SECURITY AGREEMENT
Exhibit
10.2
This
SECURITY AGREEMENT, dated as of October 16, 2008 (this “Agreement”), is among
Enable Holdings, Inc., a Delaware 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 18% Senior
Secured Debentures due January 16, 2009 and issued on October 16, 2008 in the
original aggregate Principal Amount of up to $4,000,000 (collectively, the
“Debentures”) signatory hereto, their endorsees, transferees and assigns
(collectively, the “Secured Parties”).
WITNESSETH:
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”) attached hereto as Exhibit
B,
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 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”
“Collateral” means the collateral in which the Secured Parties are granted a
security interest by this Agreement and which shall include the following
personal property of the Debtors, whether presently owned or existing or
hereafter acquired or coming into existence, wherever situated, and all
additions and accessions thereto and all substitutions and replacements thereof,
and all proceeds, products and accounts thereof, including, without limitation,
all proceeds from the sale or transfer of the Collateral and of insurance
covering the same and of any tort claims in connection therewith , and all
dividends, interest, cash, notes, securities, equity interest or other property
at any time and from time to time acquired, receivable or otherwise distributed
in respect of, or in exchange for, any or all of the Pledged Securities (as
defined below):
(i) All
goods, including, without 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;
(ix) All
files, records, books of account, business papers, and computer programs;
and
(x) the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(ix) above.
Without
limiting the generality of the foregoing, the “Collateral”
shall
include all investment property and general intangibles respecting ownership
and/or other equity interests in each Guarantor, including, without limitation,
the shares of capital stock and the other equity interests listed on Schedule
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.
(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 Secured Parties
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
Interests”
shall
have the meaning ascribed to such term in Section 4(j).
(h) “Pledged
Securities”
shall
have the meaning ascribed to such term in Section 4(i).
(i) “UCC”
means
the Uniform Commercial Code of the State of Illinois 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 Party 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 Secured Parties (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 the
Secured Parties, or have previously delivered to the Secured Parties, a true
and
correct copy of each Organizational Document governing any of the Pledged
Securities. Throughout the term of this Agreement, so long as no Event of
Default is incurred and continuing, the Debtors shall have the right to vote
the
Pledged Securities in all matters presented to the stockholders of the Pledge
Securities for vote thereon, except in a manner inconsistent with the terms
of
this Agreement or detrimental to the interests of the Secured Parties. The
Secured Parties shall hold the Pledged Securities in the form in which the
same
are delivered herewith, unless there shall occur an Event of Default. To the
extent that the Secured Parties shall not previously have taken, acquired,
sold,
transferred, disposed of or otherwise realized value on the Pledged Securities
in accordance with this Agreement, on the date on which the Obligations have
been indefeasibly discharged or satisfied in full, any remaining security
interest in the Pledged Securities shall automatically terminate, cease to
exist
and be released, and the Secured Parties shall forthwith return any remaining
Pledged Securities to the Company and irrevocably release such Pledge
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.
(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 any Liens held by the
September Purchasers and the June Purchaser 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
C
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
C
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 any 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. 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 in Section 4(p) hereof) with respect to
copyrights and copyright applications in the United States Copyright Office
referred to in paragraph (m), the execution and delivery of deposit account
control agreements satisfying the requirements of Section 9-104(a)(2) of the
UCC
with respect to each deposit account of the Debtors, and the delivery of the
certificates and other instruments provided in Section 3, no action is necessary
to create, perfect or protect the security interests created hereunder. Without
limiting the generality of the foregoing, except for the filing of said
financing statements, the recordation of said Intellectual Property Security
Agreement, and the execution and delivery of said deposit account control
agreements, no consent of any third parties and no authorization, approval
or
other action by, and no notice to or filing with, any governmental authority
or
regulatory body is required for (i) the execution, delivery and performance
of
this Agreement, (ii) the creation or perfection of the Security Interests
created hereunder in the Collateral or (iii) the enforcement of the rights
of
the Secured Parties hereunder.
(g) Each
Debtor hereby authorizes the Secured Parties 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.
(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 14 hereof. Each Debtor hereby
agrees to defend the same against the claims of any and all persons and
entities. Each Debtor shall safeguard and protect all Collateral for the account
of the Secured Parties. At the request of the Secured Parties, each Debtor
will
sign and deliver to the Secured Parties at any time or from time to time one
or
more financing statements pursuant to the UCC in form reasonably satisfactory
to
the Secured Parties and will pay the cost of filing the same in all public
offices wherever filing is, or is deemed by the Secured Parties to be, necessary
or desirable to effect the rights and obligations provided for herein. Without
limiting the generality of the foregoing, each Debtor shall pay all fees, taxes
and other amounts necessary to maintain the Collateral and the Security
Interests hereunder, and each Debtor shall obtain and furnish to the Secured
Parties from time to time, upon demand, such releases and/or subordinations
of
claims and liens which may be required to maintain the priority of the Security
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
Secured parties, that (a) the Secured Parties 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 Secured Parties and such cancellation
or
change shall not be effective as to the Secured Parties for at least thirty
(30)
days after receipt by the Secured Parties of such notice, unless the effect
of
such change is to extend or increase coverage under the policy; and (c) the
Secured Parties will have the right (but no obligation) at its election to
remedy any default in the payment of premiums within thirty (30) days of notice
from the insurer of such default. If no Event of Default (as defined in the
Debentures) exists and if the proceeds arising out of any claim or series of
related claims do not exceed $100,000, loss payments in each instance will
be
applied by the applicable Debtor to the repair and/or replacement of property
with respect to which the loss was incurred to the extent reasonably feasible,
and any loss payments or the balance thereof remaining, to the extent not so
applied, shall be payable to the applicable Debtor; provided, however, that
payments received by any Debtor after an Event of Default occurs and is
continuing or in excess of $100,000 for any occurrence or series of related
occurrences shall be paid to the Secured Parties and, if received by such
Debtor, shall be held in trust for the Secured Parties and immediately paid
over
to the Secured Parties unless otherwise directed in writing by the Secured
Parties. Copies of such policies or the related certificates, in each case,
naming the Secured Parties as lender loss payee and additional insured shall
be
delivered to the Secured Parties 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 therein.
