purchaser,
may at any time, do any of the following:
(i) accelerate
the payment of the amounts owing under the Note(s);
(ii) enforce
the Note(s) by exercise of the rights and remedies under this Agreement or
granted to the Purchaser by applicable law; and
(iii) exercise,
in addition to all other rights and remedies granted in this Agreement, all
rights and remedies of a secured party under the UCC and other applicable laws
and all rights and remedies it has pursuant to the NZ Security Documents and all
laws applicable in connection with the NZ Security Documents.
5. Term of
Agreement.
(a) Term. The term of
this Agreement shall begin on the date stated above and shall continue and be
binding upon Debtor until (i) all Obligations have been fully paid (other than
contingent indemnification obligations) or converted pursuant to the terms of
the Note(s), or (ii) the Purchaser elects, pursuant to the Note Purchase
Agreement, not to provide any additional funding upon the Additional Funding
Date (as defined in the Note Purchase Agreement) beyond the Initial Note (as
defined in the Note Purchase Agreement), and after three (3) days prior written
notice by Debtor confirming no such additional funding is being provided by the
Purchaser (the "Purchaser's Election to Terminate").
(b) Termination Statement.
The Purchaser agrees that upon the payment in full (or conversion) of the
Obligations (other than contingent indemnification obligations), or upon the
"Purchaser's Election to Terminate," the Purchaser will promptly deliver to
Debtor termination statements and other agreements, and shall take such other
actions, as are reasonably necessary to release the Collateral from the security
interest created by this Agreement.
6. Definitions. Where
applicable and except as otherwise defined herein or in the Note(s), terms used
in this Agreement shall have the meanings assigned to them in the UCC. For
purposes of this Agreement, the following terms shall have the following
meanings:
(a) "Collateral"
means the collateral described in Exhibit A.
(b) "Effective
Date" means
the date of this Agreement.
(c) "Lien" means
any lien, pledge, mortgage, or security interest.
(d) "Permitted
Liens" means: (i) Liens in favor of the Purchaser; (ii) Liens in favor of
prior secured creditors; (iii) other Liens that do not materially and adversely
affect the priority or validity of Purchaser's security interest in the
Collateral; (iv) Liens existing on the Effective Date hereof and disclosed
in
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writing
to the Purchaser; (v) Liens for taxes, assessments or other governmental charges
which are not yet due and payable or which are being contested in good faith
with a reserve or other appropriate provision having been made therefore; (vi)
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
similar liens imposed by law, which are incurred in the ordinary course of
business for sums not more than ninety (90) days delinquent or which are being
contested in good faith; provided that a
reserve or other appropriate provision shall have been made therefor; (vii)
Liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations,
surety, stay, customs and appeal bonds, bids, leases, government contracts,
trade contracts, performance and return of money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money); (viii)
Liens on equipment and related software to secure (I ) the purchase price and
related soft costs of such equipment and related software, as applicable, or (2)
lease obligations or indebtedness incurred solely for the purpose of financing
the acquisition of such equipment and related software; provided that such Liens
are confined solely to the equipment and related software so acquired, and the
proceeds thereof, and the amount secured does not exceed the acquisition price
thereof; (ix) liens on equipment and related software when acquired; (x)
licenses or sublicenses and any interest or title of a licensor or licensee
under any license or sublicense; (xi) Liens on xxxxxxx money deposits required
under a lease, letter of intent or purchase agreement; (xii) Liens on insurance
proceeds ill favor of insurance companies granted as security for financed
premiums; (xiii) Liens on escrowed cash, representing a portion of the proceeds
of sales or other transactions, established to satisfy contingent post closing
obligations (including earn-outs, indemnities and working capital adjustments);
(xiv) leases or subleases granted in the ordinary course of business; (xv) Liens
in favor of customs and revenue authorities which secure payment of customs
duties in connection with the importation of goods; (xvi) and any other Liens
which shall be junior to the security interest in and to the Collateral granted
to Purchaser pursuant to this Agreement.
(e)
"UCC”
means the Uniform Commercial Code as in effect in the State of California or
Delaware, as applicable, from time to time.
7. Miscellaneous.
(a) Indemnity. Debtor
agrees to indemnify the Purchaser against any and all reasonable actual
attorney's fees and other reasonable expenses incurred by the Purchaser in
connection with the exercise of remedies with respect to the Collateral
authorized hereunder; provided, however,
that the Purchaser will not be entitled to be held harmless or
indemnified by Debtor for any claim to the extent arising from the negligence,
intentional misconduct, breach of this Agreement, or knowing and culpable
violation of the law by such person. Debtor shall not be required to reimburse
the Purchaser (a) for more than one counsel, or (b) for costs and expenses
incurred by the Purchaser for routine legal advice rendered to them by counsel
in connection with the interpretation of this Agreement, the Note(s), the
Warrant or the other documents entered into in connection with the transactions
contemplated hereby.
(b) Limitation on the
Purchaser's Duty in Respect of Collateral.
The Purchaser shall have no obligation or liability under any contract or
license by reason of or arising out of this Agreement or the granting of a
security interest therein or the receipt of any payment relating to any contract
or license pursuant hereto, nor shall the Purchaser be required or obligated in
any manner to perform or fulfill any of the obligations of Debtor under or
pursuant to any contract or license, or to make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment received by it or
tile sufficiency of any performance by any party under any contract or license,
or to present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.
