SECURITY AGREEMENT
Exhibit 10.7
SECURITY AGREEMENT, dated as of March 31, 2006 (this “Agreement”) made by Global Employment
Holdings, Inc. a Delaware corporation (the “Company”), Global Employment Solutions, Inc., a
Colorado corporation (“GES”), and each of its subsidiaries (each a “Guarantor” and together with
the Company and each of its subsidiaries, each a “Grantor” and together the “Grantors”), in favor
of Amatis Limited a company organized under the laws of the Cayman Islands, in its capacity as
collateral agent (in such capacity, the “Collateral Agent”) for the “Buyers” (as defined below)
party to the Securities Purchase Agreement, dated as of even date herewith (as amended, restated or
otherwise modified from time to time, the “Securities Purchase Agreement”).
W I T N E S S E T H:
WHEREAS, GES and each party listed as a “Buyer” on the Schedule of Buyers attached thereto
(collectively, the “Buyers”) are parties to the Securities Purchase Agreement, pursuant to GES is
required to cause the Company to sell the “Notes” (as defined therein);
WHEREAS, each of the Guarantors has executed and delivered a Guaranty dated the date hereof
(the “Guaranty”) in favor of the Collateral Agent for the benefit of itself and the Buyers, with
respect to the Company’s obligations under the Securities Purchase Agreement, the Notes and the
Transaction Documents (as defined below);
WHEREAS, it is a condition precedent to the Buyers entering into the Securities Purchase
Agreement that the Grantors shall have executed and delivered to the Collateral Agent this
Agreement providing for the grant to the Collateral Agent for the benefit of the Buyers of a
security interest in all personal property of each Grantor to secure all of the Company’s
obligations under the Securities Purchase Agreement, the “Notes”(as defined therein) issued
pursuant thereto (as such Notes may be amended, restated, replaced or otherwise modified from time
to time in accordance with the terms thereof, collectively, the “Notes”), and the “Transaction
Documents” (as defined in the Securities Purchase Agreement, the “Transaction Documents”) and the
Guarantors obligations under the Guaranty; and
WHEREAS. Global Employment Solutions, Inc. and certain affiliates have obtained senior
financing as described in the Notes (the “Senior Loan”) from Xxxxx Fargo Bank N.A. (the “Senior
Lender”), acting through Xxxxx Fargo Business Credit operating division. The Obligations (as
defined below) and the security interests granted by the Grantors herein are subordinated to all of
the obligations to, and the security interests of the Senior Lender in respect of the Senior Loan
pursuant to the terms of a Subordination Agreement, dated as of the date hereof, by and among the
Collateral Agent, the Buyers, the Senior Lender and the Grantors (the “Subordination Agreement”).
NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to
induce the Collateral Agent and the Buyers to perform under the Securities Purchase Agreement, each
Grantor agrees with the Collateral Agent, for the benefit of the Buyers, as follows:
SECTION 1. Definitions.
(a) Reference is hereby made to the Securities Purchase Agreement and the Notes for a
statement of the terms thereof. All terms used in this Agreement and the recitals hereto which are
defined in the Securities Purchase Agreement, the Notes, or in Articles 8 or 9 of the Uniform
Commercial Code (the “Code”) as in effect from time to time in the State of New York, and which are
not otherwise defined herein shall have the same meanings herein as set forth therein;
provided that terms used herein which are defined in the Code as in effect in the State of
New York on the date hereof shall continue to have the same meaning notwithstanding any replacement
or amendment of such statute except as the Collateral Agent may otherwise determine. In the event
that any such term is defined in both the Securities Purchase Agreement and the Code or the Notes
and the Code, the definition of such term in the Securities Purchase Agreement or the notes, as the
case may be, shall control.
(b) The following terms shall have the respective meanings provided for in the Code:
“Accounts”, “Cash Proceeds”, “Chattel Paper”, “Commercial Tort Claim”, “Commodity Account”,
“Commodity Contracts”, “Deposit Account”, “Documents”, “Equipment”, “Fixtures”, “General
Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit
Rights”, “Noncash Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”, “Security”,
“Record”, “Security Account”, “Software”, and “Supporting Obligations”.
(c) As used in this Agreement, the following terms shall have the respective meanings
indicated below, such meanings to be applicable equally to both the singular and plural forms of
such terms:
“Copyright Licenses” means all licenses, contracts or other agreements, whether written or
oral, naming any Grantor as licensee or licensor and providing for the grant of any right to use or
sell any works covered by any copyright (including, without limitation, all Copyright Licenses set
forth in Schedule II hereto).
“Copyrights” means all domestic and foreign copyrights, whether registered or not, including,
without limitation, all copyright rights throughout the universe (whether now or hereafter arising)
in any and all media (whether now or hereafter developed), in and to all original works of
authorship fixed in any tangible medium of expression, acquired or used by any Grantor (including,
without limitation, all copyrights described in Schedule II hereto), all applications,
registrations and recordings thereof (including, without limitation, applications, registrations
and recordings in the United States Copyright Office or in any similar office or agency of the
United States or any other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals thereof.
“Event of Default” shall have the meaning set forth in the Notes.
“Insolvency Proceeding” means any proceeding commenced by or against any Person under any
provision of the Bankruptcy Code (Chapter 11 of Title 11 of the United States Code) or under any
other bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal
moratoria, compositions, or extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
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“Intellectual Property” means the Copyrights, Trademarks and Patents.
“Licenses” means the Copyright Licenses, the Trademark Licenses and the Patent Licenses.
“Lien” means any mortgage, deed of trust, pledge, lien (statutory or otherwise), security
interest, charge or other encumbrance or security or preferential arrangement of any nature,
including, without limitation, any conditional sale or title retention arrangement, any capitalized
lease and any assignment, deposit arrangement or financing lease intended as, or having the effect
of, security.
“Patent Licenses” means all licenses, contracts or other agreements, whether written or oral,
naming any Grantor as licensee or licensor and providing for the grant of any right to manufacture,
use or sell any invention covered by any Patent (including, without limitation, all Patent Licenses
set forth in Schedule II hereto).
“Patents” means all domestic and foreign letters patent, design patents, utility patents,
industrial designs, inventions, trade secrets, ideas, concepts, methods, techniques, processes,
proprietary information, technology, know-how, formulae, rights of publicity and other general
intangibles of like nature, now existing or hereafter acquired (including, without limitation, all
domestic and foreign letters patent, design patents, utility patents, industrial designs,
inventions, trade secrets, ideas, concepts, methods, techniques, processes, proprietary
information, technology, know-how and formulae described in Schedule II hereto), all
applications, registrations and recordings thereof (including, without limitation, applications,
registrations and recordings in the United States Patent and Trademark Office, or in any similar
office or agency of the United States or any other country or any political subdivision thereof),
and all reissues, divisions, continuations, continuations in part and extensions or renewals
thereof.
“Trademark Licenses” means all licenses, contracts or other agreements, whether written or
oral, naming any Grantor as licensor or licensee and providing for the grant of any right
concerning any Trademark, together with any goodwill connected with and symbolized by any such
trademark licenses, contracts or agreements and the right to prepare for sale or lease and sell or
lease any and all Inventory now or hereafter owned by any Grantor and now or hereafter covered by
such licenses (including, without limitation, all Trademark Licenses described in Schedule
II hereto).
“Trademarks” means all domestic and foreign trademarks, service marks, collective marks,
certification marks, trade names, business names, d/b/a’s, Internet domain names, trade styles,
designs, logos and other source or business identifiers and all general intangibles of like nature,
now or hereafter owned, adopted, acquired or used by any Grantor (including, without limitation,
all domestic and foreign trademarks, service marks, collective marks, certification marks, trade
names, business names, d/b/a’s, Internet domain names, trade styles, designs, logos and other
source or business identifiers described in Schedule II hereto), all applications,
registrations and recordings thereof (including, without limitation, applications, registrations
and recordings in the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state thereof or any other country or any political
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subdivision thereof), and all reissues, extensions or renewals thereof, together with all
goodwill of the business symbolized by such marks and all customer lists, formulae and other
Records of any Grantor relating to the distribution of products and services in connection with
which any of such marks are used.
