SECURITY AGREEMENT
Exhibit
10.4
This
SECURITY AGREEMENT (this
“Agreement”),
dated as of September 29, 2008, is made by and among the Grantors listed on the
signature pages hereof (collectively, jointly and severally, the “Grantors” and each,
individually, a “Grantor”), and MKM
Opportunity Master Fund, LLC (“MKM”), in its
capacity as Collateral Agent (as set forth in Section 20 hereof, together with
its successors and assigns in such capacity (the “Secured Party”) for
itself and each of the Buyers (as hereinafter defined).
W I T N E S S E T
H:
WHEREAS, pursuant to that
certain Securities Purchase Agreement dated as of July 3, 2008 (as amended,
restated, supplemented, or otherwise modified from time to time, including all
schedules thereto, the “Prior Agreement”) by
and among VALLEY FORGE COMPOSITE TECHNOLOGIES, INC., a Florida corporation
(“Parent”), and
MKM, Parent has agreed to sell, and MKM has agreed to purchase, certain Prior
Notes and Prior Warrants, and
WHEREAS, pursuant to that
certain Securities Purchase Agreement dated as of September 29, 2008 (as
amended, restated, supplemented, or otherwise modified from time to time,
including all schedules thereto, the “Purchase Agreement”)
by and among VALLEY FORGE COMPOSITE TECHNOLOGIES, INC., a Florida corporation
(“Parent”), and
the Buyers, Parent has agreed to sell, and the Buyers have agreed to purchase,
certain Notes and Warrants, and
WHEREAS, in order to induce
the Buyers to enter into the Purchase Agreement and to purchase the Notes and
Warrants as provided for in the Purchase Agreement, Grantors have agreed to
grant the Secured Party, for the benefit of itself and the Buyers, a continuing
security interest in and to the Collateral in order to secure the prompt and
complete payment, observance and performance of the Secured Obligations,
and
NOW, THEREFORE, for and in
consideration of the recitals made above and other good and valuable
consideration, the receipt, sufficiency and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Defined Terms. All
capitalized terms used herein (including in the preamble and recitals hereof)
without definition shall have the meanings ascribed thereto in the Purchase
Agreement. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein or in the Purchase Agreement; provided, however, that if the
Code is used to define any term used herein and if such term is defined
differently in different Articles of the Code, the definition of such term
contained in Article 9 of the Code shall govern. In addition to those terms
defined elsewhere in this Agreement, as used in this Agreement, the following
terms shall have the following meanings:
(a) “Account” means an
account (as that term is defined in the Code).
(b) “Account Debtor” means
an account debtor (as that term is defined in the Code).
(c) “Bankruptcy Code”
means title 11 of the United States Code, as in effect from time to
time.
(d) “Books” means books
and records (including each Grantor’s Records indicating, summarizing, or
evidencing such Grantor’s assets (including the Collateral) or liabilities, each
Grantor’s Records relating to such Grantor’s business operations or financial
condition, and each Grantor’s goods or General Intangibles related to such
information).
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(e) “Buyers” mean the
investors listed on Schedule of Buyers attached to the Purchase
Agreement.
(f) “Chattel Paper” means
chattel paper (as that term is defined in the Code) and includes tangible
chattel paper and electronic chattel paper.
(g) “Code” means the New
York Uniform Commercial Code, as in effect from time to time; provided, however, that in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection, priority, or remedies with respect to the Secured
Party’s Lien on any Collateral is governed by the Uniform Commercial Code as
enacted and in effect in a jurisdiction other than the State of New York, the
term “Code” shall mean the Uniform Commercial Code as enacted and in effect in
such other jurisdiction solely for purposes of the provisions thereof relating
to such attachment, perfection, priority, or remedies.
(h) “Collateral” has the
meaning specified therefor in Section
2.
(i) “Commencement Notice”
means a written notice, given by the Secured Party to the other Buyers in
accordance with the notice provisions set forth in the Purchase Agreement,
pursuant to which the Secured Party notifies the other Buyers of the existence
of one or more Events of Default and of the Secured Party’s intent to commence
the exercise of one or more of the remedies provided for under this Agreement
with respect to all or any portion of the Collateral as a consequence thereof,
which notice shall incorporate a reasonably detailed description of each Event
of Default then existing and of the remedial action proposed to be
taken.
(j) “Commercial Tort
Claims” means commercial tort claims (as that term is defined in the
Code), and includes those commercial tort claims listed on Schedule 1 attached
hereto..
(k) “Copyrights” means
copyrights and copyright registrations, and also includes (i) the copyright
registrations and recordings thereof and all applications in connection
therewith listed on Schedule 2 attached
hereto and made a part hereof, (ii) all reissues, continuations, extensions or
renewals thereof, (iii) all income, royalties, damages and payments now and
hereafter due or payable under and with respect thereto, including payments
under all licenses entered into in connection therewith and damages and payments
for past or future infringements or dilutions thereof, (iv) the right to xxx for
past, present and future infringements and dilutions thereof, (v) the goodwill
of each Grantor’s business symbolized by the foregoing or connected therewith,
and (vi) all of each Grantor’s rights corresponding thereto throughout the
world.
(l) “Copyright Security
Agreement” means each Copyright Security Agreement among Grantors, or any
of them, and the Secured Party, in substantially the form of Exhibit A attached
hereto, pursuant to which Grantors have granted to the Secured Party, for the
benefit of itself and the Buyers, a security interest in all their respective
Copyrights.
(m) “Deposit Account”
means a deposit account (as that term is defined in the Code).
(n) “Equipment” means
equipment (as that term is defined in the Code).
(o) “Event of Default”
means any “Event of Default” under, as and as defined in, the Notes, the Prior
Notes and, without duplication, any of the following events:
(i) If any
Grantor fails to pay when due and payable, or when declared due and payable, all
or any portion of the Secured Obligations (whether consisting of principal,
interest, fees, or charges, reimbursement of expenses, or other
amounts);
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(ii) If any
Grantor fails to perform or observe any other covenant or agreement contained in
this Agreement or in any of the other Purchase Documents;
(iii) If an
Insolvency Proceeding is commenced by any Grantor;
(iv) If an
Insolvency Proceeding is commenced against any Grantor, and any of the following
events occur: (A) the applicable Grantor consents to the institution
of such Insolvency Proceeding against it, (B) the petition commencing the
Insolvency Proceeding is not timely controverted, (C) the petition commencing
the Insolvency Proceeding is not dismissed within 60 calendar days of the date
of the filing thereof, (D) an interim trustee is appointed to take possession of
all or any substantial portion of the properties or assets of, or to operate all
or any substantial portion of the business of, such Grantor, or (E) an order for
relief shall have been issued or entered therein;
(v) If any
Grantor is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of its business
affairs;
(vi) If one or
more judgments, orders, or awards involving an aggregate amount of $500,000 or
more (except to the extent fully covered by insurance pursuant to which the
insurer has accepted liability therefor in writing) shall be entered or filed
against any Grantor or with respect to any of its assets, and the same is not
released, discharged, bonded against, or stayed pending appeal before the
earlier of 30 days after the date it first arises or 5 days prior to the date on
which such asset is subject to being forfeited by the applicable
Grantor;
(vii) If there
is a default in one or more agreements to which any Grantor is a party with one
or more third Persons relative to Indebtedness of such Grantor involving an
aggregate amount of $500,000 or more, and such default (A) occurs at the final
maturity of the obligations thereunder, or (B) results in a right by such third
Person(s), irrespective of whether exercised, to accelerate the maturity of such
Grantor’s obligations thereunder;
(viii) If any
warranty, representation, statement, or Record made herein or in any other
Purchase Document or delivered to the Secured Party in connection with this
Agreement or any Buyer in connection with any other Purchase Document proves to
be untrue in any material respect (except that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof) as of the date of
issuance or making or deemed making thereof;
(ix) If this
Agreement or any other Security Document that purports to create a Lien shall,
for any reason, fail or cease to create a valid and perfected and, except to the
extent permitted by the terms hereof or thereof, first priority Lien on or
security interest in the Collateral covered hereby or thereby, except as a
result of a disposition of the applicable Collateral in a transaction permitted
under this Agreement; or
(x) Any
provision of any Purchase Document shall at any time for any reason be declared
to be null and void, or the validity or enforceability thereof shall be
contested by any Grantor, or a proceeding shall be commenced by any Grantor, or
by any Governmental Authority having jurisdiction over any Grantor, seeking to
establish the invalidity or unenforceability thereof, or any Grantor shall deny
that it has any liability or obligation purported to be created under any
Purchase Document.
(p) “General Intangibles”
means general intangibles (as that term is defined in the Code) and, in any
event, includes payment intangibles, contract rights, rights to payment, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill (including the goodwill associated with any Trademark, Patent, or
Copyright), Patents, Trademarks, Copyrights, URLs and domain names, industrial
designs, other industrial or Intellectual Property or rights therein or
applications therefor, whether under license or otherwise, programs, programming
materials, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, including Intellectual Property
Licenses, infringement claims, computer programs, information contained on
computer disks or tapes, software, literature, reports, catalogs, pension plan
refunds, pension plan refund claims, insurance premium rebates, tax refunds, and
tax refund claims, interests in a partnership or limited liability company which
do not constitute a security under Article 8 of the Code, and any other personal
property other than Commercial Tort Claims, money, Accounts, Chattel Paper,
Deposit Accounts, goods, Investment Related Property, Negotiable Collateral, and
oil, gas, or other minerals before extraction.
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(q) “Governmental
Authority” means any domestic or foreign federal, state, local, or other
governmental or administrative body, instrumentality, board, department, or
agency or any court, tribunal, administrative hearing body, arbitration panel,
commission, or other similar dispute-resolving panel or body.
(r) “Grantor” and “Grantors” have the
meanings specified therefor in the recitals to this Agreement.
(s) “Guaranties” means
each Guaranty dated of even date herewith executed by Guarantors in favor of any
or all of the Buyers, together with any other guaranty or similar agreement now
or hereafter executed by a Guarantor in favor of any or all of the Buyers in
connection with the Notes or any of the other Purchase Documents.
(t) “Guarantor” means each
Grantor, other than Parent, and each other Person that now or hereafter executes
a Guaranty.
(u) “Insolvency
Proceeding” means any proceeding commenced by or against any Person under
any provision of the Bankruptcy Code or under any other state or federal
bankruptcy or insolvency law or any equivalent laws in any other jurisdiction,
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
(v) “Intellectual
Property” means Patents, Copyrights, Trademarks, the goodwill associated
with such Trademarks, trade secrets and customer lists, and Intellectual
Property Licenses.
(w) “Intellectual Property
Licenses” means rights under or interests in any patent, trademark,
copyright or other intellectual property, including software license agreements
with any other party, whether the applicable Grantor is a licensee or licensor
under any such license agreement, including the license agreements listed on
Schedule 3
attached hereto and made a part hereof.
(x) “Inventory” means
inventory (as that term is defined in the Code).
(y) “Investment Related
Property” means (i) investment property (as that term is defined in the
Code), and (ii) all of the following (regardless of whether classified as
investment property under the Code): all Pledged Interests, Pledged Operating
Agreements, and Pledged Partnership Agreements.
