SECURITY AGREEMENT
EXHIBIT
E
This
SECURITY AGREEMENT, dated as of July 31, 2007 (this “Agreement”), is
among Guangzhou Global Telecom, Inc., a Florida corporation (the
“Company”), all of the Subsidiaries of the Company (such subsidiaries,
the “Guarantors” and together with the Company, the “Debtors”) and
the holders of the Company’s 8% Senior Secured Convertible Debentures due
issued on July __, 2007 in the original aggregate principal amount of
$_________ (collectively, the “Debentures”) signatory hereto,
their endorsees, transferees and assigns (collectively, the “Secured
Parties”).
W
I T N E S S E T H:
WHEREAS,
pursuant to the Purchase Agreement (as defined in the Debentures), the Secured
Parties have severally agreed to extend the loans to the Company evidenced
by
the Debentures;
WHEREAS,
pursuant to a certain Subsidiary Guarantee, dated as of the date hereof
(the “Guarantee”), the Guarantors have jointly and severally
agreed to guarantee and act as surety for payment of such Debentures;
and
WHEREAS,
in order to induce the Secured Parties to extend the loans evidenced by the
Debentures, each Debtor has agreed to execute and deliver to the Secured Parties
this Agreement and to grant the Secured
Parties, pari passu with each other Secured Party and
through the Agent, a security interest in certain property of such Debtor to
secure the prompt payment, performance and discharge in full of all of the
Company’s obligations under the Debentures and the Guarantors’ obligations under
the Guarantee.
NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Certain
Definitions. As used in this Agreement, the following terms shall have
the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”,
“document”, “equipment”, “fixtures”, “general intangibles”, “goods”,
“instruments”, “inventory”, “investment property”, “letter-of-credit rights”,
“proceeds” and “supporting obligations”) shall have the respective meanings
given such terms in Article 9 of the UCC.
(a) “Collateral”
means the collateral in which the Secured Parties are granted a security
interest by this Agreement and which shall include the following personal
property of the Debtors, whether presently owned or existing or hereafter
acquired or coming into existence, wherever situated, and all additions and
accessions thereto and all substitutions and replacements thereof, and all
proceeds, products and accounts thereof, including, without limitation, all
proceeds from the sale or transfer of the Collateral and of insurance covering
the same and of any tort claims in connection therewith, and all dividends,
interest, cash, notes, securities, equity interest or other property at any
time
and from time to time acquired, receivable or otherwise distributed in respect
of, or in exchange for, any or all of the Pledged Securities (as defined
below):
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(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 any Debtor’s
businesses and all improvements thereto; and (B) all inventory;
(ii)
All contract
rights and other general intangibles, including, without limitation, all
partnership interests, membership interests, stock or other securities, rights
under any of the Organizational Documents, agreements related to the Pledged
Securities, licenses, distribution and other agreements, computer software
(whether “off-the-shelf”, licensed from any third party or developed by any
Debtor), computer software development rights, leases, franchises, customer
lists, quality control procedures, grants and rights, goodwill, trademarks,
service marks, trade styles, trade names, patents, patent applications,
copyrights, and income tax refunds;
(iii) All
accounts, together with all instruments, all documents of title representing
any
of the foregoing, all rights in any merchandising, goods, equipment, motor
vehicles and trucks which any of the same may represent, and all right, title,
security and guaranties with respect to each account, including any right of
stoppage in transit;
(iv) All
documents, letter-of-credit rights, instruments and chattel paper;
(v)
All commercial tort claims;
(vi) All
deposit accounts and all cash (whether or not deposited in such deposit
accounts);
(vii) All
investment property;
(viii) All
supporting obligations; and
(ix)
All files, records, books of account, business papers, and computer programs;
and
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(x) the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(ix) above.
Without
limiting the generality of the foregoing, the “Collateral” shall include
all investment property and general intangibles respecting ownership and/or
other equity interests in each Guarantor, including, without limitation, the
shares of capital stock and the other equity interests listed on Schedule
H hereto (as the same may be modified from time to time pursuant to the
terms hereof), and any other shares of capital stock and/or other equity
interests of any other direct or indirect subsidiary of any Debtor obtained
in
the future, 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 Debentures at the
time
of such determination) of the Secured Parties.
(d) “Necessary
Endorsement” means undated stock powers endorsed in blank or other
proper instruments of assignment duly executed and such other instruments or
documents as the Agent (as that term is defined below) may reasonably
request.
(e) “Obligations”
means all of the liabilities and obligations (primary, secondary, direct,
contingent, sole, joint or several) due or to become due, or that are now or
may
be hereafter contracted or acquired, or owing to, of any Debtor to the Secured
Parties, including, without limitation, all obligations under this Agreement,
the Debentures, the Guarantee and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith, in
each
case, whether now or hereafter existing, voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion
of
such obligations or liabilities that are paid, to the extent all or any part
of
such payment is avoided or recovered directly or indirectly from any of the
Secured Parties as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or modified from
time to time. Without limiting the generality of the foregoing, the
term “Obligations” shall include, without limitation: (i) principal of, and
interest on the Debentures and the loans extended pursuant thereto; (ii) any
and
all other fees, indemnities, costs, obligations and liabilities of the Debtors
from time to time under or in connection with this Agreement, the Debentures,
the Guarantee and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith; and (iii) all amounts
(including but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the obligations to pay
such amounts are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any
Debtor.
(f)
“Organizational Documents” means with respect to any Debtor, the
documents by which such Debtor was organized (such as a certificate of
incorporation, certificate of limited partnership or articles of organization,
and including, without limitation, any certificates of designation for preferred
stock or other forms of preferred equity) and which relate to the internal
governance of such Debtor (such as bylaws, a partnership agreement or an
operating, limited liability or members agreement).
(g) “Pledged
Securities” shall have the meaning ascribed to such term in Section
4(i).
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(h) “UCC”
means the Uniform Commercial Code of the State of New York and or any other
applicable law of any state or states which has jurisdiction with respect to
all, or any portion of, the Collateral or this Agreement, from time to
time. It is the intent of the parties that defined terms in the UCC
should be construed in their broadest sense so that the term “Collateral” will
be construed in its broadest sense. Accordingly if there are, from
time to time, changes to defined terms in the UCC that broaden the definitions,
they are incorporated herein and if existing definitions in the UCC are broader
than the amended definitions, the existing ones shall be
controlling.