SECTION 2. Grant of Security Interest. As collateral security for all of the
“Obligations” (as defined in Section 3 hereof), each Grantor hereby pledges and assigns to
the Collateral Agent for the benefit of the Buyers, and grants to the Collateral Agent for the
benefit of the Buyers a continuing security interest in, all personal property of each Grantor,
wherever located and whether now or hereafter existing and whether now owned or hereafter acquired,
of every kind and description, tangible or intangible (collectively, the “Collateral”), including,
without limitation, the following:
(a) all Accounts;
(b) all Chattel Paper (whether tangible or electronic);
(c) the Commercial Tort Claims specified on Schedule VI hereto;
(d) all Deposit Accounts, all cash, and all other property from time to time deposited therein
and the monies and property in the possession or under the control of the Collateral Agent or Buyer
or any affiliate, representative, agent or correspondent of the Collateral Agent or Buyer;
(e) all Documents;
(f) all Equipment;
(g) all Fixtures;
(h) all General Intangibles (including, without limitation, all Payment Intangibles);
(i) all Goods;
(j) all Instruments (including, without limitation, Promissory Notes and each certificated
Security);
(k) all Inventory;
(l) all Investment Property;
(m) all Copyrights, Patents and Trademarks, and all Licenses;
(n) all Letter-of-Credit Rights;
(o) all Supporting Obligations;
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(p) all other tangible and intangible personal property of each Grantor (whether or not
subject to the Code), including, without limitation, all bank and other accounts and all cash and
all investments therein, all proceeds, products, offspring, accessions, rents, profits, income,
benefits, substitutions and replacements of and to any of the property of any Grantor described in
the preceding clauses of this Section 2 (including, without limitation, any proceeds of
insurance thereon and all causes of action, claims and warranties now or hereafter held by each
Grantor in respect of any of the items listed above), and all books, correspondence, files and
other Records, including, without limitation, all tapes, desks, cards, Software, data and computer
programs in the possession or under the control of any Grantor or any other Person from time to
time acting for any Grantor that at any time evidence or contain information relating to any of the
property described in the preceding clauses of this Section 2 or are otherwise necessary or
helpful in the collection or realization thereof; and
(q) all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of any and
all of the foregoing Collateral;
in each case howsoever any Grantor’s interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise).
The Obligations (as defined below) and the security interests granted by the grantors herein
are subordinated to all of the obligations to, and the security interests of, the Senior Lender in
respect of the Senior Loan pursuant to the terms of the Subordination Agreement.
SECTION 3. Security for Obligations. The security interest created hereby in the
Collateral constitutes continuing collateral security for all of the following obligations, whether
now existing or hereafter incurred (collectively, the “Obligations”):
(a) (i) the payment by the Company, as and when due and payable (by scheduled maturity,
required prepayment, acceleration, demand or otherwise), of all amounts from time to time owing by
it in respect of the Securities Purchase Agreement, the Notes, and the other “Transaction
Documents” (as defined in the Securities Purchase Agreement), including, without limitation, (A)
all principal of and interest on the Notes (including, without limitation, all interest that
accrues after the commencement of any Insolvency Proceeding of any Grantor, whether or not the
payment of such interest is unenforceable or is not allowable due to the existence of such
Insolvency Proceeding), and (B) all fees, commissions, expense reimbursements, indemnifications and
all other amounts due or to become due under any of the Transaction Documents; and
(b) the due performance and observance by each Grantor of all of its other obligations from
time to time existing in respect of any of the Transaction Documents, including without limitation,
with respect to any conversion or redemption rights of the Buyers under the Notes, for so long as
they are outstanding.
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SECTION 4. Representations and Warranties. Each Grantor represents and warrants as
follows:
(a) Schedule I hereto sets forth (i) the exact legal name of each of the Grantors, and
(ii) the organizational identification number of each Grantor or states that no such organizational
identification number exists.
(b) There is no pending or written notice threatening any action, suit, proceeding or claim
affecting any Grantor before any governmental authority or any arbitrator, or any order, judgment
or award by any governmental authority or arbitrator, that may adversely affect the grant by any
Grantor, or the perfection, of the security interest purported to be created hereby in the
Collateral, or the exercise by the Collateral Agent of any of its rights or remedies hereunder.
(c) Intentionally Omitted
(d) All Equipment, Fixtures, Goods and Inventory of each Grantor now existing are, and all
Equipment, Fixtures, Goods and Inventory of each Grantor hereafter existing will be, located and/or
based at the addresses specified therefor in Schedule III hereto, or, at such other
locations in the United States, provided that within 10 days following the relocation of Equipment
or Inventory to such other location, Grantor shall deliver to the Collateral Agent a new
Schedule III indicating each such new location.. Each Grantor’s chief place of business
and chief executive office, the place where each Grantor keeps its Records concerning Accounts and
all originals of all Chattel Paper are located at the addresses specified therefor in Schedule
III hereto. None of the Accounts is evidenced by Promissory Notes or other Instruments. Set
forth in Schedule IV hereto is a complete and accurate list, as of the date of this
Agreement, of (i) each Promissory Note, Security and other Instrument owned by each Grantor and
(ii) each Deposit Account, Securities Account and Commodities Account of each Grantor, together
with the name and address of each institution at which each such Account is maintained, the account
number for each such Account and a description of the purpose of each such Account. Set forth in
Schedule I hereto is a complete and correct list of each trade name used by each Grantor
and the name of, and each trade name used by, each person from which each Grantor has acquired any
substantial part of the Collateral.
(e) Each Grantor has delivered to the Collateral Agent complete and correct copies of each
License described in Schedule II hereto, including all schedules and exhibits thereto,
which represents all of the Licenses existing on the date of this Agreement. Each such License
sets forth the entire agreement and understanding of the parties thereto relating to the subject
matter thereof, and there are no other agreements, arrangements or understandings, written or oral,
relating to the matters covered thereby or the rights of each Grantor or any of its affiliates in
respect thereof. Each material License now existing is, and any material License entered into in
the future will be, the legal, valid and binding obligation of the parties thereto, enforceable
against such parties in accordance with its terms. No default under any material License by any
such party has occurred, nor does any defense, offset, deduction or counterclaim exist thereunder
in favor of any such party.
(f) Each Grantor owns and controls, or otherwise possesses adequate rights to use, all
Trademarks, Patents and Copyrights, which are the only trademarks, patents, copyrights,
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inventions, trade secrets, proprietary information and technology, know-how, formulae, rights
of publicity necessary to conduct its business in substantially the same manner as conducted as of
the date hereof. Schedule II hereto sets forth a true and complete list of all registered
copyrights, issued Patents, Trademarks, and Licenses annually owned or used by each Grantor as of
the date hereof. To the best knowledge of the Grantors, all such Intellectual Property of each
Grantor is subsisting and in full force and effect, has not been adjudged invalid or unenforceable,
is valid and enforceable and has not been abandoned in whole or in part. Except as set forth in
Schedule II, no such Intellectual Property is the subject of any licensing or franchising
agreement. Each Grantor has no knowledge of any conflict with the rights of others to any
Intellectual Property and, to the best knowledge of the Grantors, each Grantor is not now
infringing or in conflict with any such rights of others in any material respect, and to the best
knowledge of the Grantors, no other Person is now infringing or in conflict in any material respect
with any such properties, assets and rights owned or used by each Grantor. No Grantor has received
any notice that it is violating or has violated the trademarks, patents, copyrights, inventions,
trade secrets, proprietary information and technology, know-how, formulae, rights of publicity or
other intellectual property rights of any third party.
(g) Each Grantor is and will be at all times the sole and exclusive owner of, or otherwise has
and will have adequate rights in, the Collateral free and clear of any Liens, except for Permitted
Liens on any Collateral. Except with respect to Permitted Liens, no effective financing statement
or other instrument similar in effect covering all or any part of the Collateral is on file in any
recording or filing office except such as may have been filed in favor of the Collateral Agent
relating to this Agreement.
