SECURITY AGREEMENT
SECURITY
AGREEMENT, dated as of [___________ ___, 200__ (this “Agreement”), among
TechnoConcepts, Inc., a Colorado corporation (the “Company”), and each of
the subsidiaries of the Company signatory hereto (such subsidiaries, the
“Guarantors”) (the Company and Guarantors are collectively referred to as the
“Debtors”) and the holder or holders of the Company’s 8% Secured
Debentures due [___________in the original aggregate principal amount of $[_____
(the “Debentures”), signatory hereto, their endorsees, transferees and assigns
(collectively referred to as, the “Secured Parties”).
WITNESSETH:
WHEREAS,
pursuant to the Debentures, the Secured Parties have severally agreed to extend
the loans to the Company evidenced by the Debentures;
WHEREAS,
pursuant to a certain Subsidiary Guarantee dated as of the date hereof (the
“Guaranty”), the Guarantors have jointly and severally agreed to guaranty
and act as surety for payment of such loans; and
WHEREAS,
in order to induce the Secured Parties to extend the loans evidenced by the
Debentures, each Debtor has agreed to execute and deliver to the Secured Parties
this Agreement and to grant the Secured Parties, pari
passu
with
each other Secured Party, a perfected security interest in certain property
of
such Debtor to secure the prompt payment, performance and discharge in full
of
all of the Company’s obligations under the Debentures and the other Debtor’s
obligations under the Guaranty.
NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1.
Certain
Definitions.
As used
in this Agreement, the following terms shall have the meanings set forth in
this
Section 1. Terms used but not otherwise defined in this Agreement that are
defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial
tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general
intangibles”, “goods”, “instruments”, “inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have
the respective meanings given such terms in Article 9 of the UCC.
(a)
“Collateral”
means
the collateral in which the Secured Parties are granted a security interest
by
this Agreement and which shall include the following personal property of the
Debtors, whether presently owned or existing or hereafter acquired or coming
into existence, wherever situated, and all additions and accessions thereto
and
all substitutions and replacements thereof, and all proceeds, products and
accounts thereof, including, without limitation, all proceeds from the sale
or
transfer of the Collateral and of insurance covering the same and of any tort
claims in connection therewith, and all dividends, interest, cash, notes,
securities, equity interest or other property at any time and from time to
time
acquired, receivable or otherwise distributed in respect of, or in exchange
for,
any or all of the Pledged Securities (as defined below):
(i)
All
goods, including, without limitations, (A) all machinery, equipment, computers,
motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
and
general tools, fixtures, test and quality control devices and other equipment
of
every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with any Debtor’s
businesses and all improvements thereto; and (B) all inventory;
(ii)
All
contract rights and other general intangibles, including, without limitation,
all partnership interests, membership interests, stock or other securities,
rights under any of the Organizational Documents, agreements related to the
Pledged Securities, licenses, distribution and other
agreements, computer software (whether “off-the-shelf”, licensed from any third
party or developed by any Debtor), computer software development rights, leases,
franchises, customer lists, quality control procedures, grants and rights,
goodwill, trademarks, service marks, trade styles, trade names, patents, patent
applications, copyrights, and income tax refunds;
(iii)
All
accounts, together with all instruments, all documents of title representing
any
of the foregoing, all rights in any merchandising, goods, equipment, motor
vehicles and trucks which any of the same may represent, and all right, title,
security and guaranties with respect to each account, including any right of
stoppage in transit;
(iv)
All
documents, letter-of-credit rights, instruments and chattel paper;
(v)
All
commercial tort claims;
(vi)
All
deposit accounts and all cash (whether or not deposited in such deposit
accounts);
(vii)
All
investment property;
(viii)
All supporting obligations; and
(ix)
All
files, records, books of account, business papers, and computer programs;
and
(x)
the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(ix)
above.
Without
limiting the generality of the foregoing, the “Collateral” shall include
all investment property and general intangibles respecting ownership and/or
other equity interests in each Guarantor, including, without limitation, the
shares of capital stock and the other equity interests listed on Schedule
G hereto (as the same may be modified from time to time pursuant to the
terms hereof), and any other shares of capital stock and/or other equity
interests of any other direct or indirect subsidiary of any Debtor obtained
in
the future, other than subsidiaries incorporated in Hong Kong or in the People’s
Republic of China, and, in each case, all certificates representing such shares
and/or equity interests and, in each case, all rights, options, warrants, stock,
other securities and/or equity interests that may hereafter be received,
receivable or distributed in respect of, or exchanged for, any of the foregoing
(all of the foregoing being referred to herein as the “Pledged
Securities”) and all rights arising under or in connection with the Pledged
Securities, including, but not limited to, all dividends, interest and cash.
Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of
any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden
by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the extent permitted by applicable law, this
Agreement shall create a valid security interest in such asset and, to the
extent permitted by applicable law, this Agreement shall create a valid security
interest in the proceeds of such asset.
(b)
“Intellectual
Property”
means
the collective reference to all rights, priorities and privileges relating
to
intellectual property, whether arising under United States, multinational or
foreign laws or otherwise, including, without limitation, (i) all copyrights
arising under the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether published
or
unpublished, all registrations and recordings thereof, and all applications
in
connection therewith, including, without limitation, all registrations,
recordings and applications in the United States Copyright Office, (ii) all
letters patent of the United States, any other country or any political
subdivision thereof, all reissues and extensions thereof, and all applications
for letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (iii) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade dress, service marks, logos, domain names and other source or
business identifiers, and all goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings thereof, and
all
applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, and all common law rights related thereto, (iv) all trade secrets
arising under the laws of the United States, any other country or any political
subdivision thereof, (v) all rights to obtain any reissues, renewals or
extensions of the foregoing, (vi) all licenses for any of the foregoing, and
(vii)
all
causes of action for infringement of the foregoing.
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(c)
“Majority in Interest” shall mean, at any time of determination, the
majority in interest (based on then-outstanding principal amounts of Debentures
at the time of such determination) of the Secured Parties.
(d)
“Necessary Endorsement” shall mean undated stock powers endorsed in blank
or other proper instruments of assignment duly executed and such other
instruments or documents as the Agent (as that term is defined below) may
reasonably request.
(e)
“Obligations”
means
all of the liabilities and obligations (primary, secondary, direct, contingent,
sole, joint or several) due or to become due, or that are now or may be
hereafter contracted or acquired, or owing to, of any Debtor to the Secured
Parties, including, without limitation, all obligations under this Agreement,
the Debentures, the Guaranty and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith, in
each
case, whether now or hereafter existing, voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion
of
such obligations or liabilities that are paid, to the extent all or any part
of
such payment is avoided or recovered directly or indirectly from any of the
Secured Parties as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or modified from
time to time. Without limiting the generality of the foregoing, the term
“Obligations” shall include, without limitation: (i) principal of, and interest
on the Debentures and the loans extended pursuant thereto; (ii) any and all
other fees, indemnities, costs, obligations and liabilities of the Debtors
from
time to time under or in connection with this Agreement, the Debentures, the
Guaranty and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith; and (iii) all amounts
(including but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the obligations to pay
such amounts are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any Debtor.
(f)
“Organizational Documents” means with respect to any Debtor, the
documents by which such Debtor was organized (such as a certificate of
incorporation, certificate of limited partnership or articles of organization,
and including, without limitation, any certificates of designation for preferred
stock or other forms of preferred equity) and which relate to the internal
governance of such Debtor (such as bylaws, a partnership agreement or an
operating, limited liability or members agreement).
(g)
“UCC” means the Uniform Commercial Code of the State of New York and or
any other applicable law of any state or states which has jurisdiction with
respect to all, or any portion of, the Collateral or this Agreement, from time
to time. It is the intent of the parties that defined terms in the UCC should
be
construed in their broadest sense so that the term “Collateral” will be
construed in its broadest sense. Accordingly if there are, from time to time,
changes to defined terms in the UCC that broaden the definitions, they are
incorporated herein and if existing definitions in the UCC are broader than
the
amended definitions, the existing ones shall be controlling.
2.
Grant
of Perfected First Priority Security Interest.
As an
inducement for the Secured Parties to extend the loans as evidenced by the
Debentures and to secure the complete and timely payment, performance
and discharge
in full, as the case may be, of all of the Obligations, each Debtor hereby
unconditionally and irrevocably pledges, grants and hypothecates to the Secured
Parties a continuing and perfected security interest in and to, a lien upon
and
a right of set-off against all of their respective right, title and interest
of
whatsoever kind and nature in and to, the Collateral (the “Security
Interest”).
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3.
Delivery
of Certain Collateral.
Contemporaneously or prior to the execution of this Agreement, each Debtor
shall
deliver or cause to be delivered to the Agent (a) any and all certificates
and
other instruments representing or evidencing the Pledged Securities, and (b)
any
and all certificates and other instruments or documents representing any of
the
other Collateral, in each case, together with all Necessary Endorsements. The
Debtors are, contemporaneously with the execution hereof, delivering to Agent,
or have previously delivered to Agent, a true and correct copy of each
Organizational Document governing any of the Pledged Securities.
4.
Representations,
Warranties, Covenants and Agreements of the Debtors.
Each
Debtor represents and warrants to, and covenants and agrees with, the Secured
Parties as follows:
(a)
Each
Debtor has the requisite corporate, partnership, limited liability company
or
other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder. The execution, delivery and performance by each
Debtor of this Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no further
action is required by such Debtor. This Agreement has been duly executed by
each
Debtor. This Agreement constitutes the legal, valid and binding obligation
of
each Debtor, enforceable against each Debtor in accordance with its terms except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors and by general principles of equity.
(b)
The
Debtors have no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of its
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule A attached hereto. Except as specifically
set forth on Schedule A, each Debtor is the record owner of the real
property where such Collateral is located, and there exist no mortgages or
other
liens on any such real property except for Permitted Liens (as defined in the
Debentures). Except as disclosed on Schedule A, none of such Collateral
is in the possession of any consignee, bailee, warehouseman, agent or processor.