(z) “Lien” means any
mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit
arrangement, encumbrance, easement, lien (statutory or other), security
interest, or other security arrangement and any other preference, priority, or
preferential arrangement of any kind or nature whatsoever, including any
conditional sale contract or other title retention agreement, the interest of a
lessor under a capital lease and any synthetic or other financing lease having
substantially the same economic effect as any of the foregoing.
(aa) “MKM” has the meaning
specified therefor in the recitals to this Agreement.
(bb) “Negotiable
Collateral” means letters of credit, letter-of-credit rights,
instruments, promissory notes, drafts, and documents.
(cc) “Notes” has the
meaning specified therefor in the Purchase Agreement.
(dd) “Parent” has the
meaning specified therefor in the recitals to this Agreement.
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(ee) “Patents” means
patents and patent applications, and also includes (i) the patents and patent
applications listed on Schedule 4 attached
hereto and made a part hereof, (ii) all renewals thereof, (iii) all income,
royalties, damages and payments now and hereafter due or payable under and with
respect thereto, including payments under all licenses entered into in
connection therewith and damages and payments for past or future infringements
or dilutions thereof, (iv) the right to xxx for past, present and future
infringements and dilutions thereof, and (v) all of each Grantor’s rights
corresponding thereto throughout the world.
(ff) “Patent Security
Agreement” means each Patent Security Agreement among Grantors and the
Secured Party, for the benefit of itself and the Buyers, in substantially the
form of Exhibit
B attached hereto, pursuant to which Grantors have granted to the Secured
Party, for the benefit of itself and the Buyers, a security interest in all
their respective Patents.
(gg) “Permitted Liens”
means (i) Liens held by the Secured Party, for the benefit of itself and the
Buyers, to secure the Secured Obligations, (ii) Liens for unpaid taxes,
assessments, or other governmental charges or levies that either (A) are not yet
delinquent, or (B) do not have priority over the Secured Party’s Liens and the
underlying taxes, assessments, or charges or levies are the subject of Permitted
Protests, (iii) Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in
the ordinary course of business and not in connection with the borrowing of
money, and which Liens either (A) are for sums not yet delinquent, or (B) are
the subject of Permitted Protests, (iv) Liens on amounts deposited in connection
with obtaining worker’s compensation or other unemployment insurance, (v) Liens
on amounts deposited in connection with the making or entering into of bids,
tenders, or leases in the ordinary course of business and not in connection with
the borrowing of money, (vi) Liens on amounts deposited as security for surety
or appeal bonds in connection with obtaining such bonds in the ordinary course
of business, and (vii) with respect to any Real Property, easements, rights of
way, and zoning restrictions that do not materially interfere with or impair the
use or operation thereof.
(hh) “Permitted Protest”
means the right of any Grantor to protest any Lien (other than any Lien that
secures the Secured Obligations), taxes (other than payroll taxes or taxes that
are the subject of a United States federal tax lien), or rental payment,
provided that (a) a reserve with respect to such obligation is established on
such Grantor’s books and records in such amount as is required under GAAP, (b)
any such protest is instituted promptly and prosecuted diligently by such
Grantor in good faith, and (c) while any such protest is pending, there will be
no impairment of the enforceability, validity, or priority of the Secured
Party’s Liens.
(ii) “Person” means any
individual, limited liability company, corporation, partnership, association,
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.
(jj) “Pledged Companies”
means, each Person listed on Schedule 5 hereto as
a “Pledged Company”, together with each other Person all or a portion of whose
Stock is acquired or otherwise owned by a Grantor after the date
hereof.
(kk) “Pledged Interests”
means all of each Grantor’s right, title and interest in and to all of the Stock
now or hereafter owned by such Grantor, regardless of class or designation,
including all substitutions therefor and replacements thereof, all proceeds
thereof and all rights relating thereto, also including any certificates
representing the Stock, the right to receive any certificates representing any
of the Stock, all warrants, options, share appreciation rights and other rights,
contractual or otherwise, in respect thereof, and the right to receive
dividends, distributions of income, profits, surplus, or other compensation by
way of income or liquidating distributions, in cash or in kind, and cash,
instruments, and other property from time to time received, receivable, or
otherwise distributed in respect of or in addition to, in substitution of, on
account of, or in exchange for any or all of the foregoing.
(ll) “Pledged Operating
Agreements” means all of each Grantor’s rights, powers, and remedies
under the limited liability company operating agreements of each of the Pledged
Companies that are limited liability companies.
(mm) “Pledged Partnership
Agreements” means all of each Grantor’s rights, powers, and remedies
under the partnership agreements of each of the Pledged Companies that are
partnerships.
(nn) “Prior Agreement” has
the meaning specified therefor in the recitals to this Agreement.
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(oo) “Prior Note” has the
meaning specified therefor in the Purchase Agreement.
(pp) “Prior Warrants” has
the meaning specified therefor in the Purchase Agreement.
(qq) “Proceeds” has the
meaning specified therefor in Section
2.
(rr) “Purchase Agreement”
has the meaning specified therefor in the recitals to this
Agreement.
(ss) “Purchase Documents”
means, collectively, the Purchase Agreement, the Prior Agreement, the Notes, the
Prior Notes, the Warrants, the Prior Warrants, this Agreement, the Security
Documents, and each other agreement, instrument and certificate executed and
delivered by a Grantor in connection with the Purchase Agreement and Prior
Agreement.
(tt) “Real Property” means
any estates or interests in real property now owned or hereafter acquired by any
Grantor and the improvements thereto.
(uu) “Records” means
information that is inscribed on a tangible medium or which is stored in an
electronic or other medium and is retrievable in perceivable form.
(vv) “Secured Obligations”
mean all of the present and future payment and performance obligations of
Grantors arising under this Agreement, the Notes, the Prior Agreement, the Prior
Notes, the Guaranties, and the other Purchase Documents, including, without
duplication, reasonable attorneys fees and expenses and any interest, fees, or
expenses that accrue after the filing of an Insolvency Proceeding, regardless of
whether allowed or allowable in whole or in part as a claim in any Insolvency
Proceeding.
(ww) “Securities Account”
means a securities account (as that term is defined in the Code).
(xx) “Security Documents”
means, collectively, this Agreement, each Copyright Security Agreement, each
Patent Security Agreement, each Trademark Security Agreement, and each other
security agreement, pledge agreement, assignment, mortgage, security deed, deed
of trust, and other agreement or document executed and delivered by a Grantor as
security for any of the Secured Obligations.
(yy) “Security Interest”
and “Security
Interests” have the meanings specified therefor in Section
2.
(zz) “Stock” means all
shares, options, warrants, interests (including membership and partnership
interests), participations, or other equivalents (regardless of how designated)
of or in a Person, whether voting or nonvoting, including common stock,
preferred stock, or any other “equity security” (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the United States
Securities and Exchange Commission and any successor thereto under the
Securities Exchange Act of 1934, as in effect from time to time).
(aaa) “Supporting
Obligations” means supporting obligations (as such term is defined in the
Code).
(bbb) “Trademarks” means
trademarks, trade names, trademark applications, service marks, service xxxx
applications, and also includes (i) the trade names, trademarks, trademark
applications, service marks, and service xxxx applications listed on Schedule 6 attached
hereto and made a part hereof, and (ii) all renewals thereof, (iii) all income,
royalties, damages and payments now and hereafter due or payable under and with
respect thereto, including payments under all licenses entered into in
connection therewith and damages and payments for past or future infringements
or dilutions thereof, (iv) the right to xxx for past, present and future
infringements and dilutions thereof, (v) the goodwill of each Grantor’s business
symbolized by the foregoing or connected therewith, and (vi) all of each
Grantor’s rights corresponding thereto throughout the world.
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(ccc) “Trademark Security
Agreement” means each Trademark Security Agreement among Grantors and the
Secured Party in substantially the form of Exhibit C attached
hereto, pursuant to which Grantors have granted to the Secured Party, for the
benefit of itself and the Buyers, a security interest in all their respective
Trademarks.
(ddd) “URL” means “uniform
resource locator,” an internet web address.
(eee) “Warrants” has the
meaning specified therefor in the Purchase Agreement.
2. Grant of
Security. Each Grantor hereby unconditionally grants, assigns,
and pledges to the Secured Party, for the benefit of itself and the Buyers, a
separate, continuing security interest (each, a “Security Interest”
and, collectively, the “Security Interests”)
in all assets of such Grantor whether now owned or hereafter acquired or arising
and wherever located, including, without limitation, such Grantor’s right,
title, and interest in and to the following, whether now owned or hereafter
acquired or arising and wherever located (collectively, the “Collateral”):
(a) all of
such Grantor’s Accounts;
(b) all of
such Grantor’s Books;
(c) all of
such Grantor’s Chattel Paper;
(d) all of
such Grantor’s Deposit Accounts;
(e) all of
such Grantor’s Equipment and fixtures;
(f) all of
such Grantor’s General Intangibles;
(g) all of
such Grantor’s Inventory;
(h) all of
such Grantor’s Investment Related Property;
(i) all of
such Grantor’s Negotiable Collateral;
(j) all of
such Grantor’s rights in respect of Supporting Obligations;
(k) all of
such Grantor’s Commercial Tort Claims;
(l) all of
such Grantor’s money, cash, cash equivalents, or other assets of each such
Grantor that now or hereafter come into the possession, custody, or control of
the Secured Party;
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(m) all of
the proceeds and products, whether tangible or intangible, of any of the
foregoing, including proceeds of insurance or Commercial Tort Claims covering or
relating to any or all of the foregoing, and any and all Accounts, Books,
Chattel Paper, Deposit Accounts, Equipment, General Intangibles, Inventory,
Investment Related Property, Negotiable Collateral, Supporting Obligations,
money, or other tangible or intangible property resulting from the sale, lease,
license, exchange, collection, or other disposition of any of the foregoing, the
proceeds of any award in condemnation with respect to any of the foregoing, any
rebates or refunds, whether for taxes or otherwise, and all proceeds of any such
proceeds, or any portion thereof or interest therein, and the proceeds thereof,
and all proceeds of any loss of, damage to, or destruction of the above, whether
insured or not insured, and, to the extent not otherwise included, any
indemnity, warranty, or guaranty payable by reason of loss or damage to, or
otherwise with respect to any of the foregoing (the “Proceeds”). Without
limiting the generality of the foregoing, the term “Proceeds” includes whatever
is receivable or received when Investment Related Property or proceeds are sold,
exchanged, collected, or otherwise disposed of, whether such disposition is
voluntary or involuntary, and includes proceeds of any indemnity or guaranty
payable to any Grantor or the Secured Party, for the benefit of itself and the
Buyers, from time to time with respect to any of the Investment Related
Property.
3. Security for
Obligations. This Agreement and the Security Interests created
hereby secure the payment and performance of the Secured Obligations, whether
now existing or arising hereafter. Without limiting the generality of
the foregoing, this Agreement secures the payment of all amounts which
constitute part of the Secured Obligations and would be owed by Grantors, or any
of them, to the Secured Party, for the benefit of itself and the Buyers, but for
the fact that they are unenforceable or not allowable due to the existence of an
Insolvency Proceeding involving any Grantor.