(h) The exercise by the Collateral Agent of any of its rights and remedies hereunder will not
contravene any law or any contractual restriction binding on or otherwise affecting each Grantor or
any of its properties and will not result in or require the creation of any Lien, upon or with
respect to any of its properties.
(i) No authorization or approval or other action by, and no notice to or filing with, any
governmental authority or other regulatory body, or any other Person, is required for (i) the grant
by each Grantor, or the perfection, of the security interest purported to be created hereby in the
Collateral, or (ii) the exercise by the Collateral Agent of any of its rights and remedies
hereunder, except (A) for the filing under the Uniform Commercial Code as in effect in the
applicable jurisdiction of the financing statements, all of which financing statements, have been
duly filed and are in full force and effect, (B) with respect to the perfection of the security
interest created hereby in the Intellectual Property, for the recording of the appropriate
Assignment for Security, substantially in the form of Exhibit A hereto, as applicable, in
the United States Patent and Trademark Office or the United States Copyright Office, as applicable,
and (C) with respect to the perfection of the security interest created hereby in foreign
Intellectual Property and Licenses, for registrations and filings in jurisdictions located outside
of the United States and covering rights in such jurisdictions relating to the Intellectual
Property and Licenses.
(j) This Agreement creates in favor of the Collateral Agent a legal, valid and enforceable
security interest in the Collateral, as security for the Obligations. The Collateral Agent’s
having possession of all Instruments and cash constituting Collateral from time to time,
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(or with respect to deposit accounts, entry into appropriate control agreements) the recording
of the appropriate Assignment for Security executed pursuant hereto in the United States Patent and
Trademark Office and the United States Copyright Office, the execution of appropriate assignments
of Letter of Credit Rights, as applicable, and the filing of the financing statements and the other
filings and recordings, as applicable, described in Schedule V hereto and, with respect to
the Intellectual Property hereafter existing and not covered by an appropriate Assignment for
Security, the recording in the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, of appropriate instruments of assignment, result in the perfection
of such security interests. Such security interests are, or in the case of Collateral in which
each Grantor obtains rights after the date hereof, will be, perfected security interests, subject
to the recording of such instruments of assignment, and subject in priority only to (i) the lien of
the Senior Lender pursuant to the Subordination Agreement and (ii) Permitted Liens and. Such
recordings and filings and all other action necessary or desirable to perfect and protect such
security interest have been duly taken, except for the Collateral Agent’s having possession of
Instruments and cash constituting Collateral after the date hereof and the other filings and
recordations described in Section 4(l) hereof.
(k) As of the date hereof, no Grantor holds any Commercial Tort Claims nor is aware of any
such pending claims, except for such claims described in Schedule VI.
SECTION 5. Covenants as to the Collateral. So long as any of the Obligations shall
remain outstanding, unless the Collateral Agent shall otherwise consent in writing and subject to
the prior rights of the Senior Lender pursuant to the terms of the Subordination Agreement:
(a) Further Assurances. Each Grantor will at its expense, at any time and from time
to time, promptly execute and deliver all further instruments and documents and take all further
action that the Collateral Agent may reasonably request in order to: (i) perfect and protect the
security interest purported to be created hereby; (ii) enable the Collateral Agent to exercise and
enforce its rights and remedies hereunder in respect of the Collateral; or (iii) otherwise effect
the purposes of this Agreement, including, without limitation: (A) marking conspicuously all
Chattel Paper and each License and, at the request of the Collateral Agent, each of its Records
pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral
Agent, indicating that such Chattel Paper, License or Collateral is subject to the security
interest created hereby pursuant to the terms of the Subordination Agreement, (B) delivering and
pledging to the Collateral Agent hereunder each Promissory Note, Security, Chattel Paper or other
Instrument, now or hereafter owned by any Grantor, duly endorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance satisfactory to the Collateral
Agent, (C) executing and filing (to the extent, if any, that any Grantor’s signature is required
thereon) or authenticating the filing of, such financing or continuation statements, or amendments
thereto, as may be necessary or desirable or that the Collateral Agent may request in order to
perfect and preserve the security interest purported to be created hereby, (D) furnishing to the
Collateral Agent from time to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral in each case as the Collateral
Agent may reasonably request, all in reasonable detail, (E) if any Collateral shall be in the
possession of a third party, notifying such Person of the Collateral Agent’s security interest
created hereby and obtaining a written acknowledgment
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from such Person that such Person holds possession of the Collateral for the benefit of the
Collateral Agent, which such written acknowledgement shall be in form and substance satisfactory to
the Collateral Agent, (F) if at any time after the date hereof, any Grantor acquires or holds any
Commercial Tort Claim, promptly notifying the Collateral Agent in a writing signed by such Grantor
setting forth a brief description of such Commercial Tort Claim and granting to the Collateral
Agent a security interest therein and in the proceeds thereof, which writing shall incorporate the
provisions hereof and shall be in form and substance satisfactory to the Collateral Agent, (G) upon
the acquisition after the date hereof by any Grantor of any motor vehicle or other Equipment
subject to a certificate of title or ownership (other than a Motor Vehicle or Equipment that is
subject to a purchase money security interest), causing the Collateral Agent to be listed as the
lienholder on such certificate of title or ownership and delivering evidence of the same to the
Collateral Agent in accordance with the Securities Purchase Agreement; and (H) taking all actions
required by any earlier versions of the Uniform Commercial Code or by other law, as applicable, in
any relevant Uniform Commercial Code jurisdiction, or by other law as applicable in any foreign
jurisdiction.
(b) Location of Equipment and Inventory. Each Grantor will keep the Equipment and
Inventory at the locations specified therefor on Schedule III hereto or, at such other
locations in the United States, provided that within 10 days following the relocation of Equipment
or Inventory to such other location, Grantor shall deliver to the Collateral Agent a new
Schedule III indicating each such new location.
(c) Condition of Equipment. Each Grantor will maintain or cause the Equipment
(necessary or useful to its business) to be maintained and preserved in good condition, repair and
working order, ordinary wear and tear excepted, and will forthwith, or in the case of any loss or
damage to any Equipment of any Grantor within a commercially reasonable time after the occurrence
thereof, make or cause to be made all repairs, replacements and other improvements in connection
therewith which are necessary or desirable, consistent with past practice, or which the Collateral
Agent may request to such end. Any Grantor will promptly furnish to the Collateral Agent a
statement describing in reasonable detail any such loss or damage in excess of $250,000 per
occurrence to any Equipment.
(d) Taxes, Etc. Each Grantor agrees to pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and Inventory, except to the
extent the validity thereof is being contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves in accordance with GAAP have been set aside for the payment thereof.
(e) Insurance.
(i) Each Grantor will, at its own expense, maintain insurance (including, without limitation,
commercial general liability and property insurance) with respect to the Equipment and Inventory in
such amounts, against such risks, in such form and with responsible and reputable insurance
companies or associations as is required by any governmental authority having jurisdiction with
respect thereto or as is carried generally in
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accordance with sound business practice by companies in similar businesses similarly situated
and in any event, in amount, adequacy and scope reasonably satisfactory to the Collateral Agent.
Each such policy for liability insurance shall provide for all losses to be paid on behalf of the
Collateral Agent and any Grantor as their respective interests may appear, and each policy for
property damage insurance shall provide for all losses to be adjusted with, and paid directly to,
the Collateral Agent. Each such policy shall in addition (A) name the Collateral Agent as an
additional insured party thereunder, subject to the prior rights of the Senior Lender pursuant to
the Subordination Agreement (without any representation or warranty by or obligation upon the
Collateral Agent) as their interests may appear, (B) contain an agreement by the insurer that any
loss thereunder shall be payable to the Collateral Agent subject to the prior rights of the Senior
Lender pursuant to the Subordination Agreement, on its own account notwithstanding any action,
inaction or breach of representation or warranty by any Grantor, (C) provide that there shall be no
recourse against the Collateral Agent for payment of premiums or other amounts with respect
thereto, and (D) provide that at least 30 days’ prior written notice of cancellation, lapse,
expiration or other adverse change shall be given to the Collateral Agent by the insurer. Any
Grantor will, if so requested by the Collateral Agent, deliver to the Collateral Agent original or
duplicate policies of such insurance and, as often as the Collateral Agent may reasonably request,
a report of a reputable insurance broker with respect to such insurance. Any Grantor will also, at
the request of the Collateral Agent, execute and deliver instruments of assignment of such
insurance policies and cause the respective insurers to acknowledge notice of such assignment.
