AMENDED AND RESTATED SECURITY AGREEMENT
Exhibit 10.4
EXECUTION COPY
AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT, dated as of February 29, 2008 (this “Agreement”) made
by STINGER SYSTEMS, INC., a Nevada corporation, (the “Company”), and the undersigned subsidiaries
of the Company (each a “Grantor” and collectively and together with the Company the “Grantors”), in
favor of CASTLERIGG MASTER INVESTMENTS LTD., a company organized under the laws of the British
Virgin Islands, in its capacity as collateral agent (in such capacity, the “Collateral Agent”) for
the “Buyers” (as defined below) party to the Securities Purchase Agreements (defined below).
W I T N E S S E T H:
WHEREAS, the Company and each party listed as a “Buyer” on the Schedule of Buyers attached
thereto (collectively, the “Original Buyers”) are parties to the Securities Purchase Agreement,
dated as of August 3, 2007 (as amended, restated or otherwise modified from time to time, the
“August 2007 Securities Purchase Agreement”), pursuant to which the Company sold, and the Buyers
purchased certain “Notes” (as defined therein) (as such Notes may be amended, restated, replaced or
otherwise modified from time to time in accordance with the terms thereof, collectively, the
“Original Notes”);
WHEREAS, the Company and each party listed as a “Buyer” on the Schedule of Buyers attached
thereto (collectively, the “New Buyers”) are entering into a new Securities Purchase Agreement,
dated as of the date hereof (as amended, restated or otherwise modified from time to time, the “New
Securities Purchase Agreement” and together with the August 2007 Securities Purchase Agreement, the
“Securities Purchase Agreements”), pursuant to which (i) the Original Notes shall be amended and
restated pursuant to the “Amended and Restated Notes” (as defined therein) and (ii) the Company
shall agree to sell, and the Buyers shall agree to purchase certain additional “New Notes” (as
defined therein) (as may be amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, the “New Notes”, and collectively with the Amended and Restated
Notes, the “Notes”);
WHEREAS, Contemporaneously with the consummation of the transactions contemplated by the
August 2007 Securities Purchase Agreement, the Company entered into a Security Agreement, dated as
of August 3, 2007, by the Company in favor of the Collateral Agent, (the “Existing Security
Agreement”).
WHEREAS, it is a condition precedent to the Buyers purchasing the Notes pursuant to the New
Securities Purchase Agreement that the Grantors shall amend and restate the Existing Security
Agreement to include obligations all of the Company’s obligations under both Securities Purchase
Agreements, the Amended and Restated Notes, the New Notes and all other “Transaction Documents” (as
defined in the respective Securities Purchase Agreement) (collectively, the “Transaction
Documents”) as “Obligations” hereunder; and
WHEREAS, the Grantors have determined that the execution, delivery and performance of this
Agreement directly benefits, and is in the best interest of, the Grantors.
NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to
induce the Buyers to perform under the New Securities Purchase Agreement, each Grantor agrees with
the Collateral Agent, for the benefit of the Buyers, as follows:
SECTION 1. Definitions.
(a) Reference is hereby made to the Securities Purchase Agreements and the Notes for a
statement of the terms thereof. All terms used in this Agreement and the recitals hereto which are
defined in the Securities Purchase Agreements, the Notes or in Articles 8 or 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York (the “Code”), and which
are not otherwise defined herein shall have the same meanings herein as set forth therein;
provided that terms used herein which are defined in the Code as in effect in the State of
New York on the date hereof shall continue to have the same meaning notwithstanding any replacement
or amendment of such statute except as the Collateral Agent may otherwise determine.
(b) The following terms shall have the respective meanings provided for in the Code:
“Accounts”, “Cash Proceeds”, “Chattel Paper”, “Commercial Tort Claim”, “Commodity Account”,
“Commodity Contracts”, “Deposit Account”, “Documents”, “Equipment”, “Fixtures”, “General
Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit
Rights”, “Noncash Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”, “Security”,
“Record”, “Security Account”, “Software”, and “Supporting Obligations”.
(c) As used in this Agreement, the following terms shall have the respective meanings
indicated below, such meanings to be applicable equally to both the singular and plural forms of
such terms:
“Additional Requirements” means (i) with respect to Deposit Accounts, and all cash and other
property from time to time deposited therein, for the execution of a control agreement with the
depository institution with which such account is maintained, as provided in Section 5(i),
(ii) with respect to Commodity Contracts, for the execution of a control agreement with the
commodity intermediary with which such commodity contract is carried, as provided in Section
5(i), (iii) with respect to the perfection of the security interest created hereby in any
Letter-of-Credit Rights, for the consent of the issuer of the applicable letter of credit to the
assignment of proceeds as provided in the Uniform Commercial Code as in effect in the applicable
jurisdiction, (iv) with respect to any action that may be necessary to obtain control of Collateral
constituting Deposit Accounts, Commodity Contracts, Electronic Chattel Paper, Investment Property
or Letter-of-Credit Rights, the taking of such actions, and (v) the Collateral Agent having
possession of all Documents, Chattel Paper, Instruments and cash constituting Collateral.
“Capital Stock” means (i) with respect to any Person that is a corporation, any and all
shares, interests, participations or other equivalents (however designated and whether or not
voting) of corporate stock, and (ii) with respect to any Person that is not a corporation, any and
all partnership, membership or other equity interests of such Person.
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“Copyright Licenses” means all licenses, contracts or other agreements, whether written or
oral, naming any Grantor as licensee or licensor and providing for the grant of any right to use or
sell any works covered by any copyright (including, without limitation, all Copyright Licenses set
forth in Schedule II hereto).
“Copyrights” means all domestic and foreign copyrights, whether registered or not, including,
without limitation, all copyright rights throughout the universe (whether now or hereafter arising)
in any and all media (whether now or hereafter developed), in and to all original works of
authorship fixed in any tangible medium of expression, acquired or used by any Grantor (including,
without limitation, all copyrights described in Schedule II hereto), all applications,
registrations and recordings thereof (including, without limitation, applications, registrations
and recordings in the United States Copyright Office or in any similar office or agency of the
United States or any other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals thereof.
“Event of Default” shall have the meaning set forth in the Notes.
“Governmental Authority” means any nation or government, any Federal, state, city, town,
municipality, county, local or other political subdivision thereof or thereto and any department,
commission, board, bureau, instrumentality, agency or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to
government.
“Insolvency Proceeding” means any proceeding commenced by or against any Person under any
provision of the Bankruptcy Code (Chapter 11 of Title 11 of the United States Code) or under any
other bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal
moratoria, compositions, or extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
“Intellectual Property” means the Copyrights, Trademarks and Patents.
“Licenses” means the Copyright Licenses, the Trademark Licenses and the Patent Licenses.
“Lien” means any mortgage, lien, pledge, charge, security interest or other encumbrance upon
or in any property or assets (including accounts and contract rights).
“Patent Licenses” means all licenses, contracts or other agreements, whether written or oral,
naming any Grantor as licensee or licensor and providing for the grant of any right to manufacture,
use or sell any invention covered by any Patent (including, without limitation, all Patent Licenses
set forth in Schedule II hereto).
“Patents” means all domestic and foreign letters patent, design patents, utility patents,
industrial designs, inventions, trade secrets, ideas, concepts, methods, techniques, processes,
proprietary information, technology, know-how, formulae, rights of publicity and other general
intangibles of like nature, now existing or hereafter acquired (including, without limitation, all
domestic and foreign letters patent, design patents, utility patents, industrial designs,
inventions, trade secrets, ideas, concepts, methods, techniques, processes, proprietary
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information, technology, know-how and formulae described in Schedule II hereto), all
applications, registrations and recordings thereof (including, without limitation, applications,
registrations and recordings in the United States Patent and Trademark Office, or in any similar
office or agency of the United States or any other country or any political subdivision thereof),
and all reissues, divisions, continuations, continuations in part and extensions or renewals
thereof.
