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Exhibit 10.2
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of May 15, 2001, between K2 DIGITAL, INC., a
Delaware corporation ("Grantor") and K2 HOLDINGS LLC, a Delaware limited
liability company ("SGI").
WHEREAS, Grantor entered into a Senior Secured Demand Promissory Note
dated of even date herewith (as amended and in effect from time to time, the
"Note"), with SGI, pursuant to which SGI, subject to the terms and conditions
contained therein, has loaned $250,000 to Grantor; and
WHEREAS, it is a condition precedent to SGI's making the loan evidenced by
the Note to Grantor that Grantor execute and deliver to SGI a security agreement
in substantially the form hereof to secure all Obligations (hereinafter
defined);
NOW, THEREFORE, the parties agree as follows:
ARTICLE I. DEFINITIONS
Section 1.1. Definition of Terms Used Herein. All capitalized terms used
herein and not defined herein have the respective meanings provided therefor in
the Note. All terms defined in the Uniform Commercial Code (hereinafter defined)
as in effect from time to time and used herein and not otherwise defined herein
(whether or not such terms are capitalized) have the same definitions herein as
specified therein.
Section 1.2. Definition of Certain Terms Used Herein. As used herein, the
following terms have the following meanings:
"Collateral" means all personal and fixture property of every kind and
nature including without limitation all furniture, fixtures, equipment, raw
materials, inventory, or other goods, accounts, contract rights, rights to the
payment of money, insurance refund claims and all other insurance claims and
proceeds, tort claims, chattel paper, documents, instruments, securities and
other investment property, deposit accounts, rights to proceeds of letters of
credit and all general intangibles including, without limitation, all tax refund
claims, license fees, patents, patent licenses, patent applications, trademarks,
trademark licenses, trademark applications, trade names, copyrights, copyright
licenses, copyright applications, rights to xxx and recover for past
infringement of patents, trademarks and copyrights, computer programs, computer
software, engineering drawings, service marks, customer lists, goodwill, and all
licenses, permits, agreements of any kind or nature pursuant to which Grantor
possesses, uses or has authority to possess or use property (whether tangible or
intangible) of others or others possess, use or have authority to possess or use
property (whether tangible or intangible) of Grantor, and all recorded data of
any kind or nature, regardless of the medium of recording including, without
limitation, all books and records, software, writings, plans, specifications and
schematics; and all proceeds and products of each of the foregoing.
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"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured, waived, or otherwise
remedied during such time) constitute an Event of Default.
"Event of Default" has the meaning specified in the Note.
"Indemnitees" has the meaning specified in Section 7.5(b).
"Lien" means: (i) any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, or contract, and including a
security interest, charge, claim, or lien arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
agreement, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes; (ii) to the extent not included
under clause (i), any reservation, exception, encroachment, easement,
right-of-way, covenant, condition, restriction, lease or other title exception
or encumbrance affecting property; and (iii) any contingent or other agreement
to provide any of the foregoing.
"Note" has the meaning assigned to such term in the first recital of this
Agreement.
"Obligations" means all indebtedness, liabilities, obligations, covenants
and duties of Grantor to SGI of every kind, nature and description, direct or
indirect, absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, now
existing of hereafter arising under or in connection with the Note or this
Agreement.
"Registered Organization" means an entity formed by filing a registration
document with a United States Governmental Authority, such as a corporation,
limited partnership or limited liability company.
"Revised Article 9" has the meaning specified in Section 7.14.
"Security Interest" has the meaning assigned to such term in Section 2.1.
"Uniform Commercial Code" means the Uniform Commercial Code from time to
time in effect in the State of New York.
ARTICLE II. SECURITY INTEREST
Section 2.1. Security Interest. As security for the payment and
performance, in full of the Obligations, and any extensions, renewals,
modifications or refinancings of the Obligations, Grantor hereby bargains,
sells, conveys, assigns, sets over, mortgages, pledges, hypothecates and
transfers to SGI, and hereby grants to SGI, its successors and assigns, a
security interest in, all of Grantor's right, title and interest in, to and
under the Collateral (the "Security Interest").