(ii) Reimbursement under any liability insurance maintained by any Grantor pursuant to this
Section 5(e) may be paid directly to the Person who shall have incurred liability covered
by such insurance. In the case of any loss involving damage to Equipment or Inventory, any
proceeds of insurance maintained by any Grantor pursuant to this Section 5(e) shall be paid
to the Collateral Agent subject to the prior rights of the Senior Lender pursuant to the
Subordination Agreement (except as to which paragraph (iii) of this Section 5(e) is not
applicable), any Grantor will make or cause to be made the necessary repairs to or replacements of
such Equipment or Inventory, and any proceeds of insurance maintained by any Grantor pursuant to
this Section 5(e) shall be paid by the Collateral Agent to any Grantor as reimbursement for
the costs of such repairs or replacements.
(iii) All insurance payments in respect of such Equipment or Inventory shall be paid to the
Collateral Agent and applied as specified in Section 7(b) hereof, subject to the rights of
the Senior Lender pursuant to the Subordination Agreement.
(f) Provisions Concerning the Accounts and the Licenses.
(i) Any Grantor will (A) give the Collateral Agent at least 30 days’ prior written notice of
any change in such Grantor’s name, identity or organizational structure, (B) maintain its
jurisdiction of incorporation as set forth in Section 4(b) hereto, (C) immediately notify
the Collateral Agent upon obtaining an organizational identification number, if on the date hereof
such Grantor did not have such identification number, and (D) keep adequate records concerning the
Accounts and Chattel Paper and permit representatives of the Collateral Agent during normal
business hours on reasonable notice to such Grantor, to inspect and make abstracts from such
Records and Chattel Paper.
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(ii) Each Grantor will, except as otherwise provided in this subsection (f), continue to
collect, at its own expense, all amounts due or to become due under the Accounts. The Collateral
Agent shall have the right at any time, upon the occurrence and during the continuance of an Event
of Default, to notify the account debtors or obligors under any Accounts of the assignment of such
Accounts to the Collateral Agent and to direct such account debtors or obligors to make payment of
all amounts due or to become due to any Grantor thereunder directly to the Collateral Agent or its
designated agent and, upon such notification and at the expense of any Grantor and to the extent
permitted by law, to enforce collection of any such Accounts and to adjust, settle or compromise
the amount or payment thereof, in the same manner and to the same extent as may Grantor might have
done. After receipt by any Grantor of a notice from the Collateral Agent that the Collateral Agent
has notified, intends to notify, or has enforced or intends to enforce any Grantor’s rights against
the account debtors or obligors under any Accounts as referred to in the proviso to the immediately
preceding sentence, (A) subject to the prior rights of the Senior Lender pursuant to the
Subordination Agreement, all amounts and proceeds (including Instruments) received by any Grantor
in respect of the Accounts shall be received in trust for the benefit of the Collateral Agent
hereunder, shall be segregated from other funds of any Grantor and shall be forthwith paid over to
the Collateral Agent in the same form as so received (with any necessary endorsement) to be held as
cash collateral and either (i) credited to the outstanding obligations so long as no Event of
Default shall have occurred and be continuing or (ii) if an Event of Default shall have occurred
and be continuing, applied as specified in Section 7(b) hereof, and (B) no Grantor will
adjust, settle or compromise the amount or payment of any Account or release wholly or partly any
account debtor or obligor thereof or allow any credit or discount thereon. In addition, upon the
occurrence and during the continuance of an Event of Default, the Collateral Agent may (in its sole
and absolute discretion) subject to the prior rights of the Senior Lender pursuant to the
Subordination Agreement, direct any or all of the banks and financial institutions with which any
Grantor either maintains a Deposit Account or a lockbox or deposits the proceeds of any Accounts to
send immediately to the Collateral Agent by wire transfer (to such account as the Collateral Agent
shall specify, or in such other manner as the Collateral Agent shall direct) all or a portion of
such securities, cash, investments and other items held by such institution. Any such securities,
cash, investments and other items so received by the Collateral Agent shall (in the sole and
absolute discretion of the Collateral Agent) be held as additional Collateral for the Obligations
or distributed in accordance with Section 7 hereof.
(iii) Upon the occurrence and during the continuance of any breach or default under any
material License referred to in Schedule II hereto by any party thereto other than any
Grantor, each Grantor party thereto will, promptly after obtaining knowledge thereof, give the
Collateral Agent written notice of the nature and duration thereof, specifying what action, if any,
it has taken and proposes to take with respect thereto and thereafter will take reasonable steps to
protect and preserve its rights and remedies in respect of such breach or default, or will obtain
or acquire an appropriate substitute License.
(iv) Each Grantor will, at its expense, promptly deliver to the Collateral Agent a copy of
each notice or other communication received by it by which any other party to any material License
referred to in Schedule II hereto purports to exercise any of its rights or affect any of
its obligations thereunder, together with a copy of any reply by such Grantor thereto.
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(v) Each Grantor will exercise promptly and diligently each and every right which it may have
under each material License (other than any right of termination) and will duly perform and observe
in all respects all of its obligations under each material License and will take all action
reasonably necessary to maintain such Licenses in full force and effect. No Grantor will, without
the prior written consent of the Collateral Agent, cancel, terminate, amend or otherwise modify in
any respect, or waive any provision of, any material License referred to in Schedule II
hereto.
(g) Transfers and Other Liens.
(i) No Grantor will sell, assign (by operation of law or otherwise), lease, license, exchange
or otherwise transfer or dispose of any of the Collateral, except (A) Inventory in the ordinary
course of business, and (B) worn-out or obsolete assets not necessary to the business.
(ii) No Grantor will create, suffer to exist or grant any Lien upon or with respect to any
Collateral other than a Permitted Lien.
(h) Intellectual Property.
(i) If applicable, any Grantor shall, upon the Collateral Agent’s written request, duly
execute and deliver the applicable Assignment for Security in the form attached hereto as
Exhibit A. Each Grantor (either itself or through licensees) will, and will cause each
licensee thereof to, take all action necessary to maintain all of the Intellectual Property in full
force and effect, including, without limitation, using the proper statutory notices and markings
and using the Trademarks on each applicable trademark class of goods in order to so maintain the
Trademarks in full force and free from any claim of abandonment for non-use, and each Grantor will
not (nor permit any licensee thereof to) do any act or knowingly omit to do any act whereby any
Intellectual Property may become invalidated; provided, however, that so long as no
Event of Default has occurred and is continuing, no Grantor shall have an obligation to use or to
maintain any Intellectual Property (A) that relates solely to any product or work, that has been,
or is in the process of being, discontinued, abandoned or terminated, (B) that is being replaced
with Intellectual Property substantially similar to the Intellectual Property that may be abandoned
or otherwise become invalid, so long as the failure to use or maintain such Intellectual Property
does not materially adversely affect the validity of such replacement Intellectual Property and so
long as such replacement Intellectual Property is subject to the Lien created by this Agreement or
(C) that is substantially the same as another Intellectual Property that is in full force, so long
the failure to use or maintain such Intellectual Property does not materially adversely affect the
validity of such replacement Intellectual Property and so long as such other Intellectual Property
is subject to the Lien and security interest created by this Agreement. Each Grantor will cause to
be taken all necessary steps in any proceeding before the United States Patent and Trademark Office
and the United States Copyright Office or any similar office or agency in any other country or
political subdivision thereof to maintain each registration of the Intellectual Property (other
than the Intellectual Property described in the proviso to the immediately preceding sentence),
including, without limitation, filing of renewals, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings and payment of
maintenance fees, filing fees, taxes or other governmental fees. If any Intellectual Property
(other than Intellectual Property
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described in the proviso to the first sentence of subsection (i) of this clause (h)) is
infringed, misappropriated, diluted or otherwise violated in any material respect by a third party,
each Grantor shall (x) upon learning of such infringement, misappropriation, dilution or other
violation, promptly notify the Collateral Agent and (y) to the extent any Grantor shall deem
appropriate under the circumstances, promptly xxx for infringement, misappropriation, dilution or
other violation, seek injunctive relief where appropriate and recover any and all damages for such
infringement, misappropriation, dilution or other violation, or take such other actions as such
Grantor shall deem appropriate under the circumstances to protect such Intellectual Property. Each
Grantor shall furnish to the Collateral Agent from time to time upon its request statements and
schedules further identifying and describing the Intellectual Property and Licenses and such other
reports in connection with the Intellectual Property and Licenses as the Collateral Agent may
reasonably request, all in reasonable detail and promptly upon request of the Collateral Agent,
following receipt by the Collateral Agent of any such statements, schedules or reports, each
Grantor shall modify this Agreement by amending Schedule II hereto, as the case may be, to
include any Intellectual Property and License, as the case may be, which becomes part of the
Collateral under this Agreement and shall execute and authenticate such documents and do such acts
as shall be necessary or, in the judgment of the Collateral Agent, desirable to subject such
Intellectual Property and Licenses to the Lien and security interest created by this Agreement.