4. Grantors Remain
Liable. Anything herein to the contrary notwithstanding, (a)
each of the Grantors shall remain liable under the contracts and agreements
included in the Collateral, including the Pledged Operating Agreements and the
Pledged Partnership Agreements, to perform all of the duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by the Secured Party, of any of the rights hereunder shall not
release any Grantor from any of its duties or obligations under such contracts
and agreements included in the Collateral, and (c) the Secured Party shall not
have any obligation or liability under such contracts and agreements included in
the Collateral by reason of this Agreement, nor shall the Secured Party be
obligated to perform any of the obligations or duties of any Grantors thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder. Until an Event of Default shall occur and be continuing,
except as otherwise provided in this Agreement or any other Purchase Document,
Grantors shall have the right to possession and enjoyment of the Collateral for
the purpose of conducting the ordinary course of their respective businesses,
subject to and upon the terms hereof and the other Purchase
Documents. Without limiting the generality of the foregoing, it is
the intention of the parties hereto that record and beneficial ownership of the
Pledged Interests, including all voting, consensual, and dividend rights, shall
remain in the applicable Grantor until the occurrence of an Event of Default and
until the Secured Party shall notify the applicable Grantor of the Secured
Party’s exercise of voting, consensual, or dividend rights with respect to the
Pledged Interests pursuant to Section 15
hereof.
5. Representations and
Warranties. Each Grantor hereby represents and warrants as
follows:
(a) The exact
legal name of each of the Grantors is set forth on the signature pages of this
Agreement.
(b) Schedule 7 attached
hereto sets forth all Real Property owned or leased by Grantors as of the date
hereof.
(c) As of the
date hereof, no Grantor has any interest in, or title to, any Copyrights,
Intellectual Property Licenses, Patents, or Trademarks except as set forth on
Schedules 2, 3,
4 and 6,
respectively, attached hereto. This Agreement is effective to create
a valid and continuing Lien on such Copyrights, Intellectual Property Licenses,
Patents and Trademarks and, upon filing of the Copyright Security Agreement with
the United States Copyright Office and filing of the Patent Security Agreement
and the Trademark Security Agreement with the United State Patent and Trademark
Office, and the filing of appropriate financing statements in the jurisdictions
listed on Schedule
8 hereto, all action necessary or desirable to protect and perfect the
Security Interests in and to each Grantor’s Patents, Trademarks, or Copyrights
has been taken and such perfected Security Interests are enforceable as such as
against any and all creditors of and purchasers from any Grantor. No
Grantor has any interest in any Copyright that is necessary in connection with
the operation of such Grantor’s business, except for those Copyrights identified
on Schedule 2
attached hereto which have been registered with the United States Copyright
Office.
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(d) This
Agreement creates a valid security interest in the Collateral of each of
Grantors, to the extent a security interest therein can be created under the
Code, securing the payment of the Secured Obligations. Except to the
extent a security interest in the Collateral cannot be perfected by the filing
of a financing statement under the Code, all filings and other actions necessary
or desirable to perfect and protect such security interest have been duly taken
or will have been taken upon the filing of financing statements listing each
applicable Grantor, as a debtor, and the Secured Party, for the benefit of
itself and the Buyers, as secured party, in the jurisdictions listed next to
such Grantor’s name on Schedule 8 attached
hereto. Upon the making of such filings, the Secured Party, for the
benefit of itself and the Buyers, shall each have a first priority perfected
security interest in the Collateral of each Grantor to the extent such security
interest can be perfected by the filing of a financing statement. All
action by any Grantor necessary to protect and perfect such security interest on
each item of Collateral has been duly taken.
(e) (i)
Except for the Security Interests created hereby, such Grantor is and will at
all times be the sole holder of record and the legal and beneficial owner, free
and clear of all Liens other than Permitted Liens, of the Pledged Interests
indicated on Schedule
5 as being owned by such Grantor and, when acquired by such Grantor, any
Pledged Interests acquired after the date hereof; (ii) all of the Pledged
Interests are duly authorized, validly issued, fully paid and nonassessable and
the Pledged Interests constitute or will constitute the percentage of the issued
and outstanding Stock of the Pledged Companies of such Grantor identified on
Schedule 5
hereto; (iii) such Grantor has the right and requisite authority to pledge the
Investment Related Property pledged by such Grantor to the Secured Party as
provided herein; (iv) all actions necessary or desirable to perfect, establish
the first priority of, or otherwise protect, Secured Party’s Liens in the
Investment Related Collateral, and the proceeds thereof, have been duly taken,
(A) upon the execution and delivery of this Agreement; (B) upon the taking of
possession by the Secured Party of any certificates constituting the Pledged
Interests, to the extent such Pledged Interests are represented by certificates,
together with undated powers endorsed in blank by the applicable Grantor; and
(C) upon the filing of financing statements in the applicable jurisdiction set
forth on Schedule
8 attached hereto for such Grantor with respect to the Pledged Interests
of such Grantor that are not represented by certificates; and (v) each Grantor,
within 10 days from the date of this Agreement, shall have delivered to and
deposited with the Secured Party (or, with respect to any Pledged Interests
created or obtained after the date hereof, will deliver and deposit in
accordance with Sections 6(a) and
8 hereof) all
certificates representing the Pledged Interests owned by such Grantor to the
extent such Pledged Interests are represented by certificates, and undated
powers endorsed in blank with respect to such certificates. None of the Pledged
Interests owned or held by such Grantor has been issued or transferred in
violation of any securities registration, securities disclosure, or similar laws
of any jurisdiction to which such issuance or transfer may be
subject.
(f) No
consent, approval, authorization, or other order or other action by, and no
notice to or filing with, any Governmental Authority or any other Person is
required (i) for the grant of a Security Interest by such Grantor in and to the
Collateral pursuant to this Agreement or for the execution, delivery, or
performance of this Agreement by such Grantor, or (ii) for the exercise by the
Secured Party of the voting or other rights provided in this Agreement with
respect to Investment Related Property or the remedies in respect of the
Collateral pursuant to this Agreement, except as may be required in connection
with such disposition of Investment Related Property by laws affecting the
offering and sale of securities generally.
6. Covenants. Each
Grantor, jointly and severally, covenants and agrees with the Secured Party that
from and after the date of this Agreement and until the date of termination of
this Agreement in accordance with Section 24 hereof
(but only to the extent the particular assets described in this Section 6
constitute Collateral hereunder):
(a) Possession of
Collateral. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Investment
Related Property, or Chattel Paper, and if and to the extent that perfection or
priority of the Secured Party’s Security Interests is dependent on or enhanced
by possession, the applicable Grantor, immediately upon the request of the
Secured Party, shall execute such other documents and instruments as shall be
requested by the Secured Party or, if applicable, endorse and deliver physical
possession of such Negotiable Collateral, Investment Related Property, or
Chattel Paper to the Secured Party, together with such undated powers endorsed
in blank as shall be requested by the Secured Party.
(b) Chattel
Paper.
(i) Each
Grantor shall take all steps reasonably necessary to grant to the Secured Party,
for the benefit of itself and the Buyers, control of all Chattel Paper in
accordance with the Code and all “transferable records” as that term is defined
in Section 16 of the Uniform Electronic Purchase Act and Section 201 of the
federal Electronic Signatures in Global and National Commerce Act as in effect
in any relevant jurisdiction; and
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(ii) If any
Grantor retains possession of any Chattel Paper or instruments (which retention
of possession shall be subject to the extent permitted hereby and by the
Purchase Agreement), promptly upon the request of the Secured Party, such
Chattel Paper and instruments shall be marked with the following legend: “This
writing and the obligations evidenced or secured hereby are subject to the
Security Interests of [name of Secured Party, for the benefit of itself and the
Buyers]”.
(c) Letter-of-Credit
Rights. Each Grantor that is or becomes the beneficiary of a
letter of credit shall promptly (and in any event within 2 Business Days after
becoming a beneficiary), notify the Secured Party thereof and, upon the request
by the Secured Party, enter into a multi-party agreement with the Secured Party
and the issuing or confirming bank with respect to letter-of-credit rights
assigning such letter-of-credit rights to the Secured Party and directing all
payments thereunder to the Secured Party, for the benefit of itself and the
Buyers, all in form and substance satisfactory to the Secured
Party.
(d) Commercial Tort
Claims. Each Grantor shall promptly (and in any event within 2
Business Days of receipt thereof), notify the Secured Party in writing upon
incurring or otherwise obtaining a Commercial Tort Claim after the date hereof
and, upon request of the Secured Party, promptly amend Schedule 1 to this
Agreement to describe such after-acquired Commercial Tort Claim in a manner that
reasonably identifies such Commercial Tort Claim, and hereby authorizes the
filing of additional financing statements or amendments to existing financing
statements describing such Commercial Tort Claims, and agrees to do such other
acts or things deemed necessary or desirable by the Secured Party to give the
Secured Party, for the benefit of itself and the Buyers, a first priority,
perfected security interest in any such Commercial Tort Claim.
(e) Government
Contracts. If any Account or Chattel Paper arises out of a
contract or contracts with the United States of America or any department,
agency, or instrumentality thereof, Grantors shall promptly (and in any event
within 2 Business Days of the creation thereof) notify the Secured Party thereof
in writing and execute any instruments or take any steps reasonably required by
the Secured Party in order that all moneys due or to become due under such
contract or contracts shall be assigned to the Secured Party, and shall provide
written notice thereof under the Assignment of Claims Act or other applicable
law.
(f) Intellectual
Property.
(i) Upon
request of the Secured Party, in order to facilitate filings with the United
States Patent and Trademark Office and the United States Copyright Office or any
other applicable Governmental Authority, each Grantor shall execute and deliver
to the Secured Party one or more Copyright Security Agreements, Trademark
Security Agreements, or Patent Security Agreements to further evidence the
Secured Party’s Liens on such Grantor’s Patents, Trademarks, or Copyrights, and
the General Intangibles of such Grantor relating thereto or represented
thereby;
(ii) Each
Grantor shall have the duty, to the extent necessary or economically desirable
in the operation of such Grantor’s business, (A) to promptly xxx for
infringement, misappropriation, or dilution and to recover any and all damages
for such infringement, misappropriation, or dilution, (B) to prosecute
diligently any trademark application or service xxxx application that is part of
the Trademarks pending as of the date hereof or hereafter until the termination
of this Agreement, (C) to prosecute diligently any patent application that is
part of the Patents pending as of the date hereof or hereafter until the
termination of this Agreement, and (D) to take all reasonable and necessary
action to preserve and maintain all of such Grantor’s Trademarks, Patents,
Copyrights, Intellectual Property Licenses, and its rights therein, including
the filing of applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation
proceedings. Each Grantor shall promptly file an application with the
United States Copyright Office for any Copyright that has not been registered
with the United States Copyright Office if such Copyright is necessary in
connection with the operation of such Grantor’s business. Any expenses incurred
in connection with the foregoing shall be borne by the appropriate
Grantor. Each Grantor further agrees not to abandon any Trademark,
Patent, Copyright, or Intellectual Property License that is necessary or
economically desirable in the operation of such Grantor’s business;
(iii) Grantors
acknowledge and agree that the Secured Party shall have no duties with respect
to the Trademarks, Patents, Copyrights, or Intellectual Property
Licenses. Without limiting the generality of this Section 6(f),
Grantors acknowledge and agree that the Secured Party shall not be under any
obligation to take any steps necessary to preserve rights in the Trademarks,
Patents, Copyrights, or Intellectual Property Licenses against any other Person,
but the Secured Party may do so at its option from and after the occurrence and
during the continuance of an Event of Default, and all expenses incurred in
connection therewith (including reasonable fees and expenses of attorneys and
other professionals) shall be for the sole account of the Grantors and shall be
deemed to be Secured Obligations; and
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(iv) In no
event shall any Grantor, either itself or through any agent, employee, licensee,
or designee, file an application for the registration of any Patent, Trademark,
or Copyright with the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency without giving the
Secured Party prior written notice thereof. Promptly upon any such
filing, each Grantor shall comply with Section 6(f)(i)
hereof.
