SECURITY AGREEMENT
SECURITY
AGREEMENT,
dated
as of July 7, 2008 (this "Agreement")
made
by GREEN SCREEN INTERACTIVE SOFTWARE, INC.,
a
Delaware corporation (the "Company"),
and
the undersigned subsidiaries of the Company (each a "Grantor"
and
collectively and together with the Company the "Grantors"),
in
favor of DRIFTWOOD VENTURES, INC., a Delaware corporation (the “Buyer”).
WITNESSETH:
WHEREAS,
the Company and Buyer are parties to the Securities Purchase Agreement, dated
as
of even date herewith (as amended, restated or otherwise modified from time
to
time, the "Securities
Purchase Agreement"),
pursuant to which the Company shall be required to sell, and the Buyer shall
purchase or have the right to purchase, the "Notes" (as defined therein)
issued
pursuant thereto (as such Notes may be amended, restated, replaced or otherwise
modified from time to time in accordance with the terms thereof, collectively,
the "Notes");
WHEREAS,
each of the Grantors (other than the Company) (collectively, the "Guarantors")
has
executed and delivered a Guaranty dated the date hereof (the “Guaranty”)
in
favor of the Buyer, with respect to the Company’s obligations under the
Securities Purchase Agreement, the Notes and the Transaction Documents (as
defined below); and
WHEREAS,
it is a condition precedent to the Buyer entering into the Securities Purchase
Agreement that the Grantors shall have executed and delivered to the Buyer
this
Agreement providing for the grant to the Buyer of a security interest in
all
personal property of each Grantor to secure all of the Company's obligations
under the Securities Purchase Agreement, the "Notes", the “Transaction
Documents” (as defined in the Securities Purchase Agreement) (the “Transaction
Documents”)
and
the Guarantors’ obligations under the Guaranty;
NOW,
THEREFORE, in consideration of the premises and the agreements herein and
in
order to induce the Buyer to perform under the Securities Purchase Agreement,
each Grantor agrees with the Buyer, as follows:
SECTION
1. Definitions.
(a) Reference
is hereby made to the Securities Purchase Agreement and the Notes for a
statement of the terms thereof. All terms used in this Agreement and the
recitals hereto which are defined in the Securities Purchase Agreement, the
Notes or in Articles 8 or 9 of the Uniform Commercial Code as in effect from
time to time in the State of New York (the "Code"),
and
which are not otherwise defined herein shall have the same meanings herein
as
set forth therein; provided
that
terms used herein which are defined in the Code as in effect
in
the State of New York on the date hereof shall continue to have the same
meaning
notwithstanding any replacement or amendment of such statute except as the
Buyer
may otherwise determine.
(b) The
following terms shall have the respective meanings provided for in the Code:
"Accounts", "Cash Proceeds", "Chattel Paper", "Commercial Tort Claim",
"Commodity Account", "Commodity Contracts", "Deposit Account", "Documents",
"Equipment", "Fixtures", "General Intangibles", "Goods", "Instruments",
"Inventory", "Investment Property", "Letter-of-Credit Rights", "Noncash
Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes", "Security",
"Record", "Security Account", "Software", and "Supporting
Obligations".
(c) As
used
in this Agreement, the following terms shall have the respective meanings
indicated below, such meanings to be applicable equally to both the singular
and
plural forms of such terms:
"Copyright
Licenses"
means
all licenses, contracts or other agreements, whether written or oral, naming
any
Grantor as licensee or licensor and providing for the grant of any right
to use
or sell any works covered by any copyright (including, without limitation,
all
Copyright Licenses set forth in Schedule
II
hereto).
"Copyrights"
means
all domestic and foreign copyrights, whether registered or not, including,
without limitation, all copyright rights throughout the universe (whether
now or
hereafter arising) in any and all media (whether now or hereafter developed),
in
and to all original works of authorship fixed in any tangible medium of
expression, acquired or used by any Grantor (including, without limitation,
all
copyrights described in Schedule
II
hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States
or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.
"Event
of Default"
shall
have the meaning set forth in the Notes.
"Insolvency
Proceeding"
means
any proceeding commenced by or against any Person under any provision of
the
Bankruptcy Code (Chapter 11 of Title 11 of the United States Code) or under
any other bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, or extensions generally
with creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"Intellectual
Property"
means
the Copyrights, Trademarks and Patents.
"Licenses"
means
the Copyright Licenses, the Trademark Licenses and the Patent
Licenses.
"Lien"
means
any mortgage, deed of trust, pledge, lien (statutory or otherwise), security
interest, charge or other encumbrance or security or preferential arrangement
of
any nature, including, without limitation, any conditional sale or title
retention arrangement, any capitalized lease and any assignment, deposit
arrangement or financing lease intended as, or having the effect of,
security.
"Patent
Licenses"
means
all licenses, contracts or other agreements, whether written or oral, naming
any
Grantor as licensee or licensor and providing for the grant of any right
to
manufacture, use or sell any invention covered by any Patent (including,
without
limitation, all Patent Licenses set forth in Schedule
II
hereto).
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"Patents"
means
all domestic and foreign letters patent, design patents, utility patents,
industrial designs, inventions, trade secrets, ideas, concepts, methods,
techniques, processes, proprietary information, technology, know-how, formulae,
rights of publicity and other general intangibles of like nature, now existing
or hereafter acquired (including, without limitation, all domestic and foreign
letters patent, design patents, utility patents, industrial designs, inventions,
trade secrets, ideas, concepts, methods, techniques, processes, proprietary
information, technology, know-how and formulae described in Schedule
II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office, or in any similar office or agency of the United
States or any other country or any political subdivision thereof), and all
reissues, divisions, continuations, continuations in part and extensions
or
renewals thereof.
"Trademark
Licenses"
means
all licenses, contracts or other agreements, whether written or oral, naming
any
Grantor as licensor or licensee and providing for the grant of any right
concerning any Trademark, together with any goodwill connected with and
symbolized by any such trademark licenses, contracts or agreements and the
right
to prepare for sale or lease and sell or lease any and all Inventory now
or
hereafter owned by any Grantor and now or hereafter covered by such licenses
(including, without limitation, all Trademark Licenses described in Schedule
II
hereto).
"Trademarks"
means
all domestic and foreign trademarks, service marks, collective marks,
certification marks, trade names, business names, d/b/a's, Internet domain
names, trade styles, designs, logos and other source or business identifiers
and
all general intangibles of like nature, now or hereafter owned, adopted,
acquired or used by any Grantor (including, without limitation, all domestic
and
foreign trademarks, service marks, collective marks, certification marks,
trade
names, business names, d/b/a's, Internet domain names, trade styles, designs,
logos and other source or business identifiers described in Schedule
II
hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any state thereof or any other country or any political subdivision
thereof), and all reissues, extensions or renewals thereof, together with
all
goodwill of the business symbolized by such marks and all customer lists,
formulae and other Records of any Grantor relating to the distribution of
products and services in connection with which any of such marks are
used.
SECTION
2. Grant
of Security Interest.