“Person” means an individual, corporation, limited liability company, partnership,
association, joint-stock company, trust, unincorporated organization, joint venture or other
enterprise or entity or Governmental Authority.
“Trademark Licenses” means all licenses, contracts or other agreements, whether written or
oral, naming any Grantor as licensor or licensee and providing for the grant of any right
concerning any Trademark, together with any goodwill connected with and symbolized by any such
trademark licenses, contracts or agreements and the right to prepare for sale or lease and sell or
lease any and all Inventory now or hereafter owned by any Grantor and now or hereafter covered by
such licenses (including, without limitation, all Trademark Licenses described in Schedule
II hereto).
“Trademarks” means all domestic and foreign trademarks, service marks, collective marks,
certification marks, trade names, business names, d/b/a’s, Internet domain names, trade styles,
designs, logos and other source or business identifiers and all general intangibles of like nature,
now or hereafter owned, adopted, acquired or used by any Grantor (including, without limitation,
all domestic and foreign trademarks, service marks, collective marks, certification marks, trade
names, business names, d/b/a’s, Internet domain names, trade styles, designs, logos and other
source or business identifiers described in Schedule II hereto), all applications,
registrations and recordings thereof (including, without limitation, applications, registrations
and recordings in the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state thereof or any other country or any political subdivision thereof),
and all reissues, extensions or renewals thereof, together with all goodwill of the business
symbolized by such marks and all customer lists, formulae and other Records of any Grantor relating
to the distribution of products and services in connection with which any of such marks are used.
SECTION 2. Grant of Security Interest. As collateral security for all of the
“Obligations” (as defined in Section 3 hereof), each Grantor hereby pledges and assigns to
the Collateral Agent for the benefit of the Buyers, and grants to the Collateral Agent for the
benefit of the Buyers a continuing security interest in, all personal property of each Grantor,
wherever located and whether now or hereafter existing and whether now owned or hereafter acquired,
of every kind and description, tangible or intangible (collectively, the “Collateral”), including,
without limitation, the following:
(a) all Accounts;
(b) all Chattel Paper (whether tangible or electronic);
(c) the Commercial Tort Claims specified on Schedule VI hereto;
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(d) all Deposit Accounts, all cash and other property from time to time deposited therein and
the monies and property in the possession or under the control of the Collateral Agent or Buyer or
any affiliate, representative, agent or correspondent of the Collateral Agent or Buyer;
(e) all Documents;
(f) all Equipment;
(g) all Fixtures;
(h) all General Intangibles (including, without limitation, all Payment Intangibles);
(i) all Goods;
(j) all Instruments (including, without limitation, Promissory Notes and each certificated
Security);
(k) all Inventory;
(l) all Investment Property;
(m) all Copyrights, Patents and Trademarks, and all Licenses;
(n) all Letter-of-Credit Rights;
(o) all Supporting Obligations;
(p) all other tangible and intangible personal property of each Grantor (whether or not
subject to the Code), including, without limitation, all bank and other accounts and all cash and
all investments therein, all proceeds, products, offspring, accessions, rents, profits, income,
benefits, substitutions and replacements of and to any of the property of any Grantor described in
the preceding clauses of this Section 2 (including, without limitation, any proceeds of
insurance thereon and all causes of action, claims and warranties now or hereafter held by each
Grantor in respect of any of the items listed above), and all books, correspondence, files and
other Records, including, without limitation, all tapes, desks, cards, Software, data and computer
programs in the possession or under the control of any Grantor or any other Person from time to
time acting for any Grantor, in each case, to the extent of such Grantors rights therein, that at
any time evidence or contain information relating to any of the property described in the preceding
clauses of this Section 2 or are otherwise necessary or helpful in the collection or
realization thereof; and
(q) all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of any and
all of the foregoing Collateral;
in each case howsoever any Grantor’s interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise).
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Notwithstanding anything herein to the contrary, the term “Collateral” shall not include in the
case of a Subsidiary of such Grantor organized under the laws of a jurisdiction other than the
United States, any of the states thereof or the District of Columbia (a “Foreign Subsidiary”), more
than 65% (or such greater percentage that, due to a change in applicable law after the date hereof,
(A) would not reasonably be expected to cause the undistributed earnings of such Foreign Subsidiary
as determined for United States federal income tax purposes to be treated as a deemed dividend to
such Foreign Subsidiary’s United States parent and (B) would not reasonably be expected to cause
any material adverse tax consequences) of the issued and outstanding shares of Capital Stock
entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) (it being understood and
agreed that the Collateral shall include 100% of the issued and outstanding shares of Capital Stock
not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) or other equity
interest of such Foreign Subsidiary).
The Grantors agree that the pledge of the shares of Capital Stock acquired by a Grantor of any and
all Persons now or hereafter existing who is a Foreign Subsidiary may be supplemented by one or
more separate pledge agreements, deeds of pledge, share charges, or other similar agreements or
instruments, executed and delivered by the relevant Grantors in favor of the Collateral Agent,
which pledge agreements will provide for the pledge of such shares of Capital Stock in accordance
with the laws of the applicable foreign jurisdiction. With respect to such shares of Capital
Stock, the Collateral Agent may, at any time and from time to time, in its sole discretion, take
actions in such foreign jurisdictions that will result in the perfection of the Lien created in
such shares of Capital Stock.
SECTION 3. Security for Obligations. The security interest created hereby in the
Collateral constitutes continuing collateral security for all of the following obligations, whether
now existing or hereafter incurred (collectively, the “Obligations”):
(a) for so long as the Notes are outstanding, (i) the payment by the Company, as and when due
and payable (by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all
amounts from time to time owing by it in respect of the Securities Purchase Agreements, the Notes
and the other Transaction Documents, and (ii) in the case of any Guarantors, the payment by such
Guarantors, as and when due and payable of all “Guaranteed Obligations” under (and as defined in)
the Guaranty, including, without limitation, in both cases, (A) all principal of and interest on
the Notes (including, without limitation, all interest that accrues after the commencement of any
Insolvency Proceeding of any Grantor, whether or not the payment of such interest is unenforceable
or is not allowable due to the existence of such Insolvency Proceeding), and (B) all fees,
commissions, expense reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents; and
(b) for so long as the Notes are outstanding, the due performance and observance by each
Grantor of all of its other obligations from time to time existing in respect of any of the
Transaction Documents, including without limitation, with respect to any conversion or redemption
rights of the Buyers under the Notes.
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SECTION 4. Representations and Warranties. Each Grantor represents and warrants as of
the date of this Agreement as follows:
(a) Schedule I hereto sets forth (i) the exact legal name of each Grantor, and (ii)
the state of incorporation, organization or formation and the organizational identification number
of each Grantor in such state.
(b) There is no pending or, to its knowledge, written notice threatening any action, suit,
proceeding or claim affecting any Grantor before any governmental authority or any arbitrator, or
any order, judgment or award issued by any governmental authority or arbitrator, in each case, that
may adversely affect the grant by any Grantor, or the perfection, of the security interest
purported to be created hereby in the Collateral, or the exercise by the Collateral Agent of any of
its rights or remedies hereunder.
(c) All Federal, state and local tax returns and other reports required by applicable law to
be filed by any Grantor have been filed, or extensions have been obtained, and all taxes,
assessments and other governmental charges imposed upon any Grantor or any property of any Grantor
(including, without limitation, all federal income and social security taxes on employees’ wages)
and which have become due and payable on or prior to the date hereof have been paid, except to the
extent contested in good faith by proper proceedings which stay the imposition of any penalty, fine
or Lien resulting from the non-payment thereof and with respect to which adequate reserves have
been set aside for the payment thereof in accordance with generally accepted accounting principles
consistently applied (“GAAP”).