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Section 2.2. No Assumption of Liability. The Security Interest is granted
as security only and shall not subject SGI to, or in any way alter or modify,
any obligation or liability of Grantor with respect to or arising out of the
Collateral.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
Grantor represents and warrants to SGI that:
Section 3.1. Title and Authority. Grantor has good and valid rights in and
title to the Collateral with respect to which it has purported to grant a
security interest hereunder and has full power and authority to grant to SGI the
Security Interest and to execute, deliver and perform its obligations in
accordance with the terms of this Agreement, without the consent or approval of
any other Person other than any consent or approval which has been obtained.
Section 3.2. Filings; Actions to Achieve Perfection.
Fully executed Uniform Commercial Code financing statements (including fixture
filings, as applicable) or other appropriate filings, recordings or
registrations containing a description of the Collateral have been delivered to
SGI for filing in each United States governmental, municipal or other office
specified in Schedule A, which are all the filings, recordings and registrations
that are necessary to publish notice of and protect the validity of and to
establish a legal, valid and perfected security interest in favor of SGI in
respect of all Collateral in which the Security Interest may be perfected by
filing, recording or registration in the United States (or any political
subdivision thereof) and its territories and possessions, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements or with
respect to the filing of amendments or new filings to reflect the change of
Grantor's name, location, identity or corporate structure. The Debtor's name is
listed in the preamble of this Agreement identically to how it appears on its
Certificate of incorporation or other organizational documents.
Section 3.3. Validity and Priority of Security Interest. The Security
Interest constitutes (a) a legal and valid security interest in all the
Collateral securing the payment and performance of the Obligations, (b) subject
only to the filings described in Section 3.2 above, a perfected security
interest in all Collateral in which a security interest may be perfected by
filing, recording or registration in the United States pursuant to the Uniform
Commercial Code or other applicable law in the United States (or any political
subdivision thereof) and its territories and possessions or any other country,
state or nation (or any political subdivision thereof). The Security Interest is
and shall be prior to any other Lien on any of the Collateral.
Section 3.4. Absence of Other Liens. Grantor's Collateral is owned by
Grantor free and clear of any Lien. Without limiting the foregoing, Grantor has
not filed or consented to any filing described in Section 3.2 in favor of any
Person other than SGI, nor permitted the granting or assignment of a security
interest or permitted perfection of any security interest in the Collateral in
favor of any Person other than SGI.
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ARTICLE IV. COVENANTS
Section 4.1. Change of Name; Location of Collateral; Place of Business,
State of Formation or Organization.
(a) Grantor shall notify SGI in writing promptly of any change (i)
in its corporate name or in any trade name used to identify it in the
conduct of its business or in the ownership of its properties, (ii) in the
location of its chief executive office, its principal place of business,
any office in which it maintains books or records relating to Collateral
owned by it (including the establishment of any such new office or
facility), (iii) in its identity or corporate structure such that a filed
filing made under the Uniform Commercial Code becomes misleading or (iv)
in its Federal Taxpayer Identification Number. In extension of the
foregoing, Grantor shall not effect or permit any change referred to in
the preceding sentence unless all filings have been made under the Uniform
Commercial Code or otherwise that are required in order for SGI to
continue at all times following such change to have a valid, legal and
perfected first priority security interest in all the Collateral.
(b) Without limiting Section 4.1(a), without the prior written
consent of SGI in each instance, Grantor shall not change its (i)
principal residence, if it is an individual, (ii) place of business, if it
has only one place of business and is not a Registered Organization, (iii)
principal place of business, if it has more than one place of business and
is not a Registered Organization, or (iv) state of incorporation,
formation or organization, if it is a Registered Organization.
Section 4.2. Records. Grantor shall maintain, at its own cost and expense,
such complete and accurate records with respect to the Collateral owned by it as
is consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which Grantor is engaged, but in any event to include complete accounting
records indicating all payments and proceeds received with respect to any part
of the Collateral, and, at such time or times as SGI may reasonably request,
promptly to prepare and deliver to SGI a duly certified schedule or schedules in
form and detail satisfactory to SGI showing the identity, amount and location of
any and all Collateral.
Section 4.3. Periodic Certification; Notice of Changes. In the event there
should at any time be any change in the information represented and warranted
herein or in the documents and instruments executed and delivered in connection
herewith, Grantor shall immediately notify SGI in writing of such change (this
notice requirement shall be in extension of and shall not limit or relieve
Grantor of any other covenants hereunder).
Section 4.4. Protection of Security. Grantor shall, at its own cost and
expense, take any and all actions necessary to defend title to the Collateral
against all persons and to defend the Security Interest of SGI in the Collateral
and the priority thereof against any Lien.