As
collateral security for all of the "Obligations" (as defined in Section
3
hereof),
each Grantor hereby pledges and assigns to the Buyer, and grants to the Buyer
a
continuing security interest in, all personal property of each Grantor, wherever
located and whether now or hereafter existing and whether now owned or hereafter
acquired, of every kind and description, tangible or intangible (collectively,
the "Collateral"),
including, without limitation, the following:
(a) all
Accounts;
(b) all
Chattel Paper (whether tangible or electronic);
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(c) the
Commercial Tort Claims specified on Schedule
VI
hereto;
(d) all
Deposit Accounts, all cash, and all other property from time to time deposited
therein and the monies and property in the possession or under the control
of
the Buyer or any affiliate, representative, agent or correspondent of the
Buyer;
(e) all
Documents;
(f) all
Equipment;
(g) all
Fixtures;
(h) all
General Intangibles (including, without limitation, all Payment
Intangibles);
(i) all
Goods;
(j) all
Instruments (including, without limitation, Promissory Notes and each
certificated Security);
(k) all
Inventory;
(l) all
Investment Property;
(m) all
Copyrights, Patents and Trademarks, and all Licenses;
(n) all
Letter-of-Credit Rights;
(o) all
Supporting Obligations;
(p) all
other
tangible and intangible personal property of each Grantor (whether or not
subject to the Code), including, without limitation, all bank and other accounts
and all cash and all investments therein, all proceeds, products, offspring,
accessions, rents, profits, income, benefits, substitutions and replacements
of
and to any of the property of any Grantor described in the preceding clauses
of
this Section
2
(including, without limitation, any proceeds of insurance thereon and all
causes
of action, claims and warranties now or hereafter held by each Grantor in
respect of any of the items listed above), and all books, correspondence,
files
and other Records, including, without limitation, all tapes, desks, cards,
Software, data and computer programs in the possession or under the control
of
any Grantor or any other Person from time to time acting for any Grantor
that at
any time evidence or contain information relating to any of the property
described in the preceding clauses of this Section
2
or are
otherwise necessary or helpful in the collection or realization
thereof;
and
(q) all
Proceeds, including all Cash Proceeds and Noncash Proceeds, and products
of any
and all of the foregoing Collateral;
in
each
case howsoever any Grantor's interest therein may arise or appear (whether
by
ownership, security interest, claim or otherwise).
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SECTION
3. Security
for Obligations.
The
security interest created hereby in the Collateral constitutes continuing
collateral security for all of the following obligations, whether now existing
or hereafter incurred (collectively, the "Obligations"):
(a) (i)
the
payment by the Company, as and when due and payable (by scheduled maturity,
required prepayment, acceleration, demand or otherwise), of all amounts from
time to time owing by it in respect of the Securities Purchase Agreement,
the
Notes and the other "Transaction
Documents"
(as
defined in the Securities Purchase Agreement), and (ii) in the case of the
Guarantors, the payment by each of the Guarantors, as and when due and payable
of all "Guaranteed Obligations" under (as defined in) the Guaranty, including,
without limitation, in both cases, (A) all principal of and interest on the
Notes (including, without limitation, all interest that accrues after the
commencement of any Insolvency Proceeding of any Grantor, whether or not
the
payment of such interest is unenforceable or is not allowable due to the
existence of such Insolvency Proceeding), and (B) all fees, commissions,
expense
reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents; and
(b) the
due
performance and observance by each Grantor of all of its other obligations
from
time to time existing in respect of any of the Transaction Documents, for
so
long as the Notes are outstanding.
SECTION
4. Representations
and Warranties.
Each
Grantor represents and warrants as follows:
(a) Schedule
I
hereto
sets forth (i) the exact legal name of the Grantors, and (ii) the organizational
identification number of each Grantor or states that no such organizational
identification number exists.
(b) There
is
no pending or written notice threatening any action, suit, proceeding or
claim
affecting any Grantor before any governmental authority or any arbitrator,
or
any order, judgment or award by any governmental authority or arbitrator,
that
may adversely affect the grant by any Grantor, or the perfection, of the
security interest purported to be created hereby in the Collateral, or the
exercise by the Buyer of any of its rights or remedies hereunder.
(c) All
Federal, state and local tax returns and other reports required by applicable
law to be filed by any Grantor have been filed, or extensions have been
obtained, and all taxes, assessments and other governmental charges imposed
upon
any Grantor or any property of any Grantor (including, without limitation,
all
federal income and social security taxes on employees' wages) and which have
become due and payable on or prior to the date hereof have been paid, except
to
the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves have been set aside for the payment
thereof in accordance with generally accepted accounting principles consistently
applied ("GAAP").
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(d) All
Equipment, Fixtures, Goods and Inventory of each Grantor now existing are,
and
all Equipment, Fixtures, Goods and Inventory of each Grantor hereafter existing
will be, located and/or based at the addresses specified therefor in
Schedule
III
hereto,
except that each Grantor will give the Buyer not less than 30 days' prior
written notice of any change of the location of any such Collateral, other
than
to locations set forth on Schedule
III
and with
respect to which the Buyer has filed financing statements and otherwise fully
perfected its Liens thereon. Each Grantor's chief place of business and chief
executive office, the place where each Grantor keeps its Records concerning
Accounts and all originals of all Chattel Paper are located at the addresses
specified therefor in Schedule
III
hereto.
None of the Accounts is evidenced by Promissory Notes or other Instruments.
Set
forth in Schedule
IV
hereto
is a complete and accurate list, as of the date of this Agreement, of (i)
each
Promissory Note, Security and other Instrument owned by each Grantor and
(ii)
each Deposit Account, Securities Account and Commodities Account of each
Grantor, together with the name and address of each institution at which
each
such Account is maintained, the account number for each such Account and
a
description of the purpose of each such Account. Set forth in Schedule
II hereto
is
a complete and correct list of each trade name used by each Grantor and the
name
of, and each trade name used by, each person from which each Grantor has
acquired any substantial part of the Collateral.
(e) Each
Grantor has delivered to the Buyer complete and correct copies of each License
described in Schedule
II
hereto,
including all schedules and exhibits thereto, which represents all of the
Licenses existing on the date of this Agreement. Each such License sets forth
the entire agreement and understanding of the parties thereto relating to
the
subject matter thereof, and there are no other agreements, arrangements or
understandings, written or oral, relating to the matters covered thereby
or the
rights of each Grantor or any of its affiliates in respect thereof. Each
material License now existing is, and any material License entered into in
the
future will be, the legal, valid and binding obligation of the parties thereto,
enforceable against such parties in accordance with its terms. No default
under
any material License by any such party has occurred, nor does any defense,
offset, deduction or counterclaim exist thereunder in favor of any such
party.
(f) Each
Grantor owns and controls, or otherwise possesses adequate rights to use,
all
Trademarks, Patents and Copyrights, which are the only trademarks, patents,
copyrights, inventions, trade secrets, proprietary information and technology,
know-how, formulae, rights of publicity necessary to conduct its business
in
substantially the same manner as conducted as of the date hereof. Schedule
II
hereto
sets forth a true and complete list of all registered copyrights, issued
Patents, Trademarks, and Licenses annually owned or used by each Grantor
as of
the date hereof. To the best knowledge of the Grantors, all such Intellectual
Property of each Grantor is subsisting and in full force and effect, has
not
been adjudged invalid or unenforceable, is valid and enforceable and has
not
been abandoned in whole or in part. Except as set forth in Schedule II, no
such
Intellectual Property is the subject of any licensing or franchising agreement.
Each Grantor has no knowledge of any conflict with the rights of others to
any
Intellectual Property and, to the best knowledge of the Grantors, each Grantor
is not now infringing or in conflict with any such rights of others in any
material respect, and to the best knowledge of the Grantors, no other Person
is
now infringing or in conflict in any material respect with any such properties,
assets and rights owned or used by each Grantor. No Grantor has received
any
notice that it is violating or has violated the trademarks, patents, copyrights,
inventions, trade secrets, proprietary information and technology, know-how,
formulae, rights of publicity or other intellectual property rights of any
third
party.