(g) Investment Related
Property.
(i) If any
Grantor shall receive or become entitled to receive any Pledged Interests after
the date hereof, it shall promptly (and in any event within 2 Business Days of
receipt thereof) identify such Pledged Interests in a written notice to the
Secured Party;
(ii) All sums
of money and property paid or distributed in respect of the Investment Related
Property which are received by any Grantor shall be held by the Grantors in
trust for the benefit of the Secured Party segregated from such Grantor’s other
property, and such Grantor shall deliver it forthwith to the Secured Party in
the exact form received;
(iii) Each
Grantor shall promptly deliver to the Secured Party a copy of each notice or
other communication received by it in respect of any Pledged
Interests;
(iv) No
Grantor shall make or consent to any amendment or other modification or waiver
with respect to any Pledged Interests, Pledged Operating Agreement, or Pledged
Partnership Agreement, or enter into any agreement or permit to exist any
restriction with respect to any Pledged Interests other than pursuant to the
Purchase Agreement;
(v) Each
Grantor agrees that it will cooperate with the Secured Party in obtaining all
necessary approvals and making all necessary filings under federal, state,
local, or foreign law in connection with the Security Interests on the
Investment Related Property or any sale or transfer thereof; and
(vi) As to all
limited liability company or partnership interests issued under any Pledged
Operating Agreement or Pledged Partnership Agreement, each Grantor hereby
represents, warrants and covenants that the Pledged Interests issued pursuant to
such agreement (A) are not and shall not be dealt in or traded on securities
exchanges or in securities markets, (B) do not and will not constitute
investment company securities, and (C) are not and will not be held by such
Grantor in a Securities Account. In addition, none of the Pledged
Operating Agreements, the Pledged Partnership Agreements, or any other
agreements governing any of the Pledged Interests issued under any Pledged
Operating Agreement or Pledged Partnership Agreement, provide or shall provide
that such Pledged Interests are securities governed by Article 8 of the Uniform
Commercial Code as in effect in any relevant jurisdiction.
(h) Transfers and Other
Liens. Grantors shall not (i) sell, assign (by operation of
law or otherwise) or otherwise dispose of, or grant any option with respect to,
any of the Collateral, except as expressly permitted by this Agreement and the
other Purchase Documents, or (ii) create or permit to exist any Lien upon or
with respect to any of the Collateral of any of Grantors, except for Permitted
Liens. The inclusion of Proceeds in the Collateral shall not be
deemed to constitute consent by the Secured Party to any sale or other
disposition of any of the Collateral except as expressly permitted in this
Agreement or the Purchase Agreement.
(i) Other Actions as to Any and
All Collateral. Each Grantor shall promptly (and in any event
within 2 Business Days of acquiring or obtaining such Collateral) notify the
Secured Party in writing upon (i) acquiring or otherwise obtaining any
Collateral after the date hereof consisting of Trademarks, Patents, Copyrights,
Intellectual Property Licenses, Investment Related Property, Chattel Paper
(electronic, tangible or otherwise), documents (as defined in Article 9
of the Code), promissory notes (as defined in the Code, or
instruments (as defined in the Code) or (ii) any amount payable under or in
connection with any of the Collateral being or becoming evidenced after the date
hereof by any Chattel Paper, documents, promissory notes, or instruments and, in
each such case upon the request of the Secured Party, promptly execute such
other documents, or if applicable, deliver such Chattel Paper, other documents
or certificates evidencing any Investment Related Property and do such other
acts or things deemed necessary or desirable by the Secured Party to protect the
Secured Party’s Security Interests therein.
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7. Relation to Other Purchase
Documents. The provisions of this Agreement shall be read and
construed with the Purchase Documents referred to below in the manner so
indicated.
(a) Purchase Agreement and
Notes. In the event of any conflict between any provision in this
Agreement and a provision in the Purchase Agreement, Prior Agreement, Notes or
Prior Notes, such provision of the Purchase Agreement, Prior Agreement, Notes or
Prior Notes shall control.
(b) Patent, Trademark, Copyright
Security Agreements. The provisions of the Copyright Security
Agreements, Trademark Security Agreements, and Patent Security Agreements are
supplemental to the provisions of this Agreement, and nothing contained in the
Copyright Security Agreements, Trademark Security Agreements or the Patent
Security Agreements shall limit any of the rights or remedies of the Secured
Party hereunder.
8. Further
Assurances.
(a) Each
Grantor agrees that from time to time, at its own expense, such Grantor will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or that the Secured Party may reasonably
request, in order to perfect and protect the Security Interests granted or
purported to be granted hereby or to enable the Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any of the
Collateral.
(b) Each
Grantor authorizes the filing by the Secured Party of financing or continuation
statements, or amendments thereto, and such Grantor will execute and deliver to
the Secured Party such other instruments or notices, as may be necessary or as
the Secured Party may reasonably request, in order to perfect and preserve the
Security Interests granted or purported to be granted hereby.
(c) Each
Grantor authorizes the Secured Party at any time and from time to time to file,
transmit, or communicate, as applicable, financing statements and amendments (i)
describing the Collateral as “all personal property of debtor” or “all assets of
debtor” or words of similar effect, (ii) describing the Collateral as being of
equal or lesser scope or with greater detail, or (iii) that contain any
information required by part 5 of Article 9 of the Code for the sufficiency or
filing office acceptance. Each Grantor also hereby ratifies any and
all financing statements or amendments previously filed by the Secured Party in
any jurisdiction.
(d) Each
Grantor acknowledges that it is not authorized to file any financing statement
or amendment or termination statement with respect to any financing statement
filed in connection with this Agreement without the prior written consent of the
Secured Party affected thereby, subject to such Grantor’s rights under Section
9-509(d)(2) of the Code.
9. Secured Party’s Right to
Perform Contracts, Exercise Rights, etc. Upon the occurrence
and during the continuance of an Event of Default, the Secured Party (a) may
proceed to perform any and all of the obligations of any Grantor contained in
any contract, lease, or other agreement and exercise any and all rights of any
Grantor therein contained as fully as such Grantor itself could, (b) shall have
the right to use any Grantor’s rights under Intellectual Property Licenses in
connection with the enforcement of the Secured Party’s rights hereunder,
including the right to prepare for sale and sell any and all Inventory and
Equipment now or hereafter owned by any Grantor and now or hereafter covered by
such licenses, and (c) shall have the right to request that any Stock that is
pledged hereunder be registered in the name of the Secured Party or any of its
nominees.
10. Secured Party Appointed
Attorney-in-Fact. Each Grantor hereby irrevocably appoints the
Secured Party its attorney-in-fact at the time of the execution of this
Agreement. The Secured Party shall have full authority in the place
and stead of such Grantor and in the name of such Grantor or otherwise, at such
time as an Event of Default has occurred and is continuing, to take any action
and to execute any instrument which the Secured Party may reasonably deem
necessary or advisable to accomplish the purposes of this Agreement,
including:
(a) to ask,
demand, collect, xxx for, recover, compromise, receive and give acquittance and
receipts for moneys due and to become due under or in connection with any
Collateral of such Grantor;
(b) to
receive and open all mail addressed to such Grantor and to notify postal
authorities to change the address for the delivery of mail to such Grantor to
that of the Secured Party;
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(c) to
receive, indorse, and collect any drafts or other instruments, documents,
Negotiable Collateral or Chattel Paper;
(d) to file
any claims or take any action or institute any proceedings which the Secured
Party may deem necessary or desirable for the collection of any of the
Collateral of such Grantor or otherwise to enforce the rights of the Secured
Party with respect to any of the Collateral;
(e) to
repair, alter, or supply goods, if any, necessary to fulfill in whole or in part
the purchase order of any Person obligated to such Grantor in respect of any
Account of such Grantor;
(f) to use
any labels, Patents, Trademarks, trade names, URLs, domain names, industrial
designs, Copyrights, advertising matter or other industrial or intellectual
property rights, in advertising for sale and selling Inventory and other
Collateral and to collect any amounts due under Accounts, contracts or
Negotiable Collateral of such Grantor; and
(g) such
Secured Party shall have the right, but shall not be obligated, to bring suit in
its own name to enforce the Trademarks, Patents, Copyrights and Intellectual
Property Licenses and, if such Secured Party shall commence any such suit, the
appropriate Grantor shall, at the request of such Secured Party, do any and all
lawful acts and execute any and all proper documents reasonably required by such
Secured Party in aid of such enforcement.
To the
extent permitted by law, each Grantor hereby ratifies all that such
attorney-in-fact shall lawfully do or cause to be done by virtue
hereof. This power of attorney is coupled with an interest and shall
be irrevocable until this Agreement is terminated.
11. Secured Party May
Perform. If any of Grantors fails to perform any agreement
contained herein, the Secured Party may itself perform, or cause performance of,
such agreement, and the reasonable expenses of such Secured Party incurred in
connection therewith shall be payable, jointly and severally, by
Grantors.
12. Secured Party’s Duties;
Bailee for Perfection. The powers conferred on the Secured
Party hereunder are solely to protect the Secured Party’s interests in the
Collateral and shall not impose any duty upon the Secured Party in favor of any
Grantor or any other Buyer to exercise any such powers. Except for
the safe custody of any Collateral in its actual possession and the accounting
for moneys actually received by it hereunder, the Secured Party shall not have
any duty to any Grantor or any other Buyer 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. The Secured Party shall be
deemed to have exercised reasonable care in the custody and preservation of any
Collateral in actual possession if such Collateral is accorded treatment
substantially equal to that which the Secured Party accords its own
property.
13. Collection of Accounts,
General Intangibles and Negotiable Collateral. At any time
upon the occurrence and during the continuation of an Event of Default, the
Secured Party may (a) notify Account Debtors of any Grantor that the Accounts,
General Intangibles, Chattel Paper or Negotiable Collateral have been assigned
to such Secured Party or that such Secured Party has a security interest
therein, and (b) collect the Accounts, General Intangibles and Negotiable
Collateral directly, and any collection costs and expenses shall constitute part
of such Grantor’s Secured Obligations under the Purchase Agreement.