(d) All Equipment, Fixtures, Goods and Inventory of each Grantor now existing are, and all
Equipment, Fixtures, Goods and Inventory of each Grantor hereafter existing will be, located and/or
based at the addresses specified therefor in Schedule III hereto, except that each Grantor
will give the Collateral Agent written notice of any change in the location of any such Collateral
within 20 days of such change, other than to locations set forth on Schedule III hereto (or
a new Schedule III delivered by the Grantors to the Collateral Agent from time to time) and
with respect to which the Collateral Agent has filed financing statements and otherwise fully
perfected its Liens thereon or will take such actions pursuant to Section 5(n). Each Grantor’s
chief place of business and chief executive office, the place where each Grantor keeps its Records
concerning Accounts and all originals of all Chattel Paper are located at the addresses specified
therefor in Schedule III hereto. None of the Accounts is evidenced by Promissory Notes or
other Instruments. Set forth in Schedule IV hereto is a complete and accurate list, as of
the date of this Agreement, of (i) each Promissory Note, Security and other Instrument owned by
each Grantor and (ii) each Deposit Account, Securities Account and Commodities Account of each
Grantor, together with the name and address of each institution at which each such account is
maintained, the account number for each such account and a description of the purpose of each such
account. Set forth in Schedule II hereto is a complete and correct list of each trade name
used by each Grantor and the name of, and each trade name used by, each person from which each
Grantor has acquired any substantial part of the Collateral.
(e) Each Grantor has delivered to the Collateral Agent complete and correct copies of each
License described in Schedule II hereto, including all schedules and exhibits thereto,
which represents all of the Licenses existing on the date of this Agreement. Each such
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License sets forth the entire agreement and understanding of the parties thereto relating to
the subject matter thereof, and there are no other agreements, arrangements or understandings,
written or oral, relating to the matters covered thereby or the rights of such Grantor or any of
its affiliates in respect thereof. Each material License now existing is, and any material License
entered into in the future will be, the legal, valid and binding obligation of the parties thereto,
enforceable against such parties in accordance with its terms. No default under any material
License by any such party has occurred, nor does any defense, offset, deduction or counterclaim
exist thereunder in favor of any such party.
(f) Each Grantor owns and controls, or otherwise possesses adequate rights to use, all
Trademarks, Patents and Copyrights, which are the only trademarks, patents, copyrights, inventions,
trade secrets, proprietary information and technology, know-how, formulae, rights of publicity
necessary to conduct its business in substantially the same manner as conducted as of the date
hereof. Schedule II hereto sets forth a true and complete list of all registered
copyrights, issued Patents, Trademarks, and Licenses annually owned or used by each Grantor as of
the date hereof. To the best knowledge of each Grantor, all such Intellectual Property of each
Grantor is subsisting and in full force and effect, has not been adjudged invalid or unenforceable,
is valid and enforceable and has not been abandoned in whole or in part. Except as set forth in
Schedule II, no such Intellectual Property is the subject of any licensing or franchising
agreement. Each Grantor has no knowledge of any conflict with the rights of others to any such
Intellectual Property and, to the best knowledge of each Grantor, each Grantor is not now
infringing or in conflict with any such rights of others in any material respect, and to the best
knowledge of each Grantor, no other Person is now infringing or in conflict in any material respect
with any such properties, assets and rights owned or used by each Grantor. No Grantor has received
any notice that it is violating or has violated the trademarks, patents, copyrights, inventions,
trade secrets, proprietary information and technology, know-how, formulae, rights of publicity or
other intellectual property rights of any third party.
(g) Each Grantor is and will be at all times the sole and exclusive owner of, or otherwise has
and will have adequate rights in, the Collateral free and clear of any Liens, except for Permitted
Liens. No effective financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording or filing office except such as (i) may have
been filed in favor of the Collateral Agent and/or the Buyers relating to this Agreement or the
other Security Documents and (ii) are described on Schedule 4(g) hereto.
(h) The exercise by the Collateral Agent of any of its rights and remedies hereunder will not
contravene any law or any contractual restriction binding on or otherwise affecting each Grantor or
any of its properties and will not result in or require the creation of any Lien, upon or with
respect to any of its properties.
(i) No authorization or approval or other action by, and no notice to or filing with, any
governmental authority or other regulatory body, is required for (i) the grant by each Grantor, or
the perfection, of the security interest purported to be created hereby in the Collateral, or
(ii) the exercise by the Collateral Agent of any of its rights and remedies hereunder, except
(A) for the filing under the Uniform Commercial Code as in effect in the applicable jurisdiction of
the financing statements described in Schedule V hereto (or a new Schedule V
delivered by Grantors to Collateral Agent from time to time), all of which financing statements
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have been duly filed and are in full force and effect or will be duly filed and in full force
and effect, (B) with respect to the perfection of the security interest created hereby in the
United States Intellectual Property and Licenses, for the recording of the appropriate Assignment
for Security, substantially in the form of Exhibit A hereto in the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, (C) with respect to the
perfection of the security interest created hereby in foreign Intellectual Property and Licenses,
for registrations and filings in jurisdictions located outside of the United States and covering
rights in such jurisdictions relating to such foreign Intellectual Property and Licenses, and (D)
with respect to the perfection of the security interest created hereby in Titled Collateral, for
the submission of an appropriate application requesting that the Lien of the Collateral Agent be
noted on the Certificate of Title or certificate of ownership, completed and authenticated by the
applicable Grantor, together with the Certificate of Title or certificate of ownership, with
respect to such Titled Collateral, to the appropriate governmental authority (subclauses (A), (B),
(C) and (D), together with the Additional Requirements, each a “Perfection Requirement” and
collectively, the “Perfection Requirements”).
(j) This Agreement creates in favor of the Collateral Agent a legal, valid and enforceable
security interest in the Collateral, as security for the Obligations. The Perfection Requirements
result in the perfection of such security interests. Such security interests are, or in the case
of Collateral in which each Grantor obtains rights after the date hereof, will be, perfected, first
priority security interests, subject only to Permitted Liens and the Perfection Requirements and
the financing statements described in Schedule 4(g). Such recordings and filings and all
other action necessary to perfect and protect such security interest have been duly taken or will
be taken pursuant to Section 5(n), and, in the case of Collateral in which each Grantor obtains
rights after the date hereof, will be duly taken, except for the Collateral Agent’s having
possession of all Documents, Chattel Paper, Instruments and cash constituting Collateral after the
date hereof and the other actions, filings and recordations described above, including the
Perfection Requirements.
(k) As of the date hereof, no Grantor holds any Commercial Tort Claims or has knowledge of any
pending Commercial Tort Claims, except for such Commercial Tort Claims described in Schedule
VI.
SECTION 5. Covenants as to the Collateral. So long as any of the Obligations shall
remain outstanding, unless the Collateral Agent shall otherwise consent in writing:
(a) Further Assurances. Each Grantor will at its expense, at any time and from time
to time, promptly execute and deliver all further instruments and documents and take all further
action that the Collateral Agent may reasonably request in order to: (i) perfect and protect the
security interest purported to be created hereby; (ii) enable the Collateral Agent to exercise and
enforce its rights and remedies hereunder in respect of the Collateral; or (iii) otherwise effect
the purposes of this Agreement, including, without limitation: (A) marking conspicuously all
Chattel Paper and each License and, at the request of the Collateral Agent, each of its Records
pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral
Agent, indicating that such Chattel Paper, License or Collateral is subject to the security
interest created hereby, (B) delivering and pledging to the Collateral Agent pursuant to the
Pledge Agreement each Promissory Note, Security, Chattel Paper or other Instrument, now or
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hereafter owned by any Grantor, duly endorsed and accompanied by executed instruments of
transfer or assignment, all in form and substance satisfactory to the Collateral Agent,
(C) executing and filing (to the extent, if any, that any Grantor’s signature is required thereon)
or authenticating the filing of, such financing or continuation statements, or amendments thereto,
as may be necessary or that the Collateral Agent may reasonably request in order to perfect and
preserve the security interest purported to be created hereby, (D) furnishing to the Collateral
Agent from time to time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral in each case as the Collateral Agent may
reasonably request, all in reasonable detail, (E) if any Collateral shall be in the possession of a
third party, notifying such Person of the Collateral Agent’s security interest created hereby and
obtaining a written acknowledgment from such Person that such Person holds possession of the
Collateral for the benefit of the Collateral Agent, which such written acknowledgement shall be in
form and substance reasonably satisfactory to the Collateral Agent, (F) if at any time after the
date hereof, any Grantor acquires or holds any Commercial Tort Claim, promptly notifying the
Collateral Agent in a writing signed by such Grantor setting forth a brief description of such
Commercial Tort Claim and granting to the Collateral Agent a security interest therein and in the
proceeds thereof, which writing shall incorporate the provisions hereof and shall be in form and
substance satisfactory to the Collateral Agent, (G) upon the acquisition after the date hereof by
any Grantor of any motor vehicle or other Equipment subject to a certificate of title or ownership
(other than a Motor Vehicle or Equipment that is subject to a purchase money security interest),
causing the Collateral Agent to be listed as the lienholder on such certificate of title or
ownership and delivering evidence of the same to the Collateral Agent in accordance with
Section 5(j) hereof; and (H) taking all actions required by any earlier versions of the
Uniform Commercial Code or by other law, as applicable, in any relevant Uniform Commercial Code
jurisdiction, or by other law as applicable in any foreign jurisdiction.