-6-
(g) Each
Grantor is and will be at all times the sole and exclusive owner of, or
otherwise has and will have adequate rights in, the Collateral free and clear
of
any Liens, except for Permitted Liens on any Collateral. No effective financing
statement or other instrument similar in effect covering all or any part
of the
Collateral is on file in any recording or filing office except such as may have
been filed in favor of the Buyer relating to this Agreement.
(h) The
exercise by the Buyer of any of its rights and remedies hereunder will not
contravene any law or any contractual restriction binding on or otherwise
affecting each Grantor or any of its properties and will not result in or
require the creation of any Lien, upon or with respect to any of its
properties.
(i) No
authorization or approval or other action by, and no notice to or filing
with,
any governmental authority or other regulatory body, or any other Person,
is
required for (i) the grant by each Grantor, or the perfection, of the
security interest purported to be created hereby in the Collateral, or
(ii) the exercise by the Buyer of any of its rights and remedies hereunder,
except (A) for the filing under the Uniform Commercial Code as in effect in
the applicable jurisdiction of the financing statements, all of which financing
statements, have been duly filed and are in full force and effect, (B) with
respect to the perfection of the security interest created hereby in the
Intellectual Property, for the recording of the appropriate Assignment for
Security, substantially in the form of Exhibit
A
hereto,
as applicable, in the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, and (C) with respect to the
perfection of the security interest created hereby in foreign Intellectual
Property and Licenses, for registrations and filings in jurisdictions located
outside of the United States and covering rights in such jurisdictions relating
to the Intellectual Property and Licenses.
(j) This
Agreement creates in favor of the Buyer a legal, valid and enforceable security
interest in the Collateral, as security for the Obligations. The Buyer's
having
possession of all Instruments and cash constituting Collateral from time
to time
(or with respect to deposit accounts, entering into appropriate control
agreements), the recording of the appropriate Assignment for Security executed
pursuant hereto in the United States Patent and Trademark Office and the
United
States Copyright Office, the execution of appropriate assignments of Letter
of
Credit Rights, as applicable, and the filing of the financing statements
and the
other filings and recordings, as applicable, described in Schedule
V
hereto
and, with respect to the Intellectual Property hereafter existing and not
covered by an appropriate Assignment for Security, the recording in the United
States Patent and Trademark Office or the United States Copyright Office,
as
applicable, of appropriate instruments of assignment, result in the perfection
of such security interests. Such security interests are, or in the case of
Collateral in which each Grantor obtains rights after the date hereof, will
be,
perfected, first priority security interests, subject only to Permitted Liens
and the recording of such instruments of assignment. Such recordings and
filings
and all other action necessary or desirable to perfect and protect such security
interest have been or will be duly taken, except for the Buyer's having
possession of Instruments and cash constituting Collateral after the date
hereof
and the other filings and recordations described in Section
4(l)
hereof.
(k) As
of the
date hereof, no Grantor holds any Commercial Tort Claims nor is aware of
any
such pending claims, except for such claims described in Schedule
VI.
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SECTION
5. Covenants
as to the Collateral.
So long
as any of the Obligations shall remain outstanding, unless the Buyer shall
otherwise consent in writing:
(a) Further
Assurances.
Each
Grantor will at its expense, at any time and from time to time, promptly
execute
and deliver all further instruments and documents and take all further action
that the Buyer may reasonably request in order to: (i) perfect and protect
the security interest purported to be created hereby; (ii) enable the Buyer
to exercise and enforce its rights and remedies hereunder in respect of the
Collateral; or (iii) otherwise effect the purposes of this Agreement,
including, without limitation: (A) marking conspicuously all Chattel Paper
and each License and, at the request of the Buyer, each of its Records
pertaining to the Collateral with a legend, in form and substance satisfactory
to the Buyer, indicating that such Chattel Paper, License or Collateral is
subject to the security interest created hereby, (B) delivering and
pledging to the Buyer hereunder each Promissory Note, Security, Chattel Paper
or
other Instrument, now or hereafter owned by any Grantor, duly endorsed and
accompanied by executed instruments of transfer or assignment, all in form
and
substance satisfactory to the Buyer, (C) executing and filing (to the
extent, if any, that any Grantor's signature is required thereon) or
authenticating the filing of, such financing or continuation statements,
or
amendments thereto, as may be necessary or desirable or that the Buyer may
request in order to perfect and preserve the security interest purported
to be
created hereby, (D) furnishing to the Buyer from time to time statements
and schedules further identifying and describing the Collateral and such
other
reports in connection with the Collateral in each case as the Buyer may
reasonably request, all in reasonable detail, (E) if any Collateral shall
be in the possession of a third party, notifying such Person of the Buyer's
security interest created hereby and obtaining a written acknowledgment from
such Person that such Person holds possession of the Collateral for
the
benefit of the Buyer, which such written acknowledgement shall be in form
and
substance satisfactory to the Buyer, (F) if at any time after the date
hereof, any Grantor acquires or holds any Commercial Tort Claim, promptly
notifying the Buyer in a writing signed by such Grantor setting forth a brief
description of such Commercial Tort Claim and granting to the Buyer a security
interest therein and in the proceeds thereof, which writing shall incorporate
the provisions hereof and shall be in form and substance satisfactory to
the
Buyer, (G) upon the acquisition after the date hereof by any Grantor of any
motor vehicle or other Equipment subject to a certificate of title or ownership
(other than a Motor Vehicle or Equipment that is subject to a purchase money
security interest), causing the Buyer to be listed as the lienholder on such
certificate of title or ownership and delivering evidence of the same to
the
Buyer in accordance with the Securities Purchase Agreement; and (H) taking
all actions required by any earlier versions of the Uniform Commercial Code
or
by other law, as applicable, in any relevant Uniform Commercial Code
jurisdiction, or by other law as applicable in any foreign
jurisdiction.
(b) Location
of Equipment and Inventory.
Each
Grantor will keep the Equipment and Inventory at the locations specified
therefor on
Schedule III hereto, or, at such other locations in the United States, provided
that within 10 days following the relocation of Equipment or Inventory to
such
other location, Grantor shall deliver to the Buyer a new Schedule II indicating
such new location.
(c) Condition
of Equipment.
Each
Grantor will maintain or cause the Equipment (necessary or useful to its
business) to be maintained and preserved in good condition, repair and working
order, ordinary wear and tear excepted, and will forthwith, or in the case
of
any loss or damage to any Equipment of any Grantor within a commercially
reasonable time after the occurrence thereof, make or cause to be made all
repairs, replacements and other improvements in connection therewith which
are
necessary or desirable, consistent with past practice, or which the Buyer
may
request to such end. Any Grantor will promptly furnish to the Buyer a statement
describing in reasonable detail any such loss or damage in excess of
$250,000 per
occurrence to any Equipment.
-8-
(d) Taxes,
Etc.
Each
Grantor agrees to pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Equipment
and
Inventory, except to the extent the validity thereof is being contested in
good
faith by proper proceedings which stay the imposition of any penalty, fine
or
Lien resulting from the non-payment thereof and with respect to which adequate
reserves in accordance with GAAP have been set aside for the payment
thereof.
(e) Insurance.