(p) Each
Debtor shall promptly execute and deliver to the Secured Parties such further
deeds, mortgages, assignments, security agreements, financing statements or
other instruments, documents, certificates and assurances and take such further
action as the Secured Parties may from time to time request and may in their
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 Secured Parties,
which Intellectual Property Security Agreement, other than as stated therein,
shall be subject to all of the terms and conditions hereof.
(q) Each
Debtor shall permit the Secured Parties and their representatives and agents
to
inspect the Collateral during normal business hours and upon reasonable prior
notice, and to make copies of records pertaining to the Collateral as may be
reasonably requested by the Secured Parties from time to time.
(r) Each
Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.
(s) Each
Debtor shall promptly notify the Secured Parties in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by such
Debtor that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Parties
hereunder.
(t) All
information heretofore, herein or hereafter supplied to the Secured Parties
by
or on behalf of any Debtor with respect to the Collateral is accurate and
complete in all material respects as of the date furnished.
(u) The
Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises
material to its business.
(v) No
Debtor
will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at
least 30 days prior written notice to the Secured Parties of such change and,
at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue 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 Secured Parties,
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 Secured Parties.
(bb) Each
Debtor, in its capacity as issuer, hereby agrees to comply with any and all
orders and instructions of the Secured Parties 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 Secured Parties, or, if such delivery is not possible, then
to
cause such tangible chattel paper to contain a legend noting that it is subject
to the security interest created by this Agreement. To the extent that any
Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).
(dd) If
there
is any investment property or deposit account included as Collateral that can
be
perfected by “control” through an account control agreement, the applicable
Debtor shall cause such an account control agreement, in form and substance
in
each case satisfactory to the Secured Parties, to be entered into and delivered
to the Secured Parties.
(ee) To
the
extent that any Collateral consists of letter-of-credit rights, the applicable
Debtor shall cause the issuer of each underlying letter of credit to consent
to
an assignment of the proceeds thereof to the Secured Party.
(ff) To
the
extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Secured Parties in notifying such third
party of the Secured Parties’ security interest in such Collateral and shall use
its best efforts to obtain an acknowledgement and agreement from such third
party with respect to the Collateral, in form and substance reasonably
satisfactory to the Secured Parties.
(gg) If
any
Debtor shall at any time hold or acquire a commercial tort claim, such Debtor
shall promptly notify the Secured Parties in a writing signed by such Debtor
of
the particulars thereof and grant to the Secured Parties in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory
to
the Secured Parties.
(hh) Each
Debtor shall immediately provide written notice to the Secured Parties of any
and all accounts which arise out of contracts with any governmental authority
and, to the extent necessary to perfect or continue the perfected status of
the
Security Interests in such accounts and proceeds thereof, shall execute and
deliver to the Secured Parties an assignment of claims for such accounts and
cooperate with the Secured Parties in taking any other steps required, in 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.
(
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 Secured Parties may reasonably request.
Upon delivery of the foregoing to the Secured Parties, the Additional Debtor
shall be and become a party to this Agreement with the same rights and
obligations as the Debtors, for all purposes hereof as fully and to the same
extent as if it were an original signatory hereto and shall be deemed to have
made the representations, warranties and covenants set forth herein as of the
date of execution and delivery of such Additional Debtor Joinder, and all
references herein to the “Debtors” shall be deemed to include each Additional
Debtor.
(
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 Secured Parties, the applicable Debtor
shall deliver to the Secured Parties 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 the Secured
Parties 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 the Secured Parties, will take such steps as may be necessary to
effect the transfer, and will comply with all other instructions of the Secured
Parties 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, the Secured Parties
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 Secured
Parties 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 the Secured Parties and allow the Transferee or the Secured
Parties to continue the business of the Debtors and their direct and indirect
subsidiaries.
(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 Secured Parties
notice whenever it acquires (whether absolutely or by license) or creates any
additional material Intellectual Property.
(nn) Each
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents, and
take all such further action as may be necessary or desirable, or as the Secured
Parties may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Secured
Parties to exercise and enforce their rights and remedies hereunder and with
respect to any Collateral or to otherwise carry out the purposes of this
Agreement.
(oo) Schedule
F
attached
hereto lists 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 the Secured Party’s rights hereunder shall not be deemed
to be the type of event which would trigger such conversion rights
notwithstanding any provisions in the Organizational Documents or agreements
to
which any Debtor is subject or to which any Debtor is party.
6. Defaults.
The
following events shall be “Events
of Default”:
(a) The
occurrence of an Event of Default (as defined in the Debentures) under the
Debentures;
(b) Any
representation or warranty of any Debtor in this Agreement shall prove to have
been incorrect in any material respect when made;
(c) The
failure by any Debtor to observe or perform any of its obligations hereunder
for
ten (10) days after delivery to such Debtor of notice of such failure by or
on
behalf of a Secured; 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 the Secured Parties 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 Secured Parties subject to the terms of this Agreement as
Collateral.