Notwithstanding anything herein to the contrary, upon the occurrence and during the continuance of
an Event of Default, no Grantor may abandon or otherwise permit any Intellectual Property to become
invalid without the prior written consent of the Collateral Agent, and if any Intellectual Property
is infringed, misappropriated, diluted or otherwise violated in any material respect by a third
party, each Grantor will take such action as the Collateral Agent shall deem appropriate under the
circumstances to protect such Intellectual Property.
(ii) Each Grantor shall, within 5 days following the filing of any application for the
registration of any Trademark or Copyright or the issuance of any Patent with the United States
Patent and Trademark Office or the United States Copyright Office, as applicable, or in any similar
office or agency of the United States or any country or any political subdivision thereof, provide
the Collateral Agent written notice thereof. Upon request of the Collateral Agent, any Grantor
shall execute, authenticate and deliver any and all assignments, agreements, instruments, documents
and papers as the Collateral Agent may reasonably request to evidence the Collateral Agent’s
security interest hereunder in such Intellectual Property and the General Intangibles of any
Grantor relating thereto or represented thereby, and each Grantor hereby appoints the Collateral
Agent its attorney-in-fact to execute and/or authenticate and file all such writings for the
foregoing purposes, all acts of such attorney being hereby ratified and confirmed, and such power
(being coupled with an interest) shall be irrevocable until the indefeasible payment in full in
cash of all of the Obligations in full and the termination of each of the Transaction Documents.
(i) Deposit, Commodities and Securities Accounts. Upon the Collateral Agent’s written
request, subject to the prior rights of the Senior Lender pursuant to the Subordination Agreement,
each Grantor shall cause each bank and other financial institution with an account referred to in
Schedule IV hereto to execute and deliver to the Collateral Agent a control agreement, in
form and substance reasonably satisfactory to the Collateral Agent, duly executed by each Grantor
and such bank or financial institution, or enter into other arrangements in form and substance
satisfactory to the Collateral Agent, pursuant to which such institution shall
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irrevocably agree, inter alia, that (i) it will comply at any time with the
instructions originated by the Collateral Agent to such bank or financial institution directing the
disposition of cash, Commodity Contracts, securities, Investment Property and other items from time
to time credited to such account, without further consent of each Grantor, which instructions the
Collateral Agent will not give to such bank or other financial institution in the absence of a
continuing Event of Default, (ii) all cash, Commodity Contracts, securities, Investment Property
and other items of each Grantor deposited with such institution shall be subject to a perfected
security interest in favor of the Collateral Agent, subject in priority to only (A) the lien of the
Senior Lender pursuant to the Subordination Agreement and (B) Permitted Liens, (iii) any right of
set off (other than recoupment of standard fees), banker’s Lien or other similar Lien, security
interest or encumbrance shall be fully waived as against the Collateral Agent, and (iv) upon
receipt of written notice from the Collateral Agent during the continuance of an Event of Default,
such bank or financial institution shall immediately send to the Collateral Agent by wire transfer
(to such account as the Collateral Agent shall specify, or in such other manner as the Collateral
Agent shall direct) all such cash, the value of any Commodity Contracts, securities, Investment
Property and other items held by it. Without the prior written consent of the Collateral Agent,
each Grantor shall not make or maintain any Deposit Account, Commodity Account or Securities
Account except for the accounts set forth in Schedule IV hereto. The provisions of this
paragraph 5(i) shall not apply to (i) Deposit Accounts for which the Collateral Agent is the
depositary and (ii) Deposit Accounts specially and exclusively used for payroll, payroll taxes and
other employee wage and benefit payments to or for the benefit of each Grantor’s salaried
employees.
(j) Motor Vehicles.
(i) Upon the Collateral Agent’s written request, subject to the prior rights of the Senior
Lender pursuant to the Subordination Agreement,each Grantor shall deliver to the Collateral Agent
originals of the certificates of title or ownership for all motor vehicles with a value in excess
of $50,000, owned by it with the Collateral Agent listed as lienholder, for the benefit of the
Buyers.
(ii) Each Grantor hereby appoints the Collateral Agent as its attorney-in-fact, effective the
date hereof and terminating upon the termination of this Agreement, for the purpose of (A)
executing on behalf of each Grantor title or ownership applications for filing with appropriate
state agencies to enable motor vehicles now owned or hereafter acquired by each Grantor to be
retitled and the Collateral Agent listed as lienholder thereof, (B) filing such applications with
such state agencies, and (C) executing such other documents and instruments on behalf of, and
taking such other action in the name of, each Grantor as the Collateral Agent may deem necessary or
advisable to accomplish the purposes hereof (including, without limitation, for the purpose of
creating in favor of the Collateral Agent a perfected Lien on the motor vehicles and exercising the
rights and remedies of the Collateral Agent hereunder). This appointment as attorney-in-fact is
coupled with an interest and is irrevocable until all of the Obligations are indefeasibly paid in
full in cash and after all Transaction Documents have been terminated.
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(iii) Any certificates of title or ownership delivered pursuant to the terms hereof shall be
accompanied by odometer statements for each motor vehicle covered thereby.
(iv) So long as no Event of Default shall have occurred and be continuing, upon the request of
any Grantor, the Collateral Agent shall execute and deliver to any Grantor such instruments as any
Grantor shall reasonably request to remove the notation of the Collateral Agent as lienholder on
any certificate of title for any motor vehicle; provided, however, that any such
instruments shall be delivered, and the release effective, only upon receipt by the Collateral
Agent of a certificate from any Grantor stating that such motor vehicle is to be sold or has
suffered a casualty loss (with title thereto passing to the casualty insurance company therefor in
settlement of the claim for such loss) and the amount that any Grantor will receive as sale
proceeds or insurance proceeds. Subject to the prior rights of the Senior Lender pursuant to the
Subordination Agreement, any proceeds of such sale or casualty loss shall be paid to the Collateral
Agent hereunder immediately upon receipt, to be applied to the Obligations then outstanding.
(k) Control. Subject to the prior rights of the Senior Lender pursuant to the
Subordination Agreement, each Grantor hereby agrees to take any or all action that may be necessary
or desirable or that the Collateral Agent may request in order for the Collateral Agent to obtain
control in accordance with Sections 9-105 – 9-107 of the Code with respect to the following
Collateral: (i) Electronic Chattel Paper, (ii) Investment Property, and (iii) Letter-of-Credit
Rights.
(l) Inspection and Reporting. Each Grantor shall permit the Collateral Agent, or any
agent or representatives thereof or such professionals or other Persons as the Collateral Agent may
designate, not more than once a year in the absence of an Event of Default, (i) to examine and make
copies of and abstracts from any Grantor’s records and books of account, (ii) to visit and inspect
its properties, (iii) to verify materials, leases, Instruments, Accounts, Inventory and other
assets of any Grantor from time to time, (iii) to conduct audits, physical counts, appraisals
and/or valuations, examinations at the locations of any Grantor. Each Grantor shall also permit
the Collateral Agent, or any agent or representatives thereof or such professionals or other
Persons as the Collateral Agent may designate to discuss any Grantor’s affairs, finances and
accounts with any of its directors, officers, managerial employees, independent accountants or any
of its other representatives.