(i) Each
Grantor will, at its own expense, maintain insurance (including, without
limitation, commercial general liability and property insurance) with respect
to
the Equipment and Inventory in such amounts, against such risks, in such
form
and with responsible and reputable insurance companies or associations as
is
required by any governmental authority having jurisdiction with respect thereto
or as is carried generally in accordance with sound business practice by
companies in similar businesses similarly situated and in any event, in amount,
adequacy and scope reasonably satisfactory to the Buyer. To the extent requested
by the Buyer at any time and from time to time, each such policy for liability
insurance shall provide for all losses to be paid on behalf of the Buyer
and any
Grantor as their respective interests may appear, and each policy for property
damage insurance shall provide for all losses to be adjusted with, and paid
directly to, the Buyer. To the extent requested by the Buyer at any time
and
from time to time, each such policy shall in addition (A) name the Buyer
as an
additional insured party thereunder (without any representation or warranty
by
or obligation upon the Buyer) as their interests may appear, (B) contain
an
agreement by the insurer that any loss thereunder shall be payable to the
Buyer
on its own account notwithstanding any action, inaction or breach of
representation or warranty by any Grantor, (C) provide that there shall be
no
recourse against the Buyer for payment of premiums or other amounts with
respect
thereto, and (D) provide that at least 30 days' prior written notice of
cancellation, lapse, expiration or other adverse change shall be given to
the
Buyer by the insurer. Any Grantor will, if so requested by the Buyer, deliver
to
the Buyer original or duplicate policies of such insurance and, as often
as the
Buyer may reasonably request, a report of a reputable insurance broker with
respect to such insurance. Any Grantor will also, at the request of the Buyer,
execute and deliver instruments of assignment of such insurance policies
and
cause the respective insurers to acknowledge notice of such
assignment.
(ii) Reimbursement
under any liability insurance maintained by any Grantor pursuant to this
Section
5(e)
may be
paid directly to the Person who shall have incurred liability covered by
such
insurance. In the case of any loss involving damage to Equipment or Inventory,
any proceeds of insurance maintained by any Grantor pursuant to this
Section
5(e)
shall be
paid to the Buyer (except as to which paragraph (iii) of this Section
5(e)
is not
applicable), any Grantor will make or cause to be made the necessary repairs
to
or replacements of such Equipment or Inventory, and any proceeds of insurance
maintained by any Grantor pursuant to this Section
5(e)
shall be
paid by the Buyer to any Grantor as reimbursement for the costs of such repairs
or replacements.
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(iii) All
insurance payments in respect of such Equipment or Inventory shall be paid
to
the Buyer and applied as specified in Section
7(b)
hereof.
(f) Provisions
Concerning the Accounts and the Licenses.
(i) Any
Grantor will (A) give the Buyer at least 30 days' prior written notice of
any
change in such Grantor's name, identity or organizational structure, (B)
maintain its jurisdiction of incorporation as set forth in Section
4(b)
hereto,
(C) immediately notify the Buyer upon obtaining an organizational identification
number, if on the date hereof such Grantor did not have such identification
number, and (D) keep adequate records concerning the Accounts and Chattel
Paper
and permit representatives of the Buyer during normal business hours on
reasonable notice to such Grantor, to inspect and make abstracts from such
Records and Chattel Paper.
(ii) Each
Grantor will, except as otherwise provided in this subsection (f), continue
to collect, at its own expense, all amounts due or to become due under the
Accounts. In connection with such collections, any Grantor may (and, at the
Buyer's direction, will) take such action as any Grantor or the Buyer may
deem
necessary or advisable to enforce collection or performance of the Accounts;
provided,
however,
that
the Buyer shall have the right at any time, upon the occurrence and during
the
continuance of an Event of Default, to notify the account debtors or obligors
under any Accounts of the assignment of such Accounts to the Buyer and to
direct
such account debtors or obligors to make payment of all amounts due or to
become
due to any Grantor thereunder directly to the Buyer or its designated agent
and,
upon such notification and at the expense of any Grantor and to the extent
permitted by law, to enforce collection of any such Accounts and to adjust,
settle or compromise the amount or payment thereof, in the same manner and
to
the same extent as may Grantor might have done. After receipt by any Grantor
of
a notice from the Buyer that the Buyer has notified, intends to notify, or
has
enforced or intends to enforce any Grantor's rights against the account debtors
or obligors under any Accounts as referred to in the proviso to the immediately
preceding sentence, (A) all amounts and proceeds (including Instruments)
received by any Grantor in respect of the Accounts shall be received in trust
for the benefit of the Buyer hereunder, shall be segregated from other funds
of
any Grantor and shall be forthwith paid over to the Buyer in the same form
as so
received (with any necessary endorsement) to be held as cash collateral and
either (i) credited to the outstanding obligations so long as no Event of
Default shall have occurred and be continuing or (ii) if an Event of Default
shall have occurred and be continuing, applied as specified in Section
7(b)
hereof,
and (B) no Grantor will adjust, settle or compromise the amount or payment
of
any Account or release wholly or partly any account debtor or obligor thereof
or
allow any credit or discount thereon. In addition, upon the occurrence and
during the continuance of an Event of Default, the Buyer may (in its sole
and
absolute discretion) direct any or all of the banks and financial institutions
with which any Grantor either maintains a Deposit Account or a lockbox or
deposits the proceeds of any Accounts to send immediately to the Buyer by
wire
transfer (to such account as the Buyer shall specify, or in such other manner
as
the Buyer shall direct) all or a portion of such securities, cash, investments
and other items held by such institution. Any such securities, cash, investments
and other items so received by the Buyer shall (in the sole and absolute
discretion of the Buyer) be held as additional Collateral for the Obligations
or
distributed in accordance with Section
7
hereof.
-10-
(iii) Upon
the
occurrence and during the continuance of any breach or default under any
material License referred to in Schedule
II
hereto
by any party thereto other than any Grantor, each Grantor party thereto will,
promptly after obtaining knowledge thereof, give the Buyer written notice
of the
nature and duration thereof, specifying what action, if any, it has taken
and
proposes to take with respect thereto and thereafter
will
take reasonable steps to protect and preserve its rights and remedies in
respect
of such breach or default, or will obtain or acquire an appropriate substitute
License.
(iv) Each
Grantor will, at its expense, promptly deliver to the Buyer a copy of each
notice or other communication received by it by which any other party to any
material License referred to in Schedule
II
hereto
purports to exercise any of its rights or affect any of its obligations
thereunder, together with a copy of any reply by such Grantor
thereto.
(v) Each
Grantor will exercise promptly and diligently each and every right which
it may
have under each material License (other than any right of termination) and
will
duly perform and observe in all respects all of its obligations under each
material License and will take all action reasonably necessary to maintain
such
Licenses in full force and effect. No Grantor will, without the prior written
consent of the Buyer, cancel, terminate, amend or otherwise modify in any
respect, or waive any provision of, any material License referred to in
Schedule
II
hereto.
(g) Transfers
and Other Liens.
(i) No
Grantor will sell, assign (by operation of law or otherwise), lease, license,
exchange or otherwise transfer or dispose of any of the Collateral,
except
(A) Inventory or licenses in the ordinary course of business, and (B) worn-out
or obsolete assets not necessary to the business.
(ii) No
Grantor will create, suffer to exist or grant any Lien upon or with respect
to
any Collateral other than a Permitted Lien.
-11-
(h) Intellectual
Property.
(i) If
applicable, any Grantor shall, upon the Buyer's written request, duly execute
and deliver the applicable Assignment for Security in the form attached hereto
as Exhibit
A.
