SECURITY AGREEMENT
This
SECURITY AGREEMENT, dated as of ___________, 2010 (this “Agreement”), is among
Pubco, a Nevada corporation (“Pubco”), its wholly
owned subsidiary, CommerceTel Corporation, a Nevada corporation (together with
Pubco referred to herein as the “Company”), and the
holders of the Company’s 10% Senior Secured Convertible Bridge Notes due
__________, 2011 and issued on __________, 2010 in the original aggregate
principal amount of $_________ (collectively, the “Notes”) signatory
hereto, their endorsees, transferees and assigns (collectively, the “Secured
Parties”).
WITNESSETH:
WHEREAS,
the Secured Parties have severally agreed to extend the loans to Pubco evidenced
by the Notes; and
WHEREAS,
in order to induce the Secured Parties to extend the loans evidenced by the
Notes, the Company 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 and through the Agent (as defined below), a security interest in
certain property of the Company to secure the prompt payment, performance and
discharge in full of all of the Company’s obligations under the
Notes.
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
Company, 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 limitation, (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 the Company’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
the Company), 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;
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(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 insurance proceeds from the same, judgments and proceeds from the
recovery thereof, investment property and general intangibles respecting
ownership and/or other equity interests in any entities, and any other shares of
capital stock and/or other equity interests of any other direct or indirect
subsidiary of the Company obtained in the future, 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 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”
means, at any time of determination, the majority in interest (based on
then-outstanding principal amounts of Notes at the time of such determination)
of the Secured Parties.
(d)
“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 the Company to the Secured
Parties, including, without limitation, all obligations under this Agreement,
the Notes 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 Notes and the loans
extended pursuant thereto; (ii) any and all other fees, indemnities, costs,
obligations and liabilities of the Company from time to time under or in
connection with this Agreement, the Notes 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
the Company.
(e)
“Organizational
Documents” means the documents by which the Company 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 the Company (such as bylaws, a partnership
agreement or an operating, limited liability or members agreement).
(f) “Permitted Lien” means
the individual and collective reference to the following: (a) liens for taxes,
assessments and other governmental charges or levies not yet due or Liens for
taxes, assessments and other governmental charges or levies being contested in
good faith and by appropriate proceedings for which adequate reserves (in the
good faith judgment of the management of the Company) have been established in
accordance with GAAP; and (b) liens imposed by law which were incurred in the
ordinary course of the Company’s business, such as carriers’, warehousemen’s and
mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in
the ordinary course of the Company’s business, and which (x) do not individually
or in the aggregate materially detract from the value of such property or assets
or materially impair the use thereof in the operation of the business of the
Company and its consolidated Subsidiaries or (y) are being contested in good
faith by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the property or
asset subject to such Lien.
(g)
“Pledged
Securities” shall have the meaning ascribed to such term in Section
4(g).
(h) “UCC” means the
Uniform Commercial Code of the State of California 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.
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2.
Grant of Security
Interest in Collateral. As an inducement for the Secured Parties to
extend the loans as evidenced by the Notes and to secure the complete and timely
payment, performance and discharge in full, as the case may be, of all of the
Obligations, the Company hereby unconditionally and irrevocably pledges, grants
and hypothecates to the Secured Parties a 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 (a “Security Interest”
and, collectively, the “Security
Interests”).
3. Delivery of Certain
Collateral. When requested, the Company 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.
4. Representations, Warranties,
Covenants and Agreements of the Company. Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Secured Parties concurrently herewith (the “ Disclosure Schedules
”), which Disclosure Schedules shall be deemed a part hereof, the Company
represents and warrants to, and covenants and agrees with, the Secured Parties
as follows:
(a) The
Company has the requisite corporate power and authority to enter into this
Agreement and otherwise to carry out its obligations hereunder. The execution,
delivery and performance by the Company of this Agreement and the filings
contemplated therein have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. This
Agreement has been duly executed by the Company and it constitutes the legal,
valid and binding obligation of the Company, enforceable against it 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 Company is the sole owner of the Collateral (except for non-exclusive
licenses granted 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 Interests. Except as set forth on Schedule B attached
hereto, 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. Except as set forth on Schedule B attached
hereto and except pursuant to this Agreement, as long as this Agreement shall be
in effect, the Company shall not execute and shall not knowingly permit to be on
file in any such office or agency any other 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).