(b) Location of Equipment and Inventory. Each Grantor will keep the Equipment and
Inventory (i) at the locations specified therefor on Schedule III hereto, or (ii) at such
other locations set forth on Schedule III (or a new Schedule III delivered by
Grantors to Collateral Agent from time to time) and with respect to which the Collateral Agent has
filed financing statements and otherwise fully perfected its Liens thereon, or (iii) at such other
locations in the United States, provided that within 20 days following the relocation of Equipment
or Inventory to such other location or the acquisition of Equipment or Inventory, Grantor shall
deliver to the Collateral Agent a new Schedule III indicating such new locations.
(c) Condition of Equipment. Each Grantor will maintain or cause the Equipment
(necessary or useful to its business) to be maintained and preserved in good condition, repair and
working order, ordinary wear and tear excepted, and will forthwith, or in the case of any loss or
damage to any Equipment of any Grantor within a commercially reasonable time after the occurrence
thereof, make or cause to be made all repairs, replacements and other improvements in connection
therewith which are necessary or desirable, consistent with past practice, or which the Collateral
Agent may request to such end. Any Grantor will promptly furnish to the Collateral Agent a
statement describing in reasonable detail any such loss or damage in excess of $250,000 per
occurrence to any Equipment.
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(d) Taxes, Etc. Each Grantor agrees to pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and Inventory, except to the
extent the validity thereof is being contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves in accordance with GAAP have been set aside for the payment thereof.
(e) Insurance.
(i) Each Grantor will, at its own expense, maintain insurance (including, without limitation,
commercial general liability and property insurance) with respect to the Equipment and Inventory in
such amounts, against such risks, in such form and with responsible and reputable insurance
companies or associations as is required by any governmental authority having jurisdiction with
respect thereto or as is carried generally in accordance with sound business practice by companies
in similar businesses similarly situated and in any event, in amount, adequacy and scope reasonably
satisfactory to the Collateral Agent. To the extent requested by the Collateral Agent at any time
and from time to time, each such policy for liability insurance shall provide for all losses to be
paid on behalf of the Collateral Agent and any Grantor as their respective interests may appear,
and each policy for property damage insurance shall provide for all losses to be adjusted with, and
paid directly to, the Collateral Agent. To the extent requested by the Collateral Agent at any
time and from time to time, each such policy shall in addition (A) name the Collateral Agent as an
additional insured party or loss payee thereunder (without any representation or warranty by or
obligation upon the Collateral Agent) as their interests may appear, (B) contain an agreement by
the insurer that any loss thereunder shall be payable to the Collateral Agent on its own account
notwithstanding any action, inaction or breach of representation or warranty by any Grantor, (C)
provide that there shall be no recourse against the Collateral Agent for payment of premiums or
other amounts with respect thereto, and (D) provide that at least 30 days’ prior written notice of
cancellation, lapse, expiration or other adverse change shall be given to the Collateral Agent by
the insurer. Any Grantor will, if so requested by the Collateral Agent, deliver to the Collateral
Agent original or duplicate policies of such insurance and, as often as the Collateral Agent may
reasonably request, a report of a reputable insurance broker with respect to such insurance. Any
Grantor will also, at the request of the Collateral Agent, execute and deliver instruments of
assignment of such insurance policies and cause the respective insurers to acknowledge notice of
such assignment.
(ii) Reimbursement under any liability insurance maintained by any Grantor pursuant to this
Section 5(e) may be paid directly to the Person who shall have incurred liability covered
by such insurance. In the case of any loss involving damage to Equipment or Inventory, any
proceeds of insurance maintained by any Grantor pursuant to this Section 5(e) shall be paid
to the Collateral Agent (except as to which paragraph (iii) of this Section 5(e) is not
applicable), any Grantor will make or cause to be made the necessary repairs to or replacements of
such Equipment or Inventory, and any proceeds of insurance maintained by any Grantor pursuant to
this Section 5(e) shall be paid by the Collateral Agent to any Grantor as reimbursement for
the costs of such repairs or replacements.
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(iii) Following and during the continuance of an Event of Default, all insurance payments in
respect of such Equipment or Inventory shall be paid to the Collateral Agent and applied as
specified in Section 7(b) hereof.
(f) Provisions Concerning the Accounts and the Licenses.
(i) Each Grantor will (A) give the Collateral Agent at least 30 days’ prior written notice of
any change in such Grantor’s name, identity or organizational structure, (B) maintain its
jurisdiction of incorporation, organization or formation as set forth in Schedule I hereto,
(C) immediately notify the Collateral Agent upon obtaining an organizational identification number,
if on the date hereof such Grantor did not have such identification number, and (D) keep adequate
records concerning the Accounts and Chattel Paper and permit representatives of the Collateral
Agent during normal business hours on reasonable notice to such Grantor, to inspect and make
abstracts from such Records and Chattel Paper.
(ii) Each Grantor will, except as otherwise provided in this subsection (f), continue to
collect, at its own expense, all amounts due or to become due under the Accounts. In connection
with such collections, any Grantor may (and, at the Collateral Agent’s direction, will) take such
action as any Grantor or the Collateral Agent may deem necessary or advisable to enforce collection
or performance of the Accounts; provided, however, that the Collateral Agent shall
have the right at any time, upon the occurrence and during the continuance of an Event of Default,
to notify the account debtors or obligors under any Accounts of the assignment of such Accounts to
the Collateral Agent and to direct such account debtors or obligors to make payment of all amounts
due or to become due to any Grantor thereunder directly to the Collateral Agent or its designated
agent and, upon such notification and at the expense of any Grantor and to the extent permitted by
law, to enforce collection of any such Accounts and to adjust, settle or compromise the amount or
payment thereof, in the same manner and to the same extent as any Grantor might have done. After
receipt by any Grantor of a notice from the Collateral Agent that the Collateral Agent has
notified, intends to notify, or has enforced or intends to enforce any Grantor’s rights against the
account debtors or obligors under any Accounts as referred to in the proviso to the immediately
preceding sentence, (A) all amounts and proceeds (including Instruments) received by any Grantor in
respect of the Accounts shall be received in trust for the benefit of the Collateral Agent
hereunder, shall be segregated from other funds of any Grantor and shall be forthwith paid over to
the Collateral Agent in the same form as so received (with any necessary endorsement) to be applied
as specified in Section 7(b) hereof, and (B) no Grantor will adjust, settle or compromise
the amount or payment of any Account or release wholly or partly any account debtor or obligor
thereof or allow any credit or discount thereon. In addition, upon the occurrence and during the
continuance of an Event of Default, the Collateral Agent may (in its sole and absolute discretion)
direct any or all of the banks and financial institutions with which any Grantor either maintains a
Deposit Account or a lockbox or deposits the proceeds of any Accounts to send immediately to the
Collateral Agent by wire transfer (to such account as the Collateral Agent shall specify, or in
such other manner as the Collateral Agent shall direct) all or a portion of such securities, cash,
investments and other items held by such institution. Any such securities, cash, investments and
other items so received by the Collateral Agent shall be applied as specified in accordance with
Section 7(b) hereof.
