AMENDED AND RESTATED SECURITY AGREEMENT
Exhibit
10.5
AMENDED
AND RESTATED SECURITY AGREEMENT
THIS
SECURITY AGREEMENT
(the
“Agreement”), is
entered into and made effective as of April ___, 2007, by and between
NS8
CORPORATION, INC., a
Delaware corporation with its principal place of business located at 000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx 00000 (the “Parent”),
and
the each subsidiary of the Parent listed on Schedule I attached hereto (each
a
“Subsidiary,”
and
collectively and together with the Parent, the “Company”),
in
favor of CORNELL
CAPITAL PARTNERS, L.P.
(the
“Secured
Party”
or
“Buyer”).
WHEREAS,
the
Company issued to the Secured Party convertible debentures (the “Existing
Convertible Debentures”)
under
the Securities Purchase Agreements dated May 19, 2004, and November 14, 2005,
between the Company and the Secured Party (the “Existing
SPAs”).
This
Agreement shall amend and restate the Security Agreements between the Company
and the Secured Party dated May 19, 2004 and November 14, 2005 (the
“Existing
Security Agreements”);
WHEREAS,
the
Company has requested the Secured Party to make additional financing available
to the Company;
WHEREAS,
the
parties hereto desire for this Agreement to amend and restate the Existing
Security Agreements;
WHEREAS,
the
Secured Party is willing to provide such additional financing on the condition
that such additional financing is secured hereunder and under the UCC-1
Financing Statement filed in Delaware on June 14, 2004, file number
2004-167-7198-7, and such additional UCC-1 Financing Statements as have been
filed in connection with the Existing SPAs and Existing Security Agreements,
and
the convertible debentures issued pursuant to the Existing SPAs, and as shall
be
filed pursuant to this Agreement;
WHEREAS,
The
Parent shall issue and sell to the Secured Party, as provided in the Securities
Purchase Agreement, and the Secured Party shall purchase, up to Three Million
Three Hundred Thirty Thousand Dollars ($3,300,000) of secured convertible
debentures (the “New
Convertible Debentures,”
and
together with the Existing Convertible Debentures, the “Convertible
Debentures”),
which
shall be convertible into shares of the Parent’s common stock, par value
$0.0001, as set forth in the Securities Purchase Agreement of even date herewith
(the “Securities
Purchase Agreement”);
WHEREAS,
to
induce
the Secured Party to enter into the transaction contemplated by the Securities
Purchase Agreement, the New Convertible Debentures, the Investor Registration
Rights Agreement of even date herewith between, among others, the Parent and
the
Secured Party (the “Investor
Registration Rights Agreement”),
and
the Irrevocable Transfer Agent Instructions between, among others, the Parent,
the Secured Party, the Parent’s transfer agent, and Xxxxx Xxxxxxxx, Esq. (the
“Transfer
Agent Instructions”)
(collectively referred to as the “Transaction
Documents”),
each
Company hereby grants to the Secured Party a security interest in and to the
pledged property of each Company identified on Exhibit
A
hereto
(collectively referred to as the “Pledged
Property”)
to
secure all of the Obligations (as defined 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
security interest created hereby in the Pledged Property constitutes continuing
collateral security for all of the obligations of the Parent now existing or
hereinafter incurred to the Buyer, whether oral or written and whether arising
before, on or after the date hereof including, without limitation following
obligations (collectively, the “Obligations”):
(a)
for
so long as the Convertible Debentures are outstanding, the payment by the
Parent, as and when due and payable (by scheduled maturity, acceleration, demand
or otherwise), of all amounts from time to time owing by it in respect of the
Securities Purchase Agreement, the Convertible Debentures and the other
Transaction Documents; and
(b)
for
so long as the Convertible Debentures are outstanding, the due performance
and
observance by the Parent of all of its other obligations from time to time
existing in respect of any of the Transaction Documents, including without
limitation, the Parent’s obligations with respect to any conversion or
redemption rights of the Secured Party under the Convertible
Debentures.
ARTICLE
2.
PLEDGED
PROPERTY; EVENT OF DEFAULT
Section
2.1. Pledged
Property.
(a) As
collateral security for all of the Obligations, the Company hereby pledges
to
the Secured Party, and creates in the Secured Party for its benefit, a
continuing security interest in and to all of the Pledged Property whether
now
owned or hereafter acquired.
(b) 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. 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.