2. Grant
of Security Interest in
Collateral. As an inducement for the Secured Parties to extend the
loans as evidenced by the Debentures and to secure the complete and timely
payment, performance and discharge in full, as the case may be, of all of the
Obligations, each Debtor hereby unconditionally and irrevocably pledges, grants
and hypothecates to the Secured Parties a 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. Contemporaneously or prior to the
execution of this Agreement, each Debtor shall deliver or cause to be delivered
to the Agent (a) any and all certificates and other instruments representing
or
evidencing the Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral, in each
case, together with all Necessary Endorsements. The Debtors are,
contemporaneously with the execution hereof, delivering to Agent, or have
previously delivered to Agent, a true and correct copy of each Organizational
Document governing any of the Pledged Securities.
4. Representations,
Warranties, Covenants and Agreements of the Debtors. 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, each
Debtor represents and warrants to, and covenants and agrees with, the Secured
Parties as follows:
(a) Each
Debtor has the requisite corporate, partnership, limited liability company
or
other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder. The execution, delivery and performance by each
Debtor of this Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no further
action is required by such Debtor. This Agreement has been duly
executed by each Debtor. This Agreement constitutes the legal, valid
and binding obligation of each Debtor, enforceable against each Debtor in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors and
by
general principles of equity.
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(b) The
Debtors have no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of its
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule A attached hereto. Except as
specifically set forth on Schedule A, each Debtor is the record owner of
the real property where such Collateral is located, and there exist no mortgages
or other liens on any such real property except for Permitted Liens (as defined
in the Debentures). Except as disclosed on Schedule A, none of
such Collateral is in the possession of any consignee, bailee, warehouseman,
agent or processor.
(c) Except
for Permitted Liens (as defined in the Debentures) and except as set forth
on
Schedule B attached hereto, the Debtors are the sole owner of the
Collateral (except for non-exclusive licenses granted by any Debtor in the
ordinary course of business), free and clear of any liens, security interests,
encumbrances, rights or claims, and are fully authorized to grant the Security
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 Debtors 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).
(d) No
written claim has been received that any Collateral or Debtor's use of any
Collateral violates the rights of any third party. There has been no adverse
decision to any Debtor's claim of ownership rights in or exclusive rights to
use
the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
such Collateral in full force and effect, and there is no proceeding
involving said rights pending or, to the best knowledge of any Debtor,
threatened before any court, judicial body, administrative or regulatory agency,
arbitrator or other governmental authority.
(e) Each
Debtor shall at all times maintain its books of account and records relating
to
the Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule A attached hereto and may not relocate
such books of account and records or tangible Collateral unless it delivers
to
the Secured Parties at least 30 days prior to such relocation (i) written notice
of such relocation and the new location thereof (which must be within the United
States) and (ii) evidence that appropriate financing statements under the UCC
and other necessary documents have been filed and recorded and other steps
have
been taken to perfect the Security Interests to create in favor of the Secured
Parties a valid, perfected and continuing perfected first priority lien in
the
Collateral.
(f) This
Agreement creates in favor of the Secured Parties a valid security interest
in the Collateral, subject only to Permitted Liens (as defined in the
Debentures) securing the payment and performance of the
Obligations. Upon making the filings described in the immediately
following paragraph, all security interests created hereunder in any Collateral
which may be perfected by filing Uniform Commercial Code financing statements
shall have been duly perfected.
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Except
for the filing of the Uniform Commercial Code financing statements referred
to
in the immediately following paragraph, the recordation of the Intellectual
Property Security Agreement (as defined below) with respect to copyrights and
copyright applications in the United States Copyright Office referred to in
paragraph (m), the execution and delivery of deposit account control agreements
satisfying the requirements of Section 9-104(a)(2) of the UCC with respect
to
each deposit account of the Debtors, and the delivery of the certificates and
other instruments provided in Section 3, no action is necessary to create,
perfect or protect the security interests created hereunder. Without
limiting the generality of the foregoing, except for the filing of said
financing statements, the recordation of said Intellectual Property Security
Agreement, and the execution and delivery of said deposit account control
agreements, no consent of any third parties and no authorization, approval
or
other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for (i) the execution, delivery and
performance of this Agreement, (ii) the creation or perfection of the Security
Interests created hereunder in the Collateral or (iii) the enforcement of the
rights of the Agent and the Secured Parties hereunder.
(g) Each
Debtor hereby authorizes the Agent to file one or more financing statements
under the UCC, with respect to the Security Interests, with the proper filing
and recording agencies in any jurisdiction deemed proper by it.
(h) The
execution, delivery and performance of this Agreement by the Debtors does not
(i) violate any of the provisions of any Organizational Documents of any Debtor
or any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to any Debtor
or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other
instrument (evidencing any Debtor's debt or otherwise) or other understanding
to
which any Debtor is a party or by which any property or asset of any Debtor
is bound or affected. If any, all required consents (including, without
limitation, from stockholders or creditors of any Debtor) necessary for any
Debtor to enter into and perform its obligations hereunder have been
obtained.
(i) The
capital stock and other equity interests listed on Schedule H hereto (the
“Pledged Securities”) represent all of the capital stock and other equity
interests of the Guarantors, and represent all capital stock and other equity
interests owned, directly or indirectly, by the Company. All of the
Pledged Securities are validly issued, fully paid and nonassessable, and the
Company is the legal and beneficial owner of the Pledged Securities, free and
clear of any lien, security interest or other encumbrance except for the
security interests created by this Agreement and other Permitted Liens (as
defined in the Debentures).
(j) The
ownership and other equity interests in partnerships and limited liability
companies (if any) included in the Collateral (the “Pledged Interests”)
by their express terms do not provide that they are securities governed by
Article 8 of the UCC and are not held in a securities account or by any
financial intermediary.
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(k) Except
for Permitted Liens (as defined in the Debentures), each Debtor shall at all
times maintain the liens and Security 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 Section 11 hereof. Each
Debtor hereby agrees to defend the same against the claims of any and all
persons and entities. Each Debtor shall safeguard and protect all
Collateral for the account of the Secured Parties. At the
request of the Agent, each Debtor 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, each Debtor shall pay all fees, taxes and other amounts necessary
to
maintain the Collateral and the Security Interests hereunder, and each Debtor
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.
(l)
No Debtor will transfer, pledge, hypothecate, encumber, license, sell or
otherwise dispose of any of the Collateral (except for non-exclusive licenses
granted by a Debtor in its ordinary course of business and sales of inventory
by
a Debtor in its ordinary course of business) without the prior written consent
of a Majority in Interest.
(m)
Each Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.