Section 4.5. Inspection and Verification. SGI and such persons as SGI may
reasonably designate shall have the right to inspect the Collateral, all records
related thereto (and to make
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extracts and copies from such records) and the premises upon which any of the
Collateral is located, to discuss Grantor's affairs with the officers of Grantor
and its independent accountants and to verify under reasonable procedures the
validity, amount, quality, quantity, value, condition and status of, or any
other matter relating to, the Collateral, including, in the case of collateral
in the possession of any third Person, by contacting any account debtor or third
Person possessing such Collateral for the purpose of making such a verification.
Out-of-pocket expenses in connection with any inspections by representatives of
SGI shall be paid by (a) Grantor with respect to any inspection during the
continuance of a Default or an Event of Default or in which a Default or an
Event of Default is discovered or (b) SGI in any other case.
Section 4.6. Taxes; Encumbrances. At its option, SGI may discharge, Liens
at any time levied or placed on the Collateral and may pay for the maintenance
and preservation of the Collateral to the extent Grantor fails to do so and
Grantor shall reimburse SGI on demand for any payment made or any expense
incurred by SGI pursuant to the foregoing authorization; provided, however, that
nothing in this Section shall be interpreted as excusing Grantor from the
performance of, or imposing any obligation on SGI to cure or perform, any
covenants or other obligation of Grantor with respect to any Lien or maintenance
or preservation of Collateral as set forth herein.
Section 4.7. Use and Disposition of Collateral. Grantor shall not make or
permit to be made an assignment, pledge or hypothecation of the Collateral or
shall grant any other Lien in respect of the Collateral. Grantor shall not make
or permit to be made any transfer of the Collateral and Grantor shall remain at
all times in possession of the Collateral owned by it.
Section 4.8. Insurance/Notice of Loss. Within a reasonable period of time
following the date of this Agreement, Grantor, at its own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage to
the Collateral. In extension of the foregoing and without limitation, such
insurance shall be payable to SGI as loss payee under a "standard" loss payee
clause, and SGI shall be listed as an "additional insured" on Grantor's general
liability insurance. Such insurance shall not be terminated, cancelled or not
renewed for any reason, including non-payment of insurance premiums, unless the
insurer shall have provided SGI at least 30 days prior written notice. Grantor
irrevocably makes, constitutes and appoints SGI (and all officers, employees or
agents designated by SGI) as its true and lawful agent and attorney-in-fact for
the purpose, during the continuance of an Event of Default, of making, settling
and adjusting claims in respect of Collateral under policies of insurance,
endorsing the name of Grantor on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance and for making all
determinations and decisions with respect thereto. In the event that Grantor at
any time or times shall fail to obtain or maintain any of the policies of
insurance required hereby or to pay any premium in whole or part relating
thereto, SGI may, without waiving or releasing any obligation or liability of
Grantor hereunder or any Event of Default, in its sole discretion, obtain and
maintain such policies of insurance and pay such premium and take any other
actions with respect thereto as SGI deems advisable. All sums disbursed by SGI
in connection and in accordance with this Section, including reasonable
attorneys' fees, court costs, expenses and other charges relating thereto, shall
be payable, jointly and severally upon demand, by Grantor to SGI and shall be
additional Obligations secured hereby. Grantor shall promptly notify SGI if any
material portion of the Collateral owned or
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held by Grantor is damaged or destroyed. The proceeds of any casualty insurance
in respect of any casualty loss of any of the Collateral shall (i) so long as no
Default or Event of Default has occurred and is continuing, be disbursed to
Grantor for direct application by Grantor solely to the repair or replacement of
Grantor's property so damaged or destroyed, and (ii) in all other circumstances,
be held by SGI as cash collateral for the Obligations. SGI may, at its sole
option, disburse from time to time all or any part of such proceeds so held as
cash collateral, upon such terms and conditions as SGI may reasonably prescribe,
for direct application by SGI solely to the repair or replacement of Grantor's
property so damaged or destroyed, or Grantor may apply all or any part of such
proceeds to the Obligations.
Section 4.9. Legend. Grantor shall legend, in form and manner satisfactory
to SGI, its accounts and its books, records and documents evidencing or
pertaining thereto with an appropriate reference to the fact that such accounts
have been assigned to SGI and that SGI has a security interest therein.