(c)
(RESERVED)
Section
2.2. Event
of Default
An
“Event
of Default”
shall
be deemed to have occurred under this Agreement upon an Event of Default under
and as defined in the Convertible Debentures, or any single convertible
debenture comprising the Convertible Debentures.
ARTICLE
3.
ATTORNEY-IN-FACT;
PERFORMANCE
Section
3.1. Secured
Party Appointed Attorney-In-Fact.
Upon
the
occurrence and during the continuance of an Event of Default: (a) 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; (b) 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, and (c)
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 8.3.
ARTICLE
4.
REPRESENTATIONS
AND WARRANTIES
Section
4.1. Authorization;
Enforceability.
Each
of
the parties hereto represents and warrants that it has taken all action
necessary to authorize the execution, delivery and performance of this Agreement
and the transactions contemplated hereby; and upon execution and delivery,
this
Agreement shall constitute a valid and binding obligation of the respective
party, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors’ rights or by the principles governing the
availability of equitable remedies.
Section
4.2. Ownership
of Pledged Property.
The
Company represents and warrants 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 (each, a “Lien”) except for the security interest created
by this Agreement and other Permitted Liens. For purposes of this Agreement,
“Permitted Liens” means: (1) the security interest created by this Agreement,
(2) existing Liens disclosed by the Company to the Secured Party; (3) inchoate
Liens for taxes, assessments or governmental charges or levies not yet due,
as
to which the grace period, if any, related thereto has not yet expired, or
being
contested in good faith and by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP; (4) Liens of carriers,
materialmen, warehousemen, mechanics and landlords and other similar Liens
which
secure amounts which are not yet overdue by more than 60 days or which are
being
contested in good faith by appropriate proceedings; (5) licenses, sublicenses,
leases or subleases granted to other Persons not materially interfering with
the
conduct of the business of the Company; (6) Liens securing capitalized lease
obligations and purchase money indebtedness incurred solely for the purpose
of
financing an acquisition or lease; (7) easements, rights-of-way, restrictions,
encroachments, municipal zoning ordinances and other similar charges or
encumbrances, and minor title deficiencies, in each case not securing debt
and
not materially interfering with the conduct of the business of the Company
and
not materially detracting from the value of the property subject thereto; (8)
Liens arising out of the existence of judgments or awards which judgments or
awards do not constitute an Event of Default; (9) Liens incurred in the ordinary
course of business in connection with workers compensation claims, unemployment
insurance, pension liabilities and social security benefits and Liens securing
the performance of bids, tenders, leases and contracts in the ordinary course
of
business, statutory obligations, surety bonds, performance bonds and other
obligations of a like nature (other than appeal bonds) incurred in the ordinary
course of business (exclusive of obligations in respect of the payment for
borrowed money); (10) Liens in favor of a banking institution arising by
operation of law encumbering deposits (including the right of set-off) and
contractual set-off rights held by such banking institution and which are within
the general parameters customary in the banking industry and only burdening
deposit accounts or other funds maintained with a creditor depository
institution; (11) usual and customary set-off rights in leases and other
contracts; and (12) escrows in connection with acquisitions and
dispositions.
Section
4.3. Name
Change.
The
Company and each Subsidiary have only effectuated changes their respective
corporate names as designated in Schedule 4.3 herein.
ARTICLE
5.
DEFAULT;
REMEDIES; SUBSTITUTE COLLATERAL
Section
5.1 Method
of Realizing Upon the Pledged Property: Other Remedies.