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(iii) Upon the occurrence and during the continuance of any breach or default under any
material License referred to in Schedule II hereto by any party thereto other than any
Grantor, each Grantor party thereto will, promptly after obtaining knowledge thereof, give the
Collateral Agent written notice of the nature and duration thereof, specifying what action, if any,
it has taken and proposes to take with respect thereto and thereafter will take reasonable steps to
protect and preserve its rights and remedies in respect of such breach or default, or will obtain
or acquire an appropriate substitute License.
(iv) Each Grantor will, at its expense, promptly deliver to the Collateral Agent a copy of
each notice or other communication received by it by which any other party to any material License
referred to in Schedule II hereto purports to exercise any of its rights or affect any of
its obligations thereunder, together with a copy of any reply by such Grantor thereto.
(v) Each Grantor will exercise promptly and diligently each and every right which it may have
under each material License (other than any right of termination) and will duly perform and observe
in all respects all of its obligations under each material License and will take all action
reasonably necessary to maintain such Licenses in full force and effect. No Grantor will, without
the prior written consent of the Collateral Agent, cancel, terminate, amend or otherwise modify in
any respect, or waive any provision of, any material License referred to in Schedule II
hereto.
(g) Transfers and Other Liens.
(i) No Grantor will sell, assign (by operation of law or otherwise), lease, license, exchange
or otherwise transfer or dispose of any of the Collateral, except (A) Inventory in the ordinary
course of business, and (B) worn out or obsolete assets, not necessary to the business.
(ii) No Grantor will create, suffer to exist or grant any Lien upon or with respect to any
Collateral other than a Permitted Lien.
(h) Intellectual Property.
(i) If applicable, any Grantor shall, upon the Collateral Agent’s written request, duly
execute and deliver the applicable Assignment for Security in the form attached hereto as
Exhibit A. Each Grantor (either itself or through licensees) will, and will cause each
licensee thereof to, take all action necessary to maintain all of the Intellectual Property in full
force and effect, including, without limitation, using the proper statutory notices and markings
and using the Trademarks on each applicable trademark class of goods in order to so maintain the
Trademarks in full force and free from any claim of abandonment for non-use, and each Grantor will
not (nor permit any licensee thereof to) do any act or knowingly omit to do any act whereby any
Intellectual Property may become invalidated; provided, however, that so long as no
Event of Default has occurred and is continuing, no Grantor shall have an obligation to use or to
maintain any Intellectual Property (A) that relates solely to any product or work, that has been,
or is in the process of being, discontinued, abandoned or terminated, (B) that is being replaced
with Intellectual Property substantially similar to the Intellectual Property that may be abandoned
or
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otherwise become invalid, so long as the failure to use or maintain such Intellectual Property
does not materially adversely affect the validity of such replacement Intellectual Property and so
long as such replacement Intellectual Property is subject to the Lien created by this Agreement or
(C) that is substantially the same as another Intellectual Property that is in full force, so long
the failure to use or maintain such Intellectual Property does not materially adversely affect the
validity of such replacement Intellectual Property and so long as such other Intellectual Property
is subject to the Lien and security interest created by this Agreement. Each Grantor will cause to
be taken all necessary steps in any proceeding before the United States Patent and Trademark Office
and the United States Copyright Office or any similar office or agency in any other country or
political subdivision thereof to maintain each registration of the Intellectual Property (other
than the Intellectual Property described in the proviso to the immediately preceding sentence),
including, without limitation, filing of renewals, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings and payment of
maintenance fees, filing fees, taxes or other governmental fees. If any Intellectual Property
(other than Intellectual Property described in the proviso to the first sentence of subsection (i)
of this clause (h)) is infringed, misappropriated, diluted or otherwise violated in any material
respect by a third party, each Grantor shall (x) upon learning of such infringement,
misappropriation, dilution or other violation, promptly notify the Collateral Agent and (y) to the
extent any Grantor shall deem appropriate under the circumstances, promptly xxx for infringement,
misappropriation, dilution or other violation, seek injunctive relief where appropriate and recover
any and all damages for such infringement, misappropriation, dilution or other violation, or take
such other actions as such Grantor shall deem appropriate under the circumstances to protect such
Intellectual Property. Each Grantor shall furnish to the Collateral Agent from time to time upon
its request statements and schedules further identifying and describing the Intellectual Property
and Licenses and such other reports in connection with the Intellectual Property and Licenses as
the Collateral Agent may reasonably request, all in reasonable detail and promptly upon request of
the Collateral Agent, following receipt by the Collateral Agent of any such statements, schedules
or reports, each Grantor shall modify this Agreement by amending Schedule II hereto, as the
case may be, to include any Intellectual Property and License, as the case may be, which becomes
part of the Collateral under this Agreement and shall execute and authenticate such documents and
do such acts as shall be necessary or, in the reasonable judgment of the Collateral Agent,
desirable to subject such Intellectual Property and Licenses to the Lien and security interest
created by this Agreement. Notwithstanding anything herein to the contrary, upon the occurrence
and during the continuance of an Event of Default, no Grantor may abandon or otherwise permit any
Intellectual Property to become invalid without the prior written consent of the Collateral Agent,
and if any Intellectual Property is infringed, misappropriated, diluted or otherwise violated in
any material respect by a third party, each Grantor will take such action as the Collateral Agent
shall deem appropriate under the circumstances to protect such Intellectual Property.
(ii) In no event shall any Grantor, either itself or through any agent, employee, licensee or
designee, file an application for the registration of any Trademark or Copyright or the issuance of
any Patent with the United States Patent and Trademark Office or the United States Copyright
Office, as applicable, or in any similar office or agency of the United States or any country or
any political subdivision thereof unless it gives the Collateral Agent prior written notice
thereof. Upon request of the Collateral Agent, any Grantor shall execute, authenticate and deliver
any and all assignments, agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence the Collateral Agent’s security
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interest hereunder in such Intellectual Property and the General Intangibles of any Grantor
relating thereto or represented thereby, and each Grantor hereby appoints the Collateral Agent its
attorney-in-fact to execute and/or authenticate and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed, and such power (being
coupled with an interest) shall be irrevocable until the indefeasible payment in full in cash of
all of the Obligations in full.
(i) Deposit, Commodities and Securities Accounts. Upon the Collateral Agent’s written
request, each Grantor shall request that each bank and other financial institution with an account
referred to in Schedule IV hereto execute and deliver to the Collateral Agent a control
agreement, in form and substance reasonably satisfactory to the Collateral Agent, duly executed by
each Grantor and such bank or financial institution, or enter into other arrangements in form and
substance satisfactory to the Collateral Agent, pursuant to which such institution shall
irrevocably agree, inter alia, that (i) it will comply at any time with the
instructions originated by the Collateral Agent to such bank or financial institution directing the
disposition of cash, Commodity Contracts, securities, Investment Property and other items from time
to time credited to such account, without further consent of each Grantor, which instructions the
Collateral Agent will not give to such bank or other financial institution in the absence of a
continuing Event of Default, (ii) all Commodity Contracts, securities, Investment Property and
other items of each Grantor deposited with such institution shall be subject to a perfected, first
priority security interest in favor of the Collateral Agent, (iii) any right of set off (other than
recoupment of standard fees), banker’s Lien or other similar Lien, security interest or encumbrance
shall be fully waived as against the Collateral Agent, and (iv) upon receipt of written notice from
the Collateral Agent during the continuance of an Event of Default, such bank or financial
institution shall immediately send to the Collateral Agent by wire transfer (to such account as the
Collateral Agent shall specify, or in such other manner as the Collateral Agent shall direct) all
such cash, the value of any Commodity Contracts, securities, Investment Property and other items
held by it. Without the prior written consent of the Collateral Agent, each Grantor shall not make
or maintain any Deposit Account, Commodity Account or Securities Account except for the accounts
set forth in Schedule IV hereto. The provisions of this paragraph 5(i) shall not apply to
(i) Deposit Accounts for which the Collateral Agent is the depositary and (ii) Deposit Accounts
specially and exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of each Grantor’s salaried or hourly employees.