(c)
The Company 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 Interests to create in favor of the Secured Parties a
valid, perfected and continuing perfected first priority lien in the
Collateral.
(d)
This Agreement creates in favor of the Secured Parties a valid security
interest in the Collateral, subject only to Permitted Liens 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 execution 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.
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(e)
The Company hereby authorizes the Agent to file one or more financing
statements under the UCC, with respect to the Security Interests, with the
proper filing and recording agencies in any jurisdiction deemed proper by
it.
(f)
The execution, delivery and performance of this Agreement by the Company
does not (i) violate any of the provisions of any of its Organizational
Documents or any judgment, decree, order or award of any court, governmental
body or arbitrator or any applicable law, rule or regulation applicable to it 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 Company debt or otherwise) or other understanding to
which the Company is a party or by which any property or asset of the Company is
bound or affected. If any, all required consents (including, without limitation,
from stockholders or creditors of the Company) necessary for the Company to
enter into and perform its obligations hereunder have been
obtained.
(g)
The capital stock and other equity interests (the “Pledged Securities”)
represent all of the 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.
(h)
The ownership and other equity interests in partnerships and limited
liability companies (if any) included in the Collateral 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.
(i)
Except for Permitted Liens, the Company shall at all times maintain the
liens and Security Interests 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 the terms hereof. The Company hereby agrees to
defend the same against the claims of any and all persons and entities. The
Company shall safeguard and protect all Collateral for the account of the
Secured Parties. At the request of the Agent, the Company will sign and deliver
to the Agent on behalf of 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 Agent and will pay the cost of filing the same in all public
offices wherever filing is, or is deemed by the Agent to be, necessary or
desirable to effect the rights and obligations provided for herein. Without
limiting the generality of the foregoing, the Company shall pay all fees, taxes
and other amounts necessary to maintain the Collateral and the Security
Interests hereunder, and the Company shall obtain and furnish to the Agent 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 Interests
hereunder.
(j)
The Company shall not will transfer, pledge, hypothecate, encumber,
license, sell or otherwise dispose of any of the Collateral (except for
non-exclusive licenses granted in the ordinary course of business and sales of
inventory in the ordinary course of business) without the prior written consent
of a Majority in Interest.
(k) The
Company shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.
(l) The
Company shall maintain with financially sound and reputable insurers, insurance
with respect to the Collateral, including Collateral hereafter acquired, 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. The Company 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 Notes) 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 Company 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 Company; provided , however , that
payments received by the Company 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 on behalf of the Secured Parties and, if
received by the Company, shall be held in trust for the Secured Parties 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.
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(m)
The Company shall promptly execute and deliver to the Agent 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 the Secured Parties’ security
interest in the Collateral.
(n)
The Company 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.
(o)
The Company 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
it that may materially affect the value of the Collateral, the Security Interest
or the rights and remedies of the Secured Parties hereunder.
(p) Except
in the ordinary course of business, the Company may not 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 the Agent
which shall not be unreasonably withheld.
(q) The
Company shall register the pledge of the applicable Pledged Securities on the
books of the Company.
(r) 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, the Company
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 Company and its direct and indirect
subsidiaries; (ii) use its best efforts to obtain resignations of the persons
then serving as officers and directors of the Company and its direct and
indirect subsidiaries, 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 Company and their direct and indirect
subsidiaries.
(s) The
Company will from time to time, at the joint and several expense of the Company,
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 Agent
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.
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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 the Company is
subject or to which it is party.
6.
Defaults. The
following events shall be “Events of
Default”:
(a) The
occurrence of an Event of Default (as defined in the Notes) under the
Notes;
(b) Any
representation or warranty of the Company in this Agreement shall prove to have
been incorrect in any material respect when made;
(c) The
failure by the Company to observe or perform any of its obligations hereunder
for five (5) days after delivery to the Company 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 the Company 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 the Company, or a proceeding shall be commenced by the Company, or by any
governmental authority having jurisdiction over the Company, seeking to
establish the invalidity or unenforceability thereof, or the Company shall deny
that it 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, the Company
shall, upon receipt of any revenue, income, dividend, interest or other sums
subject to the Security Interests, whether payable pursuant to the Notes 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
respective then-currently outstanding principal amount of Notes for application
to the satisfaction of the Obligations.