(c)
Except for Permitted Liens (as defined in the Debentures) and except as set
forth on Schedule B attached hereto, the Debtors are the sole owner of
the Collateral (except for non-exclusive licenses granted by any Debtor in
the
ordinary course of business), free and clear of any liens, security interests,
encumbrances, rights or claims, and are fully authorized to grant the Security
Interest. There is not on file in any governmental or regulatory authority,
agency or recording office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other than those
that
will be filed in favor of the Secured Parties pursuant to this Agreement)
covering or affecting any of the Collateral. So long as this Agreement shall
be
in effect, the Debtors shall not execute and shall not knowingly permit to
be on
file in any such office or agency any such financing statement or other document
or instrument (except to the extent filed or recorded in favor of the Secured
Parties pursuant to the terms of this Agreement). With respect to Permitted
Liens in connection with the Debtors’ Series A Secured Subordinated Promissory
Notes (“Series A Notes”), the rights of the Secured Parties are subject
to an Inter-Creditor Agreement between the Secured Parties and certain holders
of the Series A Notes (“Inter-Creditor Agreement”), the form of which is
attached hereto as Annex C. The
Agent is hereby explicitly granted authority to execute the Inter-Creditor
Agreement on behalf of the Secured Parties.
(d)
No
written claim has been received that any Collateral or Debtor's use of any
Collateral violates the rights of any third party. There has been no adverse
decision to any Debtor's claim of ownership rights in or exclusive rights to
use
the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
such Collateral in full force and effect, and there is no proceeding involving
said rights pending or, to the best knowledge of any Debtor, overtly threatened
before any court, judicial body, administrative or regulatory agency, arbitrator
or other governmental authority.
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(e)
Each
Debtor shall at all times maintain its books of account and records relating
to
the Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule A attached hereto and may not relocate
such books of account and records or tangible Collateral unless it delivers
to
the Secured Parties at least 30 days prior to such relocation (i) written notice
of such relocation and the new location thereof (which must be within the United
States) and (ii) evidence that appropriate financing statements under the UCC
and other necessary documents have been filed and recorded and other steps
have
been taken to perfect the Security Interest to create in favor of the Secured
Parties a valid, perfected and continuing perfected first priority lien in
the
Collateral.
(f)
This
Agreement creates in favor of the Secured Parties a valid, security interest
in
the Collateral, subject only to Permitted Liens (as defined in the Debentures)
securing the payment and performance of the Obligations. Upon making the filings
described in the immediately following paragraph, all security interests created
hereunder in any Collateral which may be perfected by filing Uniform Commercial
Code financing statements shall have been duly perfected. Except for the filing
of the Uniform Commercial Code financing statements referred to in the
immediately following paragraph, the recordation of the Intellectual Property
Security Agreement (as defined below) with respect to copyrights and copyright
applications in the United States Copyright Office referred to in paragraph
(m),
the execution and delivery of deposit account control agreements satisfying
the
requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
account of the Debtors, and the delivery of the certificates and other
instruments provided in Section 3, no action is necessary to create, perfect
or
protect the security interests created hereunder. Without limiting the
generality of the foregoing, except for the filing of said financing statements,
the recordation of said Intellectual Property Security Agreement, and the
execution and delivery of said deposit account control agreements, no consent
of
any third parties and no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for (i) the execution, delivery and performance of this Agreement,
(ii)
the creation or perfection of the Security Interests created hereunder in the
Collateral or (iii) the enforcement of the rights of the Secured Parties
hereunder.
(g)
Each
Debtor hereby authorizes the Agent to file one or more financing statements
under the UCC, with respect to the Security Interest with the proper filing
and
recording agencies in any jurisdiction deemed proper by it. Notwithstanding
the
foregoing, such authorization shall not impact the Debtor’s obligation to file
such UCC-1 or other financing statements that may be required to perfect or
maintain the Security Interest.
(h)
The
execution, delivery and performance of this Agreement by the Debtors does not
(i) violate any of the provisions of any Organizational Documents of any Debtor
or any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to any Debtor
or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other
instrument (evidencing any Debtor's debt or otherwise) or other understanding
to
which any Debtor is a party or by which any property or asset of any Debtor
is
bound or affected except as would not reasonably be expected to have a material
adverse effect. No consent (including, without limitation, from stockholders
or
creditors of any Debtor) is required for any Debtor to enter into and perform
its obligations hereunder.
(i)
The
capital stock and other equity interests listed on Schedule G hereto
represent all of the capital stock and other equity interests of the Guarantors,
and represent all capital stock and other equity interests owned, directly
or
indirectly, by the Company. All of the Pledged Securities are validly issued,
fully paid and nonassessable, and the Company is the legal and beneficial owner
of the Pledged Securities, free and clear of any lien, security interest or
other encumbrance except for the security interests created by this Agreement
and other Permitted Liens (as defined in the Debentures).
(j)
The
ownership and other equity interests in partnerships and limited liability
companies (if any) included in the Collateral (the “Pledged Interests”)
by their express terms do not provide that they are
securities governed by Article 8 of the UCC and are not held in a securities
account or by any financial intermediary.
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(k)
Except for Permitted Liens (as defined in the Debentures), each Debtor shall
at
all times maintain the liens and Security Interest provided for hereunder as
valid and perfected first priority liens and security interests in the
Collateral in favor of the Secured Parties until this Agreement and the Security
Interest hereunder shall be terminated pursuant to Section 11 hereof. Each
Debtor hereby agrees to defend the same against the claims of any and all
persons and entities. Each Debtor shall safeguard and protect all Collateral
for
the account of the Secured Parties. At the request of the Secured Parties,
each
Debtor will sign and deliver to the Secured Parties at any time or from time
to
time one or more financing statements pursuant to the UCC in form reasonably
satisfactory to the Secured Parties and will pay the cost of filing the same
in
all public offices wherever filing is, or is deemed by the Secured Parties
to
be, necessary or desirable to effect the rights and obligations provided for
herein. Without limiting the generality of the foregoing, each Debtor shall
pay
all fees, taxes and other amounts necessary to maintain the Collateral and
the
Security Interest hereunder, and each Debtor shall obtain and furnish to the
Secured Parties from time to time, upon demand, such releases and/or
subordinations of claims and liens which may be required to maintain the
priority of the Security Interest hereunder.
(l)
No
Debtor will transfer, pledge, hypothecate, encumber, license, sell or otherwise
dispose of any of the Collateral (except for non-exclusive licenses granted
by a
Debtor in its ordinary course of business and sales of inventory by a Debtor
in
its ordinary course of business) without the prior written consent of a Majority
in Interest.
(m)
Each
Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order, ordinary wear and tear excepted,
and shall not operate or locate any such Collateral (or cause to be operated
or
located) in any area excluded from insurance coverage.
(n)
Each
Debtor shall maintain with financially sound and reputable insurers, insurance
with respect to the Collateral against loss or damage of the kinds and in the
amounts customarily insured against by entities of established reputation having
similar properties similarly situated and in such amounts as are customarily
carried under similar circumstances by other such entities and otherwise as
is
prudent for entities engaged in similar businesses but in any event sufficient
to cover the full replacement cost thereof. Each Debtor shall cause each
insurance policy issued in connection herewith to provide, and the insurer
issuing such policy to certify to the Agent that (a) the Agent will be named
as
lender loss payee and additional insured under each such insurance policy;
(b)
if such insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at least
thirty (30) days after receipt by the Agent of such notice, unless the effect
of
such change is to extend or increase coverage under the policy; and (c) the
Agent will have the right (but no obligation) at its election to remedy any
default in the payment of premiums within thirty (30) days of notice from the
insurer of such default. If no Event of Default (as defined in the Debentures)
exists and if the proceeds arising out of any claim or series of related claims
do not exceed $100,000, loss payments in each instance will be applied by the
applicable Debtor to the repair and/or replacement of property with respect
to
which the loss was incurred to the extent reasonably feasible, and any loss
payments or the balance thereof remaining, to the extent not so applied, shall
be payable to the applicable Debtor, provided, however, that payments received
by any Debtor after an Event of Default occurs and is continuing or in excess
of
$100,000 for any occurrence or series of related occurrences shall be paid
to
the Agent and, if received by such Debtor, shall be held in trust for and
immediately paid over to the Agent unless otherwise directed in writing by
the
Agent. Copies of such policies or the related certificates, in each case, naming
the Agent as lender loss payee and additional insured shall be delivered to
the
Agent at least annually and at the time any new policy of insurance is issued.
(o)
Each
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Parties promptly, in sufficient detail, of any substantial change in
the
Collateral, and of the occurrence
of any event which would have a material adverse effect on the value of the
Collateral or on the Secured Parties’ security interest therein.
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(p)
Each
Debtor shall promptly execute and deliver to the Secured Parties such further
deeds, mortgages, assignments, security agreements, financing statements or
other instruments, documents, certificates and assurances and take such further
action as the Agent may from time to time request and may in its sole discretion
deem necessary to perfect, protect or enforce its security interest in the
Collateral including, without limitation, if applicable, the execution and
delivery of a separate security agreement with respect to each Debtor’s
Intellectual Property (“Intellectual Property Security Agreement”) in
which the Secured Parties have been granted a security interest hereunder,
substantially in a form acceptable to the Secured Parties, which Intellectual
Property Security Agreement, other than as stated therein, shall be subject
to
all of the terms and conditions hereof.
(q)
Each
Debtor shall permit the Secured Parties and their representatives and agents
to
inspect the Collateral during normal business hours upon reasonable advance
notice at any time, and to make copies of records pertaining to the Collateral
as may be reasonably requested by a Secured Party from time to time.
(r)
Each
Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.
(s)
Each
Debtor shall promptly notify the Secured Parties in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by such
Debtor that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Parties hereunder.
(t)
All
information heretofore, herein or hereafter supplied to the Secured Parties
by
or on behalf of any Debtor with respect to the Collateral is accurate and
complete in all material respects as of the date furnished.
(u)
The
Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises
material to its business.
(v)
No
Debtor will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at
least 30 days prior written notice to the Secured Parties of such change and,
at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue perfected the
perfected security Interest granted and evidenced by this Agreement.
(w)
No
Debtor may consign any of its Inventory or sell any of its Inventory on xxxx
and
hold, sale or return, sale on approval, or other conditional terms of sale
without the consent of a Majority in Interest which shall not be unreasonably
withheld, except to the extent such consignment or sale does not exceed 15%
of
the total value of all of the Company’s finished goods in Inventory.
(x)
No
Debtor may relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to the Secured Parties
and
so long as, at the time of such written notification, such Debtor provides
any
financing statements or fixture filings necessary to perfect and continue
perfected the perfected security Interest granted and evidenced by this
Agreement.
(y)
Each
Debtor was organized and remains organized solely under the laws of the state
set forth next to such Debtor’s name in the first paragraph of this Agreement.
Schedule D attached hereto sets forth each Debtor’s organizational
identification number or, if any Debtor does not have one, states that one
does
not exist.