14. Disposition of Pledged
Interests by Secured Party. None of the Pledged Interests
existing as of the date of this Agreement are, and none of the Pledged Interests
hereafter acquired on the date of acquisition thereof will be, registered or
qualified under the various federal, state or other securities laws of the
United States or any other jurisdiction, and disposition thereof after an Event
of Default may be restricted to one or more private (instead of public) sales in
view of the lack of such registration. Each Grantor understands that
in connection with such disposition, the Secured Party may approach only a
restricted number of potential purchasers and further understands that a sale
under such circumstances may yield a lower price for the Pledged Interests than
if the Pledged Interests were registered and qualified pursuant to federal,
state and other securities laws and sold on the open market. Each
Grantor, therefore, agrees that: (a) if a Secured
Party shall, pursuant to the terms of this Agreement, sell or cause
the Pledged Interests or any portion thereof to be sold at a private sale, such
Secured Party shall have the right to rely upon the advice and opinion of any
nationally recognized brokerage or investment firm (but shall not be obligated
to seek such advice and the failure to do so shall not be considered in
determining the commercial reasonableness of such action) as to the best manner
in which to offer the Pledged Interest or any portion thereof for sale and as to
the best price reasonably obtainable at the private sale thereof; and (b) such
reliance shall be conclusive evidence that such Secured Party has handled the
disposition in a commercially reasonable manner.
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15. Voting
Rights.
(a) Upon the
occurrence and during the continuation of an Event of Default, (i) the Secured
Party may, at its option, and with 2 Business Days prior notice to any Grantor,
and in addition to all rights and remedies available to the Secured Party under
any other agreement, at law, in equity, or otherwise, exercise all voting
rights, and all other ownership or consensual rights in respect of the Pledged
Interests owned by such Grantor, but under no circumstances is the Secured Party
obligated by the terms of this Agreement to exercise such rights, and (ii) if
such Secured Party duly exercises its right to vote any of such Pledged
Interests, each Grantor hereby appoints such Secured Party, such Grantor’s true
and lawful attorney-in-fact and IRREVOCABLE PROXY to vote such Pledged Interests
in any manner that such Secured Party deems advisable for or against all matters
submitted or which may be submitted to a vote of shareholders, partners or
members, as the case may be. The power-of-attorney granted hereby is
coupled with an interest and shall be irrevocable.
(b) For so
long as any Grantor shall have the right to vote the Pledged Interests owned by
it, such Grantor covenants and agrees that it will not, without the prior
written consent of the Secured Party, vote or take any consensual action with
respect to such Pledged Interests which would materially adversely affect the
rights of the Secured Party exercising the voting rights owned by such Grantor
or the value of the Pledged Interests.
16. Remedies. Upon
the occurrence and during the continuance of an Event of Default:
(a) The
Secured Party may exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein, in the other Purchase Documents, or
otherwise available to it, all the rights and remedies of a secured party on
default under the Code or any other applicable law. Without limiting
the generality of the foregoing, each Grantor expressly agrees that, in any such
event, the Secured Party without any demand, advertisement, or notice of any
kind (except a notice specified below of time and place of public or private
sale) to or upon any of Grantors or any other Person (all and each of which
demands, advertisements and notices are hereby expressly waived to the maximum
extent permitted by the Code or by any other applicable law), may take immediate
possession of all or any portion of the Collateral and (i) require Grantors to,
and each Grantor hereby agrees that it will at its own expense and upon request
of such Secured Party forthwith, assemble all or part of the Collateral as
directed by such Secured Party and make it available to such Secured Party at
one or more locations where such Grantor regularly maintains Inventory, and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of such Secured
Party’s offices or elsewhere, for cash, on credit, and upon such other terms as
such Secured Party may deem commercially reasonable. Each Grantor
agrees that, to the extent notice of sale shall be required by law, at least 10
days notice to any of Grantors of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification and specifically such notice shall constitute a reasonable
“authenticated notification of disposition” within the meaning of Section 9-611
of the Code. No Secured Party shall be obligated to make any sale of
Collateral 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.
(b) The
Secured Party is hereby granted a license or other right to use, without
liability for royalties or any other charge, each Grantor’s labels, Patents,
Copyrights, rights of use of any name, trade secrets, trade names, Trademarks,
service marks and advertising matter, URLs, domain names, industrial designs,
other industrial or intellectual property or any property of a similar nature,
whether owned by any of Grantors or with respect to which any of Grantors have
rights under license, sublicense, or other agreements (but only to the extent
(i) such license, sublicense or agreement does not prohibit such use by such
Secured Party and (ii) such Grantor will not be in default under such license,
sublicense, or other agreement as a result of such use by such Secured Party),
as it pertains to the Collateral, in preparing for sale, advertising for sale
and selling any Collateral, and each Grantor’s rights under all licenses and all
franchise agreements shall inure to the benefit of such Secured
Party.
(c) Any cash
held by the Secured Party as Collateral and all proceeds received by the Secured
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied against the Secured Obligations
in the order set forth in Section 17 hereof. In the event the
proceeds of Collateral are insufficient to satisfy all of the Secured
Obligations in full, each Grantor shall remain jointly and severally liable for
any such deficiency.
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(d) Each
Grantor hereby acknowledges that the Secured Obligations arose out of a
commercial transaction, and agrees that if an Event of Default shall occur and
be continuing the Secured Party shall have the right to an immediate writ of
possession without notice of a hearing. The Secured Party shall have
the right to the appointment of a receiver for the properties and assets of each
of Grantors, and each Grantor hereby consents to such rights and such
appointment and hereby waives any objection such Grantors may have thereto or
the right to have a bond or other security posted by the Secured
Party.
17. Application of Proceeds of
Collateral. All proceeds of Collateral received by the Secured
Party shall be applied as follows:
(a) first, ratably to pay
any expenses due to the Secured Party, for the benefit of itself and the Buyers,
(including, without limitation, the reasonable costs and expenses paid or
incurred by the Secured Party to correct any default under or enforce any
provision of the Purchase Documents, or after the occurrence of any Default or
Event of Default in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated) or indemnities then due to any of the Buyers under the Purchase
Documents, until paid in full;
(b) second, ratably to
pay any fees or premiums then due to any of the Buyers under the Purchase
Documents, until paid in full;
(c) third, ratably to pay
interest due in respect of the Secured Obligations then due to any of the
Buyers, until paid in full;
(d) fourth, ratably to
pay the principal amount of all Secured Obligations then due to any of the
Buyers, until paid in full;
(e) fifth, ratably to pay
any other Secured Obligations then due to any of the Buyers; and
(f) sixth, to Grantors or
such other Person entitled thereto under applicable law.
18. Remedies
Cumulative. Each right, power, and remedy of the Secured Party
as provided for in this Agreement or in any Purchase Document or now or
hereafter existing at law or in equity or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power,
or remedy provided for in this Agreement or in the Purchase Documents or now or
hereafter existing at law or in equity or by statute or otherwise, and the
exercise or beginning of the exercise by the Secured Party, of any one or more
of such rights, powers, or remedies shall not preclude the simultaneous or later
exercise by such Secured Party of any or all such other rights, powers, or
remedies.
19. Marshaling. No
Secured Party shall be required to marshal any present or future collateral
security (including but not limited to the Collateral) for, or other assurances
of payment of, the Secured Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order, and
all of its rights and remedies hereunder and in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to
all other rights and remedies, however existing or arising. To the
extent that it 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 Secured Party’s rights and remedies under this
Agreement or under any other instrument creating or evidencing any of the
Secured Obligations or under which any of the Secured Obligations is outstanding
or by which any of the Secured 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.
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20. Collateral Agent and Secured
Party Indemnification.
(a) Each
Buyer hereby irrevocably appoints and authorizes MKM to act as collateral agent
(the “Collateral
Agent”) on its behalf under this Agreement and to enter into each of the
instruments, documents and agreements, including any pledge agreement, guaranty,
financing statements, mortgage, account control agreement or any other Security
Documents (the “Financing
Documents”), to which MKM is a party (including in its capacity as
Collateral Agent) on such Buyer’s behalf and to take such actions as Collateral
Agent on such Buyer’s behalf and to exercise such powers under the Financing
Documents as are delegated to Collateral Agent or Secured Party (as applicable)
by the terms thereof, together with all such powers as are reasonably incidental
thereto. The Collateral Agent shall take such action under this Agreement and/or
any other Purchase Documents as the Collateral Agent shall reasonably determine
in its sole discretion in accordance with the terms of the Purchase Documents.
Collateral Agent is authorized and empowered to amend, modify, or waive any
provisions of this Agreement or the other Financing Documents only with the
consent of the Required Holders (as defined in the Note).
(b) Whether
or not the transactions contemplated hereby shall be consummated, upon demand
therefor the Buyers shall indemnify the Collateral Agent (to the extent not
reimbursed by or on behalf of the Company and without limiting the obligation of
the Company to do so), ratably from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind whatsoever, including, for purposes of
clarification, all taxes, which may at any time (including at any time following
the payment in full of the Notes and Prior Notes and the termination or
resignation of the Collateral Agent) be imposed on, incurred by or asserted
against the Collateral Agent in any way relating to or arising out of this
Agreement, any other Financing Document or any document contemplated hereby or
referred to herein or the transactions contemplated hereby or thereby or any
action taken or omitted by the Collateral Agent under or in connection with any
of the foregoing; provided, however, that no Buyer shall be liable for the
payment to the Collateral Agent of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Collateral Agent’s gross negligence or
willful misconduct. In addition, each Buyer shall reimburse the Collateral Agent
upon demand for its ratable share of any costs or out-of-pocket expenses
(including attorney costs) incurred by the Collateral Agent in connection with
the preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Purchase Document, or any document contemplated hereby or referred to
herein to the extent that the Collateral Agent is not reimbursed for such
expenses by or on behalf of the Company. Without limiting the generality of the
foregoing, if the Internal Revenue Service or any other governmental authority
of the United States or any other jurisdiction asserts a claim that the
Collateral Agent did not properly withhold tax from amounts paid to or for the
account of any Buyer (because the appropriate form was not delivered, was not
properly executed, or because such Buyer failed to notify the Collateral Agent
of a change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Buyer shall indemnify
the Collateral Agent fully for all amounts paid, directly or indirectly, by the
Collateral Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to the
Collateral Agent under this Section 20(b), together with all related costs
and expenses (including attorney costs). The obligation of the Buyers
in this Section 20(b) shall survive the payment of all Liabilities
hereunder.
(c) The
Collateral Agent shall not be deemed to have knowledge or notice of the
occurrence of any Event of Default or any event that with the giving of notice
or passage of time would constitute an Event of Default unless the Collateral
Agent shall have received written notice from a Buyer describing such Event of
Default or event that with the giving of notice or passage of time would
constitute an Event of Default and stating that such notice is a “notice of
default”. Upon the occurrence and continuance of an Event of Default, or an
event that with the giving of notice or passage of time would constitute an
Event of Default, the Collateral Agent shall take such action under this
Agreement and/or any other Purchase Document with respect to such Event of
Default or event that with the giving of notice or passage of time would
constitute an Event of Default as Collateral Agent shall reasonably be directed
by the Required Holders (as defined in the Note) in accordance with the terms of
the Purchase Documents, provided that unless and until the Collateral Agent
shall have received such directions, the Collateral Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
of such Event of Default or event that with the giving of notice or passage of
time would constitute an Event of Default as the Collateral Agent shall deem
advisable in the best interests of the Buyers. In taking such action or
refraining from taking such action without specific direction from the Required
Holders (as defined in the Note), the Collateral Agent shall use the same degree
of care and skill as a prudent person would exercise or use under the
circumstances in the conduct of such person’s own affairs.