Each
Grantor (either itself or through licensees) will, and will cause each licensee
thereof to, take all action necessary to maintain all of the Intellectual
Property in full force and effect, including, without limitation, using the
proper statutory notices and markings and using the Trademarks on each
applicable trademark class of goods in order to so maintain the Trademarks
in
full force and free from any claim of abandonment for non-use, and each Grantor
will not (nor permit any licensee thereof to) do any act or knowingly omit
to do
any act whereby any Intellectual Property may become invalidated; provided,
however,
that so
long as no Event of Default has occurred and is continuing, no Grantor shall
have an obligation to use or to maintain any Intellectual Property (A) that
relates solely to any product or work, that has been, or is in the process
of
being, discontinued, abandoned or terminated, (B) that is being replaced
with
Intellectual Property substantially similar to the Intellectual Property
that
may be abandoned or otherwise become invalid, so long as the failure to use
or
maintain such Intellectual Property does not materially adversely affect
the
validity of such replacement Intellectual Property and so long as such
replacement Intellectual Property is subject to the Lien created by this
Agreement or (C) that is substantially the same as another Intellectual Property
that is in full force, so long the failure to use or maintain such Intellectual
Property does not materially adversely affect the validity of such replacement
Intellectual Property and so long as such other Intellectual Property is
subject
to the Lien and security interest created by this Agreement. Each
Grantor
will
cause to be taken all necessary steps in any proceeding before the United
States
Patent and Trademark Office and the United States Copyright Office or any
similar office or agency in any other country or political subdivision thereof
to maintain each registration of the Intellectual Property (other than the
Intellectual Property described in the proviso to the immediately preceding
sentence), including, without limitation, filing of renewals, affidavits
of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings and payment of maintenance fees, filing fees, taxes or other
governmental fees. If any Intellectual Property (other than Intellectual
Property described in the proviso to the first sentence of subsection (i)
of
this clause (h)) is infringed, misappropriated, diluted or otherwise violated
in
any material respect by a third party, each Grantor shall (x) upon learning
of
such infringement, misappropriation, dilution or other violation, promptly
notify the Buyer and (y) to the extent any Grantor shall deem appropriate
under
the circumstances, promptly xxx for infringement, misappropriation, dilution
or
other violation, seek injunctive relief where appropriate and recover any
and
all damages for such infringement, misappropriation, dilution or other
violation, or take such other actions as such Grantor shall deem appropriate
under the circumstances to protect such Intellectual Property. Each
Grantor
shall
furnish to the Buyer from time to time upon its request statements and schedules
further identifying and describing the Intellectual Property and Licenses
and
such other reports in connection with the Intellectual Property and Licenses
as
the Buyer may reasonably request, all in reasonable detail and promptly upon
request of the Buyer, following receipt by the Buyer of any such statements,
schedules or reports, each Grantor shall modify this Agreement by amending
Schedule
II
hereto,
as the case may be, to include any Intellectual Property and License, as
the
case may be, which becomes part of the Collateral under this Agreement and
shall
execute and authenticate such documents and do such acts as shall be necessary
or, in the judgment of the Buyer, desirable to subject such Intellectual
Property and Licenses to the Lien and security interest created by this
Agreement. Notwithstanding anything herein to the contrary, upon the occurrence
and during the continuance of an Event of Default, no Grantor may abandon
or
otherwise permit any Intellectual Property to become invalid without the
prior
written consent of the Buyer, and if any Intellectual Property is infringed,
misappropriated, diluted or otherwise violated in any material respect by
a
third party, each Grantor will take such action as the Buyer shall deem
appropriate under the circumstances to protect such Intellectual
Property.
-12-
(ii) In
no
event shall any Grantor, either itself or through any agent, employee, licensee
or designee, file an application for the registration of any Trademark or
Copyright or the issuance of any Patent with the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, or
in any
similar office or agency of the United States or any country or any political
subdivision thereof unless it gives the Buyer prior written notice thereof.
Upon
request of the Buyer, any Grantor shall execute, authenticate and deliver
any
and all assignments, agreements, instruments, documents and papers as the
Buyer
may reasonably request to evidence the Buyer's security interest hereunder
in
such Intellectual Property and the General Intangibles of any Grantor relating
thereto or represented thereby, and each Grantor hereby appoints the Buyer
its
attorney-in-fact to execute and/or authenticate and file all such writings
for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed, and such power (being coupled with an interest) shall be irrevocable
until the indefeasible payment in full in cash of all of the Obligations
in full
and the termination of each of the Transaction Documents.
(i) Deposit,
Commodities and Securities Accounts.
Upon
the Buyer's written request, each Grantor shall cause each bank and other
financial institution with an account referred to in Schedule
IV
hereto
to execute and deliver to the Buyer a control agreement, in form and substance
reasonably satisfactory to the Buyer, duly executed by each Grantor and such
bank or financial institution, or enter into other arrangements in form and
substance satisfactory to the Buyer, pursuant to which such institution shall
irrevocably agree, inter alia,
that
(i) it will comply at any time with the instructions originated by the
Buyer to such bank or financial institution directing the disposition of
cash,
Commodity Contracts, securities, Investment Property and other items from
time
to time credited to such account, without further consent of each Grantor,
which
instructions the Buyer will not give to such bank or other financial institution
in the absence of a continuing Event of Default, (ii) all cash, Commodity
Contracts, securities, Investment Property and other items of each Grantor
deposited with such institution shall be subject to a perfected, first priority
security interest in favor of the Buyer, (iii) any right of set off (other
than recoupment of standard fees), banker's Lien or other similar Lien, security
interest or encumbrance shall be fully waived as against the Buyer, and
(iv) upon receipt of written notice from the Buyer during the continuance
of an Event of Default, such bank or financial institution shall immediately
send to the Buyer by wire transfer (to such account as the Buyer shall specify,
or in such other manner as the Buyer shall direct) all such cash, the value
of
any Commodity Contracts, securities, Investment Property and other items
held by
it. Without the prior written consent of the Buyer, each Grantor shall not
make
or maintain any Deposit Account, Commodity Account or Securities Account
except
for the accounts set forth in Schedule
IV
hereto.
The provisions of this paragraph 5(i) shall not apply to (i) Deposit Accounts
for which the Buyer is the depositary and (ii) Deposit Accounts specially
and
exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of each Grantor's salaried
employees.
(j) Motor
Vehicles.
(i) Upon
the
Buyer's written request, each Grantor shall deliver to the Buyer originals
of
the certificates of title or ownership for all motor vehicles with a value
in
excess of $50,000, owned by it with the Buyer listed as lienholder, for the
benefit of the Buyers.
-13-
(ii) Each
Grantor hereby appoints the Buyer as its attorney-in-fact, effective the
date
hereof and terminating upon the termination of this Agreement, for the purpose
of (A) executing on behalf of each Grantor title or ownership applications
for
filing with appropriate state agencies to enable motor vehicles now owned
or
hereafter acquired by each Grantor to be retitled and the Buyer listed as
lienholder thereof, (B) filing such applications with such state agencies,
and
(C) executing such other documents and instruments on behalf of, and taking
such
other action in the name of, each Grantor as the Buyer may deem necessary
or
advisable to accomplish the purposes hereof (including, without limitation,
for
the purpose of creating in favor of the Buyer a perfected Lien on the motor
vehicles and exercising the rights and remedies of the Buyer hereunder).
This
appointment as attorney-in-fact is coupled with an interest and is irrevocable
until all of the Obligations are indefeasibly paid in full in cash and after
all
Transaction Documents have been terminated.
(iii) Any
certificates of title or ownership delivered pursuant to the terms hereof
shall
be accompanied by odometer statements for each motor vehicle covered
thereby.
(iv) So
long
as no Event of Default shall have occurred and be continuing, upon the request
of any Grantor, the Buyer shall execute and deliver to any Grantor such
instruments as any Grantor shall reasonably request to remove the notation
of
the Buyer as lienholder on any certificate of title for any motor vehicle;
provided,
however,
that
any such instruments shall be delivered, and the release effective, only
upon
receipt by the Buyer of a certificate from any Grantor stating that such
motor
vehicle is to be sold or has suffered a casualty loss (with title thereto
passing to the casualty insurance company therefor in settlement of the claim
for such loss) and the amount that any Grantor will receive as sale proceeds
or
insurance proceeds. Any proceeds of such sale or casualty loss shall be paid
to
the Buyer hereunder immediately upon receipt, to be applied to the Obligations
then outstanding.