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 Secured Parties, shall have the right to exercise
all of the remedies conferred hereunder and under the Debentures, and the
Secured Parties shall have all the rights and remedies of a secured party under
the UCC. Without limitation, the Secured Parties, shall have the following
rights and powers:
(i) The
Secured Parties shall have the right to take possession of the Collateral and,
for that purpose, enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed and remove the
same, and each Debtor shall assemble the Collateral and make it available to
the
Secured Parties at places which the Secured Parties shall reasonably select,
whether at such Debtor's premises or elsewhere, and make available to the
Secured Parties, without rent, all of such Debtor’s respective premises and
facilities for the purpose of the Secured Parties taking possession of, removing
or putting the Collateral in saleable or disposable form.
(ii) Upon
notice to the Debtors by the Secured Parties, 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, the Secured Parties shall have the right to receive
any
interest, cash dividends or other payments on the Collateral and, at the option
of the Secured Parties, to exercise in such Secured Party’s discretion all
voting rights pertaining thereto. Without limiting the generality of the
foregoing, the Secured Parties 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
Secured Parties shall have the right to operate the business of each Debtor
using the Collateral and shall have the right to assign, sell, lease or
otherwise dispose of and deliver all or any part of the Collateral, at public
or
private sale or otherwise, either with or without special conditions or
stipulations, for cash or on credit or for future delivery, in such parcel
or
parcels and at such time or times and at such place or places, and upon such
terms and conditions as the Secured Parties may deem commercially reasonable,
all without (except as shall be required by applicable statute and cannot be
waived) advertisement or demand upon or notice to any Debtor or right of
redemption of a Debtor, which are hereby expressly waived. Upon each such sale,
lease, assignment or other transfer of Collateral, the Secured Parties, may,
unless prohibited by applicable law which cannot be waived, purchase all or
any
part of the Collateral being sold, free from and discharged of all trusts,
claims, right of redemption and equities of any Debtor, which are hereby waived
and released.
(iv) The
Secured Parties shall have the right (but not the obligation) to notify any
account debtors and any obligors under instruments or accounts to make payments
directly to the Secured Parties, and to enforce the Debtors’ rights against such
account debtors and obligors.
(v) The
Secured Parties, may (but is not obligated to) direct any financial intermediary
or any other person or entity holding any investment property to transfer the
same to the Secured Parties, or its designee.
(vi) The
Secured Parties 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
Secured Parties 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
Secured Parties may sell the Collateral without giving any warranties and may
specifically disclaim such warranties. If the Secured Parties sell 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
Secured Parties’ 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 Secured Parties to further exercise rights and remedies
under this Section 8 or elsewhere provided by agreement or applicable law,
each
Debtor hereby grants to the Secured Parties, for the benefit of 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 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. 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 24% 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 the Secured Parties 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
the Secured Parties have 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 the Secured Parties in its attempt to satisfy any requirements under the
Securities Laws (including, without limitation, registration thereunder if
requested by Secured Parties) applicable to the sale of the Pledged Securities
by the Secured Parties.
11. Costs
and Expenses.
Each
Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
incurred in connection with any filing required hereunder, including without
limitation, any financing statements pursuant to the UCC, continuation
statements, partial releases and/or termination statements related thereto
or
any expenses of any searches reasonably required by the Secured Parties. The
Debtors shall also pay all other claims and charges which in the reasonable
opinion of the Secured Parties 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 Secured Parties 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 Secured Parties, may incur in
connection with the creation, perfection, protection, satisfaction, foreclosure,
collection or enforcement of the Security Interest and the preparation,
administration, continuance, amendment or enforcement of this Agreement and
pay
to the Secured Parties 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 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) no 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. No 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 any Secured Party of
any
payment relating to any of the Collateral, nor shall 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 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 Secured Parties or to which 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.
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 or otherwise
satisfied in full and all other Obligations have been paid, discharged or
satisfied in full; 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. Upon the termination of this Agreement,
the
Secured Parties shall immediately return to the Company any Collateral that
has
been delivered to the Secured Parties pursuant to this Agreement.
15. Further
Assurances.
On a
continuing basis, each Debtor will make, execute, acknowledge, deliver, file
and
record, as the case may be, with the proper filing and recording agencies in
any
jurisdiction, including, without limitation, the jurisdictions indicated on
Schedule C attached hereto, all such instruments, and take all such action
as
may reasonably be deemed necessary or advisable, or as reasonably requested by
the Secured Party, 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 Secured Party the grant or perfection of a
perfected security interest in all the Collateral under the UCC.
16. Notices.
All
notices, requests, demands and other communications hereunder shall be subject
to the notice provision of the Purchase Agreement (as such term is defined
in
the Debentures).
17. Other
Security.
To the
extent that the Obligations are now or hereafter secured by property other
than the Collateral or by the guarantee, endorsement or property of any other
person, firm, corporation or other entity, then the Secured Party 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 Party’ rights and remedies hereunder.
18. Miscellaneous.
(a) No
course
of dealing between the Debtors and the Secured Parties, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Parties,
any
right, power or privilege hereunder or under the Debentures shall operate as
a
waiver thereof; nor shall any single or partial exercise of any right, power
or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
(b) All
of
the rights and remedies of the Secured Parties with respect to the Collateral,
whether established hereby or by the Debentures or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised
singly or concurrently.
(c) This
Agreement, 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 (as
defined in the Purchase Agreement) to whom such Secured Party assigns or
transfers any Obligations, provided such transferee agrees in writing to be
bound, with respect to the transferred Obligations, by the provisions of this
Agreement that apply to the “Secured Parties.”
(g) Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
(h)
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Illinois, 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 Chicago. Each Debtor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of Chicago 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 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. 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 any Secured Party to liability
as a partner in any Debtor or any of 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 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]
IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
be
duly executed by their respective authorized signatories as of the date first
indicated above.