(j) Motor Vehicles.
(i) Upon the Collateral Agent’s written request, each Grantor shall deliver to the Collateral
Agent originals of the certificates of title or ownership for all motor vehicles with a value in
excess of $50,000, owned by it with the Collateral Agent listed as lienholder, for the benefit of
the Buyers.
(ii) Each Grantor hereby appoints the Collateral Agent as its attorney-in-fact, effective the
date hereof and terminating upon the termination of this Agreement, for the purpose of (A)
executing on behalf of such Grantor title or ownership applications for filing with appropriate
state agencies to enable motor vehicles now owned or hereafter acquired by such Grantor to be
retitled and the Collateral Agent listed as lienholder thereof, (B) filing such
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applications with such state agencies, and (C) executing such other documents and instruments
on behalf of, and taking such other action in the name of, such Grantor as the Collateral Agent may
deem necessary or advisable to accomplish the purposes hereof (including, without limitation, for
the purpose of creating in favor of the Collateral Agent a perfected Lien on the motor vehicles and
exercising the rights and remedies of the Collateral Agent hereunder). This appointment as
attorney-in-fact is coupled with an interest and is irrevocable until all of the Obligations are
indefeasibly paid in full in cash.
(iii) Any certificates of title or ownership delivered pursuant to the terms hereof shall be
accompanied by odometer statements for each motor vehicle covered thereby.
(iv) So long as no Event of Default shall have occurred and be continuing, upon the request of
any Grantor, the Collateral Agent shall execute and deliver to any Grantor such instruments as any
Grantor shall reasonably request to remove the notation of the Collateral Agent as lienholder on
any certificate of title for any motor vehicle; provided, however, that any such
instruments shall be delivered, and the release effective, only upon receipt by the Collateral
Agent of a certificate from any Grantor stating that such motor vehicle is to be sold or has
suffered a casualty loss (with title thereto in such case passing to the casualty insurance company
therefor in settlement of the claim for such loss) and the amount that any Grantor will receive as
sale proceeds or insurance proceeds. Any proceeds of such sale or casualty loss shall be paid to
the Collateral Agent hereunder immediately upon receipt, to be applied to the Obligations then
outstanding.
(k) Control. Each Grantor hereby agrees to take any or all action that may be
necessary or that the Collateral Agent may reasonably request in order for the Collateral Agent to
obtain control in accordance with Sections 9-105 – 9-107 of the Code with respect to the following
Collateral: (i) Electronic Chattel Paper, (ii) Investment Property, and (iii) Letter-of-Credit
Rights.
(l) Inspection and Reporting. Each Grantor shall permit the Collateral Agent, or any
agent or representatives thereof or such professionals or other Persons as the Collateral Agent may
designate, during normal business hours, after reasonable notice in the absence of an Event of
Default and not more than once a year in the absence of an Event of Default, (i) to examine and
make copies of and abstracts from any Grantor’s records and books of account, (ii) to visit and
inspect its properties, (iii) to verify materials, leases, Instruments, Accounts, Inventory and
other assets of any Grantor from time to time, (iii) to conduct audits, physical counts, appraisals
and/or valuations, examinations at the locations of any Grantor. Each Grantor shall also permit
the Collateral Agent, or any agent or representatives thereof or such professionals or other
Persons as the Collateral Agent may designate to discuss such Grantor’s affairs, finances and
accounts with any of its directors, officers, managerial employees, independent accountants or any
of its other representatives.
(m) Future Subsidiaries. If any Grantor shall hereafter create or acquire any
Subsidiary, simultaneously with the creation or acquisition of such Subsidiary, such Grantor shall
(i) cause such Subsidiary to become a party to this Agreement as an additional “Grantor”
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hereunder, (ii) shall deliver to Collateral Agent revised Schedules to this Agreement, as
appropriate, (iii) cause such Subsidiary (the “Guarantor”) to duly execute and deliver a guaranty
(the “Guaranty”) of the Obligations in favor of the Collateral Agent in form and substance
reasonably acceptable to the Collateral Agent, (iv) cause such Subsidiary to duly execute and
deliver a pledge agreement in form and substance reasonably acceptable to the Collateral Agent (the
“Pledge Agreement”) together with (x) certificates evidencing all of the Capital Stock of any
Person owned by such Subsidiary, and (y) undated stock powers executed in blank with signature
guaranteed, (v) shall execute and deliver a Pledge Agreement together with (x) certificates
evidencing all of the Capital Stock of such Subsidiary, and (y) undated stock powers executed in
blank with signature guaranteed, and (vi) shall duly execute and/or deliver such opinions of
counsel and other documents, in form and substance reasonably acceptable to the Collateral Agent,
as the Collateral Agent shall reasonably request with respect thereto, provided that any Grantor
that acquires a subsidiary on or within two days after the Closing Date shall have 10 Business Days
in which to satisfy the requirements of this Section 5(m).
SECTION 6. Additional Provisions Concerning the Collateral.
(a) To the maximum extent permitted by applicable law, and for the purpose of taking any
action that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, each Grantor hereby (i) authorizes the Collateral Agent to file such agreements,
instruments or other documents in such Grantor’s name and in any appropriate filing office, (ii)
authorizes the Collateral Agent at any time and from time to time to file, one or more financing or
continuation statements, and amendments thereto, relating to the Collateral (including, without
limitation, any such financing statements that (A) describe the Collateral as “all assets” or “all
personal property” (or words of similar effect) or that describe or identify the Collateral by type
or in any other manner as the Collateral Agent may determine regardless of whether any particular
asset of such Grantor falls within the scope of Article 9 of the Uniform Commercial Code or whether
any particular asset of such Grantor constitutes part of the Collateral, and (B) contain any other
information required by Part 5 of Article 9 of the Code for the sufficiency or filing office
acceptance of any financing statement, continuation statement or amendment, including, without
limitation, whether such Grantor is an organization, the type of organization and any
organizational identification number issued to such Grantor) and (iii) ratifies such authorization
to the extent that the Collateral Agent has filed any such financing or continuation statements, or
amendments thereto, prior to the date hereof. A photocopy or other reproduction of this Agreement
or any financing statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
(b) Each Grantor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact and
proxy, with full authority in the place and stead of such Grantor and in the name of such Grantor
or otherwise, from time to time in the Collateral Agent’s discretion, so long as an Event of
Default shall have occurred and is continuing, to take any action and to execute any instrument
which the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of
this Agreement (subject to the rights of each Grantor under Section 5 hereof), including,
without limitation, (i) to obtain and adjust insurance required to be paid to the Collateral Agent
pursuant to Section 5(e) hereof, (ii) to ask, demand, collect, xxx for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under or in respect of
any Collateral, (iii) to receive, endorse, and collect any drafts or other
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instruments, documents and chattel paper in connection with clause (i) or (ii) above, (iv) to
file any claims or take any action or institute any proceedings which the Collateral Agent may deem
necessary or desirable for the collection of any Collateral or otherwise to enforce the rights of
the Collateral Agent and the Buyers with respect to any Collateral, and (v) to execute assignments,
licenses and other documents to enforce the rights of the Collateral Agent and the Buyers with
respect to any Collateral. This power is coupled with an interest and is irrevocable until all of
the Obligations are indefeasibly paid in full in cash.