(k) Control.
Each
Grantor hereby agrees to take any or all action that may be necessary or
desirable or that the Buyer may request in order for the Buyer to obtain
control
in accordance with Sections 9-105 - 9-107 of the Code with respect to the
following Collateral: (i) Electronic Chattel Paper, (ii) Investment
Property, and (iii) Letter-of-Credit Rights.
(l) Inspection
and Reporting.
Each
Grantor shall permit the Buyer, or any agent or representatives thereof or
such
professionals or other Persons as the Buyer may designate, not more than
once a
year in the absence of an Event of Default, (i) to examine and make copies
of and abstracts from any Grantor's records and books of account, (ii) to
visit
and inspect its properties, (iii) to verify materials, leases, Instruments,
Accounts, Inventory and other assets of any Grantor from time to time,
(iii) to conduct audits, physical counts, appraisals and/or valuations,
examinations at the locations of any Grantor. Each Grantor shall also permit
the
Buyer, or any agent or representatives thereof or such professionals or other
Persons as the Buyer may designate to discuss any Grantor's affairs, finances
and accounts with any of its directors, officers, managerial employees,
independent accountants or any of its other representatives.
(m) Future
Subsidiaries.
If any
Grantor shall hereafter create or acquire any Subsidiary, simultaneously
with
the creation of acquisition of such Subsidiary, such Grantor shall cause
such
Subsidiary to become a party to this Agreement as an additional "Grantor"
hereunder, and to duly execute and deliver a guaranty of the Obligations
in
favor of the Buyer in form and substance reasonably acceptable to the Buyer,
and
to duly execute and/or deliver such opinions of counsel and other documents,
in
form and substance reasonably acceptable to the Buyer, as the Buyer shall
reasonably request with respect thereto.
-14-
SECTION
6. Additional
Provisions Concerning the Collateral.
(a) Each
Grantor hereby (i) authorizes the Buyer to file one or more Uniform
Commercial Code financing or continuation statements, and amendments thereto,
relating to the Collateral and (ii) ratifies such authorization to the
extent that the Buyer has filed any such financing or continuation statements,
or amendments thereto, prior to the date hereof. A photocopy or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
(b) Each
Grantor hereby irrevocably appoints the Buyer as its attorney-in-fact and
proxy,
with full authority in the place and stead of each Grantor and in the name
of
each Grantor or otherwise, from time to time in the Buyer's discretion, so
long
as an Event of Default shall have occurred and is continuing, to take any
action
and to execute any instrument which the Buyer may deem necessary or advisable
to
accomplish the purposes of this Agreement (subject to the rights of each
Grantor
under Section
5
hereof),
including, without limitation, (i) to obtain and adjust insurance required
to be
paid to the Buyer pursuant to Section
5(e)
hereof,
(ii) to ask, demand, collect, xxx for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect
of
any Collateral, (iii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) or
(ii)
above, (iv) to file any claims or take any action or institute any proceedings
which the Buyer may deem necessary or desirable for the collection of any
Collateral or otherwise to enforce the rights of the Buyer with respect to
any
Collateral, and (v) to execute assignments, licenses and other documents
to
enforce the rights of the Buyer with respect to any Collateral. This power
is
coupled with an interest and is irrevocable until all of the Obligations
are
indefeasibly paid in full in cash.
(c) For
the
purpose of enabling the Buyer to exercise rights and remedies hereunder,
at such
time as the Buyer shall be lawfully entitled to exercise such rights and
remedies, and for no other purpose, each Grantor hereby grants to the Buyer,
to
the extent assignable, an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to any Grantor) to use,
assign,
license or sublicense any Intellectual Property now owned or hereafter acquired
by any Grantor, wherever the same may be located, including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation
or
printout thereof. Notwithstanding anything contained herein to the contrary,
but
subject to the provisions of the Securities Purchase Agreement that limit
the
right of any Grantor to dispose of its property and Section
5(h)
hereof,
so long as no Event of Default shall have occurred and be continuing, any
Grantor may exploit, use, enjoy, protect, license, sublicense, assign, sell,
dispose of or take other actions with respect to the Intellectual Property
in
the ordinary course of its business. In furtherance of the foregoing, unless
an
Event of Default shall have occurred and be continuing, the Buyer shall from
time to time, upon the request of any Grantor, execute and deliver any
instruments, certificates or other documents, in the form so requested, which
such Grantor shall have certified are appropriate (in any Grantor's judgment)
to
allow it to take any action permitted above (including relinquishment of
the
license provided pursuant to this clause (c) as to any Intellectual Property).
Further, upon the indefeasible payment in full in cash of all of the
Obligations, the Buyer (subject to Section
10(e)
hereof)
shall release and reassign to any Grantor all of the Buyer's right, title
and
interest in and to the Intellectual Property, and the Licenses, all without
recourse, representation or warranty whatsoever. The exercise of rights and
remedies hereunder by the Buyer shall not terminate the rights of the holders
of
any licenses or sublicenses theretofore granted by each Grantor in accordance
with the second sentence of this clause (c). Each Grantor hereby releases
the
Buyer from any claims, causes of action and demands at any time arising out
of
or with respect to any actions taken or omitted to be taken by the Buyer
under
the powers of attorney granted herein other than actions taken or omitted
to be
taken through the Buyer's gross negligence or willful misconduct, as determined
by a final determination of a court of competent jurisdiction.
-15-
(d) If
any
Grantor fails to perform any agreement contained herein, the Buyer may itself
perform, or cause performance of, such agreement or obligation, in the name
of
any Grantor or the Buyer, and the expenses of the Buyer incurred in connection
therewith shall be payable by any Grantor pursuant to Section
8
hereof
and shall be secured by the Collateral.
(e) The
powers conferred on the Buyer hereunder are solely to protect its interest
in
the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and
the
accounting for moneys actually received by it hereunder, the Buyer shall
have no
duty as to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any
Collateral.
(f) Anything
herein to the contrary notwithstanding (i) each Grantor shall remain liable
under the Licenses and otherwise with respect to any of the Collateral to
the
extent set forth therein to perform all of its obligations thereunder to
the
same extent as if this Agreement had not been executed, (ii) the exercise
by the Buyer of any of its rights hereunder shall not release any Grantor
from
any of its obligations under the Licenses or otherwise in respect of the
Collateral, and (iii) the Buyer shall not have any obligation or liability
by reason of this Agreement under the Licenses or with respect to any of
the
other Collateral, nor shall the Buyer be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to
collect
or enforce any claim for payment assigned hereunder.
-16-
SECTION
7. Remedies
Upon Event of Default.