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(z)
(i)
The actual name of each Debtor is the name set forth in the preamble above;
(ii)
no Debtor has any trade names except as set forth on Schedule E attached
hereto; (iii) no Debtor has used any name other than that stated in the preamble
hereto or as set forth on Schedule E for the preceding five years; and
(iv) no entity has merged into any Debtor or been acquired by any Debtor within
the past five years except as set forth on Schedule E.
(aa)
At
any time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by
the
secured party to perfect the security interest created hereby, the applicable
Debtor shall deliver such Collateral to the Agent.
(bb)
Each
Debtor, in its capacity as issuer, hereby agrees to comply with any and all
orders and instructions of Agent regarding the Pledged Interests consistent
with
the terms of this Agreement without the further consent of any Debtor as
contemplated by Section 8-106 (or any successor section) of the UCC. Further,
each Debtor agrees that it shall not enter into a similar agreement (or one
that
would confer “control” within the meaning of Article 8 of the UCC) with any
other person or entity.
(cc)
Each
Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Agent, or, if such delivery is not possible, then to cause
such
tangible chattel paper to contain a legend noting that it is subject to the
security interest created by this Agreement. To the extent that any Collateral
consists of electronic chattel paper, the applicable Debtor shall cause the
underlying chattel paper to be “marked” within the meaning of Section 9-105 of
the UCC (or successor section thereto).
(dd)
If
there is any investment property or deposit account included as Collateral
that
can be perfected by “control” through an account control agreement, the
applicable Debtor shall cause such an account control agreement, in form and
substance in each case satisfactory to the Secured Parties, to be entered into
and delivered to the Secured Parties.
(ee)
To
the extent that any Collateral consists of letter-of-credit rights, the
applicable Debtor shall cause the issuer of each underlying letter of credit
to
consent to an assignment of the proceeds thereof to the Secured Parties.
(ff)
To
the extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Secured Parties in notifying such third
party of the Secured Parties’ security interest in such Collateral and shall use
its best efforts to obtain an acknowledgement and agreement from such third
party with respect to the Collateral, in form and substance satisfactory to
the
Secured Parties.
(gg)
If
any Debtor shall at any time hold or acquire a commercial tort claim, such
Debtor shall promptly notify the Secured Parties in a writing signed by such
Debtor of the particulars thereof and grant to the Secured Parties 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 the Secured Parties.
(hh)
Each
Debtor shall immediately provide written notice to the Secured Parties of any
and all accounts which arise out of contracts with any governmental authority
and, to the extent necessary to perfect or continue the perfected status of
the
Security Interest in such accounts and proceeds thereof, shall execute and
deliver to the Secured Parties an assignment of claims for such accounts and
cooperate with the Secured Parties in taking any other steps required, in their
judgment, under the Federal Assignment of Claims Act or any similar federal,
state or local statute or rule to perfect or continue the perfected status
of
the Security Interest in such accounts and proceeds thereof.
(ii)
Each
Debtor shall cause each subsidiary of such Debtor, other than subsidiaries
incorporation in Hong Kong or in the People’s Republic of China, immediately and
in any event within 30 days that it becomes a subsidiary of such Debtor, to
become a party hereto (an “Additional Debtor”), by executing and
delivering an Additional Debtor Joinder in substantially the form of Annex
A
attached hereto and comply with the provisions hereof applicable to the Debtors.
Concurrent therewith, the Additional Debtor shall deliver replacement schedules
for, or supplements to all other Schedules to (or referred to in) this
Agreement, as applicable, which replacement schedules shall supersede, or
supplements shall modify, the Schedules then in effect. The Additional Debtor
shall also deliver such opinions of counsel, authorizing resolutions, good
standing certificates, incumbency certificates, organizational documents,
financing statements and other information and documentation as the Secured
Parties may reasonably request. Upon delivery of the foregoing to the Secured
Parties, the Additional Debtor shall be and become a party to this Agreement
with the same rights and obligations as the Debtors, for all purposes hereof
as
fully and to the same extent as if it were an original signatory hereto and
shall be deemed to have made the representations, warranties and covenants
set
forth herein as of the date of execution and delivery of such Additional Debtor
Joinder, and all references herein to the “Debtors” shall be deemed to include
each Additional Debtor.
8
(jj)
Each
Debtor shall vote the Pledged Securities to comply with the covenants and
agreements set forth herein and in the Debentures.
(kk)
Each
Debtor shall register the pledge of the applicable Pledged Securities on the
books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities
to register the pledge of the applicable Pledged Securities in the name of
the
Secured Parties on the books of such issuer. Further, except with respect to
certificated securities delivered to the Agent, the applicable Debtor shall
deliver to Agent an acknowledgement of pledge (which, where appropriate, shall
comply with the requirements of the relevant UCC with respect to perfection
by
registration) signed by the issuer of the applicable Pledged Securities, which
acknowledgement shall confirm that: (a) it has registered the pledge on its
books and records; and (b) at any time directed by Agent during the continuation
of an Event of Default, such issuer will transfer the record ownership of such
Pledged Securities into the name of any designee of Agent, will take such steps
as may be necessary to effect the transfer, and will comply with all other
instructions of Agent regarding such Pledged Securities without the further
consent of the applicable Debtor.
(ll)
In
the event that, upon an occurrence of an Event of Default, Agent shall sell
all
or any of the Pledged Securities to another party or parties (herein called
the
“Transferee”) or shall purchase or retain all or any of the Pledged Securities,
each Debtor shall, to the extent applicable: (i) deliver to Agent or the
Transferee, as the case may be, the articles of incorporation, bylaws, minute
books, stock certificate books, corporate seals, deeds, leases, indentures,
agreements, evidences of indebtedness, books of account, financial records
and
all other Organizational Documents and records of the Debtors and their direct
and indirect subsidiaries (other than subsidiaries incorporated in Hong Kong
or
in the People’s Republic of China); (ii) use its best efforts to obtain
resignations of the persons then serving as officers and directors of the
Debtors and their direct and indirect subsidiaries (other than subsidiaries
incorporated in Hong Kong or in the People’s Republic of China), if so
requested; and (iii) use its best efforts to obtain any approvals that are
required by any governmental or regulatory body in order to permit the sale
of
the Pledged Securities to the Transferee or the purchase or retention of the
Pledged Securities by Agent and allow the Transferee or Agent to continue the
business of the Debtors and their direct and indirect subsidiaries (other than
subsidiaries incorporated in Hong Kong or in the People’s Republic of China).
(mm)
Without limiting the generality of the other obligations of the Debtors
hereunder, each Debtor shall promptly (i) cause to be registered at the United
States Copyright Office all of its material copyrights, (ii) cause the security
interest contemplated hereby with respect to all Intellectual Property
registered at the United States Copyright Office or United States Patent and
Trademark Office to be duly recorded at the applicable office, and (iii) give
the Agent notice whenever it acquires (whether absolutely or by license) or
creates any additional material Intellectual Property.
(nn)
Each
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents, and
take all such further action as may be necessary or desirable, or as the Secured
Parties may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Secured
Parties to exercise and enforce their rights and remedies hereunder and with
respect to any Collateral or to otherwise carry out the purposes of this
Agreement.
(oo)
Schedule F attached hereto lists, to the best knowledge of the Debtors,
all of the patents, patent applications, trademarks, trademark applications,
registered copyrights, and domain names owned by any of the Debtors as of the
date hereof. Schedule F lists all material licenses in favor of any
Debtor for the use of any patents, trademarks, copyrights and domain names
as of
the date hereof. All material patents and trademarks of the Debtors have been
duly recorded at the United States Patent and Trademark Office and all material
copyrights of the Debtors have been duly recorded at the United States Copyright
Office. Schedule F shall be updated to the extent necessary to reflect new
or
additional patents, trademarks, copyrights, domain names, and applications
or
licenses therefor, in favor of the Debtors,
9
(pp)
None
of the account debtors or other persons or entities obligated on any of the
Collateral is a governmental authority covered by the Federal Assignment of
Claims Act or any similar federal, state or local statute or rule in respect
of
such Collateral.
5.
Effect
of Pledge on Certain Rights.
If any
of the Collateral subject to this Agreement consists of nonvoting equity or
ownership interests (regardless of class, designation, preference or rights)
that may be converted into voting equity or ownership interests upon the
occurrence of certain events (including, without limitation, upon the transfer
of all or any of the other stock or assets of the issuer), it is agreed that
the
pledge of such equity or ownership interests pursuant to this Agreement or
the
enforcement of any of Agent’s rights hereunder shall not be deemed to be the
type of event which would trigger such conversion rights notwithstanding any
provisions in the Organizational Documents or agreements to which any Debtor
is
subject or to which any Debtor is party.
6.
Defaults.
The
following events shall be “Events of Default”:
(a)
The
occurrence of an Event of Default (as defined in the Debentures) under the
Debentures that continues beyond applicable cure periods;
(b)
Any
representation or warranty of any Debtor in this Agreement shall prove to have
been incorrect in any material respect when made;
(c)
The
failure by any Debtor to observe or perform any of its obligations hereunder
for
ten (10) days after delivery to such Debtor of notice of such failure by or
on
behalf of a Secured Party unless such default is capable of cure but cannot
be
cured within such time frame and such Debtor is using best efforts to cure
same
in a timely fashion; or
(d)
If
any provision of this Agreement 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 Debtor, or a proceeding shall be commenced by any Debtor, or by any
governmental authority having jurisdiction over any Debtor, seeking to establish
the invalidity or unenforceability thereof, or any Debtor shall deny that any
Debtor has any liability or obligation purported to be created under this
Agreement.
7.
Duty
To Hold In Trust.
(a)
Upon
the occurrence of any Event of Default and at any time thereafter, each Debtor
shall, upon receipt of any revenue, income, dividend, interest or other sums
subject to the Security Interest, whether payable pursuant to the Debentures
or
otherwise, or of any check, draft, note, trade acceptance or other instrument
evidencing an obligation to pay any such sum, hold the same in trust for the
Secured Parties and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Secured Parties, pro-rata in proportion to their
initial purchases of Debentures for application to the satisfaction of the
Obligations (and if any Debenture is not outstanding, pro-rata in proportion
to
the initial purchases of the remaining Debentures).
(b)
If
any Debtor shall become entitled to receive or shall receive any securities
or
other property (including, without limitation, shares of Pledged Securities
or
instruments representing Pledged Securities acquired after the date hereof,
or
any options, warrants, rights or other similar property or certificates
representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries, other than subsidiaries incorporated in Hong Kong
or
in the People’s Republic of China) in respect of the Pledged Securities (whether
as an addition to, in substitution of, or in exchange for, such Pledged
Securities or otherwise), such Debtor agrees to (i) accept the
same
as the agent of the Secured Parties; (ii) hold the same in trust on behalf
of
and for the benefit of the Secured Parties; and (iii) to deliver any and all
certificates or instruments evidencing the same to Agent on or before the close
of business on the fifth business day following the receipt thereof by such
Debtor, in the exact form received together with the Necessary Endorsements,
to
be held by Agent subject to the terms of this Agreement as Collateral.