ARTICLE V. POWER OF ATTORNEY; FURTHER ASSURANCES
Section 5.1. Further Assurances. Grantor shall, at its own expense,
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as SGI may from time to time
reasonably request to better assure, preserve, protect and perfect the Security
Interest and the rights and remedies created hereby, including the payment of
any fees and taxes required in connection with the execution and delivery of
this Agreement, the granting of the Security Interest and the filing of any
financing statements (including fixture filings) or other documents in
connection herewith or therewith. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any promissory note
or other instrument, such note or instrument shall be immediately pledged and
delivered to SGI, duly endorsed in a manner satisfactory to SGI.
Section 5.2. Power of Attorney.
(a) Grantor hereby irrevocably (as a power coupled with an interest)
constitutes and appoints SGI (and all officers, employees or agents designated
by SGI), its attorney-in-fact with full power of substitution,
(i) to take all appropriate action and to execute all
documents and instruments that may be necessary or desirable to accomplish
the purposes of this Agreement, and without limiting the generality of the
foregoing, Grantor hereby grants the power to file one or more financing
statements (including fixture filings), continuation statements, filings
with the United States Patent and Trademark Office or United States
Copyright Office (or any successor office or any similar office in any
other country) or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the Security Interest
granted by Grantor, without the signature of Grantor, and naming Grantor
as debtor and SGI as secured party; and
(ii) upon the occurrence and during the continuance of an
Event of Default (i) to receive, endorse, assign and/or deliver any and
all notes, acceptances,
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checks, drafts, money orders or other evidences of payment relating to the
Collateral or any part thereof; (ii) to demand, collect, receive payment
of, give receipt for and give discharges and releases of all or any of the
Collateral; (iii) to sign the name of Grantor on any invoice or xxxx of
lading relating to any of the Collateral; (iv) to send verifications of
accounts to any account debtor or any other Person liable for an account;
(v) to commence and prosecute any and all suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect or
otherwise realize on all or any of the Collateral or to enforce any rights
in respect of any Collateral; (vi) to settle, compromise, compound, adjust
or defend any actions, suits or proceeding relating to all or any of the
Collateral; and (vii) to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of the
Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though SGI were the
absolute owner of the Collateral for all purposes; provided, however, that
nothing herein contained shall be construed as requiring or obligating SGI
to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by SGI, or to present or file any
claim or notice, or to take any action with respect to the Collateral or
any part thereof or the moneys due or to become due in respect thereof or
any property covered thereby, and no action taken or omitted to be taken
by SGI with respect to the Collateral or any part thereof shall give rise
to any defense, counterclaim or offset in favor of Grantor or to any claim
or action against SGI.
(b) The provisions of this Article shall in no event relieve Grantor
of any of its obligations hereunder with respect to the Collateral or any part
thereof or impose any obligation on SGI to proceed in any particular manner with
respect to the Collateral or any part thereof, or in any way limit the exercise
by SGI of any other or further right which it may have on the date of this
Agreement or hereafter, whether hereunder, by law or otherwise.
ARTICLE VI. REMEDIES
Section 6.1. Remedies upon Default.
(a) Upon the occurrence and during the continuance of an Event of
Default, Grantor agrees to deliver each item of its Collateral to SGI on
demand, and it is agreed that SGI shall have the right to take any of or
all the following actions at the same or different times: with or without
legal process and with or without prior notice or demand for performance,
to take possession of the Collateral and without liability for trespass to
enter any premises where the Collateral may be located for the purpose of
taking possession of or removing the Collateral, exercise Grantor's right
to xxxx and receive payment for completed work and, generally, to exercise
any and all rights afforded to a secured party under the Uniform
Commercial Code or other applicable law. Without limiting the generality
of the foregoing, Grantor agrees that SGI shall have the right, subject to
the mandatory requirements of applicable law, to sell or otherwise dispose
of all or any part of the Collateral, at public or private sale or at any
broker's board or on any securities exchange, for cash, upon credit or for
future delivery as SGI shall deem appropriate. SGI shall be authorized at
any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree
that
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they are purchasing the Collateral for their own account for investment
and not with a view to the distribution or sale thereof, and upon
consummation of any such sale SGI shall have the right to assign, transfer
and deliver to the purchaser or purchasers thereof the Collateral so sold.
Each such purchaser at any such sale shall hold the property sold
absolutely, free from any claim or right on the part of Grantor, and
Grantor hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which Grantor now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted.