If any
Event of Default shall have occurred and be continuing:
(a) The
Buyer
may exercise in respect of the Collateral, in addition to any other rights
and
remedies provided for herein or otherwise available to it, all of the rights
and
remedies of a secured party upon default under the Code (whether or not the
Code
applies to the affected Collateral), and also may (i) take absolute control
of the Collateral, including, without limitation, transfer into the Buyer's
name
or into the name of its nominee or nominees and thereafter receive, for the
benefit of the Buyer, all payments made thereon, give all consents, waivers
and
ratifications in respect thereof and otherwise act with respect thereto as
though it were the outright owner thereof, (ii) require each Grantor to,
and each Grantor hereby agrees that it will at its expense and upon request
of
the Buyer forthwith, assemble all or part of its respective Collateral as
directed by the Buyer and make it available to the Buyer at a place or places
to
be designated by the Buyer that is reasonably convenient to both parties,
and
the Buyer may enter into and occupy any premises owned or leased by any Grantor
where the Collateral or any part thereof is located or assembled for a
reasonable period in order to effectuate the Buyer's rights and remedies
hereunder or under law, without obligation to any Grantor in respect of such
occupation, and (iii) without notice except as specified below and without
any obligation to prepare or process the Collateral for sale, (A) sell the
Collateral or any part thereof in one or more parcels at public or private
sale,
at any of the Buyer's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the Buyer
may
deem commercially reasonable and/or (B) lease, license or dispose of the
Collateral or any part thereof upon such terms as the Buyer may deem
commercially reasonable. Each Grantor agrees that, to the extent notice of
sale
or any other disposition of its respective Collateral shall be required by
law,
at least ten (10) days' notice to any Grantor of the time and place of any
public sale or the time after which any private sale or other disposition
of its
respective Collateral is to be made shall constitute reasonable notification.
The Buyer shall not be obligated to make any sale or other disposition of
any
Collateral regardless of notice of sale having been given. The Buyer may
adjourn
any public or private sale from time to time by announcement at the time
and
place fixed therefor, and such sale may, without further notice, be made
at the
time and place to which it was so adjourned. Each Grantor hereby waives any
claims against the Buyer arising by reason of the fact that the price at
which
its respective Collateral may have been sold at a private sale was less than
the
price which might have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Buyer accepts the first
offer
received and does not offer such Collateral to more than one offeree, and
waives
all rights that any Grantor may have to require that all or any part of such
Collateral be marshalled upon any sale (public or private) thereof. Each
Grantor
hereby acknowledges that (i) any such sale of its respective Collateral by
the Buyer shall be made without warranty, (ii) the Buyer may specifically
disclaim any warranties of title, possession, quiet enjoyment or the like,
and
(iii) such actions set forth in clauses (i) and (ii) above shall not
adversely effect the commercial reasonableness of any such sale of Collateral.
In addition to the foregoing, (1) upon written notice to any Grantor from
the Buyer, such Grantor shall cease any use of the Intellectual Property
or any
trademark, patent or copyright similar thereto for any purpose described
in such
notice; (2) the Buyer may, at any time and from time to time, upon 10 days'
prior notice to such Grantor, license, whether general, special or otherwise,
and whether on an exclusive or non-exclusive basis, any of the Intellectual
Property, throughout the universe for such term or terms, on such conditions,
and in such manner, as the Buyer shall in its sole discretion determine;
and (3)
the Buyer may, at any time, pursuant to the authority granted in Section
6
hereof
(such authority being effective upon the occurrence and during the continuance
of an Event of Default), execute and deliver on behalf of such Grantor, one
or
more instruments of assignment of the Intellectual Property (or any application
or registration thereof), in form suitable for filing, recording or registration
in any country.
(b) Any
cash
held by the Buyer as Collateral and all Cash Proceeds received by the Buyer
in
respect of any sale of or collection from, or other realization upon, all
or any
part of the Collateral may, in the discretion of the Buyer, be held by the
Buyer
as collateral for, and/or then or at any time thereafter applied (after payment
of any amounts payable to the Buyer pursuant to Section
8
hereof)
in whole or in part by the Buyer against, all or any part of the Obligations
in
such order as the Buyer shall elect, consistent with the provisions of the
Securities Purchase Agreement. Any surplus of such cash or Cash Proceeds
held by
the Buyer and remaining after the indefeasible payment in full in cash of
all of
the Obligations shall be paid over to whomsoever shall be lawfully entitled
to
receive the same or as a court of competent jurisdiction shall
direct.
-17-
(c) In
the
event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Buyer is legally entitled, such
each shall be liable for the deficiency, together with interest thereon at
the
highest rate specified in any of the applicable Transaction Documents for
interest on overdue principal thereof or such other rate as shall be fixed
by
applicable law, together with the costs of collection and the reasonable
fees,
costs, expenses and other client charges of any attorneys employed by the
Buyer
to collect such deficiency.
(d) Each
Grantor hereby acknowledges that if the Buyer complies with any applicable
state, provincial, or federal law requirements in connection with a disposition
of the Collateral, such compliance will not adversely affect the commercial
reasonableness of any sale or other disposition of the Collateral.
(e) The
Buyer
shall not be required to marshal any present or future collateral security
(including, but not limited to, this Agreement and the Collateral) for, or
other
assurances of payment of, the Obligations or any of them or to resort to
such
collateral security or other assurances of payment in any particular order,
and
all of the Buyer's rights hereunder and in respect of such collateral security
and other assurances of payment shall be cumulative and in addition to all
other
rights, however existing or arising. To the extent that any Grantor lawfully
may, each Grantor hereby agrees that it will not invoke any law relating
to the
marshalling of collateral which might cause delay in or impede the enforcement
of the Buyer's rights under this Agreement or under any other instrument
creating or evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is secured
or
payment thereof is otherwise assured, and, to the extent that it lawfully
may,
each Grantor hereby irrevocably waives the benefits of all such
laws.
SECTION
8. Indemnity
and Expenses.
(a) Each
Grantor agrees, jointly and severally, to defend, protect, indemnify and
hold
the Buyer, jointly and severally, harmless from and against any and all claims,
damages, losses, liabilities, obligations, penalties, fees, costs and expenses
(including, without limitation, reasonable legal fees, costs, expenses, and
disbursements of such Person's counsel) to the extent that they arise out
of or
otherwise result from this Agreement (including, without limitation, enforcement
of this Agreement), except claims, losses or liabilities resulting solely
and
directly from such Person's gross negligence or willful misconduct, as
determined by a final judgment of a court of competent
jurisdiction.
(b) Each
Grantor agrees, jointly and severally, to upon demand pay to the Buyer the
amount of any and all costs and expenses, including the reasonable fees,
costs,
expenses and disbursements of counsel for the Buyer and of any experts and
agents (including, without limitation, any collateral trustee which may act
as
agent of the Buyer), which the Buyer may incur in connection with (i) the
preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any Collateral, (iii) the
exercise or enforcement of any of the rights of the Buyer hereunder, or
(iv) the failure by any Grantor to perform or observe any of the provisions
hereof.
-18-
SECTION
9. Notices,
Etc.
All
notices and other communications provided for hereunder shall be in writing
and
shall be mailed (by certified mail, postage prepaid and return receipt
requested), telecopied, e-mailed or delivered, if to any Grantor at its address
specified below and if to the Buyer to it, at its address specified below;
or as
to any such Person, at such other address as shall be designated by such
Person
in a written notice to such other Person complying as to delivery with the
terms
of this Section
9.
All
such notices and other communications shall be effective (a) if sent by
certified mail, return receipt requested, when received or three days after
deposited in the mails, whichever occurs first, (b) if telecopied or
e-mailed, when transmitted (during normal business hours) and confirmation
is
received, otherwise, the day after the notice was transmitted if confirmation
is
received, or (c) if delivered, upon delivery.
SECTION
10. Miscellaneous.
(a) No
amendment of any provision of this Agreement shall be effective unless it
is in
writing and signed by each Grantor and the Buyer, and no waiver of any provision
of this Agreement, and no consent to any departure by each Grantor therefrom,
shall be effective unless it is in writing and signed by the Buyer, and then
such waiver or consent shall be effective only in the specific instance and
for
the specific purpose for which given.