(m) Future Subsidiaries. If any Grantor shall hereafter create or acquire any
Subsidiary, simultaneously with the creation of acquisition of such Subsidiary, such Grantor shall
cause such Subsidiary to become a party to this Agreement as an additional “Grantor” hereunder, and
to duly execute and deliver a guaranty of the Obligations in favor of the Collateral Agent in form
and substance reasonably acceptable to the Collateral Agent, and to duly execute and/or deliver
such opinions of counsel and other documents, in form and substance reasonably acceptable to the
Collateral Agent, as the Collateral Agent shall reasonably request with respect thereto.
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SECTION 6. Additional Provisions Concerning the Collateral.
(a) Each Grantor hereby (i) authorizes the Collateral Agent to file one or more Uniform
Commercial Code financing or continuation statements, and amendments thereto, relating to the
Collateral and (ii) ratifies such authorization to the extent that the Collateral Agent has filed
any such financing or continuation statements, or amendments thereto, prior to the date hereof.
(b) Each Grantor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact and
proxy, with full authority in the place and stead of each Grantor and in the name of each Grantor
or otherwise, from time to time in the Collateral Agent’s discretion, so long as an Event of
Default shall have occurred and is continuing, to take any action and to execute any instrument
which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this
Agreement (subject to the rights of each Grantor under Section 5 hereof), including,
without limitation, (i) to obtain and adjust insurance required to be paid to the Collateral Agent
pursuant to Section 5(e) hereof, (ii) to ask, demand, collect, xxx for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under or in respect of
any Collateral, (iii) to receive, endorse, and collect any drafts or other instruments, documents
and chattel paper in connection with clause (i) or (ii) above, (iv) to file any claims or take any
action or institute any proceedings which the Collateral Agent may deem necessary or desirable for
the collection of any Collateral or otherwise to enforce the rights of the Collateral Agent and the
Buyers with respect to any Collateral, and (v) to execute assignments, licenses and other documents
to enforce the rights of the Collateral Agent and the Buyers with respect to any Collateral. This
power is coupled with an interest and is irrevocable until all of the Obligations are indefeasibly
paid in full in cash.
(c) For the purpose of enabling the Collateral Agent to exercise rights and remedies
hereunder, at such time as the Collateral Agent shall be lawfully entitled to exercise such rights
and remedies, and for no other purpose, each Grantor hereby grants to the Collateral Agent, to the
extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to any Grantor) to use, assign, license or sublicense any Intellectual Property
now owned or hereafter acquired by any Grantor, wherever the same may be located, including in such
license reasonable access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout thereof. Notwithstanding
anything contained herein to the contrary, but subject to the provisions of the Securities Purchase
Agreement that limit the right of any Grantor to dispose of its property and Section 5(h)
hereof, so long as no Event of Default shall have occurred and be continuing, any Grantor may
exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or take other actions
with respect to the Intellectual Property in the ordinary course of its business. In furtherance
of the foregoing, unless an Event of Default shall have occurred and be continuing, the Collateral
Agent shall from time to time, upon the request of any Grantor, execute and deliver any
instruments, certificates or other documents, in the form so requested, which such Grantor shall
have certified are appropriate (in any Grantor’s judgment) to allow it to take any action permitted
above (including relinquishment of the license provided pursuant to this clause (c) as to any
Intellectual Property). Further, upon the indefeasible payment in full in cash of all of the
Obligations, the Collateral Agent (subject to Section 10(e) hereof) shall release and
reassign to any Grantor all of the Collateral Agent’s right, title and interest in and to the
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Intellectual Property, and the Licenses, all without recourse, representation or warranty
whatsoever. The exercise of rights and remedies hereunder by the Collateral Agent shall not
terminate the rights of the holders of any licenses or sublicenses theretofore granted by each
Grantor in accordance with the second sentence of this clause (c). Each Grantor hereby releases
the Collateral Agent from any claims, causes of action and demands at any time arising out of or
with respect to any actions taken or omitted to be taken by the Collateral Agent under the powers
of attorney granted herein other than actions taken or omitted to be taken through the Collateral
Agent’s gross negligence or willful misconduct, as determined by a final determination of a court
of competent jurisdiction.
(d) If any Grantor fails to perform any agreement contained herein, the Collateral Agent may
itself perform, or cause performance of, such agreement or obligation, in the name of any Grantor
or the Collateral Agent, and the expenses of the Collateral Agent incurred in connection therewith
shall be payable by any Grantor pursuant to Section 8 hereof and shall be secured by the
Collateral.
(e) The powers conferred on the Collateral Agent hereunder are solely to protect its interest
in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for
the safe custody of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
(f) Anything herein to the contrary notwithstanding (i) each Grantor shall remain liable under
the Licenses and otherwise with respect to any of the Collateral to the extent set forth therein to
perform all of its obligations thereunder to the same extent as if this Agreement had not been
executed, (ii) the exercise by the Collateral Agent of any of its rights hereunder shall not
release any Grantor from any of its obligations under the Licenses or otherwise in respect of the
Collateral, and (iii) the Collateral Agent shall not have any obligation or liability by reason of
this Agreement under the Licenses or with respect to any of the other Collateral, nor shall the
Collateral Agent be obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned hereunder.
SECTION 7. Remedies Upon Event of Default. If any Event of Default shall have
occurred and be continuing, in each case subject to the prior rights of the Senior Lender pursuant
to the Subordination Agreement:
(a) The Collateral Agent may exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein or otherwise available to it, all of the rights and
remedies of a secured party upon default under the Code (whether or not the Code applies to the
affected Collateral), and also may (i) take absolute control of the Collateral, including, without
limitation, transfer into the Collateral Agent’s name or into the name of its nominee or nominees
(to the extent the Collateral Agent has not theretofore done so) and thereafter receive, for the
benefit of the Collateral Agent, all payments made thereon, give all consents, waivers and
ratifications in respect thereof and otherwise act with respect thereto as though it were the
outright owner thereof, (ii) require each Grantor to, and each Grantor hereby agrees that it will
at its expense and upon request of the Collateral Agent forthwith, assemble all or part of its
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respective Collateral as directed by the Collateral Agent and make it available to the
Collateral Agent at a place or places to be designated by the Collateral Agent that is reasonably
convenient to both parties, and the Collateral Agent may enter into and occupy any premises owned
or leased by any Grantor where the Collateral or any part thereof is located or assembled for a
reasonable period in order to effectuate the Collateral Agent’s rights and remedies hereunder or
under law, without obligation to any Grantor in respect of such occupation, and (iii) without
notice except as specified below and without any obligation to prepare or process the Collateral
for sale, (A) sell the Collateral or any part thereof in one or more parcels at public or private
sale, at any of the Collateral Agent’s offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the Collateral Agent may deem
commercially reasonable and/or (B) lease, license or dispose of the Collateral or any part thereof
upon such terms as the Collateral Agent may deem commercially reasonable. Each Grantor agrees
that, to the extent notice of sale or any other disposition of its respective Collateral shall be
required by law, at least ten (10) days’ notice to any Grantor of the time and place of any public
sale or the time after which any private sale or other disposition of its respective Collateral is
to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated
to make any sale or other disposition of any Collateral regardless of notice of sale having been
given. The Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Each Grantor hereby waives any claims
against the Collateral Agent and the Buyers arising by reason of the fact that the price at which
its respective Collateral may have been sold at a private sale was less than the price which might
have been obtained at a public sale or was less than the aggregate amount of the Obligations, even
if the Collateral Agent accepts the first offer received and does not offer such Collateral to more
than one offeree, and waives all rights that any Grantor may have to require that all or any part
of such Collateral be marshalled upon any sale (public or private) thereof. Each Grantor hereby
acknowledges that (i) any such sale of its respective Collateral by the Collateral Agent shall be
made without warranty, (ii) the Collateral Agent may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth in clauses (i) and (ii)
above shall not adversely effect the commercial reasonableness of any such sale of Collateral. In
addition to the foregoing, (1) upon written notice to any Grantor from the Collateral Agent, such
Grantor shall cease any use of the Intellectual Property or any trademark, patent or copyright
similar thereto for any purpose described in such notice; (2) the Collateral Agent may, at any time
and from time to time, upon 10 days’ prior notice to such Grantor, license, whether general,
special or otherwise, and whether on an exclusive or non-exclusive basis, any of the Intellectual
Property, throughout the universe for such term or terms, on such conditions, and in such manner,
as the Collateral Agent shall in its sole discretion determine; and (3) the Collateral Agent may,
at any time, pursuant to the authority granted in Section 6 hereof (such authority being
effective upon the occurrence and during the continuance of an Event of Default), execute and
deliver on behalf of such Grantor, one or more instruments of assignment of the Intellectual
Property (or any application or registration
thereof), in form suitable for filing, recording or
registration in any country.