10
8.
Rights
and Remedies Upon Default.
(a)
Upon
the occurrence of any Event of Default and at any time thereafter, the Secured
Parties, acting through any agent appointed by them for such purpose, shall
have
the right to exercise all of the remedies conferred hereunder and under the
Debentures, and the Secured Parties shall have all the rights and remedies
of a
secured party under the UCC. Without limitation, the Secured Parties shall
have
the following rights and powers:
(i)
The
Secured Parties shall have the right to take possession of the Collateral and,
for that purpose, enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed and remove the
same, and each Debtor shall assemble the Collateral and make it available to
the
Secured Parties at places which the Secured Parties shall reasonably select,
whether at such Debtor's premises or elsewhere, and make available to the
Secured Parties, without rent, all of such Debtor’s respective premises and
facilities for the purpose of the Secured Parties taking possession of, removing
or putting the Collateral in saleable or disposable form.
(ii)
Upon
notice to the Debtors by Agent, all rights of each Debtor to exercise the voting
and other consensual rights which it would otherwise be entitled to exercise
and
all rights of each Debtor to receive the dividends and interest which it would
otherwise be authorized to receive and retain, shall cease. Upon such notice,
Agent shall have the right to receive any interest, cash dividends or other
payments on the Collateral and, at the option of Agent, to exercise in such
Agent’s discretion all voting rights pertaining thereto. Without limiting the
generality of the foregoing, Agent shall have the right (but not the obligation)
to exercise all rights with respect to the Collateral as it were the sole and
absolute owners thereof, including, without limitation, to vote and/or to
exchange, at its sole discretion, any or all of the Collateral in connection
with a merger, reorganization, consolidation, recapitalization or other
readjustment concerning or involving the Collateral or any Debtor or any of
its
direct or indirect subsidiaries (other than subsidiaries incorporated in Hong
Kong or in the People’s Republic of China).
(iii)
The
Secured Parties shall have the right to operate the business of each Debtor
using the Collateral and shall have the right to assign, sell, lease or
otherwise dispose of and deliver all or any part of the Collateral, at public
or
private sale or otherwise, either with or without special conditions or
stipulations, for cash or on credit or for future delivery, in such parcel
or
parcels and at such time or times and at such place or places, and upon such
terms and conditions as the Secured Parties may deem commercially reasonable,
all without (except as shall be required by applicable statute and cannot be
waived) advertisement or demand upon or notice to any Debtor or right of
redemption of a Debtor, which are hereby expressly waived. Upon each such sale,
lease, assignment or other transfer of Collateral, the Secured Parties may,
unless prohibited by applicable law which cannot be waived, purchase all or
any
part of the Collateral being sold, free from and discharged of all trusts,
claims, right of redemption and equities of any Debtor, which are hereby waived
and released.
(iv)
The
Secured Parties shall have the right (but not the obligation) to notify any
account debtors and any obligors under instruments or accounts to make payments
directly to the Secured Parties and to enforce the Debtors’ rights against such
account debtors and obligors.
(v)
The
Secured Parties may (but are not obligated to) direct any financial intermediary
or any other person or entity holding any investment property to transfer the
same to the Secured Parties or their designee.
11
(vi)
The
Secured Parties may (but are not obligated to) transfer any or all Intellectual
Property registered in the name of any Debtor at the United States Patent and
Trademark Office and/or Copyright Office into the name of the Secured Parties
or
any designee or any purchaser of any Collateral.
(b)
The
Agent may comply with any applicable law in connection with a disposition of
Collateral and such compliance will not be considered adversely to affect the
commercial reasonableness of any sale of the Collateral. The Agent may sell
the
Collateral without giving any warranties and may specifically disclaim such
warranties. If the Agent sells any of the Collateral on credit, the Debtors
will
only be credited with payments actually made by the purchaser. In addition,
each
Debtor waives any and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the Agent’s rights and remedies hereunder,
including, without limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its rights and remedies
with respect thereto.
(c)
For
the purpose of enabling the Agent to further exercise rights and remedies under
this Section 8 or elsewhere provided by agreement or applicable law, each Debtor
hereby grants to the Agent, for the benefit of the Agent and the Secured
Parties, an irrevocable, nonexclusive license (exercisable without payment
of
royalty or other compensation to such Debtor) to use, license or sublicense
following an Event of Default, any Intellectual Property now owned or hereafter
acquired by such Debtor, and wherever the same may be located, and including
in
such license 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.
9.
Applications
of Proceeds.
The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder shall be applied first, to the expenses of retaking, holding, storing,
processing and preparing for sale, selling, and the like (including, without
limitation, any taxes, fees and other costs incurred in connection therewith)
of
the Collateral, to the reasonable attorneys’ fees and expenses incurred by the
Secured Parties in enforcing their rights hereunder and in connection with
collecting, storing and disposing of the Collateral, and then to satisfaction
of
the Obligations pro rata among the Secured Parties (based on then-outstanding
principal amounts of Debentures at the time of any such determination), and
to
the payment of any other amounts required by applicable law, after which the
Secured Parties shall pay to the applicable Debtor any surplus proceeds. If,
upon the sale, license or other disposition of the Collateral, the proceeds
thereof are insufficient to pay all amounts to which the Secured Parties are
legally entitled, the Debtors will be liable for the deficiency, together with
interest thereon, at the rate of 10% per annum or the lesser amount permitted
by
applicable law (the “Default Rate”), and the reasonable fees of any attorneys
employed by the Secured Parties to collect such deficiency. To the extent
permitted by applicable law, each Debtor waives all claims, damages and demands
against the Secured Parties arising out of the repossession, removal, retention
or sale of the Collateral, unless due solely to the gross negligence or willful
misconduct of the Secured Parties as determined by a final judgment (not subject
to further appeal) of a court of competent jurisdiction.
10.
Securities
Law Provision.
Each
Debtor recognizes that Agent may be limited in its ability to effect a sale
to
the public of all or part of the Pledged Securities by reason of certain
prohibitions in the Securities Act of 1933, as amended, or other federal or
state securities laws (collectively, the “Securities Laws”), and may be
compelled to resort to one or more sales to a restricted group of purchasers
who
may be required to agree to acquire the Pledged Securities for their own
account, for investment and not with a view to the distribution or resale
thereof. Each Debtor agrees that sales so made may be at prices and on terms
less favorable than if the Pledged Securities were sold to the public, and
that
Agent has no obligation to delay the sale of any Pledged Securities for the
period of time necessary to register the Pledged Securities for sale to the
public under the Securities Laws. Each Debtor shall cooperate with Agent in
its
attempt to satisfy any requirements under the Securities Laws (including,
without limitation, registration thereunder if requested by Agent) applicable
to
the sale of the Pledged Securities by Agent.
11.
Costs
and Expenses.
Each
Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
incurred in connection with any filing required hereunder, including without
limitation, any financing statements pursuant to the UCC, continuation
statements, partial releases and/or termination statements related thereto
or
any expenses of any searches reasonably required by the Secured Parties. The
Debtors shall also pay all other
claims and charges which in the reasonable opinion of the Secured Parties might
prejudice, imperil or otherwise affect the Collateral or the Security Interest
therein. The Debtors will also, upon demand, pay to the Secured Parties the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel, the Agent and of any experts and agents, which the
Secured Parties may incur in connection with (i) the enforcement of this
Agreement, (ii) the custody or preservation of, or the sale of, collection
from,
or other realization upon, any of the Collateral, or (iii) the exercise or
enforcement of any of the rights of the Secured Parties under the Debentures.
Until so paid, any fees payable hereunder shall be added to the principal amount
of the Debentures and shall bear interest at the Default Rate.
12
12.
Responsibility
for Collateral.
The
Debtors assume all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or
its
unavailability for any reason. Without limiting the generality of the foregoing,
(a) neither the Agent nor any Secured Party (i) has any duty (either before
or
after an Event of Default) to collect any amounts in respect of the Collateral
or to preserve any rights relating to the Collateral, or (ii) has any obligation
to clean-up or otherwise prepare the Collateral for sale, and (b) each Debtor
shall remain obligated and liable under each contract or agreement included
in
the Collateral to be observed or performed by such Debtor thereunder. Neither
the Agent nor any Secured Party shall have any obligation or liability under
any
such contract or agreement by reason of or arising out of this Agreement or
the
receipt by the Agent or any Secured Party of any payment relating to any of
the
Collateral, nor shall the Agent or any Secured Party be obligated in any manner
to perform any of the obligations of any Debtor under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency of any
payment received by the Agent or any Secured Party in respect of the Collateral
or as to the sufficiency of any performance by any party under any such contract
or agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Agent or to which the Agent or any Secured Party may be entitled
at any time or times.
13.
Security
Interest Absolute.
All
rights of the Secured Parties and all obligations of the Debtors hereunder,
shall be absolute and unconditional, irrespective of: (a) any lack of validity
or enforceability of this Agreement, the Debentures or any agreement entered
into in connection with the foregoing, or any portion hereof or thereof; (b)
any
change in the time, manner or place of payment or performance 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 Debentures or any other agreement
entered into in connection with the foregoing; (c) any exchange, release or
nonperfection of any of the Collateral, or any release or amendment or waiver
of
or consent to departure from any other collateral for, or any guaranty, or
any
other security, for all or any of the Obligations; (d) any action by the Secured
Parties to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the Collateral;
or (e) any other circumstance which might otherwise constitute any legal or
equitable defense available to a Debtor, or a discharge of all or any part
of
the Security Interest granted hereby. Until the Obligations shall have been
paid
and performed in full, the rights of the Secured Parties shall continue even
if
the Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy. Each Debtor expressly
waives presentment, protest, notice of protest, demand, notice of nonpayment
and
demand for performance. In the event that at any time any transfer of any
Collateral or any payment received by the Secured Parties hereunder shall be
deemed by final order of a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under the bankruptcy or insolvency
laws of the United States, or shall be deemed to be otherwise due to any party
other than the Secured Parties, then, in any such event, each Debtor’s
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof. Each Debtor waives all
right
to require the Secured Parties to proceed against any other person or entity
or
to apply any Collateral which the Secured Parties may hold at any time, or
to
marshal assets, or to pursue any other remedy. Each Debtor waives any defense
arising by reason of the application of the statute of limitations to any
obligation secured hereby.