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(c) Governing Law. This Agreement
is governed by and shall be construed in accordance with the laws of the State
of California, without reference to the conflicts of law provisions thereof
except as required by mandatory provisions of law and to the extent the validity
or perfection of the security interests hereunder, or the remedies hereunder, in
respect of any Collateral are governed by the law of a jurisdiction other than
California.
(d) Severability of Provisions.
In the event any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision hereof, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained
herein.
(e) Notices. All notices
required or permitted hereunder shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified, (b)
when sent by confirmed electronic mail, telex or facsimile if sent during normal
business hours of the recipient, if not, then on the next business day, (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to Debtor at the
address specified on the signature pages hereto, and to the Purchaser at the
addresses as set forth on the signature page hereto or at such other address or
electronic mail address as Debtor or the Purchaser may designate in written
notice.
(f) Waiver; Amendment. No
failure or delay on the Purchaser's part in the exercise of any right or remedy,
power or privilege shall operate as a waiver thereof. No single or partial
exercise of a right or remedy, power or privilege shall preclude other or
further exercise thereof. No waiver of any right hereunder shall be effective
unless in a writing executed by the Purchaser and Debtor. Any such waiver shall
be effective only for the specific purpose for which it is given. The rights and
remedies under this Agreement are cumulative and not exclusive of any other
rights, remedies, powers or privileges that may otherwise the available to the
Purchaser. No provision of this Agreement may be amended, waived or modified or
rights modified or released, other than by a document signed by Debtor and the
Purchaser. This Agreement may be amended, waived or modified upon the written
consent of Debtor and the Purchaser.
(g) Survival; Third Party
Beneficiaries. This Agreement is binding upon and inures to the benefit
of, and is enforceable against, all lawful successors and assigns of Debtor and
the Purchaser. This Agreement and the documents and instruments and other
agreements specifically referred to herein or delivered pursuant hereto,
including the exhibits hereto, are not intended to confer upon any other person
any rights or remedies hereunder, and shall not be assigned by operation of law
or otherwise without the written consent of the other parties.
(h) Counterparts. This
Agreement may be executed by facsimile and in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement.
Signature
Pages Follow
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the date first above written.
DEBTOR:
By:
/s/ Xxxxxxxx X.
XxXxxxx
Name: /s/ Xxxxxxxx X. XxXxxxx
Its: President
Address: 000
Xxxxxxxxx Xxxxx, Xxxxx 000 Xxxxxxx Xxxx, XX, XXX 00000
THE
PURCHASER:
K
ONE W ONE LIMITED
By:
_________________________
Name:
Its:
Address:
SIGNATURE
PAGE TO SECURITY AGREEMENT
EXHIBIT
A
COLLATERAL
DESCRIPTION
All
personal property of PureDepth, Inc. (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:
(a) all
accounts, chattel paper (including tangible and electronic chattel paper),
deposit accounts, documents (including negotiable documents), equipment, general
intangibles (including payment intangibles and software), goods (including
fixtures), instruments (including promissory notes), inventory (including all
goods held for sale or lease or to be furnished under a contract of service, and
including returns and repossessions), investment property (including securities
and securities entitlements), letter of credit rights, money, and all of
Debtor's books and records with respect to any of the foregoing, and the
computers and equipment containing said books and records;
(b) all
common law and statutory copyrights and copyright registrations, applications
for registration, now existing or hereafter arising, in the United States of
America or in any foreign jurisdiction, obtained or to be obtained on or in
connection with any of the forgoing, or any parts thereof or any underlying or
component elements of any of the forgoing, together with the right to copyright
and all rights to renew or extend such copyrights and the right (but not the
obligation) of Purchaser to xxx in its own name and/or in the name of Debtor for
past, present and future infringements of copyright;
(c) all
trademarks, service marks, trade names and domain names and the goodwill
associated therewith, registrations, applications for registration, now existing
or hereafter arising, in the United States of America or in any foreign
jurisdiction, obtained or to be obtained on or in connection with any of the
forgoing, together with the right to trademark and all rights to renew or extend
such trademarks and the right (but not the obligation) of Purchaser to xxx in
its own name and/or in the name of Debtor for past, present and future
infringements of trademark;
(d) all
(i) patents and patent applications filed in the United States Patent and
Trademark Office or any similar office of any foreign jurisdiction, and
interests under patent license agreements, including, without limitation, the
inventions and improvements described and claimed therein, (ii) licenses
pertaining to any patent whether Debtor is licensor or licensee, (iii) income,
royalties, damages, payments, accounts and accounts receivable now or hereafter
due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) right (but not the obligation) to xxx in the name of Debtor and/or
in the name of Purchaser for past, present and future infringements thereof, (v)
rights corresponding thereto throughout the world in all jurisdictions in which
such patents have been issued or applied for, and (vi) reissues, divisions,
continuations, renewals, extensions and continuations-in-part with respect to
any of the foregoing; and
(e) any
and all cash proceeds and/or noncash proceeds of any of the foregoing,
including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the Uniform Commercial Code, as amended
or supplemented from time to time.