(n) Each
Debtor shall maintain with financially sound and reputable insurers, insurance
with respect to the Collateral, 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. Each Debtor shall cause each insurance policy issued in
connection herewith to provide, and the insurer issuing such policy to certify
to the Agent, that (a) the Agent will be named as lender loss payee and
additional insured under each such insurance policy; (b) if such insurance
be
proposed to be cancelled or materially changed for any reason whatsoever, such
insurer will promptly notify the Agent and such cancellation or change shall
not
be effective as to the Agent for at least thirty (30) days after receipt by
the
Agent of such notice, unless the effect of such change is to extend or increase
coverage under the policy; and (c) the Agent will have the right (but no
obligation) at its election to remedy any default in the payment of premiums
within thirty (30) days of notice from the insurer of such
default.
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If
no
Event of Default (as defined in the Debentures) exists and if the proceeds
arising out of any claim or series of related claims do not exceed $100,000,
loss payments in each instance will be applied by the applicable Debtor to
the
repair and/or replacement of property with respect to which the loss was
incurred to the extent reasonably feasible, and any loss payments or the balance
thereof remaining, to the extent not so applied, shall be payable to the
applicable Debtor; provided, however, that payments received
by any Debtor after an Event of Default occurs and is continuing or in excess
of
$100,000 for any occurrence or series of related occurrences shall be paid
to
the Agent on behalf of the Secured Parties and, if received by such Debtor,
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.
(o) Each
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Parties promptly, in sufficient detail, of any material adverse change
in the Collateral, and of the occurrence of any event which would have a
material adverse effect on the value of the Collateral or on the Secured
Parties’ security interest, through the Agent, therein.
(p) Each
Debtor 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 including, without limitation, if applicable, the execution
and delivery of a separate security agreement with respect to each Debtor’s
Intellectual Property (“Intellectual Property Security Agreement”) in
which the Secured Parties have been granted a security interest hereunder,
substantially in a form reasonably acceptable to the Agent, which
Intellectual Property Security Agreement, other than as stated therein, shall
be
subject to all of the terms and conditions hereof.
(q) Each
Debtor shall permit the Agent and its representatives and agents to inspect
the
Collateral during normal business hours and upon reasonable prior notice, and
to
make copies of records pertaining to the Collateral as may be reasonably
requested by the Agent from time to time.
(r) Each
Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.
(s) Each
Debtor shall promptly notify the Secured Parties in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by such
Debtor that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Parties
hereunder.
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(t) All
information heretofore, herein or hereafter supplied to the Secured Parties
by
or on behalf of any Debtor with respect to the Collateral is accurate and
complete in all material respects as of the date furnished.
(u) The
Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises
material to its business.
(v) No
Debtor will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at
least 30 days prior written notice to the Secured Parties of such change and,
at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this Agreement.
(w) Except
in the ordinary course of business, no Debtor may consign any of its inventory
or sell any of its inventory on xxxx and hold, sale or return, sale on approval,
or other conditional terms of sale without the consent of the Agent which shall
not be unreasonably withheld.
(x) No
Debtor may relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to the Secured Parties
and
so long as, at the time of such written notification, such Debtor provides
any
financing statements or fixture filings necessary to perfect and continue the
perfection of the Security Interests granted and evidenced by this
Agreement.
(y) Each
Debtor was organized and remains organized solely under the laws of the state
set forth next to such Debtor’s name in Schedule D attached hereto, which
Schedule D sets forth each Debtor’s organizational identification number
or, if any Debtor does not have one, states that one does not
exist.
(z)
(i) The actual name of each Debtor is the name set forth in Schedule
D attached hereto; (ii) no Debtor has any trade names except as set forth
on
Schedule E attached hereto; (iii) no Debtor has used any name other than
that stated in the preamble hereto or as set forth on Schedule E for the
preceding five years; and (iv) no entity has merged into any Debtor or been
acquired by any Debtor within the past five years except as set forth on
Schedule E.
(aa) At
any time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by
the
secured party to perfect the security interest created hereby, the applicable
Debtor shall deliver such Collateral to the Agent.
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(bb) Each
Debtor, in its capacity as issuer, hereby agrees to comply with any and all
orders and instructions of Agent regarding the Pledged Interests consistent
with
the terms of this Agreement without the further consent of any Debtor as
contemplated by Section 8-106 (or any successor section) of the
UCC. Further, each Debtor agrees that it shall not enter into a
similar agreement (or one that would confer “control” within the meaning of
Article 8 of the UCC) with any other person or entity.
(cc) Each
Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Agent, or, if such delivery is not possible, then to cause
such
tangible chattel paper to contain a legend noting that it is subject to the
security interest created by this Agreement. To the extent that any
Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).
(dd) If
there is any investment property or deposit account included as Collateral
that
can be perfected by “control” through an account control agreement, the
applicable Debtor shall cause such an account control agreement, in form and
substance in each case satisfactory to the Agent, to be entered into and
delivered to the Agent for the benefit of the Secured Parties.
(ee) To
the extent that any Collateral consists of letter-of-credit rights, the
applicable Debtor shall cause the issuer of each underlying letter of credit
to
consent to an assignment of the proceeds thereof to the Secured
Parties.
(ff) To
the extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Agent in notifying such third party of
the
Secured Parties’ security interest in such Collateral and shall use its best
efforts to obtain an acknowledgement and agreement from such third party with
respect to the Collateral, in form and substance reasonably satisfactory to
the
Agent.
(gg) If
any Debtor shall at any time hold or acquire a commercial tort claim, such
Debtor shall promptly notify the Secured Parties in a writing signed by such
Debtor of the particulars thereof and grant to the Secured Parties in such
writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance
satisfactory to the Agent.
(hh) Each
Debtor shall immediately provide written notice to the Secured Parties of any
and all accounts which arise out of contracts with any governmental authority
and, to the extent necessary to perfect or continue the perfected status of
the
Security Interests in such accounts and proceeds thereof, shall execute and
deliver to the Agent an assignment of claims for such accounts and cooperate
with the Agent in taking any other steps required, in its judgment, under the
Federal Assignment of Claims Act or any similar federal, state or local statute
or rule to perfect or continue the perfected status of the Security Interests
in
such accounts and proceeds thereof.