14.
Term
of Agreement.
This
Agreement and the Security Interest shall terminate on the date on which all
payments under the Debentures have been indefeasibly paid in full and all other
Obligations have been paid or discharged; provided, however, that all
indemnities of the Debtors contained in this Agreement (including, without
limitation, Annex B hereto) shall survive and remain operative and in full
force
and effect regardless of the termination of this Agreement.
13
15.
Power
of Attorney; Further Assurances.
(a)
Each
Debtor authorizes the Agent, and does hereby make, constitute and appoint the
Agent and its respective officers, agents, successors or assigns with full
power
of substitution, as such Debtor’s true and lawful attorney-in-fact, with power,
in the name of the various Secured Parties or such Debtor, to, after the
occurrence and during the continuance of an Event of Default, (i) endorse any
note, checks, drafts, money orders or other instruments of payment (including
payments payable under or in respect of any policy of insurance) in respect
of
the Collateral that may come into possession of the Agent; (ii)
to
sign and endorse any financing statement pursuant to the UCC or any invoice,
freight or express xxxx, xxxx of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection with
accounts, and other documents relating to the Collateral; (iii) to pay or
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on or threatened against the Collateral; (iv) to demand,
collect, receipt for, compromise, settle and xxx for monies due in respect
of
the Collateral; (v) to transfer any Intellectual Property or provide licenses
respecting any Intellectual Property; and (vi) generally, at the option of
the
Agent, and at the expense of the Debtors, at any time, or from time to time,
to
execute and deliver any and all documents and instruments and to do all acts
and
things which the Secured Parties deem necessary to protect, preserve and realize
upon the Collateral and the Security Interest granted therein in order to effect
the intent of this Agreement and the Debentures all as fully and effectually
as
the Debtors might or could do; and each Debtor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. This power
of
attorney is coupled with an interest and shall be irrevocable for the term
of
this Agreement and thereafter as long as any of the Obligations shall be
outstanding. The designation set forth herein shall be deemed to amend and
supersede any inconsistent provision in the Organizational Documents or other
documents or agreements to which any Debtor is subject or to which any Debtor
is
a party. Without limiting the generality of the foregoing, after the occurrence
and during the continuance of an Event of Default, each Secured Party is
specifically authorized to execute and file any applications for or instruments
of transfer and assignment of any patents, trademarks, copyrights or other
Intellectual Property with the United States Patent and Trademark Office and
the
United States Copyright Office.
(b)
On a
continuing basis, each Debtor will make, execute, acknowledge, deliver, file
and
record, as the case may be, with the proper filing and recording agencies in
any
jurisdiction, including, without limitation, the jurisdictions indicated on
Schedule C attached hereto, all such instruments, and take all such action
as
may reasonably be deemed necessary or advisable, or as reasonably requested
by
the Secured Parties, to perfect the Security Interest granted hereunder and
otherwise to carry out the intent and purposes of this Agreement, or for
assuring and confirming to the Secured Parties the grant or perfection of a
perfected security interest in all the Collateral under the UCC.
(c)
Each
Debtor hereby irrevocably appoints the Secured Parties as such Debtor’s
attorney-in-fact, with full authority in the place and instead of such Debtor
and in the name of such Debtor, from time to time in the Secured Parties’
discretion, to take any action and to execute any instrument which the Secured
Parties may deem necessary or advisable to accomplish the purposes of this
Agreement, including the filing, in its sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to any
of
the Collateral without the signature of such Debtor where permitted by law,
which financing statements may (but need not) describe the Collateral as “all
assets” or “all personal property” or words of like import, and ratifies all
such actions taken by the Secured Parties. This power of attorney is coupled
with an interest and shall be irrevocable for the term of this Agreement and
thereafter as long as any of the Obligations shall be outstanding.
16.
Notices.
All
notices, requests, demands and other communications hereunder shall be subject
to the notice provision of the Purchase Agreement (as such term is defined
in
the Debentures).
17.
Other
Security.
To the
extent that the Obligations are now or hereafter secured by property other
than
the Collateral or by the guarantee, endorsement or property of any other person,
firm, corporation or other entity,
then the Secured Parties shall have the right, in its sole discretion, to
pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Secured Parties’
rights and remedies hereunder.
14
18.
Appointment
of Agent.
The
Secured Parties hereby appoint the firm of Xxxxxxxxx, Xxxxxx & Xxxxxx to act
as their agent (“Agent”) for purposes of exercising any and all rights and
remedies of the Secured Parties hereunder. Such appointment shall continue
until
revoked in writing by a Majority in Interest, at which time a Majority in
Interest shall appoint a new Agent. The Agent shall have the rights,
responsibilities and immunities set forth in Annex B hereto.
19.
Miscellaneous.
(a)
No
course of dealing between the Debtors and the Secured Parties, nor any failure
to exercise, nor any delay in exercising, on the part of the Secured Parties,
any right, power or privilege hereunder or under the Debentures shall operate
as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder or thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
(b)
All
of the rights and remedies of the Secured Parties with respect to the
Collateral, whether established hereby or by the Debentures or by any other
agreements, instruments or documents or by law shall be cumulative and may
be
exercised singly or concurrently.
(c)
This
Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof and is intended to supersede all prior negotiations,
understandings and agreements with respect thereto. Except as specifically
set
forth in this Agreement, no provision of this Agreement may be modified or
amended except by a written agreement specifically referring to this Agreement
and signed by the parties hereto.
(d)
In
the event any provision of this Agreement is held to be invalid, prohibited
or
unenforceable in any jurisdiction for any reason, unless such provision is
narrowed by judicial construction, this Agreement shall, as to such
jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited
or
unenforceable. If, notwithstanding the foregoing, any provision of this
Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective
to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions
of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other jurisdiction.
(e)
No
waiver of any breach or default or any right under this Agreement shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
or right, whether of the same or similar nature or otherwise.
(f)
This
Agreement shall be binding upon and inure to the benefit of each party hereto
and its successors and assigns.
(g)
Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
(h)
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each Debtor agrees that all proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and the Debentures (whether brought against
a
party hereto or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced exclusively in the
state and federal courts sitting in the City of New York, Borough of Manhattan.
Each Debtor 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
proceeding, any claim that it is not personally subject to the jurisdiction
of
any such court, that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees
that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
and
all right to trial by jury in any legal proceeding arising out of or relating
to
this Agreement or the transactions contemplated hereby. If any party shall
commence a proceeding to enforce any provisions of this Agreement, then the
prevailing party in such proceeding shall be reimbursed by the other party
for
its reasonable attorney’s fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such proceeding.
15
(i)
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(j)
All
Debtors shall jointly and severally be liable for the obligations of each Debtor
to the Secured Parties hereunder.
(k)
Each
Debtor shall indemnify, reimburse and hold harmless the Secured Parties and
their respective partners, members, shareholders, officers, directors, employees
and agents (collectively, “Indemnitees”) from and against any and all
losses, claims, liabilities, damages, penalties, suits, costs and expenses,
of
any kind or nature, (including fees relating to the cost of investigating and
defending any of the foregoing) imposed on, incurred by or asserted against
such
Indemnitee in any way related to or arising from or alleged to arise from this
Agreement or the Collateral, except any such losses, claims, liabilities,
damages, penalties, suits, costs and expenses which result from the gross
negligence or willful misconduct of the Indemnitee as determined by a court
of
competent jurisdiction. This indemnification provision is in addition to, and
not in limitation of, any other indemnification provision in the Debentures,
the
Purchase Agreement (as such term is defined in the Debentures) or any other
agreement, instrument or other document executed or delivered in connection
herewith or therewith.
(l)
Nothing in this Agreement shall be construed to subject Agent or any Secured
Party to liability as a partner in any Debtor or any if its direct or indirect
subsidiaries that is a partnership or as a member in any Debtor or any of its
direct or indirect subsidiaries that is a limited liability company, nor shall
Agent or any Secured Party be deemed to have assumed any obligations under
any
partnership agreement or limited liability company agreement, as applicable,
of
any such Debtor or any if its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be substituted
for such Debtor as a partner or member, as applicable, pursuant hereto.
(m)
To
the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of
any
partner or member, as applicable, of any Debtor or any direct or indirect
subsidiary of any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby grant such consent and approval
and
waive any such noncompliance with the terms of said documents.
[SIGNATURE
PAGES FOLLOW]
16
IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
be
duly executed on the day and year first above written.
|
|
|||
| By: | |||
|
Name:
Title:
|
|||
|
ASANTE NETWORKS, INC.
|
|||
| By: | |||
|
Name:
Title:
|
|||
|
TECHNOCONCEPTS,
INC. (NEVADA)
|
|||
| By: | |||
|
Name:
Title:
|
|||
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
17
[SIGNATURE
PAGE OF HOLDERS TO TECHNOCONCEPTS, INC. SECURITY AGREEMENT]
|
Name
of Investor:
|
|
|
|
Signature
of Investor or Authorized Signatory:
|
||
|
Name
and Title of Authorized Signatory
(if
investor is an Entity)
|
||
|
Name
of Joint Investor (if any):
|
||
|
Signature
of Joint Investor (if any):
|
||
18
SCHEDULES
A - D
Schedule
A
Principal
Place of Business of Debtors:
0000
Xxxxxxxxx Xxxx
Xxxxx
000
Xxx
Xxxx,
XX 00000
Locations
Where Collateral is Located or Stored:
TechnoConcepts,
Inc. Corporate Xxxxxx
00000
Xxxxxxxxx Xxxx. #000
Xxx
Xxxx,
XX 00000 Phone 000-000-0000 Phone 000-000-0000
TechnoConcepts,
Inc. Administrative Xxxxxx
00000
Xxxxxxx Xxxx. # 000
Xxxxxxx
Xxxx, Xx 00000
TechnoConcepts,
Xxx.Xxxxxxxxxxx office
0000
XxXxxx Xx Xxxxx 00-00
Xxxxxx,
XX 00000
TechnoConcepts,
Inc. Engineering office
000
Xxxxx Xxxxxxxx Xxxx.
Xxxxxxxx,
XX 00000
Asante
Networks Corporate Xxxxxx
000
Xxxxx
Xxxxxxxx Xxxx.
Xxxxxxxx,
XX 00000
Asante
Networks Warehouse
0000
Xxxxxxxx Xxxxx
Xxxxxxxx,
XX 00000
Schedule
B
Permitted
Liens: None,
except “Permitted Liens” as set forth in the Debenture
Schedule
C
Jurisdictions
to Perfect Security Interest: Colorado
and California
Schedule
D
| Organizational Identification Numbers: |
Asante Networks, Inc.