(b) Any cash held by the Collateral Agent as Collateral and all Cash Proceeds received by the
Collateral Agent in respect of any sale of or collection from, or other realization upon, all or
any part of the Collateral may, in the discretion of the Collateral Agent, be held by the
Collateral Agent as collateral for, and/or then or at any time thereafter applied (after payment
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of any amounts payable to the Collateral Agent pursuant to Section 8 hereof) in whole
or in part by the Collateral Agent against, all or any part of the Obligations in such order as the
Collateral Agent shall elect, consistent with the provisions of the Securities Purchase Agreement.
Any surplus of such cash or Cash Proceeds held by the Collateral Agent and remaining after the
indefeasible payment in full in cash of all of the Obligations shall be paid over to whomsoever
shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall
direct.
(c) In the event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Collateral Agent and the Buyers are legally entitled,
each Grantor shall be liable for the deficiency, together with interest thereon at the highest rate
specified in any of the applicable Transaction Documents for interest on overdue principal thereof
or such other rate as shall be fixed by applicable law, together with the costs of collection and
the reasonable fees, costs, expenses and other client charges of any attorneys employed by the
Collateral Agent to collect such deficiency.
(d) Each Grantor hereby acknowledges that if the Collateral Agent complies with any applicable
state, provincial, or federal law requirements in connection with a disposition of the Collateral,
such compliance will not adversely affect the commercial reasonableness of any sale or other
disposition of the Collateral.
(e) The Collateral Agent shall not be required to marshal any present or future collateral
security (including, but not limited to, this Agreement and the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such collateral security
or other assurances of payment in any particular order, and all of the Collateral Agent’s rights
hereunder and in respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or arising. To the extent that
any Grantor lawfully may, each Grantor hereby agrees that it will not invoke any law relating to
the marshalling of collateral which might cause delay in or impede the enforcement of the
Collateral Agent’s rights under this Agreement or under any other instrument creating or evidencing
any of the Obligations or under which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully
may, each Grantor hereby irrevocably waives the benefits of all such laws.
SECTION 8. Indemnity and Expenses.
(a) Each Grantor agrees, jointly and severally, to defend, protect, indemnify and hold the
Collateral Agent and each of the Buyers, jointly and severally, harmless from and against any and
all claims, damages, losses, liabilities, obligations, penalties, fees, costs and expenses
(including, without limitation, reasonable legal fees, costs, expenses, and disbursements of such
Person’s counsel) to the extent that they arise out of or otherwise result from this Agreement
(including, without limitation, enforcement of this Agreement), except claims, losses or
liabilities resulting solely and directly from such Person’s gross negligence or willful
misconduct, as determined by a final judgment of a court of competent jurisdiction.
(b) Each Grantor agrees, jointly and severally, to upon demand pay to the Collateral Agent the
amount of any and all costs and expenses, including the reasonable fees, costs, expenses and
disbursements of counsel for the Collateral Agent and of any experts and
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agents (including, without limitation, any collateral trustee which may act as agent of the
Collateral Agent), which the Collateral Agent may incur in connection with (i) the preparation,
negotiation, execution, delivery, recordation, administration, amendment, waiver or other
modification or termination of this Agreement, (ii) the custody, preservation, use or operation of,
or the sale of, collection from, or other realization upon, any Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent hereunder, or (iv) the failure by any
Grantor to perform or observe any of the provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications provided for hereunder
shall be in writing and shall be mailed (by certified mail, postage prepaid and return receipt
requested), telecopied, e-mailed or delivered, if to any Grantor at its address specified below and
if to the Collateral Agent to it, at its address specified below; or as to any such Person, at such
other address as shall be designated by such Person in a written notice to such other Person
complying as to delivery with the terms of this Section 9. All such notices and other
communications shall be effective (a) if sent by certified mail, return receipt requested, when
received or three days after deposited in the mails, whichever occurs first, (b) if telecopied or
e-mailed, when transmitted (during normal business hours) and confirmation is received, otherwise,
the day after the notice was transmitted if confirmation is received, or (c) if delivered, upon
delivery.
SECTION 10. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be effective unless it is in writing
and signed by each Grantor and the Collateral Agent, and no waiver of any provision of this
Agreement, and no consent to any departure by each Grantor therefrom, shall be effective unless it
is in writing and signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which given.
(b) No failure on the part of the Collateral Agent to exercise, and no delay in exercising,
any right hereunder or under any of the other Transaction Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of the Collateral
Agent or any Buyer provided herein and in the other Transaction Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The rights of the
Collateral Agent or any Buyer under any of the other Transaction Documents against any party
thereto are not conditional or contingent on any attempt by such Person to exercise any of its
rights under any of the other Transaction Documents against such party or against any other Person,
including but not limited to, any Grantor.
(c) Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until the indefeasible payment in full in cash of the
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Obligations, and (ii) be binding on each Grantor and all other Persons who become bound as
debtor to this Agreement in accordance with Section 9-203(d) of the Code and shall inure, together
with all rights and remedies of the Collateral Agent and the Buyers hereunder, to the benefit of
the Collateral Agent and the Buyers and their respective permitted successors, transferees and
assigns. Without limiting the generality of clause (ii) of the immediately preceding sentence,
without notice to any Grantor, the Collateral Agent and the Buyers may assign or otherwise transfer
their rights and obligations under this Agreement and any of the other Transaction Documents, to
any other Person and such other Person shall thereupon become vested with all of the benefits in
respect thereof granted to the Collateral Agent and the Buyers herein or otherwise. Upon any such
assignment or transfer, all references in this Agreement to the Collateral Agent or any such Buyer
shall mean the assignee of the Collateral Agent or such Buyer. None of the rights or obligations
of any Grantor hereunder may be assigned or otherwise transferred without the prior written consent
of the Collateral Agent, and any such assignment or transfer without the consent of the Collateral
Agent shall be null and void.
(e) Upon the indefeasible payment in full in cash of the Obligations, (i) this Agreement and
the security interests created hereby shall terminate and all rights to the Collateral shall revert
to the respective Grantor that granted such security interests hereunder, and (ii) the Collateral
Agent will promptly, upon any Grantor’s request and at such Grantor’s expense, (A) return to such
Grantor such of the Collateral as shall not have been sold or otherwise disposed of or applied
pursuant to the terms hereof, and (B) execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such termination, all without any representation,
warranty or recourse whatsoever.
(f) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE
EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR
NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(g) ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT
RELATED THERETO MAY BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX IN THE COUNTY OF NEW YORK OR
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS
-21-
AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.
(h) EACH GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE COLLATERAL
AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE
PARTIES HERETO.
(i) Each Grantor irrevocably consents to the service of process of any of the aforesaid courts
in any such action, suit or proceeding by the mailing of copies thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to any Grantor at its address
provided herein, such service to become effective 10 days after such mailing.
(j) Nothing contained herein shall affect the right of the Collateral Agent to serve process
in any other manner permitted by law or commence legal proceedings or otherwise proceed against any
Grantor or any property of any Grantor in any other jurisdiction.