11
(ii)
Each Debtor shall cause each subsidiary of such Debtor to immediately become
a
party hereto (an “Additional Debtor”), by executing and delivering an
Additional Debtor Joinder in substantially the form of Annex A attached
hereto and comply with the provisions hereof applicable to the
Debtors. Concurrent therewith, the Additional Debtor shall deliver
replacement schedules for, or supplements to all other Schedules to (or referred
to in) this Agreement, as applicable, which replacement schedules shall
supersede, or supplements shall modify, the Schedules then in
effect. The Additional Debtor shall also deliver such opinions of
counsel, authorizing resolutions, good standing certificates, incumbency
certificates, organizational documents, financing statements and other
information and documentation as the Agent may reasonably
request. Upon delivery of the foregoing to the Agent, the Additional
Debtor shall be and become a party to this Agreement with the same rights and
obligations as the Debtors, for all purposes hereof as fully and to the same
extent as if it were an original signatory hereto and shall be deemed to have
made the representations, warranties and covenants set forth herein as of the
date of execution and delivery of such Additional Debtor Joinder, and all
references herein to the “Debtors” shall be deemed to include each Additional
Debtor.
(jj) Each
Debtor shall vote the Pledged Securities to comply with the covenants and
agreements set forth herein and in the Debentures.
(kk) Each
Debtor shall register the pledge of the applicable Pledged Securities on the
books of such Debtor. Each Debtor shall notify each issuer of Pledged
Securities to register the pledge of the applicable Pledged Securities in the
name of the Secured Parties on the books of such issuer. Further,
except with respect to certificated securities delivered to the Agent, the
applicable Debtor shall deliver to Agent an acknowledgement of pledge (which,
where appropriate, shall comply with the requirements of the relevant UCC with
respect to perfection by registration) signed by the issuer of the applicable
Pledged Securities, which acknowledgement shall confirm that: (a) it has
registered the pledge on its books and records; and (b) at any time directed
by
Agent during the continuation of an Event of Default, such issuer will transfer
the record ownership of such Pledged Securities into the name of any designee
of
Agent, will take such steps as may be necessary to effect the transfer, and
will
comply with all other instructions of Agent regarding such Pledged Securities
without the further consent of the applicable Debtor.
(ll) In
the event that, upon an occurrence of an Event of Default, Agent shall sell
all
or any of the Pledged Securities to another party or parties (herein called
the
“Transferee”) or shall purchase or retain all or any of the
Pledged Securities, each Debtor shall, to the extent applicable: (i) deliver
to
Agent or the Transferee, as the case may be, the articles of incorporation,
bylaws, minute books, stock certificate books, corporate seals, deeds, leases,
indentures, agreements, evidences of indebtedness, books of account, financial
records and all other Organizational Documents and records of the Debtors and
their direct and indirect subsidiaries; (ii) use its best efforts to obtain
resignations of the persons then serving as officers and directors of the
Debtors and their direct and indirect subsidiaries, if so requested; and (iii)
use its best efforts to obtain any approvals that are required by any
governmental or regulatory body in order to permit the sale of the Pledged
Securities to the Transferee or the purchase or retention of the Pledged
Securities by Agent and allow the Transferee or Agent to continue the business
of the Debtors and their direct and indirect subsidiaries.
12
(mm) Without
limiting the generality of the other obligations of the Debtors hereunder,
each
Debtor shall promptly (i) cause to be registered at the United States Copyright
Office all of its material copyrights, (ii) cause the security interest
contemplated hereby with respect to all Intellectual Property registered at
the
United States Copyright Office or United States Patent and Trademark Office
to
be duly recorded at the applicable office, and (iii) give the Agent notice
whenever it acquires (whether absolutely or by license) or creates any
additional material Intellectual Property.
(nn) Each
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents, and
take all such further action as may be necessary or desirable, or as the 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.
(oo) Schedule
F attached hereto lists all of the patents, patent applications, trademarks,
trademark applications, registered copyrights, and domain names owned by any
of
the Debtors as of the date hereof. Schedule F lists all
material licenses in favor of any Debtor for the use of any patents, trademarks,
copyrights and domain names as of the date hereof. All material
patents and trademarks of the Debtors have been duly recorded at the United
States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright Office.
(pp) Except
as set forth on Schedule G attached hereto, none of the account debtors
or other persons or entities obligated on any of the Collateral is a
governmental authority covered by the Federal Assignment of Claims Act or any
similar federal, state or local statute or rule in respect of such
Collateral.
5. Effect
of Pledge on Certain Rights. If any of the
Collateral subject to this Agreement consists of nonvoting equity or ownership
interests (regardless of class, designation, preference or rights) that may
be
converted into voting equity or ownership interests upon the occurrence of
certain events (including, without limitation, upon the transfer of all or
any
of the other stock or assets of the issuer), it is agreed that the pledge of
such equity or ownership interests pursuant to this Agreement or the enforcement
of any of Agent’s rights hereunder shall not be deemed to be the type of event
which would trigger such conversion rights notwithstanding any provisions in
the
Organizational Documents or agreements to which any Debtor is subject or to
which any Debtor is party.
6.
Defaults.
The following events shall be “Events of Default”:
13
(a) The
occurrence of an Event of Default (as defined in the Debentures) under the
Debentures;
(b) Any
representation or warranty of any Debtor in this Agreement shall prove to have
been incorrect in any material respect when made;
(c) The
failure by any Debtor to observe or perform any of its obligations hereunder
for
five (5) days after delivery to such Debtor of notice of such failure by or
on
behalf of a Secured Party unless such default is capable of cure but cannot
be
cured within such time frame and such Debtor is using best efforts to cure
same
in a timely fashion; or
(d) If
any provision of this Agreement shall at any time for any reason be declared
to
be null and void, or the validity or enforceability thereof shall be contested
by any Debtor, or a proceeding shall be commenced by any Debtor, or by any
governmental authority having jurisdiction over any Debtor, seeking to establish
the invalidity or unenforceability thereof, or any Debtor shall deny that any
Debtor has any liability or obligation purported to be created under this
Agreement.
7. Duty
To Hold In Trust.
(a) Upon
the occurrence of any Event of Default and at any time thereafter, each Debtor
shall, upon receipt of any revenue, income, dividend, interest or other sums
subject to the Security Interests, whether payable pursuant to the Debentures
or
otherwise, or of any check, draft, note, trade acceptance or other instrument
evidencing an obligation to pay any such sum, hold the same in trust for the
Secured Parties and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Secured Parties, pro-rata in proportion to their
respective then-currently outstanding principal amount of Debentures for
application to the satisfaction of the Obligations (and if any Debenture is
not
outstanding, pro-rata in proportion to the initial purchases of the remaining
Debentures).
(b) If
any Debtor shall become entitled to receive or shall receive any securities
or
other property (including, without limitation, shares of Pledged Securities
or
instruments representing Pledged Securities acquired after the date hereof,
or
any options, warrants, rights or other similar property or certificates
representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as
an
addition to, in substitution of, or in exchange for, such Pledged Securities
or
otherwise), such Debtor agrees to (i) accept the same as the agent of the
Secured Parties; (ii) hold the same in trust on behalf of and for the benefit
of
the Secured Parties; and (iii) to deliver any and all certificates or
instruments evidencing the same to Agent on or before the close of business
on
the fifth business day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be held by
Agent subject to the terms of this Agreement as Collateral.