TechnoConcepts, Inc. (Nevada)
|
Tax ID 00-0000000
Tax ID 00-0000000
Tax ID 00-0000000
|
SCHEDULES
E - F
Schedule
E
Names
/ Mergers & Acquisitions:
TechnoConcepts,
Inc. (the “Company”, “we”) was organized as a Colorado corporation under the
name Technology Consulting Partners, Inc. (“TCP”) in September 2001. On December
15, 2003, TCP entered into an agreement and plan of merger with TechnoConcepts
Inc., a Nevada corporation, (“TCI Nevada”), under which TCP acquired all of the
issued and outstanding shares of capital stock of TCI Nevada in exchange for
shares of TCP representing a controlling interest in TCP. This transaction
was
completed on February 17, 2004.
In
May
2005, we formed Techno (Hong Kong) Limited, a wholly-owned subsidiary organized
to perform production design and application-specific engineering and to provide
product support in Asia for our microchip products.
In
June
2005, we acquired the assets and significant liabilities of Asanté Technologies
Inc. in exchange for 1,161,170 shares of our common stock, valued at $4.306
per
share, such that the aggregate value of the transaction was $5 million. In
October 2005, we restructured Asanté, merging it into RegalTech Inc., a publicly
traded Delaware corporation. RegalTech's name was changed to Asanté Networks
Inc. (PNK:ASTN). We own shares of Asanté Networks’ preferred stock, which are
convertible into eighty five (85%) percent of Asanté Networks common stock on a
non-dilutable basis.
In
December 2005, we formed Jinshilin Techno as a wholly owned subsidiary, based
in
Shanghai, to provide marketing, sales and technical support for our True
Software Radio™ technology in China.
Schedule
F
Intellectual
Property:
Domain
Names
xxx.xxxxxxxxxxxxxx.xxx
Trademarks
|
Item
|
|
|
Application
|
Filing
|
Registration
|
Reg.
Date
|
Renewal
|
|||||||
|
No.
|
Xxxx
|
Country
|
Serial
No.
|
Date
|
No.
|
or
Status
|
Due
|
|||||||
|
00
000-000
|
TECHNOCONCEPTS
Logo
|
US
|
75/244,343
|
02/19/97
|
2,197,178
|
10/20/98
|
10/20/2008
|
|||||||
|
22
|
TECHNOCONCEPTS
|
US
|
75/532,045
|
08/06/98
|
2,292,497
|
11/16/99
|
11/16/2009
|
|||||||
|
106-010
|
||||||||||||||
|
23
|
RF/D
|
US
|
78/522,970
|
11/24/04
|
-
|
Pending
-
|
||||||||
|
106-011
|
under
final
|
|||||||||||||
|
rejection
|
||||||||||||||
|
00
000-000
|
TRUE
SOFTWARE RADIO
|
US
|
78/522,968
|
11/24/04
|
-
|
Pending
- published for
|
||||||||
|
opposition
|
Patents
See
following page.
SCHEDULE
F (cont’d)
Patents
|
Item
No.
|
Title
|
Country
|
Filed
|
Serial
No.
|
Patent
No.
|
Issue
Date or Status
|
||||||
|
1
|
Differential
Comparator Circuit
|
US
|
10/14/94
|
08/322,986
|
5,563,59
|
Issued
|
||||||
|
106-007
|
8
|
|||||||||||
|
0
000-000
|
Direct
Conversion Delta-Sigma Receiver
|
US
|
02/02/99
|
09/241,994
|
6,748,02
5
|
Issued
|
||||||
|
0
000-000
|
Direct
Conversion Delta-Sigma Receiver (Continuation)
|
US
|
06/02/04
|
10/858,611
|
-
|
Pending
|
||||||
|
4
|
Direct
Conversion Delta-Sigma
|
CN
|
06/07/04
|
200410007143
|
-
|
Pending
- Request for Exam
|
||||||
|
000-000.XX
|
Receiver
|
9.X
|
due
6/7/2007
|
|||||||||
|
5
|
Direct
Conversion Delta-Sigma
|
KR
|
06/07/04
|
10-2004-
|
-
|
Pending
- Request for Exam
|
||||||
|
000-000.XX
|
Receiver
|
0041465
|
due
6/5/2009
|
|||||||||
|
0
000-000
|
Direct
Conversion Delta-Sigma Transmitter
|
US
|
11/26/04
|
10/998,212
|
-
|
Pending
|
||||||
|
7
|
Direct
Conversion Delta-Sigma
|
CN
|
-
|
-
|
-
|
Not
Authorized
|
||||||
|
000-000.XX
|
Transmitter
|
|||||||||||
|
8
|
Direct
Conversion Delta-Sigma
|
EP
|
8/26/05
|
05255261.9
|
-
|
Pending
|
||||||
|
106-
|
Transmitter
|
|||||||||||
|
002.EPO
|
||||||||||||
|
9
|
Direct
Conversion Delta-Sigma
|
HK
|
-
|
-
|
-
|
(Will
be through China)
|
||||||
|
000-000.XX
|
Transmitter
|
|||||||||||
|
10
|
Direct
Conversion Delta-Sigma
|
JP
|
-
|
-
|
-
|
Not
Authorized
|
||||||
|
000-000.XX
|
Transmitter
|
|||||||||||
|
11
|
Direct
Conversion Delta-Sigma
|
KR
|
03/22/05
|
10-2005-
|
-
|
Pending
|
||||||
|
000-000.XX
|
Transmitter
|
0023490
|
||||||||||
|
12
|
Direct
Conversion Delta-Sigma
|
PCT
|
01/10/05
|
PCT/US05/00
|
-
|
Pending
|
||||||
|
106-
|
Transmitter
|
751
|
||||||||||
|
002.PCT
|
||||||||||||
|
13
000-000.XX
|
Direct
Conversion Delta-Sigma Transmitter
|
TW
|
09/06/05
|
94130461
|
-
|
Pending
|
||||||
|
00
000-000
|
Linearizing
Commutating Amplifier (Provisional)
|
US
|
01/21/05
|
60/646,082
|
-
|
Expired
Provisional
|
||||||
|
00
000-000
|
Linearizing
Commutating Amplifier
|
US
|
09/02/05
|
11/219,238
|
-
|
Pending
|
||||||
|
00
000-000
|
Bandpass
Filter for Delta-Sigma Transmitter (Provisional)
|
US
|
01/21/05
|
60/646,059
|
-
|
Expired
Provisional
|
||||||
|
00
000-000
|
Bandpass
Filter for Delta-Sigma Transmitter
|
US
|
01/20/06
|
11/337,189
|
-
|
Pending
|
||||||
|
18
|
Adaptive
Narrow Band Interference
|
US
|
09/30/06
|
60/713,921
|
-
|
Pending
Provisional
|
||||||
|
106-017
|
Canceller
for Broadband Signals
|
|||||||||||
|
(Provisional)
|
||||||||||||
|
19
|
Single
Input, Single Output, Multi-Band RF Front End (Provisional)
|
US
|
-
|
Pending
Provisional
|
||||||||
|
20
|
Low
Power, Low Voltage, Digitally
|
US
|
-
|
Pending
Provisional
|
||||||||
|
Trim-able
Active Back-termination
|
||||||||||||
|
LVDS
driver (Provisional)
|
SCHEDULE
G
Pledged
Securities
All
of
the shares of preferred stock of Asanté Networks, Inc., which are convertible
into eighty five (85%) percent of Asanté Network, Inc’s common stock on a
non-dilutable basis.
ANNEX
A
to
SECURITY
AGREEMENT
FORM
OF ADDITIONAL DEBTOR JOINDER
Security
Agreement dated as of [_____ ___, 200__ made by
[_____________
and
its
subsidiaries party thereto from time to time, as Debtors
to
and in
favor of
the
Secured Parties identified therein (the “Security Agreement”)
Reference
is made to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in, or by reference in, the Security Agreement.
The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
to the Secured Parties referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the
same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth in Section ___ therein
as of the date of execution and delivery of this Additional Debtor Joinder.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY
GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE
FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE
WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.
Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement,
as applicable.
An
executed copy of this Joinder shall be delivered to the Secured Parties, and
the
Secured Parties may rely on the matters set forth herein on or after the date
hereof. This Joinder shall not be modified, amended or terminated without the
prior written consent of the Secured Parties.
IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the
name and on behalf of the undersigned.
[Name
of
Additional Debtor]
By:
Name:
Title:
Address:
Dated:
ANNEX
B
to
SECURITY
AGREEMENT
THE
AGENT
1.
Appointment.
The
Secured Parties (all capitalized terms used herein and not otherwise defined
shall have the respective meanings provided in the Security Agreement to which
this Annex B is attached (the "Agreement")), by their acceptance of the
benefits of the Agreement, hereby designate Xxxxxxxxx, Xxxxxx & Xxxxxx (
“Agent”) as the Agent to act as specified herein and in the Agreement.
Each Secured Party shall be deemed irrevocably to authorize the Agent to take
such action on its behalf under the provisions of the Agreement and any other
Transaction Document (as such term is defined in the Debentures) and to exercise
such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. The Agent
may perform any of its duties hereunder by or through its agents or employees.
2.
Nature
of Duties.
The
Agent shall have no duties or responsibilities except those expressly set forth
in the Agreement. Neither the Agent nor any of its partners, members,
shareholders, officers, directors, employees or agents shall be liable for
any
action taken or omitted by it as such under the Agreement or hereunder or in
connection herewith or therewith, be responsible for the consequence of any
oversight or error of judgment or answerable for any loss, unless caused solely
by its or their gross negligence or willful misconduct as determined by a final
judgment (not subject to further appeal) of a court of competent jurisdiction.
The duties of the Agent shall be mechanical and administrative in nature; the
Agent shall not have by reason of the Agreement or any other Transaction
Document a fiduciary relationship in respect of any Debtor or any Secured Party;
and nothing in the Agreement or any other Transaction Document, expressed or
implied, is intended to or shall be so construed as to impose upon the Agent
any
obligations in respect of the Agreement or any other Transaction Document except
as expressly set forth herein and therein.
3.
Lack
of Reliance on the Agent.