(c) For the purpose of enabling the Collateral Agent to exercise rights and remedies
hereunder, at such time as the Collateral Agent shall be lawfully entitled to exercise such rights
and remedies, and for no other purpose, each Grantor hereby grants to the Collateral Agent, to the
extent assignable, and so long as an Event of Default shall have occurred and is continuing, an
irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to
any Grantor) to use, assign, license or sublicense any Intellectual Property now owned or hereafter
acquired by such Grantor, wherever the same may be located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout thereof. Notwithstanding anything contained
herein to the contrary, but subject to the provisions of the Securities Purchase Agreements that
limit the right of any Grantor to dispose of its property, and Section 5(g) and Section
5(h) hereof, so long as no Event of Default shall have occurred and be continuing, any Grantor
may exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of its business. In
furtherance of the foregoing, unless an Event of Default shall have occurred and be continuing, the
Collateral Agent shall from time to time, upon the request of any Grantor, execute and deliver any
instruments, certificates or other documents, in the form so requested, which such Grantor shall
have certified are appropriate (in such Grantor’s judgment) to allow it to take any action
permitted above (including relinquishment of the license provided pursuant to this clause (c) as to
any Intellectual Property). Further, upon the indefeasible payment in full in cash of all of the
Obligations or the conversion into shares of Common Stock of the Company all of the Obligations,
the Collateral Agent (subject to Section 10(e) hereof) shall release and reassign to any
Grantor all of the Collateral Agent’s right, title and interest in and to the Intellectual
Property, and the Licenses, all without recourse, representation or warranty whatsoever. The
exercise of rights and remedies hereunder by the Collateral Agent shall not terminate the rights of
the holders of any licenses or sublicenses theretofore granted by each Grantor in accordance with
the second sentence of this clause (c). Each Grantor hereby releases the Collateral Agent from any
claims, causes of action and demands at any time arising out of or with respect to any actions
taken or omitted to be taken by the Collateral Agent under the powers of attorney granted herein
other than actions taken or omitted to be taken through the Collateral Agent’s gross negligence or
willful misconduct, as determined by a final determination of a court of competent jurisdiction.
(d) If any Grantor fails to perform any agreement or obligation contained herein, the
Collateral Agent may itself perform, or cause performance of, such agreement or obligation, in the
name of such Grantor or the Collateral Agent, and the expenses of the Collateral Agent incurred in
connection therewith shall be payable by such Grantor pursuant to Section 8 hereof and
shall be secured by the Collateral.
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(e) The powers conferred on the Collateral Agent hereunder are solely to protect its interest
in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for
the safe custody of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
(f) Anything herein to the contrary notwithstanding (i) each Grantor shall remain liable under
the Licenses and otherwise with respect to any of the Collateral to the extent set forth therein to
perform all of its obligations thereunder to the same extent as if this Agreement had not been
executed, (ii) the exercise by the Collateral Agent of any of its rights hereunder shall not
release any Grantor from any of its obligations under the Licenses or otherwise in respect of the
Collateral, and (iii) the Collateral Agent shall not have any obligation or liability by reason of
this Agreement under the Licenses or with respect to any of the other Collateral, nor shall the
Collateral Agent be obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned hereunder.
SECTION 7. Remedies Upon Event of Default. If any Event of Default shall have
occurred and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, 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 Code (whether or not the Code applies to the
affected Collateral), and also may (i) take absolute control of the Collateral, including, without
limitation, transfer into the Collateral Agent’s name or into the name of its nominee or nominees
(to the extent the Collateral Agent has not theretofore done so) and thereafter receive, for the
benefit of the Collateral Agent, 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 each Grantor to, and each Grantor hereby agrees that it will
at its expense and upon request of the Collateral Agent forthwith, assemble all or part of its
respective Collateral as directed by the Collateral Agent and make it available to the Collateral
Agent at a place or places to be designated by the Collateral Agent that is reasonably convenient
to both parties, and the Collateral Agent may enter into and occupy any premises owned or leased by
any Grantor where the Collateral or any part thereof is located or assembled for a reasonable
period in order to effectuate the Collateral Agent’s rights and remedies hereunder or under law,
without obligation to any Grantor in respect of such occupation, and (iii) without notice except as
specified below and without any obligation to prepare or process the Collateral for sale, (A) sell
the Collateral or any part thereof in one or more parcels at public or private sale, at any of the
Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as the Collateral Agent may deem commercially reasonable
and/or (B) lease, license or dispose of the Collateral or any part thereof upon such terms as the
Collateral Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice
of sale or any other disposition of its respective Collateral shall be required by law, at least
ten (10) days’ notice to any Grantor of the time and place of any public sale or the time after
which any private sale or other disposition of its respective Collateral is to be made shall
constitute reasonable notification. The Collateral Agent shall not be obligated
- 19 -
to make any sale or other disposition of any Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Each Grantor hereby waives any claims
against the Collateral Agent and the Buyers arising by reason of the fact that the price at which
its respective Collateral 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 Collateral Agent accepts the first offer received and does not offer such Collateral to more
than one offeree, and waives all rights that any Grantor may have to require that all or any part
of such Collateral be marshaled upon any sale (public or private) thereof. Each Grantor hereby
acknowledges that (i) any such sale of its respective Collateral by the Collateral Agent shall be
made without warranty, (ii) the Collateral Agent 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 Collateral. In
addition to the foregoing, (1) upon written notice to any Grantor from the Collateral Agent after
and during the continuance of an Event of Default, such Grantor shall cease any use of the
Intellectual Property or any trademark, patent or copyright similar thereto for any purpose
described in such notice; (2) the Collateral Agent may, at any time and from time to time after and
during the continuance of an Event of Default, upon 10 days’ prior notice to such Grantor, license,
whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any of
the Intellectual Property, throughout the universe for such term or terms, on such conditions, and
in such manner, as the Collateral Agent shall in its sole discretion determine; and (3) the
Collateral Agent may, at any time, pursuant to the authority granted in Section 6 hereof
(such authority being effective upon the occurrence and during the continuance of an Event of
Default), execute and deliver on behalf of such Grantor, one or more instruments of assignment of
the Intellectual Property (or any application or registration thereof), in form suitable for
filing, recording or registration in any country.
(b) Any cash held by the Collateral Agent as Collateral and all Cash Proceeds received by the
Collateral Agent in respect of any sale of or collection from, or other realization upon, all or
any part of the Collateral shall be applied (after payment of any amounts payable to the Collateral
Agent pursuant to Section 8 hereof) by the Collateral Agent against, all or any part of the
Obligations in such order as the Collateral Agent shall elect, consistent with the provisions of
the Securities Purchase Agreements. Any surplus of such cash or Cash Proceeds held by the
Collateral Agent 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.
(c) In the event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Collateral Agent and the Buyers are legally entitled,
each Grantor shall be liable for the deficiency, together with interest thereon at the highest rate
specified in the Notes 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 Collateral Agent to collect such
deficiency.
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(d) Each Grantor hereby acknowledges that if the Collateral Agent complies with any applicable
state, provincial, or federal law requirements in connection with a disposition of the Collateral,
such compliance will not adversely affect the commercial reasonableness of any sale or other
disposition of the Collateral.
(e) The Collateral Agent shall not be required to marshal any present or future collateral
security (including, but not limited to, this Agreement and the Collateral) 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 Collateral Agent’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
any Grantor lawfully may, each Grantor 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 Collateral
Agent’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, each
Grantor hereby irrevocably waives the benefits of all such laws.
SECTION 8. Indemnity and Expenses.
(a) Each Grantor agrees, jointly and severally, to defend, protect, indemnify and hold the
Collateral Agent and each of the Buyers, jointly and severally, harmless from and against any and
all claims, damages, losses, liabilities, obligations, penalties, fees, costs and expenses
(including, without limitation, reasonable legal fees, costs, expenses, and disbursements of such
Person’s counsel) to the extent that they arise out of or otherwise result from this Agreement
(including, without limitation, enforcement of this Agreement), except to the extent resulting from
such Person’s gross negligence or willful misconduct, as determined by a final judgment of a court
of competent jurisdiction.