14
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 Debentures, and the Secured Parties
shall have all the rights and remedies of a secured party under the
UCC. Without limitation, the Agent, for the benefit of the Secured
Parties, shall have the following rights and powers:
(i) The
Agent shall have
the right to take possession of the Collateral and, for that purpose, enter,
with the aid and assistance of any person, any premises where the Collateral,
or
any part thereof, is or may be placed and remove the same, and each Debtor
shall
assemble the Collateral and make it available to the Agent at places which
the
Agent shall reasonably select, whether at such Debtor's premises or elsewhere,
and make available to the Agent, without rent, all of such Debtor’s respective
premises and facilities for the purpose of the Agent taking possession of,
removing or putting the Collateral in saleable or disposable form.
(ii) Upon
notice to the
Debtors by Agent, all rights of each Debtor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise and all
rights of each Debtor to receive the dividends and interest which it would
otherwise be authorized to receive and retain, shall cease. Upon such
notice, Agent shall have the right to receive, for the benefit of the Secured
Parties, any interest, cash dividends or other payments on the Collateral and,
at the option of Agent, to exercise in such Agent’s discretion all voting rights
pertaining thereto. Without limiting the generality of the foregoing,
Agent shall have the right (but not the obligation) to exercise all rights
with
respect to the Collateral as it were the sole and absolute owner thereof,
including, without limitation, to vote and/or to exchange, at its sole
discretion, any or all of the Collateral in connection with a merger,
reorganization, consolidation, recapitalization or other readjustment concerning
or involving the Collateral or any Debtor or any of its direct or indirect
subsidiaries.
(iii) The
Agent shall have
the right to operate the business of each Debtor using the Collateral and shall
have the right to assign, sell, lease or otherwise dispose of and deliver all
or
any part of the Collateral, at public or private sale or otherwise, either
with
or without special conditions or stipulations, for cash or on credit or for
future delivery, in such parcel or parcels and at such time or times and at
such
place or places, and upon such terms and conditions as the Agent may deem
commercially reasonable, all without (except as shall be required by applicable
statute and cannot be waived) advertisement or demand upon or notice to any
Debtor or right of redemption of a Debtor, which are hereby expressly
waived. Upon each such sale, lease, assignment or other transfer of
Collateral, the Agent, for the benefit of the Secured Parties, may, unless
prohibited by applicable law which cannot be waived, purchase all or any part
of
the Collateral being sold, free from and discharged of all trusts, claims,
right
of redemption and equities of any Debtor, which are hereby waived and
released.
15
(iv) The
Agent shall have the right (but not the obligation) to notify any account
debtors and any obligors under instruments or accounts to make payments directly
to the Agent, on behalf of the Secured Parties, and to enforce the Debtors’
rights against such account debtors and obligors.
(v) The
Agent, for the benefit of the Secured Parties, may (but is not obligated to)
direct any financial intermediary or any other person or entity holding any
investment property to transfer the same to the Agent, on behalf of the Secured
Parties, or its designee.
(vi) The
Agent may (but is not obligated to) transfer any or all Intellectual Property
registered in the name of any Debtor at the United States Patent and Trademark
Office and/or Copyright Office into the name of the Secured Parties or any
designee or any purchaser of any Collateral.
(b) The
Agent 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 Agent
may sell the Collateral without giving any warranties and may specifically
disclaim such warranties. If the Agent sells any of the Collateral on
credit, the Debtors will only be credited with payments actually made by the
purchaser. In addition, each Debtor waives any and all rights that it
may have to a judicial hearing in advance of the enforcement of any of the
Agent’s rights and remedies hereunder, including, without limitation, its right
following an Event of Default to take immediate possession of the Collateral
and
to exercise its rights and remedies with respect thereto.
(c) For
the purpose of enabling the Agent to further exercise rights and remedies under
this Section 8 or elsewhere provided by agreement or applicable law, each Debtor
hereby grants to the Agent, for the benefit of the Agent and the Secured
Parties, an irrevocable, nonexclusive license (exercisable without payment
of
royalty or other compensation to such Debtor) to use, license or sublicense
following an Event of Default, any Intellectual Property now owned or hereafter
acquired by such Debtor, and wherever the same may be located, and including
in
such license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof.
9. Applications
of Proceeds. The proceeds of any such sale, lease or other disposition
of the Collateral hereunder 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
Debentures at the time of any such determination), and to the payment of any
other amounts required by applicable law, after which the Secured Parties shall
pay to the applicable Debtor any surplus proceeds.
16
If,
upon
the sale, license or other disposition of the Collateral, the proceeds thereof
are insufficient to pay all amounts to which the Secured Parties are legally
entitled, the Debtors will be liable for the deficiency, together with interest
thereon, at the rate of 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, each Debtor waives all claims, damages
and
demands against the Secured Parties arising out of the repossession, removal,
retention or sale of the Collateral, unless due solely to the gross negligence
or willful misconduct of the Secured Parties as determined by a final judgment
(not subject to further appeal) of a court of competent
jurisdiction.
10. Securities
Law Provision. Each Debtor recognizes that Agent may be
limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act
of
1933, as amended, or other federal or state securities laws (collectively,
the
“Securities Laws”), and may be compelled to resort to one or more sales
to a restricted group of purchasers who may be required to agree to acquire
the
Pledged Securities for their own account, for investment and not with a view
to
the distribution or resale thereof. Each Debtor agrees that sales so
made may be at prices and on terms less favorable than if the Pledged Securities
were sold to the public, and that Agent has no obligation to delay the sale
of
any Pledged Securities for the period of time necessary to register the Pledged
Securities for sale to the public under the Securities Laws. Each
Debtor shall cooperate with Agent in its attempt to satisfy any requirements
under the Securities Laws (including, without limitation, registration
thereunder if requested by Agent) applicable to the sale of the Pledged
Securities by Agent.
11. Costs
and Expenses. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Agent. The Debtors 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 Debtors 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 Debentures. Until so paid, any fees payable hereunder shall be added
to the principal amount of the Debentures and shall bear interest at the Default
Rate.
