Execution Version
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of December 15, 2004 (the
"Agreement") is by and among Visual Data Corporation, a corporation duly
organized and validly existing under the laws of the State of Florida (the
"Company"), the Purchasers identified on the signature pages hereto (each, a
"Purchaser" and collectively, the "Purchasers") and Vertical Ventures, LLC, as
agent for the Purchasers (in such capacity, together with its successors in such
capacity, the "Agent").
The Company and each of the Purchasers are parties to a Securities
Purchase Agreement dated as of June 8, 2004 (as modified and supplemented and in
effect from time to time, the "Purchase Agreement"), that provides, subject to
the terms and conditions thereof, for the issuance and sale by the Company to
each of the Purchasers, severally and not jointly, Notes, Warrants and
Additional Investment Rights as more fully described in the Purchase Agreement.
To induce each of the Purchasers to enter into the Purchase
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company has agreed to pledge
and grant a security interest in the Collateral (as hereinafter defined) as
security for the Secured Obligations (as hereinafter defined). Accordingly, the
parties hereto agree as follows:
Section 1. Definitions. Each capitalized term used herein and not
otherwise defined shall have the meaning assigned to such term in the Purchase
Agreement. In addition, as used herein:
"Accounts" shall have the meaning ascribed thereto in Section 3(d)
hereof.
"Business" shall mean the businesses from time to time, now or
hereafter, conducted by the Company and its Subsidiaries.
"Collateral" shall have the meaning ascribed thereto in Section 3
hereof.
"Copyright Collateral" shall mean all Copyrights, whether now owned
or hereafter acquired by the Company, that are associated with the Business.
"Copyrights" shall mean all copyrights, copyright registrations and
applications for copyright registrations, including, without limitation, all
renewals and extensions thereof, the right to recover for all past, present and
future infringements thereof, and all other rights of any kind whatsoever
accruing thereunder or pertaining thereto.
"Documents" shall have the meaning ascribed thereto in Section 3(j)
hereof.
"Equipment" shall have the meaning ascribed thereto in Section 3(h)
hereof.
"Event of Default" shall have the meaning ascribed thereto in
Section 10 of the Notes.
"Excluded Collateral" shall mean the assets of the Company which
secure the Permitted Indebtedness and the assets listed on Annex 2 hereto.
"Instruments" shall have the meaning ascribed thereto in Section
3(e) hereof.
"Intellectual Property" shall mean, collectively, all Copyright
Collateral, all Patent Collateral and all Trademark Collateral, together with
(a) all inventions, processes, production methods, proprietary information,
know-how and trade secrets used or useful in the Business; (b) all licenses or
user or other agreements granted to the Company with respect to any of the
foregoing, in each case whether now or hereafter owned or used including,
without limitation, the licenses or other agreements with respect to the
Copyright Collateral, the Patent Collateral or the Trademark Collateral; (c) all
customer lists, identification of suppliers, data, plans, blueprints,
specifications, designs, drawings, recorded knowledge, surveys, manuals,
materials standards, processing standards, catalogs, computer and automatic
machinery software and programs, and the like pertaining to the operation by the
Company of the Business; (d) all sales data and other information relating to
sales now or hereafter collected and/or maintained by the Company that pertain
to the Business; (e) all accounting information which pertains to the Business
and all media in which or on which any of the information or knowledge or data
or records which pertain to the Business may be recorded or stored and all
computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) all licenses, consents, permits, variances,
certifications and approvals of governmental agencies now or hereafter held by
the Company pertaining to the operation by the Company and its Subsidiaries of
the Business; and (g) all causes of action, claims and warranties now or
hereafter owned or acquired by the Company in respect of any of the items listed
above.
"Inventory" shall have the meaning ascribed thereto in Section 3(f)
hereof.
"Issuers" shall mean, collectively, the respective entities
identified on Annex 1 hereto, and all other entities formed by the Company or
entities in which the Company owns or acquires any capital stock or similar
interest.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"Patent Collateral" shall mean all Patents, whether now owned or
hereafter acquired by the Company that are associated with the Business.