If
any
Event of Default shall have occurred and be continuing:
(a) The
Secured Party may exercise in respect of the Pledged Property, in addition
to
any other rights and remedies provided for herein or otherwise available to
it,
all of the rights and remedies of a secured party upon default under the Uniform
Commercial Code (whether or not the Uniform Commercial Code applies to the
affected Pledged Property), and also may (i) take absolute control of the
Pledged Property, including, without limitation, transfer into the Secured
Party's name or into the name of its nominee or nominees (to the extent the
Secured Party has not theretofore done so) and thereafter receive, for the
benefit of the Secured Party, all payments made thereon, give all consents,
waivers and ratifications in respect thereof and otherwise act with respect
thereto as though it were the outright owner thereof, (ii) require the
Company to assemble all or part of the Pledged Property as directed by the
Secured Party and make it available to the Secured Party at a place or places
to
be designated by the Secured Party that is reasonably convenient to both
parties, and the Secured Party may enter into and occupy any premises owned
or
leased by the Company where the Pledged Property or any part thereof is located
or assembled for a reasonable period in order to effectuate the Secured Party's
rights and remedies hereunder or under law, without obligation to the Company
in
respect of such occupation, and (iii) without notice except as specified
below and without any obligation to prepare or process the Pledged Property
for
sale, (A) sell the Pledged Property or any part thereof in one or more
parcels at public or private sale, at any of the Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as the Secured Party may deem commercially
reasonable and/or (B) lease, license or dispose of the Pledged Property or
any part thereof upon such terms as the Secured Party may deem commercially
reasonable. The Company agrees that, to the extent notice of sale or any other
disposition of the Pledged Property shall be required by law, at least ten
(10)
days' notice to the Company of the time and place of any public sale or the
time
after which any private sale or other disposition of the Pledged Property is
to
be made shall constitute reasonable notification. The Secured Party shall not
be
obligated to make any sale or other disposition of any Pledged Property
regardless of notice of sale having been given. The Secured Party 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. The Company hereby waives any
claims against the Secured Party arising by reason of the fact that the price
at
which the Pledged Property may have been sold at a private sale was less than
the price which might have been obtained at a public sale or was less than
the
aggregate amount of the Obligations, even if the Secured Party accepts the
first
offer received and does not offer such Pledged Property to more than one
offeree, and waives all rights that the Company may have to require that all
or
any part of such Pledged Property be marshaled upon any sale (public or private)
thereof. The Company hereby acknowledges that (i) any such sale of the
Pledged Property by the Secured Party may be made without warranty,
(ii) the Secured Party may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth
in clauses (i) and (ii) above shall not adversely affect the commercial
reasonableness of any such sale of Pledged Property.
(b) (RESERVED)
(c) Any
cash
held by the Secured Party as Pledged Property and all cash proceeds received
by
the Secured Party in respect of any sale of or collection from, or other
realization upon, all or any part of the Pledged Property shall be applied
(after payment of any amounts payable to the Secured Party pursuant to Section
8.3 hereof) by the Secured Party against, all or any part of the Obligations
in
such order as the Secured Party shall elect, consistent with the provisions
of
the Securities Purchase Agreement. Any surplus of such cash or cash proceeds
held by the Secured Party and remaining after the indefeasible payment in full
in cash of all of the Obligations shall be paid over to whomsoever shall be
lawfully entitled to receive the same or as a court of competent jurisdiction
shall direct.
(d) In
the
event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Secured Party is legally entitled,
the Company shall be liable for the deficiency, together with interest thereon
at the rate specified in the Convertible Debentures for interest on overdue
principal thereof or such other rate as shall be fixed by applicable law,
together with the costs of collection and the reasonable fees, costs, expenses
and other client charges of any attorneys employed by the Secured Party to
collect such deficiency.
(e) The
Company hereby acknowledges that if the Secured Party complies with any
applicable state, provincial, or federal law requirements in connection with
a
disposition of the Pledged Property, such compliance will not adversely affect
the commercial reasonableness of any sale or other disposition of the Pledged
Property.
(f) The
Secured Party shall not be required to marshal any present or future collateral
security (including, but not limited to, this Agreement and the Pledged
Property) for, or other assurances of payment of, the Obligations or any of
them
or to resort to such collateral security or other assurances of payment in
any
particular order, and all of the Secured Party's rights hereunder and in respect
of such collateral security and other assurances of payment shall be cumulative
and in addition to all other rights, however existing or arising. To the extent
that the Company lawfully may, the Company hereby agrees that it will not invoke
any law relating to the marshaling of collateral which might cause delay in
or
impede the enforcement of the Secured Party's rights under this Agreement or
under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, the Company hereby irrevocably waives the benefits
of all such laws.
Section
5.2 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 or the Convertible Debentures
have been fully converted, 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
(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 (which other loan instruments collectively shall be
referred to as the “Loan
Instruments”) 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
reasonable 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 ability 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.
The
Company shall furnish to the Secured Party within a reasonable time such
financial data as the Secured Party may reasonably request.
Section
6.3. Accounts
and Reports.
The
Company shall maintain a standard system of accounting in accordance with
generally accepted accounting principles consistently applied (“GAAP”) 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 $500,000 (other
than the Obligations), or any demand or other request for payment under any
guaranty, assumption, purchase agreement or similar agreement or arrangement
respecting the indebtedness or obligations of others in excess of $500,000;
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 reasonably be expected to 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 (except, in each case, to the extent any such submission, filing,
report, financial statement, notice or other document is posted on XXXXX
Online).