(b) If
the Company 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 the Company or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or
otherwise), the Company 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 the Company, in the
exact form received together with the necessary endorsements, to be held by
Agent subject to the terms of this Agreement as Collateral.
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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 the Agent, shall have the right to exercise all of the
remedies conferred hereunder and under the Notes, and the Secured Parties shall
have all the rights and remedies of a secured party under the UCC.
(b) The
Agent shall 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
Company 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.
9. Applications of Proceeds. The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy insuring any
portion of the Collateral 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 Agent in enforcing the Secured Parties’ 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 Notes 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
Company 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 Company will be liable for
the deficiency, together with interest thereon, at the rate of 18% 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, the Company 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. Costs and Expenses. The
Company 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 Agent. The Company
shall also pay all other claims and charges which in the reasonable opinion of
the Agent is reasonably likely to prejudice, imperil or otherwise affect the
Collateral or the Security Interests therein. The Company will also, upon
demand, pay to the Agent the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts and
agents, which the Agent, for the benefit of 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 Notes.
11. Term of Agreement. This
Agreement and the Security Interests shall terminate on the date on which all
payments under the Notes have been indefeasibly paid in full and all other
Obligations have been paid or discharged; provided, however, that all
indemnities of the Company 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. Following
termination of this Agreement, the Agent shall take all action and execute all
documents at the expense of the Company required to ensure the termination of
the Security Interest and the prompt return of any Pledged
Securities.
12.
Power of Attorney;
Further Assurances.
(a)
The Company authorizes the Agent, and does hereby make, constitute and
appoint the Agent and its officers, agents, successors or assigns with full
power of substitution, as its true and lawful attorney-in-fact, with power, in
the name of the Agent or the Company, 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
Company, 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 Agent deems
necessary to protect, preserve and realize upon the Collateral and the Security
Interests granted therein in order to effect the intent of this Agreement and
the Notes all as fully and effectually as the Company might or could do; and the
Company 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 the Company
is subject or to which it 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.
8
(b)
On a continuing basis, the Company will make, execute, acknowledge,
deliver, file and record, as the case may be, with the proper filing and
recording agencies in any jurisdiction all such instruments, and take all such
action as may reasonably be deemed necessary or advisable, or as reasonably
requested by the Agent, to perfect the Security Interests granted hereunder and
otherwise to carry out the intent and purposes of this Agreement, or for
assuring and confirming to the Agent the grant or perfection of a perfected
security interest in all the Collateral under the UCC.
(c)
The Company hereby irrevocably appoints the Agent as its attorney-in-fact,
with full authority in the place and in its stead and in its name, from time to
time in the Agent’s discretion, to take any action and to execute any instrument
which the Agent 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 the Company 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 Agent. 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 Notes.
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 Agent 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.
18. Appointment of Agent. The
Secured Parties hereby appoint ______________ 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.
19. Miscellaneous.
(a)
No course of dealing between the Company 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 Notes 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.
9
(b)
All of the rights and remedies of the Secured Parties with respect to the
Collateral, whether established hereby or by the Notes or by any other
agreements, instruments or documents or by law shall be cumulative and may be
exercised singly or concurrently.
(c)
This Agreement, together with the exhibits and schedules hereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into this Agreement and the exhibits and schedules hereto. No provision of this
Agreement may be waived, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by the Company and the
Secured Parties or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought.
(d)
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(e)
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such
right.
(f)
This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of each Secured Party (other than by merger). Any Secured Party may
assign any or all of its rights under this Agreement to any Person to whom such
Secured Party assigns or transfers any Securities, provided such transferee
agrees in writing to be bound, with respect to the transferred Securities, by
the provisions of this Agreement that apply to the “Secured
Parties.”
(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 California, without regard to the
principles of conflicts of law thereof. The Company agrees that all proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and the Notes (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 San Diego. The Company hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of San Diego 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.
10
(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.
[SIGNATURE
PAGES FOLLOW]
11
IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed on the day and year first above written.
PUBCO
By:
_____________________
COMMERCETEL
CORPORATION
By:
_____________________________
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[SIGNATURE
PAGE OF SECURED PARTIES]
Name:
__________________________
Signature of Authorized Signatory of
Investing entity: _________________________
Name of
Authorized Signatory: _________________________
Title of
Authorized Signatory: __________________________
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
13
SCHEDULE
A
Principal
Place of Business of Debtors:
SCHEDULE
B
SCHEDULE
C
14