"Patents" shall mean all patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties, damages and
payments now or hereafter due and/or payable under and with respect thereto,
including, without limitation, damages and payments for past or future
infringements thereof, the right to xxx for past, present and future
infringements thereof, and all rights corresponding thereto throughout the
world.
"Permitted Indebtedness" shall mean the Company's existing
indebtedness, liabilities and obligations as disclosed on Annex 5 hereto and any
future capitalized leases, purchase money indebtedness and the Notes provided
that "Permitted Indebtedness" shall not include indebtedness in excess of
$1,500,000, senior to the Notes.
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"Permitted Liens" shall mean (i) the Company's existing Liens as
disclosed in the Current SEC Report or Xxxxx 0 xxxxxx, (xx) the security
interests created by this Agreement and the Pledge Agreement, (iii) Liens of
local or state authorities for franchise, real estate or other like taxes, (iv)
statutory Liens of landlords and liens of carriers, warehousemen, bailees,
mechanics, materialmen and other like Liens imposed by law, created in the
ordinary course of business and for amounts not yet due, (v) tax Liens not yet
due and payable and (vi) existing Liens which do not materially affect the value
of the Company's property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries.
"Pledged Stock" shall have the meaning ascribed thereto in Section
3(a) hereof.
"Real Estate" shall have the meaning ascribed thereto in Section
3(l) hereof.
"Secured Obligations" shall mean, collectively, (a) the principal of
and interest on the Notes issued or issuable (as applicable) by the Company and
held by the applicable Purchaser and all other amounts from time to time owing
to such Purchasers by the Company under the Purchase Agreement and the Notes and
(b) all obligations of the Company to such Purchasers thereunder.
"Stock Collateral" shall mean, collectively, the Collateral
described in clauses (a) through (c) of Section 3 hereof and the proceeds of and
to any such property and, to the extent related to any such property or such
proceeds, all books, correspondence, credit files, records, invoices and other
papers.
"Trademark Collateral" shall mean all Trademarks, whether now owned
or hereafter acquired by the Company, that are associated with the Business.
Notwithstanding the foregoing, the Trademark Collateral does not and shall not
include any Trademark which would be rendered invalid, abandoned, void or
unenforceable by reason of its being included as part of the Trademark
Collateral.
"Trademarks" shall mean all trade names, trademarks and service
marks, logos, trademark and service xxxx registrations, and applications for
trademark and service xxxx registrations, including, without limitation, all
renewals of trademark and service xxxx registrations, all rights corresponding
thereto throughout the world, the right to recover for all past, present and
future infringements thereof, all other rights of any kind whatsoever accruing
thereunder or pertaining thereto, together, in each case, with the product lines
and goodwill of the business connected with the use of, and symbolized by, each
such trade name, trademark and service xxxx.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect in the State of New York from time to time.