(b) Each Grantor agrees, jointly and severally, to pay to the Collateral Agent upon demand the
amount of any and all costs and expenses, including the reasonable fees, costs, expenses and
disbursements of counsel for the Collateral Agent and of any experts and agents (including, without
limitation, any collateral trustee which may act as agent of the Collateral Agent), which the
Collateral Agent may incur in connection with (i) the preparation, negotiation, execution,
delivery, recordation, administration, amendment, waiver or other modification or termination of
this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any Collateral, (iii) the exercise or enforcement of any of the
rights of the Collateral Agent hereunder, or (iv) the failure by any Grantor to perform or observe
any of the provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications provided for hereunder
shall be in writing and shall be mailed (by certified mail, postage prepaid and return receipt
requested), telecopied, e-mailed or delivered, if to any Grantor, at its address specified on the
signature pages below; or as to any such Person, at such other address as shall be designated by
such Person in a written notice to all other parties hereto complying as to delivery with the terms
of this Section 9. All such notices and other communications shall be effective (a) if
sent by certified mail, return receipt requested, when received or three days after deposited in
the
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mails, whichever occurs first, (b) if telecopied or e-mailed, when transmitted (during normal
business hours) and confirmation is received, and otherwise, the day after the notice or
communication was transmitted and confirmation is received, or (c) if delivered in person, upon
delivery.
SECTION 10. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be effective unless it is in writing
and signed by each Grantor and the Collateral Agent, and no waiver of any provision of this
Agreement, and no consent to any departure by each Grantor therefrom, shall be effective unless it
is in writing and signed by each Grantor and the Collateral Agent, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose for which given.
(b) No failure on the part of the Collateral Agent to exercise, and no delay in exercising,
any right hereunder or under any of the other Transaction Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of the Collateral
Agent or any Buyer provided herein and in the other Transaction Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The rights of the
Collateral Agent or any Buyer under any of the other Transaction Documents against any party
thereto are not conditional or contingent on any attempt by such Person to exercise any of its
rights under any of the other Transaction Documents against such party or against any other Person,
including but not limited to, any Grantor.
(c) Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until the indefeasible payment in full in cash of the Obligations,
and (ii) be binding on each Grantor and all other Persons who become bound as debtor to this
Agreement in accordance with Section 9-203(d) of the Code and shall inure, together with all rights
and remedies of the Collateral Agent and the Buyers hereunder, to the benefit of the Collateral
Agent and the Buyers and their respective permitted successors, transferees and assigns. Without
limiting the generality of clause (ii) of the immediately preceding sentence, without notice to any
Grantor, the Collateral Agent and the Buyers may assign or otherwise transfer their rights and
obligations under this Agreement and any of the other Transaction Documents, to any other Person
and such other Person shall thereupon become vested with all of the benefits in respect thereof
granted to the Collateral Agent and the Buyers herein or otherwise. Upon any such assignment or
transfer, all references in this Agreement to the Collateral Agent or any such Buyer shall mean the
assignee of the Collateral Agent or such Buyer. None of the rights or obligations of any Grantor
hereunder may be assigned or otherwise transferred without the prior written consent of the
Collateral Agent, and any such assignment or transfer without the consent of the Collateral Agent
shall be null and void.
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(e) Upon the indefeasible payment in full in cash of the Obligations or the conversion into
shares of Common Stock of the Company all of the Obligations, (i) this Agreement and the security
interests created hereby shall terminate and all rights to the Collateral shall revert to the
respective Grantor that granted such security interests hereunder, and (ii) the Collateral Agent
will, upon any Grantor’s request and at such Grantor’s expense, (A) return to such Grantor such of
the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the
terms hereof, and (B) execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination, all without any representation, warranty or
recourse whatsoever.
(f) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE
EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR
NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(g) ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO MAY BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX IN THE COUNTY OF NEW YORK OR
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
(h) EACH GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE COLLATERAL
AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, ORAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES
HERETO.
(i) Each Grantor irrevocably consents to the service of process of any of the aforesaid courts
in any such action, suit or proceeding by the mailing of copies thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to any
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Grantor at its address provided herein, such service to become effective 10 days after such
mailing.
(j) Nothing contained herein shall affect the right of the Collateral Agent to serve process
in any other manner permitted by law or commence legal proceedings or otherwise proceed against any
Grantor or any property of any Grantor in any other jurisdiction.
(k) Each Grantor irrevocably and unconditionally waives any right it may have to claim or
recover in any legal action, suit or proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.
(l) Section headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
(m) This Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which shall be deemed to be an original, but all of which
taken together constitute one in the same Agreement.
(n) The parties hereto hereby acknowledge and agree that this Agreement shall amend,
restate, modify, extend, renew and continue the terms and provisions contained in the Existing
Security Agreement and shall not extinguish or release any Grantor from any liability under the
Existing Security Agreement or otherwise constitute a novation of its obligations thereunder.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and delivered by its
officer thereunto duly authorized, as of the date first above written.
| COMPANY: | ||||||
| STINGER SYSTEMS, INC. | ||||||
| By: | /s/ Xxxxxx Xxxxxx
|
|||||
| Title: President | ||||||
| Address: | ||||||
| Facsimile: | ||||||
| ACCEPTED BY: | ||||
| CASTLERIGG MASTER INVESTMENTS LTD., | ||||
| as Collateral Agent | ||||
| By: Xxxxxxx Asset Management Corp. | ||||
| By: | /s/ Xxxxxxx X. Xxxxx | |||
| Name: Xxxxxxx X. Xxxxx | ||||
| Title: Senior Managing Director | ||||
EXHIBIT A
Assignment For Security
[Trademarks] [Patents] [Copyrights]
[Trademarks] [Patents] [Copyrights]
WHEREAS, (th
e “Assignor”) [has adopted, used and is using, and holds all
right, title and interest in and to, the trademarks and service marks listed on the annexed
Schedule 1A, which trademarks and service marks are registered or applied for in the United
States Patent and Trademark Office (the “Trademarks”)] [holds all right, title and interest in the
letter patents, design patents and utility patents listed on the annexed Schedule 1A, which
patents are issued or applied for in the United States Patent and Trademark Office (the “Patents”)]
[holds all right, title and interest in the copyrights listed on the annexed Schedule 1A,
which copyrights are registered in the United States Copyright Office (the “Copyrights”)];
WHEREAS, the Assignor has entered into an Amended and Restated Security Agreement, dated as of
February ___, 2008 (as amended, restated or otherwise modified from time to time the “Security
Agreement”), in favor of Castlerigg Master Investments Ltd., as collateral agent for certain
purchasers (the “Assignee”);
WHEREAS, pursuant to the Security Agreement, the Assignor has assigned to the Assignee and
granted to the Assignee for the benefit of the Buyers (as defined in the Security Agreement) a
continuing security interest in all right, title and interest of the Assignor in, to and under the
[Trademarks, together with, among other things, the good-will of the business symbolized by the
Trademarks] [Patents] [Copyrights] and the applications and registrations thereof, and all proceeds
thereof, including, without limitation, any and all causes of action which may exist by reason of
infringement thereof and any and all damages arising from past, present and future violations
thereof (the “Collateral”), to secure the payment, performance and observance of the “Obligations”
(as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Assignor does hereby pledge, convey, sell, assign, transfer and set over
unto the Assignee and grants to the Assignee for the benefit of the Buyers a continuing security
interest in the Collateral to secure the prompt payment, performance and for the benefit of the
Buyers observance of the Obligations.
The Assignor does hereby further acknowledge and affirm that the rights and remedies of the
Assignee with respect to the Collateral are more fully set forth in the Security Agreement, the
terms and provisions of which are hereby incorporated herein by reference as if fully set forth
herein.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed by its officer
thereunto duly authorized as of , 20___
| [GRANTORS] |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
STATE OF |
||||
| ss.: | ||||
COUNTY OF |
||||
On this ___day of , 20___, before me personally came
, to me
known to be the person who executed the foregoing instrument, and who, being duly sworn by me, did
depose and say that s/he is the of
, a
, and that s/he executed the foregoing instrument in the firm name of
, and that s/he had authority to sign the same, and s/he acknowledged
to me that he executed the same as the act and deed of said firm for the uses and purposes therein
mentioned.