-16-
(d) Nothing
in this Section 20 shall be deemed to limit or otherwise affect the rights of
Collateral Agent or Secured Party to exercise any remedy provided in this
Agreement or any other Purchase Document.
(e) The
Collateral Agent may resign from the performance of all of its functions and
duties hereunder and/or under the Financing Documents at any time by giving
thirty (30) Business Days prior written notice to the Secured Parties. Such
resignation shall take effect upon the appointment of a successor Collateral
Agent pursuant to clause (f) below or as otherwise provided below.
(f) Upon (i)
the Secured Parties’ receipt of a notice of resignation by the Collateral Agent
in accordance with clause (e) above, or (ii) written notice by the Required
Holders (as defined in the Note) to Collateral Agent of the Required Holders’
(as defined in the Note) election to remove the existing Collateral Agent and
appoint a successor Collateral Agent, the Required Holders (as defined in the
Note) shall have the right to appoint a successor Collateral Agent reasonably
acceptable to Grantors. Upon the acceptance of a successor’s appointment as
Collateral Agent hereunder and notice of such acceptance to the retiring
Collateral Agent, such successor shall succeed to and become vested with all of
the rights, powers, privileges and duties of the retiring (or retired)
Collateral Agent, the retiring Collateral Agent’s resignation shall become
immediately effective and the retiring Collateral Agent shall be discharged from
all of its duties and obligations hereunder and under the other Financing
Documents (if such resignation was not already effective and such duties and
obligations not already discharged, as provided below in this paragraph). If no
such successor shall have been so appointed by Required Holders (as defined in
the Note) and shall have accepted such appointment within thirty (30) days after
the retiring Collateral Agent gives notice of its resignation or the Required
Holders (as defined in the Note) give notice of their election to replace the
retiring Collateral Agent, then the retiring Collateral Agent may, on behalf of
the Buyers (but without any obligation) appoint a successor Collateral Agent
without the consent of any Buyer. From and following the expiration of such
thirty (30) day period, Collateral Agent shall have the exclusive right without
any Person’s consent, upon one (1) Business Days’ notice to the Buyers, to make
its resignation or removal effective immediately. From and following the
effectiveness of such notice, (i) the retiring Collateral Agent shall be
discharged from its duties and obligations hereunder and under the other
Financing Documents and (ii) all actions, payments, communications and
determinations provided to be made by, to or through Collateral Agent shall
instead be made by or to each Buyer directly, until such time as Required
Holders (as defined in the Note) appoint a Collateral Agent as provided for
above in this paragraph. The provisions of this Agreement shall continue in
effect for the benefit of any retiring Collateral Agent and its sub-agents after
the effectiveness of its resignation or removal hereunder and under the other
Financing Documents in respect of any actions taken or omitted to be taken by
any of them while the retiring Collateral Agent was acting or was continuing to
act as Collateral Agent.
21. Merger, Amendments;
Etc. THIS AGREEMENT, TOGETHER WITH THE OTHER PURCHASE
DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE
PARTIES. No waiver of any provision of this Agreement, and no consent
to any departure by any of Grantors herefrom, shall in any event be effective
unless the same shall be in writing and signed by the Secured Party, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No amendment of any provision
of this Agreement shall be effective unless the same shall be in writing and
signed by the Secured Party and each of Grantors to which such amendment
applies.
22. Addresses for
Notices. All notices and other communications provided for
hereunder (a) shall be given in the form and manner set forth in the Purchase
Agreement and (b) shall be delivered, (i) in the case of notice to any Grantor,
by delivery of such notice to Parent at Parent’s address specified in the
Purchase Agreement or at such other address as shall be designated by Parent in
a written notice to the Secured Party, and (ii) in the case of notice to the
Secured Party, by delivery of such notice to such Secured Party at its address
specified in the Purchase Agreement or at such other address as shall be
designated by such Secured Party in a written notice to Parent and each other
Secured Party.
-17-
23. Separate, Continuing
Security Interests; Assignments under Purchase Documents. This
Agreement shall create a separate, continuing security interest in the
Collateral in favor of the Secured Party and shall (a) remain in full force and
effect until the Secured Obligations have been paid in full in cash in
accordance with the provisions of the Purchase Documents, (b) be binding upon
each of Grantors, and their respective successors and assigns, and (c) inure to
the benefit of, and be enforceable by, the Secured Party and its successors,
transferees and assigns. Without limiting the generality of the
foregoing clause (c), the Secured Party may, in accordance with the provisions
of the Purchase Documents, assign or otherwise transfer all or any portion of
its rights and obligations under the Purchase Documents to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Secured Party herein or otherwise. Upon
payment in full in cash of the Secured Obligations in accordance with the
provisions of the Purchase Documents, the Security
Interests granted hereby shall terminate and all rights to the Collateral shall
revert to Grantors or any other Person entitled thereto. At such
time, the Secured Party will authorize the filing of appropriate termination
statements to terminate such Security Interests. No transfer or
renewal, extension, assignment, or termination of this Agreement or of the
Purchase Agreement, any other Purchase Document, or any other instrument or
document executed and delivered by any Grantor to the Secured Party nor any
additional loans made by the Secured Party to any Grantor, nor the taking of
further security, nor the retaking or re-delivery of the Collateral to Grantors,
or any of them, by the Secured Party, nor any other act of the Secured Party, or
any of them, shall release any of Grantors from any obligation, except a release
or discharge executed in writing by the Secured Party. The Secured
Party shall not by any act, delay, omission or otherwise, be deemed to have
waived any of its rights or remedies hereunder, unless such waiver is in writing
and signed by the Secured Party and then only to the extent therein set
forth. A waiver by the Secured Party of any right or remedy on any
occasion shall not be construed as a bar to the exercise of any such right or
remedy which the Secured Party would otherwise have had on any other
occasion.
24. Governing Law; Jurisdiction;
Service of Process; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper; provided, however, that any
suit seeking enforcement against any Collateral or other property may be
brought, at the Secured Party’s option, in the courts of any jurisdiction where
such Secured Party elects to bring such action or where such Collateral or other
property may be found. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Without limitation of
the foregoing, each Grantor other than Parent hereby irrevocably appoints Parent
as such Grantor’s agent for purposes of receiving and accepting any service of
process hereunder or under any of the other Security
Documents. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
25. Miscellaneous.
(a) This
Agreement may be executed in any number of counterparts and by different parties
on separate counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed
counterpart of this Agreement by telefacsimile or other electronic method of
transmission shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by telefacsimile or other electronic method of
transmission also shall deliver an original executed counterpart of this
Agreement but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this
Agreement. The foregoing shall apply to each other Security Document
mutatis
mutandis.
(b) Any
provision of this Agreement which is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof in that jurisdiction or affecting
the validity or enforceability of such provision in any other
jurisdiction.
-18-
(c) Headings
used in this Agreement are for convenience only and shall not be used in
connection with the interpretation of any provision hereof.
(d) The
pronouns used herein shall include, when appropriate, either gender and both
singular and plural, and the grammatical construction of sentences shall conform
thereto.
(e) Unless
the context of this Agreement or any other Purchase Document clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the terms “includes” and “including” are
not limiting, and the term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
or any other Purchase Document refer to this Agreement or such other Purchase
Document, as the case may be, as a whole and not to any particular provision of
this Agreement or such other Purchase Document, as the case may
be. Section, subsection, clause, schedule, and exhibit references
herein are to this Agreement unless otherwise specified. Any
reference in this Agreement or in any other Purchase Document to any agreement,
instrument, or document shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, joinders, and
supplements, thereto and thereof, as applicable (subject to any restrictions on
such alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements set forth
herein). Any reference herein or in any other Purchase Document to
the satisfaction or repayment in full of the Secured Obligations shall mean the
repayment in full in cash of all Secured Obligations other than unasserted
contingent indemnification Secured Obligations. Any reference herein
to any Person shall be construed to include such Person’s successors and
assigns. Any requirement of a writing contained herein or in any
other Purchase Document shall be satisfied by the transmission of a Record and
any Record so transmitted shall constitute a representation and warranty as to
the accuracy and completeness of the information contained therein.
-19-
IN
WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement by
and through their duly authorized officers, as of the day and year first above
written.
|
GRANTORS:
|
VALLEY
FORGE COMPOSITE TECHNOLOGIES, INC., a Florida corporation
By:
Name:
Title:
|
|
VALLEY
FORGE DETECTION SYSTEMS, INC., a Florida corporation
By:
Name:
Title:
|
|
|
VALLEY
FORGE AEROSPACE, INC., a Florida corporation
By:
Name:
Title:
|
|
|
VALLEY
FORGE IMAGING, INC., a Florida corporation
By:
Name:
Title:
|
|
|
VALLEY
FORGE EMERGING TECHNOLOGIES, INC., a Florida corporation
By:
Name:
Title:
|
|
|
SECURED
PARTY:
|
MKM
OPPORTUNITY MASTER FUND, LLC
By:
Name:
Title:
|
|
BUYERS:
|
_____________________________
Signature
_____________________________
Print
Name
|
-20-
SCHEDULE
1
COMMERCIAL
TORT CLAIMS
[include
specific case caption or descriptions per Official Code Comment 5 to Section
9-108 of the Code]
None.
-21-
SCHEDULE
2
COPYRIGHTS
None.
-22-
SCHEDULE
3
INTELLECTUAL
PROPERTY LICENSES
Agreement
by and between Valley Forge Composite Technologies, Inc. and X.X. Xxxxxxx
Institute of Russian Federation Dated March 2002
-23-
SCHEDULE
4
PATENTS
None.
-24-
SCHEDULE
5
PLEDGED
COMPANIES
|
Name
of Pledgor
|
Name
of Pledged Company
|
Number
of Shares/Units
|
Class
of Interests
|
Percentage
of Class Owned
|
Certificate
Nos.
|
|
VALLEY
FORGE DETECTION SYSTEMS, INC.
|
To
be provided
|
Common
Stock
|
100%
|
To
be provided
|
|
|
VALLEY
FORGE AEROSPACE, INC.
|
To
be provided
|
Common
Stock
|
100%
|
To
be provided
|
|
|
VALLEY
FORGE IMAGING, INC.
|
To
be provided
|
Common
Stock
|
100%
|
To
be provided
|
|
|
VALLEY
FORGE EMERGING TECHNOLOGIES, INC.
|
To
be provided
|
Common
Stock
|
100%
|
To
be provided
|
|
-00-
XXXXXXXX
0
XXXXXXXXXX
Xxxx.
-26-
SCHEDULE
7
REAL
PROPERTY
Owned Real
Property
None.