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Section 2. Representations and Warranties. The Company represents
and warrants to each of the Purchasers that:
a. the Company is the sole beneficial owner of the Collateral and
no Lien exists or will exist upon any Collateral at any time
(and, with respect to the Stock Collateral, no right or option
to acquire the same exists in favor of any other Person),
except for Permitted Liens and the pledge and security
interest in favor of each of the Purchasers created or
provided for herein which pledge and security interest
constitutes a first priority perfected pledge and security
interest in and to all of the Collateral (other than
Intellectual Property registered or otherwise located outside
of the United States of America);
b. the Pledged Stock directly or indirectly owned by the Company
in the entities identified in Annex 1 hereto is, and all other
Pledged Stock, whether issued now or in the future, will be,
duly authorized, validly issued, fully paid and nonassessable,
free and clear of all Liens other than Permitted Liens and
none of such Pledged Stock is or will be subject to any
contractual restriction, preemptive and similar rights, or any
restriction under the charter or by-laws of the respective
Issuers of such Pledged Stock, upon the transfer of such
Pledged Stock (except for any such restriction contained
herein);
c. the Pledged Stock directly or indirectly owned by the Company
in the entities identified in Annex 1 hereto constitutes all
of the issued and outstanding shares of capital stock of any
class of such Issuers beneficially owned by the Company on the
date hereof (whether or not registered in the name of the
Company) and said Annex 1 correctly identifies, as at the date
hereof, the respective Issuers of such Pledged Stock;
d. the Company owns and possesses the right to use, and has done
nothing to authorize or enable any other Person to use, all of
its Copyrights, Patents and Trademarks, and all registrations
of its material Copyrights, Patents and Trademarks are valid
and in full force and effect. Except as may be set forth in
said Annex 3, the Company owns and possesses the right to use
all material Copyrights, Patents and Trademarks, necessary for
the operation of the Business;
e. to the Company's knowledge, (i) except as set forth in Annex 3
hereto, there is no violation by others of any right of the
Company with respect to any material Copyrights, Patents or
Trademarks, respectively, and (ii) the Company is not, in
connection with the Business, infringing in any respect upon
any Copyrights, Patents or Trademarks of any other Person; and
no proceedings have been instituted or are pending against the
Company or, to the Company's knowledge, threatened, and no
claim against the Company has been received by the Company,
alleging any such violation, except as may be set forth in
said Annex 3;
f. the Company does not own any material Trademarks registered in
the United States of America to which the last sentence of the
definition of Trademark Collateral applies; and
Section 3. Collateral. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations, the Company hereby pledges and grants to each of the
Purchasers as hereinafter provided, a security interest in all of the Company's
right, title and interest in the following property, whether now owned by the
Company or hereafter acquired and whether now existing or hereafter coming into
existence, and wherever located, except for the Excluded Collateral, (all being
collectively referred to herein as "Collateral"):
a. the Company's direct or indirect ownership interest in the
respective shares of capital stock of the Issuers and all
other shares of capital stock of whatever class of the
Issuers, now or hereafter owned by the Company, together with
in each case the certificates evidencing the same
(collectively, the "Pledged Stock");
b. all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a
distribution or return of capital upon or in respect of the
Pledged Stock, or resulting from a split-up, revision,
reclassification or other like change of the Pledged Stock or
otherwise received in exchange therefor, and any subscription
warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
c. without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under the
Purchase Agreement or the Notes, in the event of any
consolidation or merger in which any Issuer is not the
surviving corporation, all shares of each class of the capital
stock of the successor corporation (unless such successor
corporation is the Company itself) formed by or resulting from
such consolidation or merger (the Pledged Stock, together with
all other certificates, shares, securities, properties or
moneys as may from time to time be pledged hereunder pursuant
to clause (a) or (b) above and this clause (c) being herein
collectively called the "Stock Collateral");
d. all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Company constituting any right
to the payment of money, including (but not limited to) all
moneys due and to become due to the Company in respect of any
loans or advances for the purchase price of Inventory or
Equipment or other goods sold or leased or for services
rendered, all moneys due and to become due to the Company
under any guarantee (including a letter of credit) of the
purchase price of Inventory or Equipment sold by the Company
and all tax refunds (such accounts, general intangibles and
moneys due and to become due being herein called collectively
"Accounts");
e. all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the Company
evidencing, representing, arising from or existing in respect
of, relating to, securing or otherwise supporting the payment
of, any of the Accounts, including (but not limited to)
promissory notes, drafts, bills of exchange and trade
acceptances (herein collectively called "Instruments");
f. all inventory (as defined in the Uniform Commercial Code) of
the Company and all goods obtained by the Company in exchange
for such inventory (herein collectively called "Inventory");
g. all Intellectual Property and all other accounts or general
intangibles of the Company not constituting Intellectual
Property or Accounts;
h. all equipment (as defined in the Uniform Commercial Code) of