Section
6.4. Maintenance
of Books and Records; Inspection.
The
Company shall maintain its books, accounts and records in accordance with GAAP,
and permit the Secured Party, its officers and employees and any professionals
designated by the Secured Party in writing, at any time during normal business
hours and upon reasonable notice to visit and inspect any of its properties
(including but not limited to the collateral security described in the
Transaction Documents 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 (it being agreed that, unless an Event
of
Default shall have occurred and be continuing, there shall be no more than
two
(2) such visits and inspections in any Fiscal Year).
Section
6.5. Maintenance
and Insurance.
(a) The
Company shall maintain or cause to be maintained, at its own expense, all of
its
material assets and properties in good working order and condition, ordinary
wear and tear excepted, 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 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 the Transaction Documents and/or applicable law
and (iv) as may be reasonably requested by Secured Party, all with 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, except to the extent the failure to so perform such obligations
would
not reasonably be expected to have a Material Adverse Effect.
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 would reasonably be
expected to have a Material Adverse Effect, each against all manner of claims
and demands on a timely basis to the full extent permitted by applicable law
(other than any such claims and demands by holders of Permitted
Liens).
Section
6.8. Taxes
and Assessments.
The
Company shall (a) file all material tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the date
of
delinquency (taking into account any extensions of the original due date),
(b) pay and discharge all material 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 material 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 if and to the extent
required by GAAP.
Section
6.9. 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, except where the
failure to so comply would not reasonably be expected to have a Material Adverse
Effect.
Section
6.10. Notice
of Default.
The
Company shall give written notice to the Secured Party of the occurrence of
any
Event of Default.
Section
6.11. 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
$250,000, 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 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. Future
Subsidiaries.
If
the
Company shall hereafter create or acquire any subsidiary, simultaneously with
the creation or acquisition of such subsidiary, the Company shall cause such
subsidiary to grant to the Secured Party a security interest of the same tenor
as created under this Agreement.
Section
6.14. (RESERVED)
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. Liens
and Encumbrances.
Directly
or indirectly make, create, incur, assume or permit to exist any Lien in, to
or
against any part of the Pledged Property other than Permitted
Liens.
Section
7.2. Restriction
on Redemption and Cash Dividends
Directly
or indirectly, redeem, repurchase or declare or pay any cash dividend or
distribution on its capital stock without the prior express written consent
of
the Secured Party.
Section
7.3. Incurrence
of Indebtedness.
Directly
or indirectly, incur or guarantee, assume or suffer to exist any indebtedness,
other than the indebtedness evidenced by the Convertible Debentures and other
Permitted Indebtedness. “Permitted
Indebtedness”
means:
(i) indebtedness evidenced by Convertible Debentures; (ii) indebtedness
described on the Disclosure Schedule to the Securities Purchase Agreement;
(iii)
indebtedness incurred solely for the purpose of financing the acquisition or
lease of any equipment by the Company, including capital lease obligations
with
no recourse other than to such equipment; (iv) indebtedness (A) the repayment
of
which has been subordinated to the payment of the Convertible Debentures on
terms and conditions acceptable to the Secured Party, including with regard
to
interest payments and repayment of principal, (B) which does not mature or
otherwise require or permit redemption or repayment prior to or on the
91st
day
after the maturity date of any Convertible Debentures then outstanding; and
(C)
which is not secured by any assets of the Company; (v) indebtedness solely
between the Company and/or one of its domestic subsidiaries, on the one hand,
and the Company and/or one of its domestic subsidiaries, on the other which
indebtedness is not secured by any assets of the Company or any of its
subsidiaries, provided that (x) in each case a majority of the equity of any
such domestic subsidiary is directly or indirectly owned by the Company, such
domestic subsidiary is controlled by the Company and such domestic subsidiary
has executed a security agreement in the form of this Agreement and (y) any
such
loan shall be evidenced by an intercompany note that is pledged by the Company
or its subsidiary, as applicable, as collateral pursuant to this Agreement;
(vi)
reimbursement obligations in respect of letters of credit issued for the account
of the Company or any of its subsidiaries for the purpose of securing
performance obligations of the Company or its subsidiaries incurred in the
ordinary course of business so long as the aggregate face amount of all such
letters of credit does not exceed $500,000 at any one time; and (vii) renewals,
extensions and refinancing of any indebtedness described in clauses (i) or
(iii)
of this subsection.
Section
7.4. Places
of Business.