Leased Real
Property
|
1.
|
00
Xxxx Xxxxx Xxxxxx Xxxx., Xxxxx 000, Xxxxxxxxx,
Xxxxxxxx
|
|
|
2,985
square feet; Lease expires on August 31,
2011
|
|
2.
|
0000
Xxxxxxx Xxxxxxxx Xxxx., Xxxx. X, Xxxxxxxx,
Xxxxxxxx
|
|
|
2,700
square feet, Lease expires on December 31,
2010
|
-27-
SCHEDULE
8
LIST OF
UNIFORM COMMERCIAL CODE FILING JURISDICTIONS
|
Grantor
|
Jurisdictions
|
|
VALLEY
FORGE COMPOSITE TECHNOLOGIES, a Florida corporation
|
Florida
Secretary of State
|
|
VALLEY
FORGE DETECTION SYSTEMS, INC., a Florida corporation
|
Florida
Secretary of State
|
|
VALLEY
FORGE AEROSPACE, INC., a Florida corporation
|
Florida
Secretary of State
|
|
VALLEY
FORGE IMAGING, INC., a Florida corporation
|
Florida
Secretary of State
|
|
VALLEY
FORGE EMERGING TECHNOLOGIES, INC., a Florida corporation
|
Florida
Secretary of State
|
|
VALLEY
FORGE DETECTION SYSTEMS, INC., a Florida corporation
|
Florida
Secretary of State
|
-28-
EXHIBIT
A
COPYRIGHT SECURITY
AGREEMENT
This
COPYRIGHT SECURITY AGREEMENT (this “Copyright Security
Agreement”) is made this 29th day of September, 2008, by the Grantors
listed on the signature pages hereof (collectively, jointly and severally,
“Grantors” and
each individually “Grantor”), in favor
of the Secured Party, for the benefit of itself and the Buyers, under and as
defined in the below-described Security Agreement.
W I T N E S S E T H:
WHEREAS, pursuant to that
certain Securities Purchase Agreement dated as of July 3, 2008 (as amended,
restated, supplemented, or otherwise modified from time to time, including all
schedules thereto, the “Prior Agreement”) by
and among VALLEY FORGE COMPOSITE TECHNOLOGIES, INC., a Florida corporation
(“Parent”), and
MKM Opportunity Master Fund, LLC (“MKM”), Parent has
agreed to sell, and MKM has agreed to purchase, certain Prior Notes and Prior
Warrants, and
WHEREAS, pursuant to that
certain Securities Purchase Agreement dated as of September 29, 2008 (as
amended, restated, supplemented, or otherwise modified from time to time,
including all schedules thereto, the “Purchase Agreement”)
by and among VALLEY FORGE COMPOSITE TECHNOLOGIES, INC., a Florida corporation
(“Parent”), and
Buyers, Parent has agreed to sell, and Buyers have agreed to purchase, certain
Notes and Warrants,
WHEREAS,
in order to induce the Buyers to enter into the Purchase Agreement and to
purchase the Notes and Warrants as provided for in the Purchase Agreement,
Grantors have executed and delivered to the Secured Party, for the benefit of
itself and the Buyers, that certain Security Agreement of even date herewith
(including all annexes, exhibits or schedules thereto, as from time to time
amended, restated, supplemented or otherwise modified, the “Security
Agreement”);
WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and deliver
to the Secured Party, in favor of the Secured Party, for the benefit of itself
and the Buyers, this Copyright Security Agreement;
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as
follows:
1. DEFINED
TERMS. All capitalized terms used but not otherwise defined
herein have the meanings given to them in the Security Agreement or the Purchase
Agreement.
2. GRANT OF SECURITY INTEREST
IN COPYRIGHT COLLATERAL. Each Grantor hereby grants to the
Secured Party, for the benefit of itself and the Buyers, a continuing first
priority security interest in all of such Grantor’s right, title and interest
in, to and under the following, whether presently existing or hereafter created
or acquired (collectively, the “Copyright
Collateral”):
(a) all of
such Grantor’s Copyrights and Copyright Intellectual Property Licenses to which
it is a party including those referred to on Schedule I
hereto;
(b) all
reissues, continuations or extensions of the foregoing; and
-29-
(c) all
products and proceeds of the foregoing, including any claim by such Grantor
against third parties for past, present or future infringement or dilution of
any Copyright or any Copyright licensed under any Intellectual Property
License.
3. SECURITY FOR
OBLIGATIONS. This Copyright Security Agreement and the
Security Interests created hereby secures the payment and performance of all the
Secured Obligations, whether now existing or arising
hereafter. Without limiting the generality of the foregoing, this
Copyright Security Agreement secures the payment of all amounts which constitute
part of the Secured Obligations and would be owed by Grantors, or any of them,
to the Secured Party, or any of them, whether or not they are unenforceable or
not allowable due to the existence of an Insolvency Proceeding involving any
Grantor.
4. SECURITY
AGREEMENT. The security interests granted pursuant to this
Copyright Security Agreement are granted in conjunction with the security
interests granted to the Secured Party pursuant to the Security
Agreement. Each Grantor hereby acknowledges and affirms that the
rights and remedies of the Secured Party with respect to its security interests
in the Copyright Collateral made and granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.
5. AUTHORIZATION TO
SUPPLEMENT. Grantors shall give the Secured Party prompt
notice in writing of any additional copyright registrations or applications
therefor after the date hereof. Grantors hereby authorize the Secured
Party unilaterally to modify this Agreement by amending Schedule I to include
any future registered copyrights or applications therefor of
Grantors. Notwithstanding the foregoing, no failure to so modify this
Copyright Security Agreement or amend Schedule I shall in
any way affect, invalidate or detract from the Secured Party’s continuing
security interest in all Collateral, whether or not listed on Schedule
I.
6. COUNTERPARTS. This
Copyright Security Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all such separate counterparts
shall together constitute but one and the same instrument. In proving
this Copyright Security Agreement or any other Purchase Document in any judicial
proceedings, it shall not be necessary to produce or account for more than one
such counterpart signed by the party against whom such enforcement is
sought. Any signatures delivered by a party by facsimile transmission
or by e-mail transmission shall be deemed an original signature
hereto.
7. CONSTRUCTION. Unless
the context of this Copyright Security Agreement or any other Purchase Document
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the terms “includes”
and “including” are not limiting, and the term “or” has, except where
otherwise indicated, the inclusive meaning represented by the phrase
“and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and
similar terms in this Copyright Security Agreement or any other Purchase
Document refer to this Copyright Security Agreement or such other Purchase
Document, as the case may be, as a whole and not to any particular provision of
this Copyright Security Agreement or such other Purchase Document, as the case
may be. Section, subsection, clause, schedule, and exhibit references
herein are to this Copyright Security Agreement unless otherwise
specified. Any reference in this Copyright Security Agreement or in
any other Purchase Document to any agreement, instrument, or document shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, joinders, and supplements, thereto and
thereof, as applicable (subject to any restrictions on such alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein). Any
reference herein or in any other Purchase Document to the satisfaction or
repayment in full of the Secured Obligations shall mean the repayment in full in
cash of all Secured Obligations other than unasserted contingent indemnification
Secured Obligations. Any reference herein to any Person shall be
construed to include such Person’s successors and assigns. Any
requirement of a writing contained herein or in any other Purchase Document
shall be satisfied by the transmission of a Record and any Record so transmitted
shall constitute a representation and warranty as to the accuracy and
completeness of the information contained therein.
-30-
IN
WITNESS WHEREOF, each Grantor has caused this Copyright Security Agreement to be
executed and delivered by its duly authorized officer as of the date first set
forth above.
|
VALLEY
FORGE COMPOSITE TECHNOLOGIES, INC., a Florida corporation
By:
Name:
Title:
|
|
|
VALLEY
FORGE DETECTION SYSTEMS, INC., a Florida corporation
By:
Name:
Title:
|
|
|
VALLEY
FORGE AEROSPACE, INC., a Florida corporation
By:
Name:
Title:
|
|
|
VALLEY
FORGE IMAGING, INC., a Florida corporation
By:
Name:
Title:
|
|
|
VALLEY
FORGE EMERGING TECHNOLOGIES, INC., a Florida corporation
By:
Name:
Title:
|
-31-
SCHEDULE
I
to
COPYRIGHT SECURITY
AGREEMENT
Copyright
Registrations
|
Grantor
|
Country
|
Copyright
|
Registration
No.
|
Registration
Date
|
Copyright
Licenses
-32-
EXHIBIT
B
PATENT SECURITY
AGREEMENT
This
PATENT SECURITY AGREEMENT (this “Patent Security
Agreement”) is made this 29th day of September, 2008, by the Grantors
listed on the signature pages hereof (collectively, jointly and severally,
“Grantors” and
each individually “Grantor”), in favor
of the Secured Party, for the benefit of itself and the Buyers, under and as
defined in the below-described Security Agreement.
W I T N E S S E T H:
WHEREAS, pursuant to that
certain Securities Purchase Agreement dated as of July 3, 2008 (as amended,
restated, supplemented, or otherwise modified from time to time, including all
schedules thereto, the “Prior Agreement”) by
and among VALLEY FORGE COMPOSITE TECHNOLOGIES, INC., a Florida corporation
(“Parent”), and
MKM Opportunity Master Fund, LLC (“MKM”), Parent has
agreed to sell, and MKM has agreed to purchase, certain Prior Notes and Prior
Warrants, and
WHEREAS, pursuant to that
certain Securities Purchase Agreement dated as of September 29, 2008 (as
amended, restated, supplemented, or otherwise modified from time to time,
including all schedules thereto, the “Purchase Agreement”)
by and among VALLEY FORGE COMPOSITE TECHNOLOGIES, INC., a Florida corporation
(“Parent”), and
Buyers, Parent has agreed to sell, and Buyers have agreed to purchase, certain
Notes and Warrants,
WHEREAS,
in order to induce the Buyers to enter into the Purchase Agreement and to
purchase the Notes and Warrants as provided for in the Purchase Agreement,
Grantors have executed and delivered to Buyers that certain Security Agreement
of even date herewith (including all annexes, exhibits or schedules thereto, as
from time to time amended, restated, supplemented or otherwise modified, the
“Security
Agreement”);
WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and deliver
to the Secured Party, for the benefit of itself and the Buyers, this Patent
Security Agreement;
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as
follows:
1. DEFINED
TERMS. All capitalized terms used but not otherwise defined
herein have the meanings given to them in the Security Agreement or the Purchase
Agreement.
2. GRANT OF SECURITY INTEREST
IN PATENT COLLATERAL. Each Grantor hereby grants to the
Secured Party, for the benefit of itself and the Buyers, a continuing first
priority security interest in all of such Grantor’s right, title and interest
in, to and under the following, whether presently existing or hereafter created
or acquired (collectively, the “Patent
Collateral”):
(a) all of
its Patents and Patent Intellectual Property Licenses to which it is a party
including those referred to on Schedule I
hereto;
(b) all
reissues, continuations or extensions of the foregoing; and
(c) all
products and proceeds of the foregoing, including any claim by such Grantor
against third parties for past, present or future infringement or dilution of
any Patent or any Patent licensed under any Intellectual Property
License.
-33-
3. SECURITY FOR
OBLIGATIONS. This Patent Security Agreement and the Security
Interests created hereby secures the payment and performance of all the Secured
Obligations, whether now existing or arising hereafter. Without
limiting the generality of the foregoing, this Patent Security Agreement secures
the payment of all amounts which constitute part of the Secured Obligations and
would be owed by Grantors, or any of them, to the Secured Party, whether or not
they are unenforceable or not allowable due to the existence of an Insolvency
Proceeding involving any Grantor.