the Company (herein collectively called "Equipment");
i. each contract and other agreement of the Company relating to
the sale or other disposition of Inventory or Equipment;
j. all documents of title (as defined in the Uniform Commercial
Code) or other receipts of the Company covering, evidencing or
representing Inventory or Equipment (herein collectively
called "Documents");
k. all rights, claims and benefits of the Company against any
Person arising out of, relating to or in connection with
Inventory or Equipment purchased by the Company, including,
without limitation, any such rights, claims or benefits
against any Person storing or transporting such Inventory or
Equipment;
l. all estates in land together with all improvements and other
structures now or hereafter situated thereon, together with
all rights, privileges, tenements, hereditaments,
appurtenances, easements, including, but not limited to,
rights and easements for access and egress and utility
connections, and other rights now or hereafter appurtenant
thereto ("Real Estate");
m. all other tangible or intangible property of the Company,
including, without limitation, all proceeds, products and
accessions of and to any of the property of the Company
described in clauses (a) through (l) above in this Section 3
(including, without limitation, any proceeds of insurance
thereon), and, to the extent related to any property described
in said clauses or such proceeds, products and accessions, all
books, correspondence, credit files, records, invoices and
other papers, including without limitation all tapes, cards,
computer runs and other papers and documents in the possession
or under the control of the Company or any computer bureau or
service company from time to time acting for the Company.
Section 4. Further Assurances; Remedies. In furtherance of the grant
of the pledge and security interest pursuant to Section 3 hereof, the Company
hereby agrees with each of the Purchasers as follows:
4.01 Delivery and Other Perfection. The Company shall:
a. if any of the above-described shares, securities, monies or
property required to be pledged by the Company under clauses
(a), (b) and (c) of Section 3 hereof are received by the
Company, forthwith either (x) transfer and deliver to the
Agent such shares or securities so received by the Company
(together with the certificates for any such shares and
securities duly endorsed in blank or accompanied by undated
stock powers duly executed in blank) all of which thereafter
shall be held by the Agent, pursuant to the terms of this
Agreement, as part of the Collateral or (y) take such other
action as the Agent shall reasonably deem necessary or
appropriate to duly record the Lien created hereunder in such
shares, securities, monies or property referred to in said
clauses (a), (b) and (c) of Section 3;
b. deliver and pledge to the Agent any and all Instruments,
endorsed and/or accompanied by such instruments of assignment
and transfer in such form and substance as the Agent may
request; provided, that so long as no Event of Default shall
have occurred and be continuing, the Company may retain for
collection in the ordinary course any Instruments received by
it in the ordinary course of business and the Purchasers
shall, promptly upon request of the Company, make appropriate
arrangements for making any other Instrument pledged by the
Company available to it for purposes of presentation,
collection or renewal (any such arrangement to be effected, to
the extent deemed appropriate by the Purchasers, against trust
receipt or like document);
c. give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other
papers that may be necessary or desirable (in the reasonable
judgment of the Agent) to create, preserve, perfect or
validate any security interest granted pursuant hereto or to
enable the Agent to exercise and enforce their rights
hereunder with respect to such security interest, including,
without limitation, causing any or all of the Stock Collateral
to be transferred of record into the name of the Agent or its
nominee (and the Agent agrees that if any Stock Collateral is
transferred into its name or the name of its nominee, the
Agent will thereafter promptly give to the Company copies of
any notices and communications received by it with respect to
the Stock Collateral), provided that notices to account
debtors in respect of any Accounts or Instruments shall be
subject to the provisions of Section 4.09 below;
d. upon the acquisition after the date hereof by the Company of
any Equipment covered by a certificate of title or ownership
cause the Agent to be listed as the lienholder on such
certificate of title and within 120 days of the acquisition
thereof deliver evidence of the same to the Agent;
e. keep accurate books and records relating to the Collateral,
and stamp or otherwise xxxx such books and records in such
manner as the Agent may reasonably require in order to reflect
the security interests granted by this Agreement;
f. furnish to the Agent from time to time (but, unless an Event
of Default shall have occurred and be continuing, no more
frequently than quarterly) statements and schedules further
identifying and describing the Copyright Collateral, the
Patent Collateral and the Trademark Collateral, respectively,
and such other reports in connection with the Copyright
Collateral, the Patent Collateral and the Trademark
Collateral, as the Agent may reasonably request, all in
reasonable detail;
g. permit representatives of the Agent, upon reasonable notice,
at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the
Collateral, and permit representatives of the Agent to be
present at the Company's place of business to receive copies
of all communications and remittances relating to the
Collateral, and forward copies of any notices or
communications by the Company with respect to the Collateral,
all in such manner as the Agent may reasonably require; and
h. upon the occurrence and during the continuance of any Event of
Default, upon request of the Agent, promptly notify each
account debtor in respect of any Accounts or Instruments that
such Collateral has been assigned to the Agent hereunder, and
that any payments due or to become due in respect of such
Collateral are to be made directly to the Agent.