(b) SGI shall give Grantor ten (10) days' written notice (which
Grantor agrees is reasonable notice within the meaning of Section 9-504(3)
of the Uniform Commercial Code) of SGI's intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the
time and place for such sale and, in the case of a sale at a broker's
board or on a securities exchange, shall state the board or exchange at
which such sale is to be made and the day on which the Collateral, or
portion thereof, will first be offered for sale at such board or exchange.
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as SGI may fix and state in the
notice (if any) of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as SGI may (in its sole and absolute discretion) determine. SGI
shall not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. SGI may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for sale, and
such sale may, without further notice, be made at the time and place to
which the same was so adjourned. In case any sale of all or any part of
the Collateral is made on credit or for future delivery, the Collateral so
sold may be retained by SGI until the sale price is paid by the purchaser
or purchasers thereof, but SGI shall not incur any liability in case any
such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like notice. At any public (or, to the extent permitted
by law, private) sale made pursuant to this Section, SGI may bid for or
purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of Grantor (all said
rights being also hereby waived and released to the extent permitted by
law), the Collateral or any part thereof offered for sale and may make
payment on account thereof by using any claim then due and payable to SGI
from Grantor as a credit against the purchase price, and SGI may, upon
compliance with the terms of sale, hold, retain and dispose of such
property without further accountability to Grantor therefor. For purposes
hereof, a written agreement to purchase the Collateral or any portion
thereof shall be treated as a sale thereof; SGI shall be free to carry out
such sale pursuant to such agreement and Grantor shall not be entitled to
the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after SGI shall have entered into such an
agreement all Events of Default shall have been remedied and the
Obligations paid in full. As an alternative to exercising the power of
sale herein conferred upon it, SGI may proceed by a suit or suits at law
or in equity to foreclose this Agreement and to sell the Collateral or any
portion thereof pursuant to a
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judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.
Section 6.2. Application of Proceeds. SGI shall apply the proceeds of any
collection or sale of the Collateral, as well as any Collateral consisting of
cash, as follows:
(a) FIRST, to the payment of all costs and expenses incurred by SGI
in connection with such collection or sale or otherwise in connection with this
Agreement or any of the Obligations, including all court costs and the fees and
expenses of its agents and legal counsel, and any other costs or expenses
incurred in connection with the exercise of any right or remedy hereunder or
under the Note;
(b) SECOND, to the payment in full of the Obligations; and
(c) THIRD, to Grantor, its successors or assigns, or to whomsoever
may be lawfully entitled to receive the same, or as a court of competent
jurisdiction may otherwise direct.
Subject to the foregoing, SGI shall have absolute discretion as to the
time of application of such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by SGI (including pursuant to a power
of sale granted by statute or under a judicial proceeding), the receipt of any
such proceeds, moneys or balances by SGI or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the Collateral so
sold and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to SGI or such officer
or be answerable in any way for the misapplication thereof.
Section 6.3. Grant of License to Use Intellectual Property. For the
purpose of enabling SGI to exercise rights and remedies under this Article at
such time as SGI shall be lawfully entitled to exercise such rights and
remedies, Grantor hereby grants to SGI an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to Grantor) to
use, license or sub-license any of the Collateral consisting of intellectual
property now owned or hereafter acquired by Grantor, and wherever the same may
be located, and including in such license reasonable access to all media in
which any of the licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout thereof. The use of
such license by SGI may be exercised, at the option of SGI, only upon the
occurrence and during the continuation of an Event of Default (after giving
effect to any applicable cure periods).
ARTICLE VII. MISCELLANEOUS
Section 7.1. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in the Note. All communications and notices hereunder to SGI and to
Grantor shall be given to it at such party's address or telecopy number set
forth below its signature line at the end of this Agreement.
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Section 7.2. Security Interest Absolute. All rights of SGI hereunder, the
Security Interest and all obligations of Grantor hereunder shall be absolute and
unconditional irrespective of (a) any lack of validity or enforceability of the
Note, any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Note or any other agreement or instrument, (c) any exchange, release or
non-perfection of any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Obligations, or (d) any other circumstance that
might otherwise constitute a defense available to, or a discharge of, Grantor in
respect of the Obligations or this Agreement.
Section 7.3. Survival of Agreement. All covenants, agreements,
representations and warranties made by Grantor herein and in the certificates or
other instruments prepared or delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by SGI and shall survive
the making of the loan and the execution and delivery to SGI of the Note,
regardless of any investigation made by SGI or on their behalf; and shall
continue in full force and effect until this Agreement shall terminate.