12. Responsibility
for Collateral. The Debtors assume all liabilities and responsibility
in connection with all Collateral, and the Obligations shall in no way be
affected or diminished by reason of the loss, destruction, damage or theft
of
any of the Collateral or its unavailability for any reason. Without
limiting the generality of the foregoing, (a) neither the Agent nor any Secured
Party (i) has any duty (either before or after an Event of Default) to collect
any amounts in respect of the Collateral or to preserve any rights relating
to
the Collateral, or (ii) has any obligation to clean-up or otherwise prepare
the
Collateral for sale, and (b) each Debtor shall remain obligated and liable
under
each contract or agreement included in the Collateral to be observed or
performed by such Debtor thereunder.
17
Neither
the Agent nor any Secured Party shall have any obligation or liability under
any
such contract or agreement by reason of or arising out of this Agreement or
the
receipt by the Agent or any Secured Party of any payment relating to any of
the
Collateral, nor shall the Agent or any Secured Party be obligated in any manner
to perform any of the obligations of any Debtor under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency of any
payment received by the Agent or any Secured Party in respect of the Collateral
or as to the sufficiency of any performance by any party under any such contract
or agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Agent or to which the Agent or any Secured Party may be entitled
at any time or times.
13. Security
Interests Absolute. All rights of the
Secured Parties and all obligations of the Debtors hereunder, shall be absolute
and unconditional, irrespective of: (a) any lack of validity or enforceability
of this Agreement, the Debentures or any agreement entered into in connection
with the foregoing, or any portion hereof or thereof; (b) any change in the
time, manner or place of payment or performance of, or in any other term of,
all
or any of the Obligations, or any other amendment or waiver of or any consent
to
any departure from the Debentures or any other agreement entered into in
connection with the foregoing; (c) any exchange, release or nonperfection of
any
of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guarantee, or any other
security, for all or any of the Obligations; (d) any action by the Secured
Parties to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the Collateral;
or (e) any other circumstance which might otherwise constitute any legal or
equitable defense available to a Debtor, or a discharge of all or any part
of
the Security Interests granted hereby. Until the Obligations shall
have been paid and performed in full, the rights of the Secured Parties shall
continue even if the Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or
bankruptcy. Each Debtor expressly waives presentment, protest, notice
of protest, demand, notice of nonpayment and demand for performance. In the
event that at any time any transfer of any Collateral or any payment received
by
the Secured Parties hereunder shall be deemed by final order of a court of
competent jurisdiction to have been a voidable preference or fraudulent
conveyance under the bankruptcy or insolvency laws of the United States, or
shall be deemed to be otherwise due to any party other than the Secured Parties,
then, in any such event, each Debtor’s obligations hereunder shall survive
cancellation of this Agreement, and shall not be discharged or satisfied by
any
prior payment thereof and/or cancellation of this Agreement, but shall remain
a
valid and binding obligation enforceable in accordance with the terms and
provisions hereof. Each Debtor waives all right to require the
Secured Parties to proceed against any other person or entity or to apply any
Collateral which the Secured Parties may hold at any time, or to marshal assets,
or to pursue any other remedy. Each Debtor waives any defense arising by reason
of the application of the statute of limitations to any obligation secured
hereby.
18
14. Term
of Agreement. This Agreement and the Security Interests shall terminate
on the date on which all payments under the Debentures have been indefeasibly
paid in full and all other Obligations have been paid or discharged; provided,
however, that all indemnities of the Debtors contained in this Agreement
(including, without limitation, Annex B hereto) shall survive and remain
operative and in full force and effect regardless of the termination of this
Agreement.
15.
Power
of Attorney; Further Assurances.
(a) Each
Debtor 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 such Debtor’s true and lawful attorney-in-fact, with power, in
the name of the Agent or such Debtor, to, after the occurrence and during the
continuance of an Event of Default, (i) endorse any note, checks, drafts, money
orders or other instruments of payment (including payments payable under or
in
respect of any policy of insurance) in respect of the Collateral that may come
into possession of the Agent; (ii) to sign and endorse any financing statement
pursuant to the UCC or any invoice, freight or express xxxx, xxxx of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other documents
relating to the Collateral; (iii) to pay or discharge taxes, liens,
security interests or other encumbrances at any time levied or placed on or
threatened against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and xxx for monies due in respect of the Collateral; (v)
to
transfer any Intellectual Property or provide licenses respecting any
Intellectual Property; and (vi) generally, at the option of the Agent, and
at
the expense of the Debtors, at any time, or from time to time, to execute and
deliver any and all documents and instruments and to do all acts and things
which the 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 Debentures all as fully and effectually as
the
Debtors might or could do; and each Debtor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. This
power of attorney is coupled with an interest and shall be irrevocable for
the
term of this Agreement and thereafter as long as any of the Obligations shall
be
outstanding. The designation set forth herein shall be deemed to
amend and supersede any inconsistent provision in the Organizational Documents
or other documents or agreements to which any Debtor is subject or to which
any
Debtor is a party. Without limiting the generality of the foregoing,
after the occurrence and during the continuance of an Event of Default, each
Secured Party is specifically authorized to execute and file any applications
for or instruments of transfer and assignment of any patents, trademarks,
copyrights or other Intellectual Property with the United States Patent and
Trademark Office and the United States Copyright Office.
(b) On
a continuing basis, each Debtor will make, execute, acknowledge, deliver, file
and record, as the case may be, with the proper filing and recording agencies
in
any jurisdiction, including, without limitation, the jurisdictions indicated
on
Schedule C attached hereto, all such instruments, and take all such
action as may reasonably be deemed necessary or advisable, or as reasonably
requested by the 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.
19
(c) Each
Debtor hereby irrevocably appoints the Agent as such Debtor’s attorney-in-fact,
with full authority in the place and instead of such Debtor and in the name
of
such Debtor, from time to time in the 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 such Debtor
where permitted by law, which financing statements may (but need not) describe
the Collateral as “all assets” or “all personal property” or words of like
import, and ratifies all such actions taken by the 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 Purchase Agreement (as such term is
defined in the Debentures).
17. Other
Security. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the
guarantee, endorsement or property of any other person, firm, corporation or
other entity, then the 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 Enable Growth Partners, LP to act as their agent
(“Enable”or
“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, provided that the existing Agent may not
be
removed as Agent unless such Agent shall then hold less than
$100,000 in principal amount of Debentures;
provided, further, that such removal may occur only if
each of the other Secured Parties shall then hold not less than an aggregate
of
$50,000 in principal amount of Debentures. The Agent shall have
the rights, responsibilities and immunities set forth in Annex B
hereto.