4.02 Other Financing Statements and Liens. Except with respect to
Permitted Indebtedness or as otherwise permitted under Schedule 3.1(a) of the
Purchase Agreement, without the prior written consent of the Agent, the Company
shall not file or suffer to be on file, or authorize or permit to be filed or to
be on file, in any jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Agent is not named as the sole secured
party for the benefit of each of the Purchasers.
4.03 Preservation of Rights. The Agent shall not be required to take
steps necessary to preserve any rights against prior parties to any of the
Collateral.
4.04 Special Provisions Relating to Certain Collateral.
a. Stock Collateral.
(1) The Company will cause the Stock Collateral to
constitute at all times 100% of the total number of
shares of each class of capital stock of each Issuer
then outstanding that is owned directly or indirectly by
the Company.
(2) So long as no Event of Default shall have occurred and
be continuing, the Company shall have the right to
exercise all voting, consensual and other powers of
ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms of this
Agreement, the Purchase Agreement, the Notes or any
other instrument or agreement referred to herein or
therein, provided that the Company agrees that it will
not vote the Stock Collateral in any manner that is
inconsistent with the terms of this Agreement, the
Purchase Agreement, the Notes or any such other
instrument or agreement; and the Agent shall execute and
deliver to the Company or cause to be executed and
delivered to the Company all such proxies, powers of
attorney, dividend and other orders, and all such
instruments, without recourse, as the Company may
reasonably request for the purpose of enabling the
Company to exercise the rights and powers which it is
entitled to exercise pursuant to this Section
4.04(a)(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and
retain any dividends on the Stock Collateral paid in
cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so
long as such Event of Default shall continue, and
whether or not the Agent exercises any available right
to declare any Secured Obligations due and payable or
seeks or pursues any other relief or remedy available to
it under applicable law or under this Agreement, the
Purchase Agreement, the Notes or any other agreement
relating to such Secured Obligations, all dividends and
other distributions on the Stock Collateral shall be
paid directly to the Agent and retained by it as part of
the Stock Collateral, subject to the terms of this
Agreement, and, if the Agent shall so request in
writing, the Company agrees to execute and deliver to
the Agent appropriate additional dividend, distribution
and other orders and documents to that end, provided
that if such Event of Default is cured, any such
dividend or distribution theretofore paid to the Agent
shall, upon request of the Company (except to the extent
theretofore applied to the Secured Obligations) be
returned by the Agent to the Company.
b. Intellectual Property.
(1) For the purpose of enabling the Agent to exercise rights
and remedies under Section 4.05 hereof at such time as
the Agent shall be lawfully entitled to exercise such
rights and remedies, and for no other purpose, the
Company hereby grants to the Agent, to the extent
assignable, an irrevocable, non-exclusive license
(exercisable without payment of royalty or other
compensation to the Company) to use, assign, license or
sublicense any of the Intellectual Property (other than
the Trademark Collateral or goodwill associated
therewith) now owned or hereafter acquired by the
Company, 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.