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By:
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Name:
Xxxxxxx
X. Xxxxxxx
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Title:
CEO
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UBID,
INC.
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REDTAG
LIVE, INC.
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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DIBU
TRADING CORP.
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REDTAG,
INC.
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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ENABLE
PAYMENT SYSTEMS, INC.
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USAAS,
INC.
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
[SIGNATURE
PAGE OF HOLDERS TO ENABLE SECURITY AGREEMENT]
Name
of
Investing Entity: __________________________
Signature
of Authorized Signatory of Investing entity:
_________________________
Name
of
Authorized Signatory: _________________________
Title
of
Authorized Signatory: __________________________
ANNEX
A
to
SECURITY
AGREEMENT
FORM
OF ADDITIONAL DEBTOR JOINDER
Security
Agreement dated as of October 16, 2008 made by Enable
Holdings, Inc., a Delaware corporation
(the
“Company”)
and
its subsidiaries party thereto from time to time, as Debtors to and in favor
of
the Secured Party 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:
EXHIBIT
A
to
SECURITY
AGREEMENT
INTELLECTUAL
PROPERTY SECURITY AGREEMENT
THIS
INTELLECTUAL PROPERTY SECURITY AGREEMENT is dated as of October 16, 2008 between
Enable Holdings, Inc. a Delaware 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 18% Senior Secured Debentures due January 16, 2009
and issued on October 16, 2008 in the original aggregate Principal Amount of
up
to $4,000,000 (collectively, the “Debentures”),
their
endorsees, transferees and assigns (collectively, the “Secured
Parties”).
RECITALS
WHEREAS,
the Secured Parties have agreed to purchase the
from
the Company its Debentures
pursuant
to that certain Securities
Purchase Agreement dated as of October 16, 2008 between the Company and the
Secured Parties signatory thereto (the “Purchase
Agreement”),
but
only upon the condition, among others, that the Debtors shall grant to the
Secured Parties a security interest in certain Intellectual Property including
copyrights, trademarks and patents to secure the obligations of the Debtors
under the Debentures. Capitalized terms used herein and not otherwise defined
shall have the meaning ascribed to them in that certain Security Agreement
dated
as of October 16, 2008 among the Company, the Guarantors and the Secured Parties
(the “Security
Agreement”)
NOW,
THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, and intending to be legally bound, as collateral security for
the
prompt and complete payment when due of its obligations under the Debentures,
Grantor hereby represents, warrants, covenants and agrees as
follows:
AGREEMENT
1. To
secure
its obligations under the Debentures, the Company and each Debtor grants and
pledges to the Secured Parties a security interest in all of the right, title
and interest in, to and under its current and future Copyrights, Patents and
Trademarks (including without limitation those copyright, patent and trademark
registrations and applications listed on Schedules A, B and C hereto), and
including without limitation all proceed thereof (such as, by way of example
but
not by way of limitation, license royalties and proceeds of infringement suits),
the right to xxx for past, present and future infringements, all rights
corresponding thereto throughout the world and all re-issues, divisions
continuations, renewals, extensions and continuations-in-part
thereof.
2. This
security interest is granted in conjunction with the security interest granted
to the Secured Party under the Security Agreement dated as of the date hereof.
The rights and remedies of the Secured Party with respect to the security
interest granted hereby are in addition to those set forth in the Debenture,
the
Security Agreement and the other Transaction Documents, and those which are
now
or hereafter available to the Secured Party as a matter of law or equity. Each
right, power and remedy of the Secured Party provided for herein or in the
Debenture or any of the Transaction Documents, or now or hereafter existing
at
law or in equity shall be cumulative and concurrent and shall be in addition
to
every right, power or remedy provided for herein and the exercise by the Secured
Party of any one or more of the rights, powers or remedies provided for in
this
Intellectual Property Security Agreement, the Debentures or any of the other
Transaction Documents, or now or hereafter existing at law or in equity, shall
not preclude the simultaneous or later exercise by any person, including the
Secured Party, of any or all other rights, powers or remedies.
3. This
Intellectual Property Security Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
[SIGNATURE
PAGE FOLLOWS]
In
Witness Whereof, the parties have caused this Intellectual Property Security
Agreement to be duly executed by its officers thereunto duly authorized as
of
the first date written above.
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By:
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Name:
Xxxxxxx X. Xxxxxxx
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Title:
CEO
|
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UBID,
INC.
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REDTAG
LIVE, INC.
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By:
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By:
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Name:
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Name:
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Title:
|
Title:
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DIBU
TRADING CORP.
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REDTAG,
INC.
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By:
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By:
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Name:
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Name:
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Title:
|
Title:
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ENABLE
PAYMENT SYSTEMS, INC.
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USAAS,
INC.
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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[SIGNATURE
PAGE OF SECURED PARTIES TO ENABLE INTELLECTUAL
PROPERTY
SECURITY AGREEMENT FOLLOWS]
[SIGNATURE
PAGE OF SECURED PARTIES TO ENABLE INTELLECTUAL
PROPERTY
SECURITY AGREEMENT]
Name
of
Investing Entity: __________________________
Signature
of Authorized Signatory of Investing entity:
_________________________
Name
of
Authorized Signatory: _________________________
Title
of
Authorized Signatory: __________________________
EXHIBIT
B
SUBSIDIARY
GUARANTEE
SUBSIDIARY
GUARANTEE, dated as of October 16, 2008 (this "Guarantee"),
made
by each of the signatories hereto (together with any other entity that may
become a party hereto as provided herein, the "Guarantors"),
in
favor of the purchasers signatory (together with their permitted assigns, the
"Purchasers")
to
that certain Securities Purchase Agreement, dated as of the date hereof, between
Enable Holdings, Inc. a Delaware corporation (the "Company")
and
the Purchasers.