Independently and without reliance upon the Agent, each Secured Party, to the
extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the Company
and its subsidiaries in connection with such Secured Party’s investment in the
Debtors, the creation and continuance of the Obligations, the transactions
contemplated by the Transaction Documents, and the taking or not taking of
any
action in connection therewith, and (ii)
its
own appraisal of the creditworthiness of the Company and its subsidiaries,
and
of the value of the Collateral from time to time, and the Agent shall have
no
duty or responsibility, either initially or on a continuing basis, to provide
any Secured Party with any credit, market or other information with respect
thereto, whether coming into its possession before any Obligations are incurred
or at any time or times thereafter. The Agent shall not be responsible to the
Debtors or any Secured Party for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith, or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority
or
sufficiency of the Agreement or any other Transaction Document, or for the
financial condition of the Debtors or the value of any of the Collateral, or
be
required to make any inquiry concerning either the performance or observance
of
any of the terms, provisions or conditions of the Agreement or any other
Transaction Document, or the financial condition of the Debtors, or the value
of
any of the Collateral, or the existence or possible existence of any default
or
Event of Default under the Agreement, the Debentures or any of the other
Transaction Documents. Anything to the contrary notwithstanding, the Agent
shall
have no obligation whatsoever to any Secured Party to assure that the Collateral
exists or is owned by the Debtors or is cared for, protected or insured or
that
the liens granted pursuant to the Agreement have been properly or sufficiently
or lawfully created, perfected, or enforced or are entitled to any particular
priority.
4.
Certain
Rights of the Agent.
The
Agent shall have the right to take any action with respect to the Collateral,
on
behalf of all of the Secured Parties. The Agent shall have the right to request
instructions from the Secured Parties with respect to any material act or action
(including failure to act) in connection with the Agreement or any other
Transaction Document, and shall be entitled to act or refrain from acting in
accordance with the instructions of Secured Parties holding a majority in
principal amount of Debentures (based on then-outstanding principal amounts
of
Debentures at the time of any such determination); if such instructions are
not
provided despite the
Agent’s request therefor, the Agent shall be entitled to refrain from such act
or taking such action, and if such action is taken, shall be entitled to
appropriate indemnification from the Secured Parties in respect of actions
to be
taken by the Agent; and the Agent shall not incur liability to any person or
entity by reason of so refraining. Without limiting the foregoing, (a) no
Secured Party shall have any right of action whatsoever against the Agent as
a
result of the Agent acting or refraining from acting hereunder in accordance
with the terms of the Agreement or any other Transaction Document, and the
Debtors shall have no right to question or challenge the authority of, or the
instructions given to, the Agent pursuant to the foregoing and (b) the Agent
shall not be required to take any action which the Agent believes (i) could
reasonably be expected to expose it to personal liability or (ii) is contrary
to
this Agreement, the Transaction Documents or applicable law.
5.
Reliance.
The
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, radiogram, order or other document or telephone
message signed, believed by it to be sent or made by the proper person or
entity, and, with respect to all legal matters pertaining to the Agreement
and
the other Transaction Documents and its duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to this Agreement
and the other Transaction Documents and its duties thereunder, upon advice
of
other experts selected by it.
6.
Indemnification.
To the
extent that the Agent is not reimbursed and indemnified by the Debtors, the
Secured Parties will jointly and severally reimburse and indemnify the Agent,
in
proportion to their initially purchased respective principal amounts of
Debentures, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in performing its duties hereunder or under the
Agreement or any other Transaction Document, or in any way relating to or
arising out of the Agreement or any other Transaction Document except for those
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction to have resulted solely from the Agent's own gross
negligence or willful misconduct. Prior to taking any action hereunder as Agent,
the Agent may require each Secured Party to deposit with it sufficient sums
as
it determines in good faith is necessary to protect the Agent for costs and
expenses associated with taking such action.
7.
Resignation
by the Agent.
(a)
The
Agent may resign from the performance of all its functions and duties under
the
Agreement and the other Transaction Documents at any time by giving 30 days'
prior written notice (as provided in the Agreement) to the Debtors and the
Secured Parties. Such resignation shall take effect upon the appointment of
a
successor Agent pursuant to clauses (b) and (c) below.
(b)
Upon
any such notice of resignation, the Secured Parties, acting by a Majority in
Interest, shall appoint a successor Agent hereunder.
(c)
If a
successor Agent shall not have been so appointed within said 30-day period,
the
Agent shall then appoint a successor Agent who shall serve as Agent until such
time, if any, as the Secured Parties appoint a successor Agent as provided
above. If a successor Agent has not been appointed within such 30-day period,
the Agent may petition any court of competent jurisdiction or may interplead
the
Debtors and the Secured Parties in a proceeding for the appointment of a
successor Agent, and all fees, including, but not limited to, extraordinary
fees
associated with the filing of interpleader and expenses associated therewith,
shall be payable by the Debtors on demand.
(d)
Upon
the acceptance of any appointment as Agent hereunder by a successor Agent,
such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and the retiring
Agent shall be discharged from its duties and obligations under the Agreement.
After any retiring Agent’s resignation or removal hereunder as Agent, the
provisions of the Agreement including this Annex B shall inure to its benefit
as
to any actions taken or omitted to be taken by it while it was Agent.
8.
Rights
with respect to Collateral.
Each
Secured Party agrees with all other Secured Parties and the Agent (i) that
it
shall not, and shall not attempt to, exercise any rights with respect to its
security interest in the Collateral, whether pursuant to any other agreement
or
otherwise (other than pursuant to this Agreement), or take or institute any
action against the Agent or any of the other Secured Parties in respect of
the
Collateral or its rights hereunder (other than any such action arising from
the
breach of this Agreement) and (ii) that such Secured Party has no other rights
with respect to the Collateral other than as set forth in this Agreement and
the
other Transaction Documents.
The
undersigned hereby accepts appointment as Agent pursuant to the terms of the
Agreement as of this ____ day of _______________, 2007.
| |
|
XXXXXXXXX,
XXXXXX
& XXXXXX |
|
By: |
||
ANNEX
C
to
SECURITY
AGREEMENT
INTER-CREDITOR
AGREEMENT
This
INTER-CREDITOR
AGREEMENT
(the
“Agreement”) is made by and between the holders of the TechnoConcepts,
Inc. Series A Secured Subordinated Promissory Notes (“Existing
Creditors”) and the New Creditors (as defined below), (the Existing
Creditors and the New Creditors are collectively referred to as the
“Creditors”).
The
Agreement shall be effective as of the date of the first issuance of debentures
to the New Creditors (the “Effective Date”).
RECITALS
WHEREAS,
the Existing Creditors are the parties to that certain Note Purchase Agreement
dated various dates between May 2006 and January 2007 (the “Purchase
Agreement”) by and between each Existing Creditor and TechnoConcepts, Inc.
(the “Company”) and are the holders of those TechnoConcepts, Inc. Series
A Secured Promissory Notes each maturing one year from issuance for an aggregate
initial issuance amount of $12,408,906.89 executed by the Company in favor
of
Purchasers (the “Existing Indebtedness”), and the Existing Creditors are
the beneficiaries of certain security interests as set forth in Section 1.7
of
such Purchase Agreement;
WHEREAS,
pursuant to those certain Subscription Agreements entered into pursuant to
a
private placement offering which commenced on January 19, 2007 (the
“Subscription Agreements”), the investors signatory thereto (the “New
Creditors”) will be purchasing at least $2,000,000 and up to $6,000,000 of
8% Secured Convertible Debentures Due eighteen months from their date of
issuance from the Company (the “New Indebtedness” and together with the
Existing Indebtedness, the “Indebtedness”);
WHEREAS,
the New Indebtedness will also be secured by all assets of the Company pursuant
to a Security Agreement dated as of each issuance date of the New Indebtedness
(the “Security Agreement”), to which this Annex C is attached;
WHEREAS,
the Creditors wish to memorialize their agreements concerning their respective
rights, duties and obligations to one another with respect to the security
interests granted under the Indebtedness.
NOW,
THEREFORE, in consideration of the mutual covenants herein, their respective
performances and benefits pertaining to the Indebtedness, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
| 1. |
Ranking.
|
| 1.1 |
The
Indebtedness shall rank in the following order of priority:
|
| 1.1.1 |
First,
to any sums secured or owed to the holder of the Company’s 7% Secured
Convertible Debenture (the “2004 Holder”). For clarity, as of
January 19, 2007 the principal balance on such debenture (not including
interest, fees or liquidated damages) is $250,000.
|
| 1.1.2 |
Second,
to any Existing Creditor who is not a party to this Agreement, each
pari
passu to each other. For clarity, as of January 19, 2007, the aggregate
principal balance of the Series A Secured Subordinated Promissory
Notes
(not including interest, fees or liquidated damages) is $10,158,907.
|
| 1.1.3 |
Third,
to any sums secured or owed to the Existing Creditors party to this
Agreement or the New Creditors, paripassu and pro-rata in
proportion to such Creditor’s outstanding principal amounts of
Indebtedness at any given time that a determination needs to be made
of
pro-rata holdings. For clarity, as of the Effective Date: (i) the
holdings
of the 2004 Holder and the Existing Holders who are not a party to
this
Agreement (collectively) shall be no greater than $1,000,000; (ii)
the
pro-rata holdings of the Existing Creditors (collectively) shall
be
no greater than $10,000,000; and (iii) the pro-rata holdings of the
New Creditors (collectively) shall be no greater than $6,000,000.
|
| 1.2 |
If
an Event of Default (as defined under any Indebtedness) occurs and
any
party hereto receives payment from the Company not in compliance
with this
Agreement, the other parties hereto shall be immediately notified
and such
payment shall be delivered to the Collateral Agent (hereinafter defined)
to be held in escrow until such time as the Collateral Agent can
make
distribution to all of the Creditors in proportion to their respective
pro-rata holdings of Indebtedness as set forth above.
|
| 1.3 |
If
an Event of Default occurs and any party hereto collects proceeds
pursuant
to its rights under any Indebtedness, the other parties hereto shall
be
immediately notified and such payment shall be delivered to the Collateral
Agent to be held in escrow until such time as the Collateral Agent
can
make distribution to all of the Creditors in proportion to their
respective pro-rata holdings of Indebtedness as set forth above.
|
| 1.4 |
Notwithstanding
any other provision in this Agreement, adjustments shall be made
between
the Creditors from time to time to reflect the fact that any contingent
obligation taken into account as an obligation under the Indebtedness
becomes satisfied or incapable of maturing into an actual obligation.