(2) Notwithstanding anything contained herein to the
contrary, so long as no Event of Default shall have
occurred and be continuing, the Company will be
permitted to 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 the business of the Company. In
furtherance of the foregoing, unless an Event of Default
shall have occurred and is continuing, the Agent shall
from time to time, upon the request of the Company,
execute and deliver any instruments, certificates or
other documents, in the form so requested, which the
Company shall have certified are appropriate (in its
judgment) to allow it to take any action permitted above
(including relinquishment of the license provided
pursuant to clause (1) immediately above as to any
specific Intellectual Property). Further, upon the
payment in full of all of the Secured Obligations or
earlier expiration of this Agreement or release of the
Collateral, the Agent shall grant back to the Company
the license granted pursuant to clause (1) immediately
above. The exercise of rights and remedies under Section
4.05 hereof by the Agent shall not terminate the rights
of the holders of any licenses or sublicenses
theretofore granted by the Company in accordance with
the first sentence of this clause (2).
4.05 Events of Default, etc. During the period during which
an Event of Default shall have occurred and be
continuing:
a. the Company shall, at the request of the Agent, assemble the
Collateral owned by it at such place or places, reasonably
convenient to both the Agent and the Company, designated in
its request;
b. the Agent may make any reasonable compromise or settlement
deemed desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, any of the
Collateral;
c. the Agent shall have all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and
such additional rights and remedies to which a secured party
is entitled under the laws in effect in any jurisdiction where
any rights and remedies hereunder may be asserted, including,
without limitation, the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of
ownership pertaining to the Collateral as if the Agent were
the sole and absolute owner thereof (and the Company agrees to
take all such action as may be appropriate to give effect to
such right);
d. the Agent in its discretion may, in its name or in the name of
the Company or otherwise, demand, xxx for, collect or receive
any money or property at any time payable or receivable on
account of or in exchange for any of the Collateral, but shall
be under no obligation to do so; and
e. the Agent may, upon 10 Business Days, prior written notice to
the Company of the time and place, with respect to the
Collateral or any part thereof which shall then be or shall
thereafter come into the possession, custody or control of the
Agent, or any of its respective agents, sell, lease, assign or
otherwise dispose of all or any of such Collateral, at such
place or places as the Agent deems best, and for cash or on
credit or for future delivery (without thereby assuming any
credit risk), at public or private sale, without demand of
performance or notice of intention to effect any such
disposition or of time or place thereof (except such notice as
is required above or by applicable statute and cannot be
waived) and the Agent or anyone else may be the purchaser,
lessee, assignee or recipient of any or all of the Collateral
so disposed of at any public sale (or, to the extent permitted
by law, at any private sale), and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind,
including any right or equity of redemption (statutory or
otherwise), of the Company, any such demand, notice or right
and equity being hereby expressly waived and released. In the
event of any sale, assignment, or other disposition of any of
the Trademark Collateral, the goodwill of the Business
connected with and symbolized by the Trademark Collateral
subject to such disposition shall be included, and the Company
shall supply to the Agent or its designee, for inclusion in
such sale, assignment or other disposition, all Intellectual
Property relating to such Trademark Collateral. The Agent may,
without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the same
may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.05, including by virtue of the exercise of the license granted to the Agent in
Section 4.04(b)(1) hereof, shall be applied in accordance with Section 4.09
hereof.
The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Agent may be compelled, with respect to any sale of all or
any part of the Collateral, to limit purchasers to those who will agree, among
other things, to acquire the Collateral for their own account, for investment
and not with a view to the distribution or resale thereof. The Company
acknowledges that any such private sales to an unrelated third party in an arm's
length transaction may be at prices and on terms less favorable to the Agent
than those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the Agent
shall have no obligation to engage in public sales and no obligation to delay
the sale of any Collateral for the period of time necessary to permit the
respective Issuer thereof to register it for public sale.