WITNESSETH:
WHEREAS,
pursuant to that certain Securities Purchase Agreement, dated as of the date
hereof, by and between the Company and the Purchasers (the "Purchase
Agreement"),
the
Company has agreed to sell and issue to the Purchasers, and the Purchasers
have
agreed to purchase from the Company the Debentures, subject to the terms and
conditions set forth therein; and
WHEREAS,
each Guarantor will directly benefit from the extension of credit to the Company
represented by the issuance of the Debentures; and
NOW,
THEREFORE, in consideration of the premises and to induce the Purchasers to
enter into the Purchase Agreement and to carry out the transactions contemplated
thereby, each Guarantor hereby agrees with the Purchasers as
follows:
1. Definitions.
Unless
otherwise defined herein, terms defined in the Purchase Agreement and used
herein shall have the meanings given to them in the Purchase Agreement. The
words "hereof," "herein," "hereto" and "hereunder" and words of similar import
when used in this Guarantee shall refer to this Guarantee as a whole and not
to
any particular provision of this Guarantee, and Section and Schedule references
are to this Guarantee unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and plural
forms
of such terms. The following terms shall have the following
meanings:
"Guarantee"
means
this Subsidiary Guarantee, as the same may be amended, supplemented or otherwise
modified from time to time.
"Obligations"
means,
in addition to all other costs and expenses of collection incurred by Purchasers
in enforcing any of such Obligations and/or this Guarantee, all of the
liabilities and obligations (primary, secondary, direct, contingent, sole,
joint
or several) due or to become due, or that are now or may be hereafter contracted
or acquired, or owing to, of the Company or any Guarantor to the Purchasers,
including, without limitation, all obligations under this Guarantee, the
Debentures 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 Purchasers 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 Company or any Guarantor from time
to
time under or in connection with this Guarantee, the Debentures and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith; and (iii) all amounts (including but not
limited to post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Company or any
Guarantor.
2. Guarantee.
(a) Guarantee.
(i) The
Guarantors hereby, jointly and severally, unconditionally and irrevocably,
guarantee to the Purchasers and their respective successors, indorsees,
transferees and assigns, the prompt and complete payment and performance when
due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations.
(ii) Anything
herein or in any other Transaction Document to the contrary notwithstanding,
the
maximum liability of each Guarantor hereunder and under the other Transaction
Documents shall in no event exceed the amount which can be guaranteed by such
Guarantor under applicable federal and state laws, including laws relating
to
the insolvency of debtors, fraudulent conveyance or transfer or laws affecting
the rights of creditors generally (after giving effect to the right of
contribution established in Section 2(b)).
(iii) Each
Guarantor agrees that the Obligations may at any time and from time to time
exceed the amount of the liability of such Guarantor hereunder without impairing
the guarantee contained in this Section 2 or affecting the rights and remedies
of the Purchasers hereunder.
(iv) The
guarantee contained in this Section 2 shall remain in full force and effect
until all the Obligations and the obligations of each Guarantor under the
guarantee contained in this Section 2 shall have been paid in full or otherwise
fully satisfied and discharged.
(v) No
payment made by the Company, any of the Guarantors, any other guarantor or
any
other Person or received or collected by the Purchasers from the Company, any
of
the Guarantors, any other guarantor or any other Person by virtue of any action
or proceeding or any set-off or appropriation or application at any time or
from
time to time in reduction of or in payment of the Obligations shall be deemed
to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by such Guarantor in respect of the Obligations or any payment received
or
collected from such Guarantor in respect of the Obligations), remain liable
for
the Obligations up to the maximum liability of such Guarantor hereunder until
the Obligations are indefeasibly paid in full.
(vi) Notwithstanding
anything to the contrary in this Guarantee, with respect to any defaulted
non-monetary Obligations the specific performance of which by the Guarantors
is
not reasonably possible (e.g. the issuance of the Company's Common Stock),
the
Guarantors shall only be liable for making the Purchasers whole on a monetary
basis for the Company's failure to perform such Obligations in accordance with
the Transaction Documents.
(b) Right
of Contribution.
Subject
to Section 2(c), each Guarantor hereby agrees that to the extent that a
Guarantor shall have paid more than its proportionate share of any payment
made
hereunder, such Guarantor shall be entitled to seek and receive contribution
from and against any other Guarantor hereunder which has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2(c). The provisions
of
this Section 2(b) shall in no respect limit the obligations and liabilities
of
any Guarantor to the Purchasers and each Guarantor shall remain liable to the
Purchasers for the full amount guaranteed by such Guarantor
hereunder.
(c) No
Subrogation.
Notwithstanding any payment made by any Guarantor hereunder or any set-off
or application of funds of any Guarantor by the Purchasers, no Guarantor shall
be entitled to be subrogated to any of the rights of the Purchasers against
the
Company or any other Guarantor or any collateral security or guarantee or right
of offset held by the Purchasers for the payment of the Obligations, nor shall
any Guarantor seek or be entitled to seek any contribution or reimbursement
from
the Company or any other Guarantor in respect of payments made by such Guarantor
hereunder, until all amounts owing to the Purchasers by the Company on account
of the Obligations are indefeasibly paid in full. If any amount shall be paid
to
any Guarantor on account of such subrogation rights at any time when all of
the
Obligations shall not have been paid in full, such amount shall be held by
such
Guarantor in trust for the Purchasers, segregated from other funds of such
Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over
to the Purchasers in the exact form received by such Guarantor (duly indorsed
by
such Guarantor to the Purchasers, if required), to be applied against the
Obligations, whether matured or unmatured, in such order as the Purchasers
may
determine.
(d) Amendments,
Etc. With Respect to the Obligations.
Each
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Obligations made
by the Purchasers may be rescinded by the Purchasers and any of the Obligations
continued, and the Obligations, or the liability of any other Person upon or
for
any part thereof, or any collateral security or guarantee therefor or right
of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Purchasers, and the Purchase Agreement and the
other Transaction Documents and any other documents executed and delivered
in
connection therewith may be amended, modified, supplemented or terminated,
in
whole or in part, as the Purchasers may deem advisable from time to time, and
any collateral security, guarantee or right of offset at any time held by the
Purchasers for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released. The Purchasers shall have no obligation to protect,
secure, perfect or insure any Lien at any time held by them as security for
the
Obligations or for the guarantee contained in this Section 2 or any property
subject thereto.
(e) Guarantee
Absolute and Unconditional.
Each
Guarantor waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations and notice of or proof of reliance by the
Purchasers upon the guarantee contained in this Section 2 or acceptance of
the
guarantee contained in this Section 2; the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or renewed,
extended, amended or waived, in reliance upon the guarantee contained in this
Section 2; and all dealings between the Company and any of the Guarantors,
on
the one hand, and the Purchasers, on the other hand, likewise shall be
conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this Section 2. Each Guarantor waives to the extent
permitted by law diligence, presentment, protest, demand for payment and notice
of default or nonpayment to or upon the Company or any of the Guarantors with
respect to the Obligations. Each Guarantor understands and agrees that the
guarantee contained in this Section 2 shall be construed as a continuing,
absolute and unconditional guarantee of payment and performance without regard
to (a) the validity or enforceability of the Purchase Agreement or any other
Transaction Document, any of the Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Purchasers, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance or fraud by
Purchasers) which may at any time be available to or be asserted by the Company
or any other Person against the Purchasers, or (c) any other circumstance
whatsoever (with or without notice to or knowledge of the Company or such
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Company for the Obligations, or of such Guarantor
under the guarantee contained in this Section 2, in bankruptcy or in any other
instance. When making any demand hereunder or otherwise pursuing its rights
and
remedies hereunder against any Guarantor, the Purchasers may, but shall be
under
no obligation to, make a similar demand on or otherwise pursue such rights
and
remedies as they may have against the Company, any other Guarantor or any other
Person or against any collateral security or guarantee for the Obligations
or
any right of offset with respect thereto, and any failure by the Purchasers
to
make any such demand, to pursue such other rights or remedies or to collect
any
payments from the Company, any other Guarantor or any other Person or to realize
upon any such collateral security or guarantee or to exercise any such right
of
offset, or any release of the Company, any other Guarantor or any other Person
or any such collateral security, guarantee or right of offset, shall not relieve
any Guarantor of any obligation or liability hereunder, and shall not impair
or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Purchasers against any Guarantor. For the purposes hereof,
"demand" shall include the commencement and continuance of any legal
proceedings.
(f) Reinstatement.
The
guarantee contained in this Section 2 shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof,
of
any of the Obligations is rescinded or must otherwise be restored or returned
by
the Purchasers upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Company or any Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been
made.
(g) Payments.
Each
Guarantor hereby guarantees that payments hereunder will be paid to the
Purchasers without set-off or counterclaim in U.S. dollars at the address set
forth or referred to in the Signature Pages to the Purchase
Agreement.
3. Representations
and Warranties.
Each
Guarantor hereby makes the following representations and warranties to
Purchasers as of the date hereof:
(a) Organization
and Qualification.
The
Guarantor is a corporation, duly incorporated, validly existing and in good
standing under the laws of the applicable jurisdiction set forth on Schedule
1,
with the requisite corporate power and authority to own and use its properties
and assets and to carry on its business as currently conducted. The Guarantor
has no subsidiaries other than those identified as such on the Disclosure
Schedules to the Purchase Agreement. The Guarantor is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the nature of the business conducted or property owned by it makes
such
qualification necessary, except where the failure to be so qualified or in
good
standing, as the case may be, could not, individually or in the aggregate,
(x)
adversely affect the legality, validity or enforceability of any of this
Guaranty in any material respect, (y) have a material adverse effect on the
results of operations, assets, prospects, or financial condition of the
Guarantor or (z) adversely impair in any material respect the Guarantor's
ability to perform fully on a timely basis its obligations under this Guaranty
(a "Material
Adverse Effect").
(b) Authorization;
Enforcement.
The Guarantor has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this Guaranty, and
otherwise to carry out its obligations hereunder. The execution and delivery
of
this Guaranty by the Guarantor and the consummation by it of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of the Guarantor. This Guaranty has been duly executed and delivered
by the Guarantor and constitutes the valid and binding obligation of the
Guarantor enforceable against the Guarantor in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(c) No
Conflicts.
The
execution, delivery and performance of this Guaranty by the Guarantor and the
consummation by the Guarantor of the transactions contemplated thereby do not
and will not (i) conflict with or violate any provision of its Certificate
of
Incorporation or By-laws or (ii) conflict with, constitute a default (or an
event which 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 of, any agreement, indenture or instrument to which the Guarantor
is a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Guarantor is subject (including Federal and State
securities laws and regulations), or by which any material property or asset
of
the Guarantor is bound or affected, except in the case of each of clauses (ii)
and (iii), such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as could not, individually or in the aggregate,
have or result in a Material Adverse Effect. The business of the Guarantor
is
not being conducted in violation of any law, ordinance or regulation of any
governmental authority, except for violations which, individually or in the
aggregate, do not have a Material Adverse Effect.
(d) Consents
and Approvals.
The
Guarantor is not required to obtain any consent, waiver, authorization or order
of, or make any filing or registration with, any court or other federal, state,
local, foreign or other governmental authority or other person in connection
with the execution, delivery and performance by the Guarantor of this
Guaranty.
(e) Purchase
Agreement.
The
representations and warranties of the Company set forth in the Purchase
Agreement as they relate to such Guarantor, each of which is hereby incorporated
herein by reference, are true and correct as of each time such representations
are deemed to be made pursuant to such Purchase Agreement, and the Purchasers
shall be entitled to rely on each of them as if they were fully set forth
herein, provided that each reference in each such representation and warranty
to
the Company's knowledge shall, for the purposes of this Section 3, be deemed
to
be a reference to such Guarantor's knowledge.
(f) Foreign
Law.
Each Guarantor has consulted with appropriate foreign legal counsel with
respect to any of the above representations for which non-U.S. law is
applicable. Such foreign counsel have advised each applicable Guarantor that
such counsel knows of no reason why any of the above representations would
not
be true and accurate. Such foreign counsel were provided with copies of this
Subsidiary Guarantee and the Transaction Documents prior to rendering their
advice.
4. Covenants.
(a) Each
Guarantor covenants and agrees with the Purchasers that, from and after the
date
of this Guarantee until the Obligations shall have been indefeasibly paid in
full, such Guarantor shall take, and/or shall refrain from taking, as the case
may be, each commercially reasonable action that is necessary to be taken or
not
taken, as the case may be, so that no Event of Default (as defined in the
Debentures) is caused by the failure to take such action or to refrain from
taking such action by such Guarantor.
(b) So
long
as any of the Obligations are outstanding, unless Purchasers holding at least
75% of the aggregate Principal Amount of the then outstanding Debentures shall
otherwise consent in writing, each Guarantor will not directly or indirectly
on
or after the date of this Guarantee:
i. other
than Permitted Indebtedness (as defined in the Debentures), enter into, create,
incur, assume or suffer to exist any indebtedness for borrowed money of any
kind, including but not limited to, a guarantee, on or with respect to any
of
its property or assets now owned or hereafter acquired or any interest therein
or any income or profits therefrom;
ii. other
than Permitted Liens (as defined in the Debentures), enter into, create, incur,
assume or suffer to exist any liens of any kind, on or with respect to any
of
its property or assets now owned or hereafter acquired or any interest therein
or any income or profits therefrom;
iii. amend
its
certificate of incorporation, bylaws or other charter documents so as to
adversely affect any rights of any Purchaser;
iv. repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de
minimis number of shares of its securities or debt obligations;
v. pay
cash
dividends on any equity securities of the Company;
vi. enter
into any transaction with any Affiliate of the Guarantor which would be required
to be disclosed in any public filing of the Company with the Commission, unless
such transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or
vii. enter
into any agreement with respect to any of the foregoing.
5. Miscellaneous.
(a) Amendments
in Writing.
None of
the terms or provisions of this Guarantee may be waived, amended, supplemented
or otherwise modified except in writing by the Purchasers.
(b) Notices.
All
notices, requests and demands to or upon the Purchasers or any Guarantor
hereunder shall be effected in the manner provided for in the Purchase
Agreement, provided that any such notice, request or demand to or upon any
Guarantor shall be addressed to such Guarantor at its notice address set forth
on Schedule
5(b).
(c) No
Waiver By Course Of Conduct; Cumulative Remedies.
The
Purchasers shall not by any act (except by a written instrument pursuant to
Section 5(a)), delay, indulgence, omission or otherwise be deemed to have waived
any right or remedy hereunder or to have acquiesced in any default under the
Transaction Documents or Event of Default. No failure to exercise, nor any
delay
in exercising, on the part of the Purchasers, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise
of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Purchasers of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Purchasers
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided by law.
(d) Enforcement
Expenses; Indemnification.
(i) Each
Guarantor agrees to pay, or reimburse the Purchasers for, all its costs and
expenses incurred in collecting against such Guarantor under the guarantee
contained in Section 2 or otherwise enforcing or preserving any rights under
this Guarantee and the other Transaction Documents to which such Guarantor
is a
party, including, without limitation, the reasonable fees and disbursements
of
counsel to the Purchasers.
(ii) Each
Guarantor agrees to pay, and to save the Purchasers harmless from, any and
all
liabilities with respect to, or resulting from any delay in paying, any and
all
stamp, excise, sales or other taxes which may be payable or determined to be
payable in connection with any of the transactions contemplated by this
Guarantee.
(iii) Each
Guarantor agrees to pay, and to save the Purchasers harmless from, any and
all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of
this
Guarantee to the extent the Company would be required to do so pursuant to
the
Purchase Agreement.
(iv) The
agreements in this Section shall survive repayment of the Obligations and all
other amounts payable under the Purchase Agreement and the other Transaction
Documents.
(e) Successor
and Assigns.
This
Guarantee shall be binding upon the successors and assigns of each Guarantor
and
shall inure to the benefit of the Purchasers and their respective successors
and
assigns; provided that no Guarantor may assign, transfer or delegate any of
its
rights or obligations under this Guarantee without the prior written consent
of
the Purchasers.
(f) Set-Off.
Each
Guarantor hereby irrevocably authorizes the Purchasers at any time and from
time
to time while an Event of Default under any of the Transaction Documents shall
have occurred and be continuing, without notice to such Guarantor or any other
Guarantor, any such notice being expressly waived by each Guarantor, to set-off
and appropriate and apply any and all deposits, credits, indebtedness or claims,
in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the Purchasers
to
or for the credit or the account of such Guarantor, or any part thereof in
such
amounts as the Purchasers may elect, against and on account of the obligations
and liabilities of such Guarantor to the Purchasers hereunder and claims of
every nature and description of the Purchasers against such Guarantor, in any
currency, whether arising hereunder, under the Purchase Agreement, any other
Transaction Document or otherwise, as the Purchasers may elect, whether or
not
the Purchasers have made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The Purchasers shall
notify such Guarantor promptly of any such set-off and the application made
by
the Purchasers of the proceeds thereof, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Purchasers under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Purchasers may have.
(g) Counterparts.
This
Guarantee may be executed by one or more of the parties to this Guarantee on
any
number of separate counterparts (including by telecopy), and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
(h) Severability.
Any
provision of this Guarantee which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any
other jurisdiction.
(i) Section
Headings.
The
Section headings used in this Guarantee are for convenience of reference only
and are not to affect the construction hereof or be taken into consideration
in
the interpretation hereof.
(j) Integration.
This
Guarantee and the other Transaction Documents represent the agreement of the
Guarantors and the Purchasers with respect to the subject matter hereof and
thereof, and there are no promises, undertakings, representations or warranties
by the Purchasers relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Transaction
Documents.
(k) Governing
Laws.
All
questions concerning the construction, validity, enforcement and interpretation
of this Guarantee shall be governed by and construed and enforced in accordance
with the internal laws of the State of Illinois, without regard to the
principles of conflicts of law thereof. Each of the Company and the
Guarantors agree that all proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Guarantee
(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
Chicago. Each of the Company and the Guarantors hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of Chicago 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 Guarantee 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
Guarantee or the transactions contemplated hereby.
(l) Acknowledgements.
Each Guarantor hereby acknowledges that:
(i) it
has
been advised by counsel in the negotiation, execution and delivery of this
Guarantee and the other Transaction Documents to which it is a
party;
(ii) the
Purchasers have no fiduciary relationship with or duty to any Guarantor arising
out of or in connection with this Guarantee or any of the other Transaction
Documents, and the relationship between the Guarantors, on the one hand, and
the
Purchasers, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and
(iii) no
joint
venture is created hereby or by the other Transaction Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Guarantors
and the Purchasers.
(m) Additional
Guarantors.
The Company shall cause each of its subsidiaries formed or acquired on or
subsequent to the date hereof to become a Guarantor for all purposes of this
Guarantee by executing and delivering an Assumption Agreement in the form of
Annex 1 hereto.
(n) Release
of Guarantors.
Each
Guarantor will be released from all liability hereunder concurrently with the
indefeasible repayment in full of all amounts owed under the Purchase Agreement,
the Debentures and the other Transaction Documents.
(o) Seniority.
The
Obligations of each of the Guarantors hereunder rank senior in priority to
any
other Indebtedness (as defined in the Purchase Agreement) of such
Guarantor.
(p) WAIVER
OF JURY TRIAL.
EACH
GUARANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, THE PURCHASERS, HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM
THEREIN.
*********************
(Signature
Pages Follow)
IN
WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly
executed and delivered as of the date first above written.
|
UBID,
INC.
|
REDTAG
LIVE, INC.
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By:
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By:
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|
Name:
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Name:
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|||
|
Title:
|
Title:
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DIBU
TRADING CORP.
|
REDTAG,
INC.
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By:
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By:
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|||
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Name:
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Name:
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|||
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Title:
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Title:
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ENABLE
PAYMENT SYSTEMS, INC.
|
USAAS,
INC.
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By:
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By:
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|||
|
Name:
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Name:
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Title:
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Title:
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Annex
1 to
SUBSIDIARY
GUARANTEE
ASSUMPTION
AGREEMENT, dated as of __________, 200_ made by ____________, a _________
corporation (the "Additional
Guarantor"),
in
favor of the Purchasers pursuant to the Purchase Agreement referred to below.
All capitalized terms not defined herein shall have the meaning ascribed to
them
in such Purchase Agreement.
WITNESSETH
:
WHEREAS,
Enable Holdings, Inc., a Delaware corporation (the "Company")
and
the Purchasers have entered into a Securities Purchase Agreement, dated as
of
October 16, 2008 (as amended, supplemented or otherwise modified from time
to
time, the "Purchase
Agreement");
WHEREAS,
in connection with the Purchase Agreement, the Subsidiaries of the Company
(other than the Additional Guarantor) have entered into the Subsidiary
Guarantee, dated as of October 16, 2008 (as amended, supplemented or otherwise
modified from time to time, the "Guarantee")
in
favor of the Purchasers;
WHEREAS,
the Purchase Agreement requires the Additional Guarantor to become a party
to
the Guarantee; and
WHEREAS,
the Additional Guarantor has agreed to execute and deliver this Assumption
Agreement in order to become a party to the Guarantee;
NOW,
THEREFORE, IT IS AGREED:
1. Guarantee.
By
executing and delivering this Assumption Agreement, the Additional Guarantor,
as
provided in Section 5(m) of the Guarantee, hereby becomes a party to the
Guarantee as a Guarantor thereunder with the same force and effect as if
originally named therein as a Guarantor and, without limiting the generality
of
the foregoing, hereby expressly assumes all obligations and liabilities of
a
Guarantor thereunder. The information set forth in Annex 1 hereto is hereby
added to the information set forth in Schedule 1 to the Guarantee. The
Additional Guarantor hereby represents and warrants that each of the
representations and warranties contained in Section 3 of the Guarantee is true
and correct on and as the date hereof as to such Additional Guarantor (after
giving effect to this Assumption Agreement) as if made on and as of such
date.
2. Governing
Law.
THIS
ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS.
IN
WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be
duly
executed and delivered as of the date first above written.
[NAME
OF
ADDITIONAL GUARANTOR]
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Name:
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Title:
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