19. Miscellaneous.
(a) No
course of dealing between the Debtors and the Secured Parties, nor any failure
to exercise, nor any delay in exercising, on the part of the Secured Parties,
any right, power or privilege hereunder or under the Debentures shall operate
as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder or thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
(b) All
of the rights and remedies of the Secured Parties with respect to the
Collateral, whether established hereby or by the Debentures or by any other
agreements, instruments or documents or by law shall be cumulative and may
be
exercised singly or concurrently.
20
(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 Debtors 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 and the Guarantors 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.
21
(h) All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each Debtor agrees that all
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Debentures (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan. Each Debtor hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the jurisdiction
of
any such court, that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees
that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby. If any
party shall commence a proceeding to enforce any provisions of this Agreement,
then the prevailing party in such proceeding shall be reimbursed by the
other party for its reasonable attorney’s fees and other costs and expenses
incurred with the investigation, preparation and prosecution of such
proceeding.
(i) This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(j) All
Debtors shall jointly and severally be liable for the obligations of each Debtor
to the Secured Parties hereunder.
(k) Each
Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
Parties and their respective partners, members, shareholders, officers,
directors, employees and agents (and any other persons with other titles
that have similar functions) (collectively, “Indemnitees”) from and
against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the
cost
of investigating and defending any of the foregoing) imposed on, incurred by
or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from the gross negligence or willful misconduct of the Indemnitee as determined
by a final, nonappealable decision of a court of competent
jurisdiction.
22
This
indemnification provision is in addition to, and not in limitation of, any
other indemnification provision in the Debentures, the Purchase Agreement (as
such term is defined in the Debentures) or any other agreement, instrument
or
other document executed or delivered in connection herewith or
therewith.
(l) Nothing
in this Agreement shall be construed to subject Agent or any Secured Party
to
liability as a partner in any Debtor or any if its direct or indirect
subsidiaries that is a partnership or as a member in any Debtor or any of its
direct or indirect subsidiaries that is a limited liability company, nor shall
Agent or any Secured Party be deemed to have assumed any obligations under
any
partnership agreement or limited liability company agreement, as applicable,
of
any such Debtor or any if its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be substituted
for such Debtor as a partner or member, as applicable, pursuant
hereto.
(m) To
the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of
any
partner or member, as applicable, of any Debtor or any direct or indirect
subsidiary of any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby grant such consent and approval
and
waive any such noncompliance with the terms of said documents.
[SIGNATURE
PAGES FOLLOW]
23
IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
be duly executed on the day and year first above written.
|
|
|
By:
/s/ Li Yanquan
Name:
Li Yanquan
Title:
Chief Executive Officer
|
|
GLOBAL
TELECOM HOLDING LIMITED
|
|
By:/s/
Li Yanquan
Name:
Li Yanquan
Title:
Chief Executive Officer
|
|
GUANGZHOU
GLOBAL TELECOMMUNICATION COMPANY LIMITED
|
|
By:/s/
Li Yanquan
Name:
Li Yanquan
Title:
Chief Executive Officer
|
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
24
[SIGNATURE
PAGE OF HOLDERS TO GZGT SA]
Name
of Investing Entity: __________________________
Signature
of Authorized Signatory of Investing entity:
_________________________
Name
of
Authorized Signatory: _________________________
Title
of
Authorized Signatory: __________________________
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
25
SECURITY
AGREEMENT SCHEDULES
SCHEDULE
A
Principal
Place of Business of Debtors:
APT
29D,
Block E
No.11
Hao
Jing Street, Zhu Jiang Di Xxxx Xxxx
XxXxxx
Xxxx, XxxXxx Xxxxxxxx,
Xxxxxxxxx
Xxxxx, 000000
Locations
Where Collateral is Located or Stored:
APT
29D,
Block E
No.11
Hao
Jing Street, Zhu Jiang Di Xxxx Xxxx
YiZhou
Road, HaiZhu District,
Guangzhou
China, 510310
26
SCHEDULE
B
PERMITTED
LIENS
None
27
SCHEDULE
C
JURISDICTIONS
TO FILE AND RECORD SECURITY INTERESTS
Florida
28
SCHEDULE
D
STATE
OF ORGANIZATION
Guangzhou
Global Telecom, Inc. – Florida
Global
Telecom Holding Limited - British Virgin Islands
Guangzhou
Global Telecom Limited - 广州寰球通讯有限公司–
People’s Republic of China
29
SCHEDULE
E
TRADE
NAMES
Guangzhou
Global Telecom, Inc. was previously known as Avalon Development Enterprises,
Inc.
30
SCHEDULE
F
INTELLECTUAL
PROPERTY
None.
31
SCHEDULE
G
GOVERNMENTAL
AUTHORITY
None.
32
SCHEDULE
H
PLEDGED
SECURITIES
Global
Telecom Holding Limited
1,000
shares of common stock
Guangzhou
Global Telecom Limited
All
registered capital of RMB 3,030,000
33
ANNEX
A
to
SECURITY
AGREEMENT
FORM
OF ADDITIONAL DEBTOR JOINDER
Security
Agreement dated as of [_____ ___, 200__ made by
Guangzhou
Global Telecom, Inc
and
its
subsidiaries party thereto from time to time, as Debtors
to
and in
favor of
the
Secured Parties identified therein (the “Security
Agreement”)
Reference
is made to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in, or by reference in, the Security Agreement.
The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
to the Secured Parties referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the
same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein as of the
date
of execution and delivery of this Additional Debtor Joinder. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS
TO
THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET
FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF
JURY TRIAL PROVISIONS SET FORTH THEREIN.
Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement,
as applicable.
An
executed copy of this Joinder shall be delivered to the Secured Parties, and
the
Secured Parties may rely on the matters set forth herein on or after the date
hereof. This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Parties.
IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the
name and on behalf of the undersigned.
|
[Name
of Additional Debtor]
|
|
By:
|
|
Name:
|
|
Title:
|
|
Address:
|
|
|
Dated:
|
ANNEX
B
to
SECURITY
AGREEMENT
THE
AGENT
1. Appointment. The
Secured Parties (all capitalized terms used herein and not otherwise defined
shall have the respective meanings provided in the Security Agreement to which
this Annex B is attached (the "Agreement")), by their acceptance of the
benefits of the Agreement, hereby designate Enable Growth Partners, LP
(“Enable” or “Agent”) as the Agent to act as specified herein
and in the Agreement. Each Secured Party shall be deemed irrevocably
to authorize the Agent to take such action on its behalf under the provisions
of
the Agreement and any other Transaction Document (as such term is defined in
the
Debentures) and to exercise such powers and to perform such duties hereunder
and
thereunder as are specifically delegated to or required of the Agent by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. The Agent may perform any of its duties hereunder by or
through its agents or employees.
2.