(b) No
failure on the part of the Buyer to exercise, and no delay in exercising,
any
right hereunder or under any of the other Transaction Documents shall operate
as
a waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right. The rights and remedies of the Buyer provided herein and in the other
Transaction Documents are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law. The rights of the Buyer under
any of
the other Transaction Documents against any party thereto are not conditional
or
contingent on any attempt by such Person to exercise any of its rights under
any
of the other Transaction Documents against such party or against any other
Person, including but not limited to, any Grantor.
(c) Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(d) This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the indefeasible payment
in full
in cash of the Obligations, and (ii) be binding on each Grantor and all other
Persons who become bound as debtor to this Agreement in accordance with Section
9-203(d) of the Code and shall inure, together with all rights and remedies
of
the Buyer hereunder, to the benefit of the Buyer and its permitted successors,
transferees and assigns. Without limiting the generality of clause (ii) of
the
immediately preceding sentence, without notice to any Grantor and the Buyer
may
assign or otherwise transfer their rights and obligations under this Agreement
and any of the other Transaction Documents, to any other Person and such
other
Person shall thereupon become vested with all of the benefits in respect
thereof
granted to the Buyer herein or otherwise. Upon any such assignment or transfer,
all references in this Agreement to the Buyer shall mean the assignee of
the
Buyer. None of the rights or obligations of any Grantor hereunder may be
assigned or otherwise transferred without the prior written consent of the
Buyer, and any such assignment or transfer without the consent of the
Buyer
shall be
null and void.
-19-
(e) Upon
the
indefeasible payment in full in cash of the Obligations, (i) this Agreement
and
the security interests created hereby shall terminate and all rights to the
Collateral shall revert to the respective Grantor that granted such security
interests hereunder, and (ii) the Buyer will, upon any Grantor's request
and at
such Grantor's expense, (A) return to such Grantor such of the Collateral
as
shall not have been sold or otherwise disposed of or applied pursuant to
the
terms hereof, and (B) execute and deliver to such Grantor such documents
as such
Grantor shall reasonably request to evidence such termination, all without
any
representation, warranty or recourse whatsoever.
(f) THIS
AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE
LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS
OF LAW
AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION
AND
THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED
HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
(g) ANY
LEGAL
ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT
RELATED THERETO MAY BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX IN
THE
COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF
NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND DELIVERY OF
THIS
AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS,
WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION, SUIT OR
PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE GRANTING
OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
(h) EACH
GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE BUYER
WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED
ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF
THE
OTHER TRANSACTION DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
VERBAL
OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.
(i) Each
Grantor irrevocably consents to the service of process of any of the aforesaid
courts in any such action, suit or proceeding by the mailing of copies thereof
by registered or certified mail (or any substantially similar form of mail),
postage prepaid, to any Grantor at its address provided herein, such service
to
become effective 10 days after such mailing.
-20-
(j) Nothing
contained herein shall affect the right of the Buyer to serve process in
any
other manner permitted by law or commence legal proceedings or otherwise
proceed
against any Grantor or any property of any Grantor in any other
jurisdiction.
(k) Each
Grantor irrevocably and unconditionally waives any right it may have to claim
or
recover in any legal action, suit or proceeding referred to in this Section
any
special, exemplary, punitive or consequential damages.
(l) Section
headings herein are included for convenience of reference only and shall
not
constitute a part of this Agreement for any other purpose.
(m) This
Agreement may be executed in any number of counterparts and by different
parties
hereto in separate counterparts, each of which shall be deemed to be an
original, but all of which taken together constitute one in the same
Agreement.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
-21-
IN
WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first
above
written.
GREEN
SCREEN INTERACTIVE SOFTWARE, INC.
By: /s/
Xxx Xxxxxxxxxx
Name:
Xxx
Xxxxxxxxxx
Title:
Chief
Executive Officer
Address:
000 Xxxxxxxx, Xxx
Xxxx,
Xxx Xxxx 00000
GREEN
SCREEN ONLINE LLC
By:
/s/
Xxxx Xxxxxxx
Name:
Xxxx
Xxxxxxx
Title:
Manager
ZOO
DIGITAL PUBLISHING LIMITED
By:
/s/
Xxx Xxxxxxx
Name:
Xxx
Xxxxxxx
Title:
Chairman
SUPERVILLAIN
STUDIOS, LLC
By:/s/
Xxxxx Xxxxxxxx
Name:
Xxxxx
Xxxxxxxx
Title:
Sole
Manager
ZOO
GAMES, INC.
By:
/s/
Xxxxx Xxxx
Name:
Xxxxx
Xxxx
Title:
President
ACCEPTED
BY:
By:
/s/
Xxxxxxx Xxxxx
Name:
Xxxxxxx
Xxxxx
Title:
Chief
Financial Officer
EXHIBIT
A
ASSIGNMENT
FOR SECURITY
[TRADEMARKS]
[PATENTS] [COPYRIGHTS]
WHEREAS,
______________________________
(the
"Assignor")
[has
adopted, used and is using, and holds all right, title and interest in and
to,
the trademarks and service marks listed on the annexed Schedule 1A,
which
trademarks and service marks are registered or applied for in the United
States
Patent and Trademark Office (the "Trademarks")]
[holds all right, title and interest in the letter patents, design patents
and
utility patents listed on the annexed Schedule 1A,
which
patents are issued or applied for in the United States Patent and Trademark
Office (the "Patents")]
[holds all right, title and interest in the copyrights listed on the annexed
Schedule
1A,
which
copyrights are registered in the United States Copyright Office (the
"Copyrights")];
WHEREAS,
the Assignor has entered into a Security Agreement, dated as of
________________, 2005 (as amended, restated or otherwise modified from time
to
time the "Security
Agreement"),
in
favor of DRIFTWOOD VENTURES, INC. (the "Assignee");
WHEREAS,
pursuant to the Security Agreement, the Assignor has assigned to the Assignee
and granted to the Assignee for the benefit of the Buyers (as defined in
the
Security Agreement) a continuing security interest in all right, title and
interest of the Assignor in, to and under the [Trademarks, together with,
among
other things, the good-will of the business symbolized by the Trademarks]
[Patents] [Copyrights] and the applications and registrations thereof, and
all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof and any and all damages
arising from past, present and future violations thereof (the "Collateral"),
to
secure the payment, performance and observance of the "Obligations" (as defined
in the Security Agreement);
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the Assignor does hereby pledge, convey, sell,
assign, transfer and set over unto the Assignee and grants to the Assignee
for
the benefit of the Buyers a continuing security interest in the Collateral
to
secure the prompt payment, performance and for the benefit of the Buyers
observance of the Obligations.
The
Assignor does hereby further acknowledge and affirm that the rights and remedies
of the Assignee with respect to the Collateral are more fully set forth in
the
Security Agreement, the terms and provisions of which are hereby incorporated
herein by reference as if fully set forth herein.
IN
WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed
by
its officer thereunto duly authorized as of _____________, 20__
| [GRANTORS] | ||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
STATE
OF
____________
ss.:
COUNTY
OF
__________
On
this
____ day of _______________, 20__, before me personally came ________________,
to me known to be the person who executed the foregoing instrument, and who,
being duly sworn by me, did depose and say that s/he is the ________________
of
_______________________________________, a ____________________, and that
s/he
executed the foregoing instrument in the firm name of
_______________________________________, and that s/he had authority to sign
the
same, and s/he acknowledged to me that he executed the same as the act and
deed
of said firm for the uses and purposes therein mentioned.
______________________________
SCHEDULE
1A TO ASSIGNMENT FOR SECURITY
[Trademarks
and Trademark Applications]
[Patent
and Patent Applications]
[Copyright
and Copyright Applications]
Owned
by
______________________________