4. SECURITY
AGREEMENT. The security interests granted pursuant to this
Patent Security Agreement are granted in conjunction with the security interests
granted to Secured Parties pursuant to the Security
Agreement. Each Grantor hereby acknowledges and affirms that the
rights and remedies of the Secured Party with respect to its security interests
in the Patent Collateral made and granted hereby are more fully set forth in the
Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.
5. AUTHORIZATION TO
SUPPLEMENT. If any Grantor shall obtain rights to any new
patentable inventions or become entitled to the benefit of any patent
application or patent for any reissue, division, or continuation, of any patent,
the provisions of this Patent Security Agreement shall automatically apply
thereto. Grantors shall give prompt notice in writing to the Secured Party with
respect to any such new patent rights. Without limiting Grantors’
obligations under this Section 5, Grantors
hereby authorize the Secured Party unilaterally to modify this Agreement by
amending Schedule
I to include any such new patent rights of
Grantors. Notwithstanding the foregoing, no failure to so modify this
Patent Security Agreement or amend Schedule I shall in
any way affect, invalidate or detract from the Secured Party’s continuing
security interest in all Collateral, whether or not listed on Schedule
I.
6. COUNTERPARTS. This
Patent Security Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all such separate counterparts
shall together constitute but one and the same instrument. In proving
this Patent Security Agreement or any other Purchase Document in any judicial
proceedings, it shall not be necessary to produce or account for more than one
such counterpart signed by the party against whom such enforcement is
sought. Any signatures delivered by a party by facsimile transmission
or by e-mail transmission shall be deemed an original signature
hereto.
7. CONSTRUCTION. Unless
the context of this Patent Security Agreement or any other Purchase Document
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the terms “includes”
and “including” are not limiting, and the term “or” has, except where
otherwise indicated, the inclusive meaning represented by the phrase
“and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and
similar terms in this Patent Security Agreement or any other Purchase Document
refer to this Patent Security Agreement or such other Purchase Document, as the
case may be, as a whole and not to any particular provision of this Patent
Security Agreement or such other Purchase Document, as the case may
be. Section, subsection, clause, schedule, and exhibit references
herein are to this Patent Security Agreement unless otherwise
specified. Any reference in this Patent Security Agreement or in any
other Purchase Document to any agreement, instrument, or document shall include
all alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). Any reference herein or
in any other Purchase Document to the satisfaction or repayment in full of the
Secured Obligations shall mean the repayment in full in cash of all Secured
Obligations other than unasserted contingent indemnification Secured
Obligations. Any reference herein to any Person shall be construed to
include such Person’s successors and assigns. Any requirement of a
writing contained herein or in any other Purchase Document shall be satisfied by
the transmission of a Record and any Record so transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
-34-
IN
WITNESS WHEREOF, each Grantor has caused this Patent Security Agreement to be
executed and delivered by its duly authorized officer as of the date first set
forth above.
|
VALLEY
FORGE COMPOSITE TECHNOLOGIES, INC., a Florida corporation
By:
Name:
Title:
|
|
VALLEY
FORGE DETECTION SYSTEMS, INC., a Florida corporation
By:
Name:
Title:
|
|
VALLEY
FORGE AEROSPACE, INC., a Florida corporation
By:
Name:
Title:
|
|
VALLEY
FORGE IMAGING, INC., a Florida corporation
By:
Name:
Title:
|
|
VALLEY
FORGE EMERGING TECHNOLOGIES, INC., a Florida corporation
By:
Name:
Title:
|
-35-
EXHIBIT
C
TRADEMARK SECURITY
AGREEMENT
This
TRADEMARK SECURITY AGREEMENT (this “Trademark Security
Agreement”) is made this 29th day of September, 2008, by the Grantors
listed on the signature pages hereof (collectively, jointly and severally,
“Grantors” and
each individually “Grantor”), in favor
of the Secured Party, for the benefit of itself and the Buyers, under and as
defined in the below-described Security Agreement..
W I T N E S S E T H:
WHEREAS, pursuant to that
certain Securities Purchase Agreement dated as of July 3, 2008 (as amended,
restated, supplemented, or otherwise modified from time to time, including all
schedules thereto, the “Prior Agreement”) by
and among VALLEY FORGE COMPOSITE TECHNOLOGIES, INC., a Florida corporation
(“Parent”), and
MKM Opportunity Master Fund, LLC (“MKM”), Parent has
agreed to sell, and MKM has agreed to purchase, certain Prior Notes and Prior
Warrants, and
WHEREAS, pursuant to that
certain Securities Purchase Agreement dated as of September 29, 2008 (as
amended, restated, supplemented, or otherwise modified from time to time,
including all schedules thereto, the “Purchase Agreement”)
by and among VALLEY FORGE COMPOSITE TECHNOLOGIES, INC., a Florida corporation
(“Parent”), and
Buyers, Parent has agreed to sell, and Buyers have agreed to purchase, certain
Notes and Warrants,
WHEREAS,
in order to induce the Buyers to enter into the Purchase Agreement and to
purchase the Notes and Warrants as provided for in the Purchase Agreement,
Grantors have executed and delivered to Secured Party, for the benefit of itself
and the Buyers, that certain Security Agreement of even date herewith (including
all annexes, exhibits or schedules thereto, as from time to time amended,
restated, supplemented or otherwise modified, the “Security
Agreement”);
WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and deliver
to the Secured Party, for the benefit of itself and the Buyers, this Trademark
Security Agreement;
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as
follows:
1. DEFINED
TERMS. All capitalized terms used but not otherwise defined
herein have the meanings given to them in the Security Agreement or the Purchase
Agreement.
2. GRANT OF SECURITY INTEREST
IN TRADEMARK COLLATERAL. Each Grantor hereby grants to the
Secured Party, for the benefit of itself and the Buyers, a continuing first
priority security interest in all of such Grantor’s right, title and interest
in, to and under the following, whether presently existing or hereafter created
or acquired (collectively, the “Trademark
Collateral”):
(a) all of
its Trademarks and Trademark Intellectual Property Licenses to which it is a
party including those referred to on Schedule I
hereto;
(b) all
goodwill, trade secrets, proprietary or confidential information, technical
information, procedures, formulae, quality control standards, designs, operating
and training manuals, customer lists, and other General Intangibles with respect
to the foregoing;
(c) all
reissues, continuations or extensions of the foregoing;
-36-
(d) all
goodwill of the business connected with the use of, and symbolized by, each
Trademark and each Trademark Intellectual Property License; and
(e) all
products and proceeds of the foregoing, including any claim by such Grantor
against third parties for past, present or future (i) infringement or dilution
of any Trademark or any Trademark licensed under any Intellectual Property
License or (ii) injury to the goodwill associated with any Trademark or any
Trademark licensed under any Intellectual Property License.
3. SECURITY FOR
OBLIGATIONS. This Trademark Security Agreement and the
Security Interests created hereby secures the payment and performance of all the
Secured Obligations, whether now existing or arising
hereafter. Without limiting the generality of the foregoing, this
Trademark Security Agreement secures the payment of all amounts which constitute
part of the Secured Obligations and would be owed by Grantors, or any of them,
to the Secured Party, or any of them, whether or not they are unenforceable or
not allowable due to the existence of an Insolvency Proceeding involving any
Grantor.
4. SECURITY
AGREEMENT. The security interests granted pursuant to this
Trademark Security Agreement are granted in conjunction with the security
interests granted to the Secured Party, for the benefit of itself and the
Buyers, pursuant to the Security Agreement. Each Grantor hereby
acknowledges and affirms that the rights and remedies of the Secured Party with
respect to its security interests in the Trademark Collateral made and granted
hereby are more fully set forth in the Security Agreement, the terms and
provisions of which are incorporated by reference herein as if fully set forth
herein.
5. AUTHORIZATION TO
SUPPLEMENT. If any Grantor shall obtain rights to any new
trademarks, the provisions of this Trademark Security Agreement shall
automatically apply thereto. Grantors shall give prompt notice in writing to the
Secured Party with respect to any such new trademarks or renewal or extension of
any trademark registration. Without limiting Grantors’
obligations under this Section 5, Grantors
hereby authorize the Secured Party unilaterally to modify this Agreement by
amending Schedule
I to include any such new trademark rights of
Grantors. Notwithstanding the foregoing, no failure to so modify this
Trademark Security Agreement or amend Schedule I shall in
any way affect, invalidate or detract from the Secured Party’s continuing
security interest in all Collateral, whether or not listed on Schedule
I.
6. COUNTERPARTS. This
Trademark Security Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all such separate counterparts
shall together constitute but one and the same instrument. In proving
this Trademark Security Agreement or any other Purchase Document in any judicial
proceedings, it shall not be necessary to produce or account for more than one
such counterpart signed by the party against whom such enforcement is
sought. Any signatures delivered by a party by facsimile transmission
or by e-mail transmission shall be deemed an original signature
hereto.
7. CONSTRUCTION. Unless
the context of this Trademark Security Agreement or any other Purchase Document
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the terms “includes”
and “including” are not limiting, and the term “or” has, except where
otherwise indicated, the inclusive meaning represented by the phrase
“and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and
similar terms in this Trademark Security Agreement or any other Purchase
Document refer to this Trademark Security Agreement or such other Purchase
Document, as the case may be, as a whole and not to any particular provision of
this Trademark Security Agreement or such other Purchase Document, as the case
may be. Section, subsection, clause, schedule, and exhibit references
herein are to this Agreement unless otherwise specified. Any
reference in this Trademark Security Agreement or in any other Purchase Document
to any agreement, instrument, or document shall include all alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements, thereto and thereof, as applicable
(subject to any restrictions on such alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, joinders, and
supplements set forth herein). Any reference herein or in any other
Purchase Document to the satisfaction or repayment in full of the Secured
Obligations shall mean the repayment in full in cash of all Secured Obligations
other than unasserted contingent indemnification Secured
Obligations. Any reference herein to any Person shall be construed to
include such Person’s successors and assigns. Any requirement of a
writing contained herein or in any other Purchase Document shall be satisfied by
the transmission of a Record and any Record so transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
-37-
IN
WITNESS WHEREOF, each Grantor has caused this Trademark Security Agreement to be
executed and delivered by its duly authorized officer as of the date first set
forth above.
|
VALLEY
FORGE COMPOSITE TECHNOLOGIES, INC., a Florida corporation
By:
Name:
Title:
|
|
|
VALLEY
FORGE DETECTION SYSTEMS, INC., a Florida corporation
By:
Name:
Title:
|
|
|
VALLEY
FORGE AEROSPACE, INC., a Florida corporation
By:
Name:
Title:
|
|
|
VALLEY
FORGE IMAGING, INC., a Florida corporation
By:
Name:
Title:
|
|
|
VALLEY
FORGE EMERGING TECHNOLOGIES, INC., a Florida corporation
By:
Name:
Title:
|
-38-
SCHEDULE
I
to
TRADEMARK SECURITY
AGREEMENT
Trademark
Registrations/Applications
|
Grantor
|
Country
|
Xxxx
|
Application/
Registration No.
|
App/Reg
Date
|
Trade
Names
Common Law
Trademarks
Trademarks Not Currently In
Use
Trademark
Licenses
-39-