Section 7.4. Binding Effect; Several Agreement; Successors and Assigns.
This Agreement shall become effective as to Grantor when a counterpart hereof
executed on behalf of Grantor shall have been delivered to SGI and a counterpart
hereof shall have been executed on behalf of SGI, and thereafter shall be
binding upon Grantor and SGI and their respective successors and assigns, and
shall inure to the benefit of Grantor, SGI and their respective successors and
assigns, except that Grantor shall not have the right to assign or transfer its
rights or obligations hereunder or any interest herein or in the Collateral (and
any such assignment or transfer shall be void) except as expressly contemplated
by this Agreement or the Note.
Section 7.5. SGI Fees and Expense; Indemnification.
(a) Grantor agrees to pay upon demand to SGI the amount of any and
all reasonable expenses, including all reasonable fees, disbursements and
other charges of its counsel and of any experts or agents, which SGI may
incur in connection with (i) the administration of this Agreement
(including the customary fees and charges of SGI for any audits conducted
by it or on its behalf with respect to the accounts inventory), (ii) the
custody or preservation of, or the sale of, collection from or other
realization upon any of the Collateral, (iii) the exercise, enforcement or
protection of any of the rights of SGI hereunder or (iv) the failure of
Grantor to perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the
Note, Grantor agrees to indemnify SGI and the agent, contractors and
employees of each of the foregoing (collectively, the "Indemnitees")
against, and hold each of them harmless from, any and all losses, claims,
damages, liabilities and related expenses, including reasonable fees,
disbursements and other charges of counsel, incurred by or asserted
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against any of them arising out of, in any way connected with, or as a
result of, the execution, delivery, or performance of this Agreement or
any agreement or instrument contemplated hereby or any claim, litigation,
investigation or proceeding relating hereto or to the Collateral, whether
or not any Indemnitee is a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by
a court of competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence or willful misconduct of such
Indemnitee.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby. The provisions of this Section
shall remain operative and in full force and effect regardless of the
termination of this Agreement or the Note, the consummation of the
transactions contemplated hereby, the repayment of any of the Obligations,
the invalidity or unenforceability of any term or provision of this
Agreement or the Note, or any investigation made by or on behalf of SGI.
All amounts due under this Section shall be payable on written demand
therefor.
Section 7.6. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
Section 7.7. Waivers; Amendment.
(a) No failure or delay of SGI in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
SGI hereunder and under the Note are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provisions
of this Agreement or the Note or consent to any departure by Grantor therefrom
shall in any event be effective unless the same shall be permitted by paragraph
(b) below, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand on
Grantor in any case shall entitle Grantor to any other or further notice or
demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements, in writing
entered into by SGI and Grantor.
Section 7.8. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE NOTE. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
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NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE NOTE, AS APPLICABLE, BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 7.9. Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
Section 7.10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract. Each party shall be entitled
to rely on a facsimile signature of any other party hereunder as if it were an
original.
Section 7.11. Jurisdiction; Consent to Service of Process.
(a) Grantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or the Note, or
for recognition or enforcement of any judgment, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in
such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that SGI may
otherwise have to bring any action or proceeding relating to this
Agreement or the Note against Grantor or its properties in the courts of
any jurisdiction.
(b) Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the Note in any
New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of
an inconvenient forum to the maintenance of such action or proceeding in
any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.1. Nothing in this
Agreement will affect the right of any party to this Agreement to process
in any other manner permitted by law.
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Section 7.12. Termination. This Agreement and the Security Interest shall
terminate when all the Obligations have been paid in full, at which time SGI
shall execute and deliver to Grantor, at Grantor's expense, all Uniform
Commercial Code termination statements and similar documents which Grantor shall
reasonably request to evidence such termination. Any execution and delivery of
termination statements or documents pursuant to this Section shall be without
recourse to or warranty by SGI.
Section 7.13. Prejudgment Remedy Waiver. Grantor acknowledges that this
Agreement and the Note evidence a commercial transaction and that it could,
under certain circumstances have the right, to notice of and hearing on the
right of SGI to obtain a prejudgment remedy, such as attachment, garnishment
and/or replevin, upon commencing any litigation against Grantor.