Change
the location of its chief place of business, chief executive office or any
place
of business disclosed to the Secured Party, unless such change in location
is to
a different location within the United States and the Company provides notice
to
the Secured Party of new location within 10 days’ of such change in
location.
Section
7.5. Company
Name. The
Company and each Subsidiary shall not change their respective names with out
providing the Secured Party thirty (30) calendar days prior written
notice.
ARTICLE
8.
MISCELLANEOUS
Section
8.1. 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 or 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:
|
Xxxxx
Xxxxxxxx or 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:
|
NS8
Corporation
|
|
000
Xxxxxxxxxx Xxxxxx - Xxxxx 0000
|
|
|
Xxxxxxx,
XX 00000
|
|
|
Attention: Xxxxxxx
Xxxx
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
With
a copy to:
|
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
|
|
1065
Avenue of the Xxxxxxxx, 00xx
Xxxxx
|
|
|
Xxx
Xxxx, Xxx Xxxx 00000
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (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.
Section
8.2. 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
8.3. Expenses.
In
the
event of an Event of Default, the Company will pay to the Secured Party the
amount of any and all reasonable out-of-pocket 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
8.4. 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 waive, 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 in the case of any such waiver, and signed by the Secured Party
and the Company in the case of any such amendment, change or
modification.
Section
8.5. Continuing
Security Interest; Partial Release.
(a)
This
Agreement shall create a continuing security interest in the Pledged Property
and shall: (i) remain in full force and effect until payment or conversion
in full of the Convertible Debentures; (ii) be binding upon the Company and
its successors and assigns; and (iii) inure to the benefit of the Secured
Party and its successors and assigns. Upon the payment or satisfaction in full
or conversion in full of the Convertible Debentures, this Agreement and the
security interest created hereby shall terminate, and, in connection therewith,
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 and the Secured Party
shall deliver to the Company such documents as the Company shall reasonably
request to evidence such termination.
(b) Effective
upon the closing of a disposition of any Pledged Property, provided the Secured
Party consents in writing prior to such disposition or such disposition is
made
in the ordinary course of business, the security interest granted hereunder
in
the Pledged Property so disposed of shall terminate and the Secured Party shall
deliver such documents as the Company shall reasonably request to evidence
such
termination; provided, however, the security interest granted hereunder in
all
remaining Pledged Property shall remain in full force and effect.
Section
8.6. 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.
Section
8.7. 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
8.8. 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
8.9. 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]
IN
WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
COMPANY:
|
|
|
NS8
CORPORATION, INC.
|
|
|
By:
|
|
|
Name: Xxxxxxx
Xxxx
|
|
|
Title: Chief
Executive Officer
|
|
IN
WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
COMPANY:
|
|
|
CANONLINE
MEDIA CORPORATION
|
|
|
By:
|
|
|
Name: Xxxxx
X. Xxxxxxx
|
|
|
Title: President
|
|
IN
WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
COMPANY:
|
|
|
CANONLINE
GLOBAL MEDIA, INC.
|
|
|
By:
|
|
|
Name: Xxxxx
X. Xxxxxxx
|
|
|
Title: President
|
|
IN
WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
COMPANY:
|
|
|
SUBSIDIARY
3
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
IN
WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
COMPANY:
|
|
|
SUBSIDIARY
4
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
IN
WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.
|
SECURED
PARTY:
|
|
|
CORNELL
CAPITAL PARTNERS, LP
|
|
|
By: Yorkville
Advisors, LLC
|
|
|
Its: Investment
Manager
|
|
|
By:
|
|
|
Name: Xxxx
Xxxxxx
|
|
|
Title: Portfolio
Manager
|
|
SCHEDULE
I
LEGAL
NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OF
ORGANIZATION
|
Company’s
Name
|
State/Province
of Organization
|
Employer
ID
|
Organizational
ID
|
|
Canonline
Media Corporation
|
British
Columbia, Canada
|
|
|
|
Canonline
Global Media, Inc.
|
Washington
|
||
|
Subsidiary
3
|
|||
|
Subsidiary
4
|
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, including, without
limitation, goodwill, trademarks, trade styles, trade names, leasehold
interests, partnership or joint venture interests, patents and patent
applications, 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;
(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
equity interests, securities or other instruments in other companies, including,
without limitation, any subsidiaries, investments or other entities (whether
or
not controlled); and
(h) all
products and proceeds (including, without limitation, insurance proceeds) from
the above-described Pledged Property.