4.06 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 4.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Company shall remain liable for any
deficiency.
4.07 Removals, etc. Without at least 30 days' prior written notice
to the Agent, the Company shall not (i) maintain any of its books or records
with respect to the Collateral at any office or maintain its chief executive
office or its principal place of business at any place, or permit any Inventory
or Equipment to be located anywhere other than at the address indicated for the
Company in Section 7.4 of the Purchase Agreement or at one of the locations
identified in Annex 4 hereto or in transit from one of such locations to another
or (ii) change its corporate name, or the name under which it does business,
from the name shown on the signature page hereto.
4.08 Private Sale. The Agent shall incur no liability as a result of
the sale of the Collateral, or any part thereof, at any private sale to an
unrelated third party in an arm's length transaction pursuant to Section 4.05
hereof conducted in a commercially reasonable manner. The Company hereby waives
any claims against the Agent arising by reason of the fact that the price at
which the Collateral may have been sold at such 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 Secured Obligations, even if the Agent accepts the first
offer received and does not offer the Collateral to more than one offeree.
4.09 Application of Proceeds. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization of all or
any part of the Collateral pursuant hereto, and any other cash at the time held
by the Agent under this Section 4, shall be applied by the Agent:
First, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and expenses
of the Agent and the fees and expenses of its agents and counsel, and all
expenses, and advances made or incurred by the Agent in connection therewith;
Next, to the payment in full of the Secured Obligations in each case
equally and ratably in accordance with the respective amounts thereof then due
and owing to each of the Purchasers; and
Finally, to the payment to the Company, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining.
As used in this Section 4, "proceeds" of Collateral shall mean cash, securities
and other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of debt of the Company or any issuer of or obligor on any of the
Collateral.
4.10 Attorney-in-Fact. Without limiting any rights or powers granted
by this Agreement to the Agent while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default, the Agent is hereby appointed the attorney-in-fact of the Company for
the purpose of carrying out the provisions of this Section 4 and taking any
action and executing any instruments which the Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, so long as the Purchasers shall be entitled
under this Section 4 to make collections in respect of the Collateral, the Agent
shall have the right and power to receive, endorse and collect all checks made
payable to the order of the Company representing any dividend, payment, or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
4.11 Perfection. Prior to or concurrently with the execution and
delivery of this Agreement, the Company shall (i) file such financing statements
and other documents in such offices as the Agent may request to perfect the
security interests granted by Section 3 of this Agreement, and (ii) deliver to
the Agent all share certificates of capital stock directly or indirectly owned
by the Company in the entities identified in Annex 1 hereto, accompanied by
undated stock powers duly executed in blank.
4.12 Termination. When all Secured Obligations shall have been paid
in full under the Purchase Agreement, this Agreement shall terminate, and the
Agent shall forthwith cause to be assigned, transferred and delivered, against
receipt but without any recourse, warranty or representation whatsoever, any
remaining Collateral and money received in respect thereof, to or on the order
of the Company and to be released and cancelled all licenses and rights referred
to in Section 4.04(b)(1) hereof. The Agent shall also execute and deliver to the
Company upon such termination such Uniform Commercial Code termination
statements, certificates for terminating the Liens on the Motor Vehicles and
such other documentation as shall be reasonably requested by the Company to
effect the termination and release of the Liens on the Collateral.
4.13 Expenses. The Company agrees to pay to the Agent all
out-of-pocket expenses (including reasonable expenses for legal services of
every kind) of, or incident to, the enforcement of any of the provisions of this
Section 4, or performance by the Agent of any obligations of the Company in
respect of the Collateral which the Company has failed or refused to perform
upon reasonable notice, or any actual or attempted sale, or any exchange,
enforcement, collection, compromise or settlement in respect of any of the
Collateral, and for the care of the Collateral and defending or asserting rights
and claims of the Agent in respect thereof, by litigation or otherwise,
including expenses of insurance, and all such expenses shall be Secured
Obligations to the Agent secured under Section 3 hereof.