Notwithstanding, Grantor hereby waives all rights to notice, judicial hearing or
prior court order to which it might otherwise have the right under any state or
federal statute or constitution in connection with the obtaining by SGI of any
prejudgment remedy by reason of this Agreement, the Note or by reason of the
Obligations or any renewals or extensions of the same. Grantor also waives any
and all objection which it might otherwise assert, now or in the future, to the
exercise or use by SGI of any right of setoff, repossession or self help as may
presently exist under statute or common law.
Section 7.14. Concerning Revised Article 9 of the Uniform Commercial Code.
The parties acknowledge and agree to the following provisions of this Agreement
in anticipation of the possible application, in one or more jurisdictions to the
transactions contemplated hereby, of the revised Article 9 of the Uniform
Commercial Code in the form or substantially in the form approved in 1998 by the
American Law Institute and the National Conference of Commissioners on Uniform
State Law ("Revised Article 9").
(a) In applying the law of any jurisdiction in which Revised Article
9 is in effect, the Collateral is all assets of Grantor, whether or not within
the scope of Revised Article 9. The Collateral shall also include, without
limitation, the following categories of assets as defined in Revised Article 9:
goods (including inventory, equipment and any accessions thereto), instruments
(including promissory notes), documents, accounts (including
health-care-insurance receivables), chattel paper (whether tangible or
electronic), deposit accounts, letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing), commercial tort claims, securities
and all other investment property, general intangibles (including payment
intangibles and software), supporting obligations and any and all proceeds of
any thereof, wherever located, whether now owned and hereafter acquired. If
Grantor shall at any time, whether or not Revised Article 9 is in effect in any
particular jurisdiction, acquire a commercial tort claim, as defined in Revised
Article 9, Grantor shall immediately notify SGI in a writing signed by Grantor
of the brief details thereof and grant to SGI in such writing a security
interest therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance satisfactory to SGI.
SGI may at any time and from time to time, pursuant to the provisions of Article
V, file financing statements, continuation statements and amendments thereto
that describe the Collateral as all assets of Grantor or words of similar effect
and which contain any other information required by Part 5 of Revised Article 9
for the sufficiency or filing office acceptance of any financing statement,
continuation statement or amendment, including whether Grantor is an
organization, the type of organization and any organization identification
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number issued to Grantor. Grantor shall furnish any such information to SGI
promptly upon request. Any such financing statements, continuation statements or
amendments may be signed by SGI on behalf of Grantor, as provided in Article V,
and may be filed at any time in any jurisdiction whether or not Revised Article
9 is then in effect in that jurisdiction.
(b) Grantor shall at any time and from time to time, whether or not
Revised Article 9 is in effect in any particular jurisdiction, take such steps
as SGI may reasonably request for SGI (i) to obtain an acknowledgement, in form
and substance satisfactory to SGI, of any bailee having possession of any of the
Collateral that the bailee holds such Collateral for SGI, (ii) to obtain
"control" of any investment property, deposit accounts, letter-of-credit rights
or electronic chattel paper (as such terms are defined in Revised Article 9 with
corresponding provisions in Sections 9-104, 9-105, 9-106 and 9-107
relating to what constitutes "control" for such items of Collateral), with any
agreements establishing control to be in form and substance satisfactory to SGI,
and (iii) otherwise to insure the continued perfection and priority of SGI's
security interest in any of the Collateral and of the preservation of its rights
therein, whether in anticipation and following the effectiveness of Revised
Article 9 in any jurisdiction.
(c) Nothing contained in this Section shall be construed to narrow
the scope of the security interest granted hereby in any of the Collateral or
the perfection or priority thereof or to impair or otherwise limit any of the
rights, powers, privileges or remedies of SGI hereunder except as (and then only
to the extent) specifically mandated by Revised Article 9 to the extent then
applicable.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first written above.
K2 DIGITAL, INC.
By:___________________________________
Xxxx Xxxxx
Chief Operating Officer
Address for notices:
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: 000 000-0000
Attention: Xxxx Xxxxx
K2 HOLDINGS LLC
By:___________________________________
Name:
Title: Manager
Address for notices:
x/x XXX Partners
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: 000 000-0000
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SCHEDULE A
PLACES OF BUSINESS; CHIEF EXECUTIVE OFFICE; FILING LOCATIONS
Place of Business and Chief Executive Office:
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Filing Locations:
1) Secretary of State of the State of New York
2) New York County