Nature of Duties. The Agent shall have no
duties or responsibilities except those expressly set forth in the
Agreement. Neither the Agent nor any of its partners, members,
shareholders, officers, directors, employees or agents shall be liable for
any
action taken or omitted by it as such under the Agreement or hereunder or in
connection herewith or therewith, be responsible for the consequence of any
oversight or error of judgment or answerable for any loss, unless caused solely
by its or their gross negligence or willful misconduct as determined by a final
judgment (not subject to further appeal) of a court of competent
jurisdiction. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of the Agreement
or
any other Transaction Document a fiduciary relationship in respect of any Debtor
or any Secured Party; and nothing in the Agreement or any other Transaction
Document, expressed or implied, is intended to or shall be so construed as
to
impose upon the Agent any obligations in respect of the Agreement or any other
Transaction Document except as expressly set forth herein and
therein.
3.
Lack of Reliance on the
Agent. Independently and without reliance
upon the Agent, each Secured Party, to the extent it deems appropriate, has
made
and shall continue to make (i) its own independent investigation of the
financial condition and affairs of the Company and its subsidiaries in
connection with such Secured Party’s investment in the Debtors, the creation and
continuance of the Obligations, the transactions contemplated by the Transaction
Documents, and the taking or not taking of any action in connection therewith,
and (ii) its own appraisal of the creditworthiness of the Company and its
subsidiaries, and of the value of the Collateral from time to time, and the
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Secured Party with any credit, market or other
information with respect thereto, whether coming into its possession before
any
Obligations are incurred or at any time or times
thereafter.
The
Agent
shall not be responsible to the Debtors or any Secured Party for any
recitals, statements, information, representations or warranties herein or
in
any document, certificate or other writing delivered in connection herewith,
or
for the execution, effectiveness, genuineness, validity, enforceability,
perfection, collectibility, priority or sufficiency of the Agreement or any
other Transaction Document, or for the financial condition of the Debtors or
the
value of any of the Collateral, or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of the Agreement or any other Transaction Document, or the financial
condition of the Debtors, or the value of any of the Collateral, or the
existence or possible existence of any default or Event of Default under the
Agreement, the Debentures or any of the other Transaction
Documents.
4.
Certain Rights of the Agent. The Agent shall have
the right to take any action with respect to the Collateral, on behalf of all
of
the Secured Parties. To the extent practical, the Agent shall request
instructions from the Secured Parties with respect to any material act or action
(including failure to act) in connection with the Agreement or any other
Transaction Document, and shall be entitled to act or refrain from acting in
accordance with the instructions of Secured Parties holding a majority in
principal amount of Debentures (based on then-outstanding principal amounts
of
Debentures at the time of any such determination); if such instructions are
not
provided despite the Agent’s request therefor, the Agent shall be entitled to
refrain from such act or taking such action, and if such action is taken, shall
be entitled to appropriate indemnification from the Secured Parties in respect
of actions to be taken by the Agent; and the Agent shall not incur liability
to
any person or entity by reason of so refraining. Without limiting the
foregoing, (a) no Secured Party shall have any right of action whatsoever
against the Agent as a result of the Agent acting or refraining from acting
hereunder in accordance with the terms of the Agreement or any other Transaction
Document, and the Debtors shall have no right to question or challenge the
authority of, or the instructions given to, the Agent pursuant to the foregoing
and (b) the Agent shall not be required to take any action which the Agent
believes (i) could reasonably be expected to expose it to personal liability
or
(ii) is contrary to this Agreement, the Transaction Documents or applicable
law.
5. Reliance. The
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, radiogram, order or other document or telephone
message signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to the Agreement and the other Transaction
Documents and its duties thereunder, upon advice of counsel selected by it
and
upon all other matters pertaining to this Agreement and the other Transaction
Documents and its duties thereunder, upon advice of other experts selected
by
it. Anything to the contrary notwithstanding, the Agent shall have no
obligation whatsoever to any Secured Party to assure that the Collateral exists
or is owned by the Debtors or is cared for, protected or insured or that the
liens granted pursuant to the Agreement have been properly or sufficiently
or
lawfully created, perfected, or enforced or are entitled to any particular
priority.
6. Indemnification. To
the extent that the Agent is not reimbursed and indemnified by the Debtors,
the
Secured Parties will jointly and severally reimburse and indemnify the Agent,
in
proportion to their initially purchased respective principal amounts of
Debentures, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in performing its duties hereunder or under the
Agreement or any other Transaction Document, or in any way relating to or
arising out of the Agreement or any other Transaction Document except for those
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction to have resulted solely from the Agent's own gross
negligence or willful misconduct. Prior to taking any action
hereunder as Agent, the Agent may require each Secured Party to deposit with
it
sufficient sums as it determines in good faith is necessary to protect the
Agent for costs and expenses associated with taking such action.
7. Resignation
by the Agent.
(a) The
Agent may resign from the performance of all its functions and duties under
the
Agreement and the other Transaction Documents at any time by giving 30 days'
prior written notice (as provided in the Agreement) to the Debtors and the
Secured Parties. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c)
below.
(b) Upon
any such notice of resignation, the Secured Parties, acting by a Majority
in Interest, shall appoint a successor Agent hereunder.
(c)
If a
successor Agent shall not have been so appointed within said 30-day period,
the
Agent shall then appoint a successor Agent who shall serve as Agent until such
time, if any, as the Secured Parties appoint a successor Agent as provided
above. If a successor Agent has not been appointed within such 30-day
period, the Agent may petition any court of competent jurisdiction or may
interplead the Debtors and the Secured Parties in a proceeding for the
appointment of a successor Agent, and all fees, including, but not limited
to,
extraordinary fees associated with the filing of interpleader and expenses
associated therewith, shall be payable by the Debtors on demand.
8. Rights
with respect to Collateral. Each Secured Party
agrees with all other Secured Parties and the Agent (i) that it shall not,
and
shall not attempt to, exercise any rights with respect to its security interest
in the Collateral, whether pursuant to any other agreement or otherwise (other
than pursuant to this Agreement), or take or institute any action against the
Agent or any of the other Secured Parties in respect of the Collateral or its
rights hereunder (other than any such action arising from the breach of this
Agreement) and (ii) that such Secured Party has no other rights with respect
to
the Collateral other than as set forth in this Agreement and the other
Transaction Documents. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed
to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall be discharged from its duties and
obligations under the Agreement. After any retiring Agent’s resignation or
removal hereunder as Agent, the provisions of the Agreement including this
Annex
B shall inure to its benefit as to any actions taken or omitted to be taken
by
it while it was Agent.