4.14 Further Assurances. The Company agrees that, from time to time
upon the written request of the Agent, the Company will execute and deliver such
further documents and do such other acts and things as the Agent may reasonably
request in order fully to effect the purposes of this Agreement.
4.15 Indemnity. Each of the Purchasers hereby jointly and severally
covenants and agrees to reimburse, indemnify and hold the Agent harmless from
and against any and all claims, actions, judgments, damages, losses,
liabilities, costs, transfer or other taxes, and expenses (including, without
limitation, reasonable attorneys' fees and expenses) incurred or suffered
without any bad faith or willful misconduct by the Agent, arising out of or
incident to this Agreement or the administration of the Agent's duties
hereunder, or resulting from its actions or inactions as Agent.
Section 5. Miscellaneous.
5.01 No Waiver. No failure on the part of the Agent or any of its
agents to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Agent or any of its
agents of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided by
law.
5.02 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
5.03 Notices. All notices, requests, consents and demands hereunder
shall be in writing and facsimile (facsimile confirmation required) or delivered
to the intended recipient at its address or telex number specified pursuant to
Section 7.4 of the Purchase Agreement and shall be deemed to have been given at
the times specified in said Section 7.4.
5.04 Waivers, etc. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by the Company
and the Agent. Any such amendment or waiver shall be binding upon each of the
Purchasers and the Company.
5.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of the Company
and each of the Purchasers (provided, however, that the Company shall not assign
or transfer its rights hereunder without the prior written consent of the
Agent).
5.06 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one and the same instrument
and any of the parties hereto may execute this Agreement by signing any such
counterpart.
5.07 Agent. Each Purchaser agrees to appoint Vertical Ventures, LLC
as its Agent for purposes of this Agreement. The Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.
5.08 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Purchasers in
order to carry out the intentions of the parties hereto as nearly as may be
possible and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed as of the day and year first above written.
COMPANY: VISUAL DATA CORPORATION
By: ______________________________
Name:
Title:
AGENT: VERTICAL VENTURES, LLC
By: ______________________________
Name:
Title:
PURCHASERS: VERTICAL VENTURES, LLC
By: ______________________________
Name:
Title:
_________________________________
By: ______________________________
Name:
Title:
ANNEX 1
ENTITIES IN WHICH THE COMPANY IS PLEDGING ITS CAPITAL STOCK
Approximate
Entity Percentage Interest
------ -------------------
Media On Demand, Inc. 100% ownership
Entertainment Digital Network, Inc. 100% ownership
HotelView Corporation 100% ownership
Onstream Media Corporation 28% ownership
ANNEX 2
EXCLUDED COLLATERAL
NONE
ANNEX 3
EXCEPTIONS FOR COPYRIGHTS, PATENTS AND TRADEMARKS
NONE
ANNEX 4
LIST OF LOCATIONS
Pompano Beach, Florida
San Francisco, California
New York, New York
ANNEX 5
EXISTING INDEBTEDNESS
XxXxxx Loan amount $1,000,000
Redemption of A-11 Preferred $500,000
Repayment of J&C Resources $300,000
Virage Note of $206,250
Virage Note of $1,406,250 for Onstream Media
Trinity Financing Investments Corp. Note of $100,000
Xxxx Xxxxxx Note of $150,000
(See Securities Purchase Agreement Schedules)
ANNEX 6
EXISTING LIENS
On May 7, 2003 we entered into an Amended and Restated Loan
Agreement with Mr. Xxxx Xxxxxx and issued a three-year
promissory note in the principal amount of $3,000,000
collateralized by a blanket security interest in our assets
and a pledge of the stock of our subsidiaries. As part of the
Transaction discussed in this Securities Purchase Agreement,
Xx. XxXxxx'x debt would be paid in full.