Additionally, the Creditors hereby acknowledge that varying maturity
dates
apply to the Existing Indebtedness and varying maturity dates may
apply to
the New Indebtedness. A payment of principal or interest to a Creditor
pursuant to the terms of his or her Indebtedness not subject to an
Event
of Default shall not trigger any requirement for payment to any other
Creditor hereunder unless pursuant to the terms of such Creditor’s
Indebtedness.
|
| 1.5 |
Xxxxxxxxx,
Xxxxxx & Xxxxxx as Collateral Agent for the New Creditors (the
“Collateral Agent”), is hereby authorized to file a UCC-1 with the
Secretary of States of Colorado and California each naming Xxxxxxxxx,
Xxxxxx & Xxxxxx as Collateral Agent as secured party and the Company
as the debtor. Notwithstanding the foregoing, such authorization
shall not
impact the Company’s obligation to file such UCC-1 or other statements
that may be required to perfect or maintain the security interest
relating
to the Collateral.
|
| 1.6 |
Notwithstanding
anything to the contrary contained in the Purchase Agreement, the
Subscription Agreements, the Security Agreement or any document executed
in connection with the New Indebtedness or the Existing Indebtedness
and
irrespective of: (i) the time, order or method of attachment or perfection
of the security interests created in favor of Existing Creditors
and the
New Creditors, (ii) the time or order of filing or recording of financing
statements or other documents filed or recorded to perfect security
interests in any collateral; (iii) anything contained in any filing
or
agreement to which any Creditor now or hereafter may be a party;
and (iv)
the rules for determining perfection or priority under the Uniform
Commercial Code or any other law governing the relative priorities
of
secured creditors, each Creditor acknowledges that (x) all other
Creditors
have a valid security interest in the Collateral and (y) the security
interests of the Creditors in any Collateral pursuant to any outstanding
Indebtedness shall be pari-passu with each other.
|
| 1.7 |
Each
Creditor agrees not to commence any action or proceeding concerning
the
Indebtedness or the Collateral without providing at least one business
day’s notice to all Creditors.
|
| 2. |
Indemnification
by Existing Creditors.
Existing Creditors shall indemnify, defend, and hold harmless New
Creditors and the Collateral Agent against and in respect of any
and all
claims, demands, losses, costs, expenses, obligations, liabilities,
damages, recoveries, and deficiencies, including interest, penalties,
and
reasonable professional and attorneys’ fees, including those arising from
settlement negotiations, that New Creditors and the Collateral Agent,
respectively, shall incur or suffer, which arise, result from, or
relate
to a breach of, or failure by Existing Creditors to perform under
this
Agreement.
|
| 3. |
Indemnification
by New Creditors.
New Creditors shall indemnify, defend, and hold harmless Existing
Creditors and the Collateral Agent against and in respect of any
and all
claims, demands, losses, costs, expenses, obligations, liabilities,
damages, recoveries, and deficiencies, including interest, penalties,
and
reasonable professional and attorneys’ fees, including those arising from
settlement negotiations, that Existing Creditors and the Collateral
Agent,
respectively, shall incur or suffer, which arise, result from, or
relate
to a breach of, or failure by New Creditors to perform under this
Agreement.
|
| 4. |
Indemnification
of Collateral Agent.
To the extent that the Collateral Agent is not reimbursed and indemnified
by the Company, the Existing Creditors and the New Creditors will
jointly
and severally reimburse and indemnify the Collateral Agent, in proportion
to their then outstanding respective principal amounts of Indebtedness,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
of
any kind or nature whatsoever which may be imposed on, incurred by
or
asserted against the Collateral Agent in performing its duties hereunder,
or in any way relating to or arising out of the Agreement except
for those
determined by a final judgment (not subject to further appeal) of
a court
of competent jurisdiction to have resulted solely from the Collateral
Agent's own gross negligence or willful misconduct.
|
| 5. |
Miscellaneous.
|
| 5.1 |
Assignment.
The rights and obligations of the Creditors under this Agreement
may be
assigned to or assumed to a transferee of the Debentures (as defined
in
the Existing Creditors Securities Purchase Agreement and as defined
in the
New Creditors Securities Purchase Agreement), as applicable.
|
| 5.2 |
Binding
Effect.
This Agreement shall be binding on, and shall inure to the benefit
of, the
parties to it and their respective heirs, legal representatives,
and
successors.
|
| 5.3 |
Parties
in Interest.
Except as expressly provided in this Agreement, nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies
under or by reason of this Agreement on any persons other than the
parties
to it and their respective successors and assigns, nor is anything
in this
Agreement intended to relieve or discharge the obligation or liability
of
any third persons to any party to this Agreement, nor shall any provision
give any third persons any right to subrogation or action over against
any
party to this Agreement.
|
| 5.4 |
Entire
Agreement.
This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter contained in it and supersedes all
prior
and contemporaneous agreements, representations and understandings
of the
parties.
|
| 5.5 |
Amendment.
No supplement, modification, or amendment of this Agreement shall
be
binding unless executed in writing by all the parties.
|
| 5.6 |
Waiver.
No waiver of any of the provisions of this Agreement shall be deemed,
or
shall constitute, a waiver of any other provision, whether or not
similar,
nor shall any waiver constitute a continuing waiver. No waiver shall
be
binding unless executed in writing by the party making the waiver.
|
| 5.7 |
Notices.
Notices given under this Agreement shall be delivered as set forth
in the
Purchase Agreement.
|
| 5.8 |
| 5.9 |
Effect
of Headings.
The headings of the Sections of this Agreement are included for
purposes
of convenience only, and shall not affect the construction or
interpretation of any of its provisions.
|
| 5.10 |
Invalidity.
Any provision of this Agreement which is invalid, void, or illegal,
shall
not affect, impair, or invalidate any other provision of this Agreement,
and such other provisions of this Agreement shall remain in full
force and
effect.
|
| 5.11 |
Counterparts.
This Agreement may be executed in multiple counterparts, each of
which may
be executed by less than all of the parties and shall be deemed
to be an
original instrument which shall be enforceable against the parties
actually executing such counterparts and all of which together
shall
constitute one and the same instrument. In lieu of the original
documents,
a facsimile transmission or copy of the original documents shall
be as
effective and enforceable as the original.
|
| 5.12 |
Number
and Gender.
When required by the context of this Agreement, each number (singular
and
plural) shall include all numbers, and each gender shall include
all
genders.
|
| 5.13 |
Further
Assurances.
Each party to this Agreement agrees to execute further instruments
as may
be necessary or desirable to carry out this Agreement, provided
the party
requesting such further action shall bear all related costs and
expenses.
|
| 5.14 |
Professional
Fees and Costs.
If any legal or equitable action, arbitration, or other proceeding,
whether on the merits or on motion, are brought or undertaken,
or an
attorney retained, to enforce this Agreement, or because of an
alleged
dispute, breach, default, or misrepresentation in connection with
any of
the provisions of this Agreement, then the successful or prevailing
party
or parties in such undertaking (or the party that would prevail
if an
action were brought) shall be entitled to recover reasonable attorney's
fees and other professional fees and other costs incurred in such
action,
proceeding, or discussions, in addition to any other relief to
which such
party may be entitled. The parties intend this provision to be
given the
most liberal construction possible and to apply to any circumstances
in
which such party reasonably incurs expenses.
|
| 6. |
Additional
Parties to this Agreement. Any Existing Creditor or New Creditor that
wishes to become a party to this Agreement subsequent to the Effective
Date can become a party hereto (an “Additional Creditor”), by
executing and delivering an Additional Creditor Joinder in substantially
the form of Schedule I attached hereto and shall comply with the
provisions hereof applicable to the Creditors.
|
| 7. |
Termination.
|
| 7.1 |
This
Agreement shall terminate with respect to each Existing Creditor
on the
date on which all payments under the Series A Secured Subordinated
Promissory Notes held by such Existing Creditor have been indefeasibly
paid in full and all other obligations thereunder have been paid
or
discharged.
|
| 7.2 |
This
Agreement shall terminate with respect to each New Creditor on
the date on
which all payments under the 8% Secured Convertible Debentures
held by
such New Creditor have been indefeasibly paid in full and all other
obligations thereunder have been paid or discharged.
|
| 7.3 |
Notwithstanding
the foregoing Section 7.1 and 7.2, all indemnities of the Existing
Creditors and the New Creditors contained in this Agreement shall
survive
and remain operative and in full force and effect regardless of
the
termination of this Agreement..
|
|
*************************
|
[SIGNATURE
PAGE TO INTERCREDITOR AGREEMENT]
IN
WITNESS WHEREOF, this Agreement has been duly executed by the Creditors as
of
the day and year first written above.
EXISTING
CREDITORS:
Print
Name: __________________________________________
By:
________________________________________________
Name:
Title:
Address
for Notices:
___________________________________________________
___________________________________________________
NEW
CREDITORS:
Print
Name: __________________________________________
By:
________________________________________________
Name:
Title:
Address
for Notices:
___________________________________________________
___________________________________________________
Exhibit
I to Inter-Creditor Agreement
FORM
OF ADDITIONAL CREDITOR JOINDER
Inter-Creditor
Agreement dated as of [_____ ___, 200__ made by
the
Existing Creditors and the New Creditors identified therein
(the
“Inter-Creditor Agreement”)
with
respect to certain Indebtedness issued by
TechnoConcepts,
Inc. (the “Company”)
Reference
is made to the Inter-Creditor Agreement as defined above; capitalized terms
used
herein and not otherwise defined herein shall have the meanings given to such
terms in, or by reference in, the Inter-Creditor Agreement.
The
undersigned hereby agrees that upon delivery of this Additional Creditor Joinder
to the Collateral Agent referred to in the Inter-Creditor Agreement, the
undersigned shall (a) be an Additional Creditor under the Security Agreement,
(b) have all the rights and obligations of the Existing Creditors or the New
Creditors, as applicable, under the Inter-Creditor Agreement as fully and to
the
same extent as if the undersigned was an original signatory thereto and (c)
be
deemed to have made the representations and warranties set forth therein as
of
the date of execution and delivery of this Additional Creditor Joinder. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY
ACKNOWLEDGES THE RESPECTIVE RIGHTS, DUTIES AND OBLIGATIONS OF THE CREDITORS
TO
ONE ANOTHER WITH RESPECT TO THE SECURITY INTERESTS GRANTED UNDER THE
INDEBTEDNESS AS MORE FULLY SET FORTH IN THE INTER-CREDITOR AGREEMENT.
An
executed copy of this Joinder shall be delivered to the Collateral Agent, and
the Collateral Agent may rely on the matters set forth herein on or after the
date hereof. This Joinder shall not be modified, amended or terminated without
the prior written consent of the Creditors.
IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the
name and on behalf of the undersigned.
|
EXISTING
CREDITORS:
|
NEW CREDITORS: | ||
| Print Name: | Print Name: | ||
|
|
|
||
|
By:
Name:
Title:
|
By:
Name:
Title:
|
||
| Address for Notices: | Address for Notices: | ||
|
|
|
||
|
|
|
Dated:
