SECURITY AGREEMENT
(Senior)
THIS
SECURITY AGREEMENT dated as of August 21, 2008 (this "Agreement"), is by and
between REMOTE KNOWLEDGE, INC., a Delaware corporation (the "Debtor"), and SLW
INTERNATIONAL, LLC, a Texas limited liability company ("Secured
Party").
R E C I T A L
S:
A. Debtor
has executed and delivered to Secured Party that certain Senior Convertible Note
in the original principal amount of $800,000.00 dated of even date herewith
(such promissory note, as the same may be renewed, extended, increased, amended
or modified from time to time, is referred to herein as the
"Note").
B. Secured
Party has conditioned its obligations under the Note upon, among other things,
the execution and delivery of this Agreement by Debtor.
NOW
THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I.
Security
Interest
Section
1.1 Security
Interest. Debtor hereby grants to Secured Party a security
interest in the following property, whether now owned or existing or hereafter
arising or acquired and wherever arising or located (such property being
hereinafter sometimes called the "Collateral"):
a) all
of its accounts, accounts receivable, contract rights, general intangibles,
chattel paper, instruments, documents, promissory notes, deposit accounts, funds
on deposit with Secured Party, investment property, investment securities,
financial assets, letter of credit rights, electronic chattel paper, software,
supporting obligations, payment intangibles, commercial tort claims and all
other personal property, whether now owned or hereafter acquired, including
without limitation, all lease receivables and note receivables, all cash, notes,
drafts and acceptances arising therefrom, all returned and repossessed goods
arising from or relating to any such accounts, or other proceeds of any sale,
lease or other disposition of inventory, all tradenames, trademarks, patents and
other licenses, and all proceeds (including insurance proceeds) and products
thereof;
b) all
of its inventory, whether now owned or hereafter acquired, including, without
limitation, all raw materials, goods in process, finished goods and other
tangible personal property held for sale or lease or furnished or to be
furnished under contracts for service or used or consumed in Debtor's trade or
business and all additions, accessions, substitutions, attachments and
replacements thereto and all contracts with respect thereto and all documents of
title evidencing or representing any part thereof and all products and proceeds
(including insurance proceeds) thereof; and
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c) all
of its machinery, equipment, rolling stock, furniture, fixtures and personalty
of every nature and description, whether now owned or hereafter acquired, and
all appurtenances, accessions and additions thereto and substitutions and
replacements therefor, wheresoever located, including all tools, parts and
accessories used in connection therewith, and all products and proceeds thereof
(including insurance proceeds).
All terms
used herein that are defined in the Uniform Commercial Code as adopted in the
State of Texas shall have the meanings specified in the Uniform Commercial Code
as adopted by the State of Texas as in effect from time to time (the
"UCC").
Section
1.2) Obligations. The
Collateral shall secure the following obligations, indebtedness, and liabilities
(all such obligations, indebtedness, and liabilities being hereinafter sometimes
called the "Obligations"):
a) the
obligations and indebtedness of Debtor to Secured Party evidenced by the
Note;
b) all
future advances by Secured Party to Debtor;
c) the
Obligations (as defined in the Note);
d) all
costs and expenses, including, without limitation, all attorneys' fees and legal
expenses, incurred by Secured Party to preserve and maintain the Collateral,
collect the obligations herein described, and enforce this
Agreement;
e) all
other obligations, indebtedness, and liabilities of Debtor to Secured Party, now
existing or hereafter arising, regardless of whether such obligations,
indebtedness, and liabilities are similar, dissimilar, related, unrelated,
direct, indirect, fixed, contingent, primary, secondary, joint, several, or
joint and several; and
f) all
extensions, renewals, and modifications of any of the foregoing and all
promissory notes given in extension, renewal or modification of any of the
foregoing.
ARTICLE
II.
Representations and
Warranties
To induce
Secured Party to enter into this Agreement and the Note, Debtor represents and
warrants to Secured Party that:
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Section
2.1 Title. Debtor
owns, and with respect to Collateral acquired after the date hereof Debtor will
own, the Collateral free and clear of any lien, security interest, or other
encumbrance other than in favor of Muragai LLC, a Delaware corporation, as
Lender Representative (as defined in the Credit Agreement (hereinafter defined))
for the Lenders (as defined in the Credit Agreement) (the “Junior Secured
Party”) pursuant to that certain Security Agreement dated as of even date
herewith (the “Junior Security Agreement”). Secured Party, by its
acceptance hereof, acknowledges that the Junior Secured Party has a second
priority security interest and liens in the Collateral pursuant to the Junior
Security Agreement.
Section 2.2
Accounts. Unless
Debtor has given Secured Party written notice to the contrary, whenever the
security interest granted hereunder attaches to an account, Debtor shall be
deemed to have represented and warranted to Secured Party as to each and all of
its accounts that (a) each account is genuine and is in all respects what it
purports to be, (b) each account represents the legal, valid, and binding
obligation of the account debtor evidencing indebtedness unpaid and owed by such
account debtor arising out of the performance of labor or services by Debtor or
the sale or lease of goods by Debtor, (c) the amount of each account represented
as owing is the correct amount actually and unconditionally owing except for
normal trade discounts granted in the ordinary course of business, and (d) no
account is subject to any offset, counterclaim, or other defense.
Section 2.3 Financing
Statements. Except for those in favor of Subordinated Lenders,
no financing statement, security agreement, or other lien instrument covering
all or any part of the Collateral is on file in any public office, except as may
have been filed in favor of Secured Party.
Section 2.4 Jurisdiction of
Organization; Legal Name. Debtor is a Delaware
corporation. Debtor's legal name set forth in its Certificate of
Incorporation filed with the Delaware Secretary of State, as amended to date is:
Remote Knowledge, Inc. Debtor's organizational ID is
3679746.
Section 2.5 Principal Place of
Business. The principal place of business and chief executive
office of Debtor, and the office where Debtor keeps its books and records, is
located at the address of Debtor listed in the Note.
Section 2.6
Location of
Collateral. All inventory, machinery, and equipment of Debtor
are located at the address of Debtor listed in the Note.
Section 2.7 Business
Purpose. The Collateral is used, acquired and held exclusively
for business purposes and no portion of the Collateral is consumer
goods. The Obligations were incurred solely for business purposes and
not as a consumer-goods transaction or a consumer transaction.
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ARTICLE
III.
Covenants
Debtor
covenants and agrees with Secured Party that until the Obligations are paid and
performed in full:
Section 3.1 Maintenance. Debtor
shall maintain the Collateral in good operating condition and repair and shall
not permit any waste or destruction of the Collateral or any part
thereof. Debtor shall not use or permit the Collateral to be used in
violation of any law or inconsistently with the terms of any policy of
insurance. Debtor shall not use or permit the Collateral to be used
in any manner or for any purpose that would impair the value of the Collateral
or expose the Collateral to unusual risk.
Section 3.2 Encumbrances. Debtor
shall not create, permit, or suffer to exist, and shall defend the Collateral,
against any lien, security interest, or other encumbrance on the Collateral
except the security interest of Secured Party hereunder and the security
interest of Senior Lender, and shall defend Debtor's rights in the Collateral
and Secured Party's security interest in the Collateral against the claims of
all persons and entities.
Section 3.3 Modification of
Collateral. Debtor shall do nothing to impair the rights of
Secured Party in the Collateral. Without the prior written consent of
Secured Party, Debtor shall not grant any extension of time for any payment with
respect to the Collateral, or compromise, compound, or settle any of the
Collateral, or release in whole or in part any person or entity liable for
payment with respect to the Collateral, or allow any credit or discount for
payment with respect to the Collateral other than normal trade discounts granted
in the ordinary course of business, or release any lien, security interest, or
assignment securing the Collateral, or otherwise amend or modify any of the
Collateral.
Section 3.4 Disposition of
Collateral. Debtor shall not sell, lease, or otherwise dispose
of the Collateral or any part thereof without the prior written consent of
Secured Party, except Debtor may sell inventory in the ordinary course of
business.
Section 3.5 Further
Assurances. At any time and from time to time, upon the
request of Secured Party, and at the sole expense of Debtor, Debtor shall
promptly execute and deliver all such further instruments and documents and take
such further action as Secured Party may deem necessary or desirable to preserve
and perfect its security interest in the Collateral and carry out the provisions
and purposes of this Agreement. Debtor shall promptly endorse and
deliver to Secured Party all documents, instruments, and chattel paper that it
now owns or may hereafter acquire which constitute Collateral or relate to the
Collateral.
Section 3.6
Risk of Loss;
Insurance. Debtor shall be responsible for any loss of or
damage to the Collateral. Debtor shall maintain insurance on the
Collateral as provided in the Note.
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Section 3.7 Inspection. Debtor
shall permit Secured Party and its representatives to examine or inspect the
Collateral wherever located and to examine, inspect, and copy Debtor's books and
records at any reasonable time and as often as Secured Party may desire all as
further provided in the Note.
Section 3.8 Notification. Debtor
shall promptly notify Secured Party of (a) any lien, security interest,
encumbrance, or claim made or threatened against the Collateral, and (b) any
material change in the Collateral, including, without limitation, any material
damage to or loss of the Collateral.
Section 3.9
Organizational
Changes. Debtor shall not, without the prior written consent
of Secured Party, change its name, identity, organizational structure or state
of organization (including, without limitation, through any merger or
reorganization). Debtor shall not do business under any trade name,
unless such trade name has been disclosed to Secured Party. Debtor
shall not change its principal place of business, chief executive office, or the
place where it keeps its books and records unless it shall have given Secured
Party thirty (30) days prior written notice thereof and shall have taken all
action deemed necessary or desirable by Secured Party to cause its security
interest in the Collateral to be perfected with the priority required by this
Agreement.
Section 3.10 Books and Records;
Information. Debtor shall keep accurate and complete books and
records of the Collateral and Debtor's business and financial condition in
accordance with generally accepted accounting principles consistently
applied. Debtor shall from time to time at the request of Secured
Party deliver to Secured Party such information regarding the Collateral and
Debtor as Secured Party may request, including, without limitation, lists and
descriptions of the Collateral and evidence of the identity and existence of the
Collateral. Debtor shall xxxx its books and records to reflect the
security interest of Secured Party under this Agreement.
Section 3.11
Location of
Collateral. Debtor shall not move any of its equipment,
machinery, or inventory from the location specified in Section 2.6 without the
prior written consent of Secured Party.
Section 3.12
Landlord Waivers or
Subordinations. Debtor shall cause each landlord of real
property leased by Debtor to execute and deliver instruments satisfactory in
form and substance to Secured Party by which such landlord waives or
subordinates its rights, if any, in the Collateral.
ARTICLE
IV.
Rights of Secured
Party
Section 4.1 Power of
Attorney. Debtor hereby irrevocably constitutes and appoints
Secured Party and any officer or agent thereof, with full power of substitution,
as its true and lawful attorney-in-fact with full irrevocable power and
authority in the name of Debtor or in its own name, upon the occurrence of an
Event of Default, to take any and all action and to execute any and all
documents and instruments which Secured Party at any time and from time to time
deems necessary or desirable to accomplish the purposes of this Agreement and,
without limiting the generality of the foregoing, Debtor hereby gives Secured
Party the power and right on behalf of Debtor and in its own name to do any of
the following, without notice to or the consent of Debtor:
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(a) to
demand, xxx for, collect, or receive in the name of Debtor or in its own name,
any money or property at any time payable or receivable on account of or in
exchange for any of the Collateral and, in connection therewith, endorse checks,
notes, drafts, acceptances, money orders, documents of title, or any other
instruments for the payment of money under the Collateral or any policy of
insurance;
(b) to
pay or discharge taxes, liens, security interests, or other encumbrances
levied or placed on or threatened against the Collateral;
(c) to
send requests for verification to account debtors and other
obligors;
(d) (i)
to direct account debtors and any other parties liable for any payment under any
of the Collateral to make payment of any and all monies due and to become due
thereunder directly to Secured Party or as Secured Party shall direct; (ii) to
receive payment of and receipt for any and all monies, claims, and other amounts
due and to become due at any time in respect of or arising out of any
Collateral; (iii) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, proxies, stock powers, verifications, and notices in connection
with accounts and other documents relating to the Collateral; (iv) to exchange
any of the Collateral for other property upon any merger, consolidation,
reorganization, recapitalization, or other readjustment of the issuer thereof
and, in connection therewith, deposit any of the Collateral with any committee,
depositary, transfer agent, registrar, or other designated agency upon such
terms as Secured Party may determine; (v) to insure, and to make, settle,
compromise, or adjust claims under any insurance policy covering any of the
Collateral; and (vi) to sell, transfer, pledge, make any agreement with respect
to or otherwise deal with any of the Collateral as fully and completely as
though Secured Party were the absolute owner thereof for all purposes, and to
do, at Secured Party's option and Debtor's expense, at any time, or from time to
time, all acts and things which Secured Party deems necessary to protect,
preserve, or realize upon the Collateral and Secured Party's security interest
therein.
This
power of attorney is a power coupled with an interest and shall be
irrevocable. Secured Party shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges, and options
expressly or implicitly granted to Secured Party in this Agreement, and shall
not be liable for any failure to do so or any delay in doing
so. Secured Party shall not be liable for any act or omission or for
any error of judgment or any mistake of fact or law in its individual capacity
or in its capacity as attorney-in-fact except acts or omissions resulting from
its willful misconduct. This power of attorney is conferred on
Secured Party to protect, preserve, and realize upon its security interest in
the Collateral. Secured Party shall not be responsible for any
decline in the value of the Collateral and shall not be required to take any
steps to preserve rights against prior parties or to protect, preserve, or
maintain any security interest or lien given to secure the
Collateral.
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Section 4.2 Performance by Secured
Party. If Debtor fails to perform or comply with any of its
agreements contained herein, Secured Party itself may, at its sole discretion,
cause or attempt to cause performance or compliance with such agreement and the
expenses of Secured Party, together with interest thereon at the Default Rate
(as defined in the Note), shall be payable by Debtor to Secured Party on demand
and shall constitute Obligations secured by this
Agreement. Notwithstanding the foregoing, it is expressly agreed that
Secured Party shall not have any liability or responsibility for the performance
of any obligation of Debtor under this Agreement.
Section 4.3 Assignment by Secured
Party. Secured Party may from time to time assign the
Obligations and any portion thereof and the Collateral and any portion thereof,
and the assignee shall be entitled to all of the rights and remedies of Secured
Party under this Agreement in relation thereto.
Section 4.4 Financing
Statements. Debtor expressly authorizes Secured Party to file
financing statements showing Debtor as debtor covering all or any portion of the
Collateral in such filing locations as selected by Secured Party and authorizes,
ratifies and confirms any financing statement filed prior to the date hereof by
Secured Party in any jurisdiction showing Debtor as debtor covering all or any
portion of the Collateral.
ARTICLE
V.
Default
Section 5.1 Events of
Default. The term "Event of Default" shall mean an Event of
Default as defined in the Note.
Section 5.2 Rights and
Remedies. Upon the occurrence of an Event of Default, Secured
Party shall have the following rights and remedies:
(a) Secured
Party may declare the Obligations or any part thereof immediately due and
payable, without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by Debtor; provided, however, that upon the occurrence of an Event of
Default under clause (d) or (e) of the definition of AEvent
of Default@
contained in the Note, the Obligations shall become immediately due and payable
without notice, demand, presentment, notice of dishonor, notice of acceleration,
notice of intent to accelerate, notice of intent to demand, protest, or other
formalities of any kind, all of which are hereby expressly waived by
Debtor.
(b) In
addition to all other rights and remedies granted to Secured Party in this
Agreement and in any other instrument or agreement securing, evidencing, or
relating to the Obligations or any part thereof, Secured Party shall have all of
the rights and remedies of a secured party under the UCC. Without
limiting the generality of the foregoing, Secured Party may (i) without demand
or notice to Debtor, collect, receive, or take possession of the Collateral or
any part thereof and for that purpose Secured Party may enter upon any premises
on which the Collateral is located and remove the Collateral therefrom or render
it inoperable, and/or (ii) sell, lease, or otherwise dispose of the Collateral,
or any part thereof, in one or more parcels at public or private sale or sales,
at Secured Party's offices or elsewhere, for cash, on credit, or for future
delivery. Upon the request of Secured Party, Debtor shall assemble
the Collateral and make it available to Secured Party at any place designated by
Secured Party that is reasonably convenient to Debtor and Secured
Party. Debtor agrees that Secured Party shall not be obligated to
give more than ten (10) days written notice of the time and place of any public
sale or of the time after which any private sale may take place and that such
notice shall constitute reasonable notice of such matters. Debtor
shall be liable for all expenses of retaking, holding, preparing for sale, or
the like, and all attorneys' fees, legal expenses, and all other costs and
expenses incurred by Secured Party in connection with the collection of the
Obligations and the enforcement of Secured Party's rights under this
Agreement. Secured Party may apply the Collateral against the
Obligations in such order and manner as Secured Party may elect in its sole
discretion. Debtor shall remain liable for any deficiency if the
proceeds of any sale or disposition of the Collateral are insufficient to pay
the Obligations in full. Debtor waives all rights of marshalling in
respect of the Collateral.
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(c) Secured
Party may cause any or all of the Collateral held by it to be transferred into
the name of Secured Party or the name or names of Secured Party's nominee or
nominees.
(d) Secured
Party may exercise or cause to be exercised all voting rights and corporate
powers in respect of the Collateral.
(e) On
any sale of the Collateral, Secured Party is authorized (i) to disclaim any
warranty, express or implied, and (ii) to sell any of the Collateral without any
refurbishment or reconditioning thereof. Debtor acknowledges and
agrees that the foregoing actions by Secured Party may reduce the sales proceeds
from any such sale of Collateral.
ARTICLE
VI.
Miscellaneous
Section 6.1 No Waiver; Cumulative
Remedies. No failure on the part of Secured Party to exercise
and no delay in exercising, and no course of dealing with respect to, any right,
power, or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power, or privilege under
this Agreement preclude any other or further exercise thereof or the exercise of
any other right, power, or privilege. The rights and remedies
provided for in this Agreement are cumulative and not exclusive of any rights
and remedies provided by law.
Section 6.2 Expenses. Debtor
will pay to Secured Party all fees and expenses (including all legal fees and
expenses) incurred by Secured Party in connection with the enforcement of any of
the provisions of this Agreement or the enforcement of any of the Obligations,
or any actual or attempted sale, or any exchange, enforcement, collection,
compromise or settlement of any of the Collateral or receipt of the proceeds
thereof, and for the care of the Collateral and defending or asserting the
rights and claims of the Secured Party in respect thereof, by litigation or
otherwise; and all such fees and expenses shall be Obligations within the terms
of this Agreement.
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Section 6.3 Amendment. The
provisions of this Agreement may be amended or waived only by an instrument in
writing signed by the parties hereto.
Section 6.4 Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of Debtor and Secured Party and their respective heirs, successors, and
assigns, except that Debtor may not assign any of its rights or obligations
under this Agreement without the prior written consent of Secured
Party.
Section 6.5 Notices. All
notices and other communications provided for in this Agreement shall be given
as provided in the Note.
Section 6.6 Applicable Law; Venue;
Service of Process. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas and the applicable
laws of the United States of America. This Agreement has been entered
into in Xxxxxx County, Texas, and it shall be performable for all purposes in
Xxxxxx County, Texas. Any action or proceeding against Debtor under
or in connection with this Agreement or any other Loan Document (as defined in
the Note) may be brought in any state or federal court in Xxxxxx County, Texas,
and Debtor hereby irrevocably submits to the nonexclusive jurisdiction of such
courts and waives any objection it may now or hereafter have as to the venue of
any such action or proceeding brought in such court or that such court in an
inconvenient forum. Nothing in this Agreement or any other Loan
Document shall affect the right of Secured Party to serve process in any other
manner permitted by law or shall limit the right of Secured Party to bring any
action or proceeding against Debtor or with respect to any of the Collateral in
any state or federal court in any other jurisdiction. Any action or
proceeding by Debtor against Secured Party shall be brought only in a court
located in Xxxxxx County, Texas.
Section 6.7 Headings. The
headings, captions, and arrangements used in this Agreement are for convenience
only and shall not affect the interpretation of this Agreement.
Section 6.8 Survival of Representations
and Warranties. All representations and warranties made in
this Agreement or in any certificate delivered pursuant hereto shall survive the
execution and delivery of this Agreement, and no investigation by Secured Party
shall affect the representations and warranties or the right of Secured Party to
rely upon them.
Section 6.9
Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
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Section 6.10 Waiver of
Bond. In the event Secured Party seeks to take possession of
any or all of the Collateral by judicial process, Debtor hereby irrevocably
waives any bonds and any surety or security relating thereto that may be
required by applicable law as an incident to such possession, and waives any
demand for possession prior to the commencement of any such suit or
action.
Section 6.11 Severability. Any
provision of this Agreement 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 of this Agreement, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
Section 6.12
Obligations
Absolute. The obligations of Debtor under this Agreement shall
be absolute and unconditional and, except upon payment and performance of the
Obligations in full, shall not be released, discharged, reduced, or in any way
impaired by any circumstance whatsoever, including, without limitation, any
amendment, modification, extension, or renewal of this Agreement, the
Obligations, or any document or instrument evidencing, securing, or otherwise
relating to the Obligations, or any release or subordination of collateral, or
any waiver, consent, extension, indulgence, compromise, settlement, or other
action or inaction in respect of this Agreement, the Obligations, or any
document or instrument evidencing, securing, or otherwise relating to the
Obligations, or any exercise or failure to exercise any right, remedy, power, or
privilege in respect of the Obligations. Secured Party shall not have
any liability or responsibility for the performance of any obligation of Debtor
under this Agreement.
Section 6.13 NO ORAL
AGREEMENTS. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO
AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES
HERETO.
[Remainder
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IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the
day and year first written above.
DEBTOR:
REMOTE
KNOWLEDGE, INC.,
a
Delaware corporation
By: ________________________________
Xxxxx X.
Xxxxx, President
SECURED
PARTY:
SLW
INTERNATIONAL, LLC,
A Texas
limited liability company
By: ____________________________________
Xxxxxxx
X. Gijon, Chief Financial Officer
[SIGNATURE
PAGE FOR SECURITY AGREEMENT]