(k) Each Grantor irrevocably and unconditionally waives any right it may have to claim or
recover in any legal action, suit or proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.
(l) Section headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
(m) This Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which shall be deemed to be an original, but all of which
taken together constitute one in the same Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and delivered by its
officer thereunto duly authorized, as of the date first above written.
| GLOBAL EMPLOYMENT HOLDINGS, INC | ||||||||||
| By: | /s/ XXXXXX XXXXX | |||||||||
| Name: | Xxxxxx Xxxxx | |||||||||
| Title: | Chief Executive Officer and President | |||||||||
| Address: | 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000 | |||||||||
| Xxxxxxxxx, Xxxxxxxx 00000 | ||||||||||
| GLOBAL EMPLOYMENT SOLUTIONS, INC | ||||||||||
| By: | /s/ XXXXXX XXXXX | |||||||||
| Name: | Xxxxxx Xxxxx | |||||||||
| Title: | Chief Executive Officer and President | |||||||||
| Address: | 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000 | |||||||||
| Xxxxxxxxx, Xxxxxxxx 00000 | ||||||||||
| EXCELL PERSONNEL SERVICES, INC. | ||||||||||
| By: | /s/ XXXXXX XXXXX | |||||||||
| Name: | Xxxxxx Xxxxx | |||||||||
| Title: | Executive Vice President | |||||||||
| Address: | 0000 Xxxxxxxxx Xxxxxxxxx,
Xxxxx 000 Xxxxxxxxx, Xxxxxxxx 00000 |
|||||||||
FRIENDLY ADVANCED SOFTWARE TECHNOLOGY, INC. |
||||||||||
| By: | /s/ XXXXXX XXXXX | |||||||||
| Name: | Xxxxxx Xxxxx | |||||||||
| Title: | Executive Vice President | |||||||||
| Address: | 0000 Xxxxxxxxx Xxxxxxxxx,
Xxxxx 000 Xxxxxxxxx, Xxxxxxxx 00000 |
|||||||||
| MAIN LINE PERSONAL SERVICE, INC. | ||||||||||
| By: | /s/ XXXXXX XXXXX | |||||||||
| Name: | Xxxxxx Xxxxx | |||||||||
| Title: | Executive Vice President | |||||||||
| Address: | 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000 | |||||||||
| Xxxxxxxxx, Xxxxxxxx 00000 | ||||||||||
SOUTHEASTERN PERSONNEL MANAGEMENT, INC. |
||||||||||
| By: | /s/ XXXXXX XXXXX | |||||||||
| Name: | Xxxxxx Xxxxx | |||||||||
| Title: | Executive Vice President | |||||||||
| Address: | 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000 | |||||||||
| Xxxxxxxxx, Xxxxxxxx 00000 | ||||||||||
| SOUTHEASTERN STAFFING, INC. | ||||||||||
| By: | /s/ XXXXXX XXXXX | |||||||||
| Name: | Xxxxxx Xxxxx | |||||||||
| Title: | Executive Vice President | |||||||||
| Address: | 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000 | |||||||||
| Xxxxxxxxx, Xxxxxxxx 00000 | ||||||||||
| BAY HR, INC. | ||||||||||
| By: | /s/ XXXXXX XXXXX | |||||||||
| Name: | Xxxxxx Xxxxx | |||||||||
| Title: | Executive Vice President | |||||||||
| Address: | 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000 | |||||||||
| Xxxxxxxxx, Xxxxxxxx 00000 | ||||||||||
| SOUTHEASTERN GEORGIA HR, INC. | ||||||||||
| By: | /s/ XXXXXX XXXXX | |||||||||
| Name: | Xxxxxx Xxxxx | |||||||||
| Title: | Executive Vice President | |||||||||
| Address: | 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000 | |||||||||
| Xxxxxxxxx, Xxxxxxxx 00000 | ||||||||||
| TEMPORARY PLACEMENT SERVICE, INC. | ||||||||||
| By: | /s/ XXXXXX XXXXX | |||||||||
| Name: | Xxxxxx Xxxxx | |||||||||
| Title: | Executive Vice President | |||||||||
| Address: | 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000 | |||||||||
| Xxxxxxxxx, Xxxxxxxx 00000 | ||||||||||
ACCEPTED BY:
AMATIS LIMITED,
as Collateral Agent
as Collateral Agent
By: |
/s/ XXXX X. XXXXXXX | |||||
| Name: | Xxxx X. Xxxxxxx | |||||
| Title: | Authorized Signatory | |||||
Address:
|
Xxx Xxxxxxxx Xxxx | |||||
| Xxxxxxxxx , XX 00000 | ||||||
SCHEDULE I
LEGAL NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OR
JURISDICTION OF ORGANIZATION
JURISDICTION OF ORGANIZATION
Sched. I-1
SCHEDULE II
INTELLECTUAL PROPERTY AND LICENSES
Sched. II-1
SCHEDULE III
LOCATIONS
LOCATION
|
Description of Location (State if Location | |
| (i) contains Rolling Stock, other Equipment, Fixtures, | ||
| Goods or Inventory, | ||
| (ii) is chief place of business and chief executive office, or | ||
| (iii) contains Records concerning Accounts and originals of Chattel Paper) |
Sched. III-1
SCHEDULE IV
PROMISSORY NOTES, SECURITIES, DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS
AND COMMODITIES ACCOUNTS
AND COMMODITIES ACCOUNTS
Promissory Notes:
Securities and Other Instruments:
| Name and Address | |||||
| of Institution | |||||
| Maintaining Account | Account Number | Type of Account |
Sched. IV-1
Sched. IV-1
SCHEDULE V
UCC-1 FINANCING STATEMENTS
Sched. V-1
SCHEDULE VI
COMMERCIAL TORT CLAIMS
Sched. VI-1
EXHIBIT A
ASSIGNMENT FOR SECURITY
[TRADEMARKS] [PATENTS] [COPYRIGHTS]
WHEREAS, (the “Assignor”) [has adopted, used and is
using, and holds all right, title and interest in and to, the trademarks and service marks listed
on the annexed Schedule 1A, which trademarks and service marks are registered or applied
for in the United States Patent and Trademark Office (the “Trademarks”)] [holds all right,
title and interest in the letter patents, design patents and utility patents listed on the annexed
Schedule 1A, which patents are issued or applied for in the United States Patent and
Trademark Office (the “Patents”)] [holds all right, title and interest in the copyrights
listed on the annexed Schedule 1A, which copyrights are registered in the United States
Copyright Office (the “Copyrights”)];
WHEREAS, the Assignor has entered into a Security Agreement, dated as of ,
2006 (as amended, restated or otherwise modified from time to time the “Security
Agreement”), in favor of [Amphora] Limited, as collateral agent for certain purchasers (the
“Assignee”);
WHEREAS, pursuant to the Security Agreement, the Assignor has assigned to the Assignee and
granted to the Assignee for the benefit of the Buyers (as defined in the Security Agreement) a
continuing security interest in all right, title and interest of the Assignor in, to and under the
[Trademarks, together with, among other things, the good-will of the business symbolized by the
Trademarks] [Patents] [Copyrights] and the applications and registrations thereof, and all proceeds
thereof, including, without limitation, any and all causes of action which may exist by reason of
infringement thereof and any and all damages arising from past, present and future violations
thereof (the “Collateral”), to secure the payment, performance and observance of the
“Obligations” (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Assignor does hereby pledge, convey, sell, assign, transfer and set over
unto the Assignee and grants to the Assignee for the benefit of the Buyers a continuing security
interest in the Collateral to secure the prompt payment, performance and for the benefit of the
Buyers observance of the Obligations.
The Assignor does hereby further acknowledge and affirm that the rights and remedies of the
Assignee with respect to the Collateral are more fully set forth in the Security Agreement, the
terms and provisions of which are hereby incorporated herein by reference as if fully set forth
herein.
Exh. A-1
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed by its officer
thereunto duly authorized as of ___, 20___
| [GRANTORS] | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
[Security Agreement]
STATE OF |
||||
| ss.: | ||||
COUNTY OF |
||||
On this day of , 20 , before me personally came , to me
known to be the person who executed the foregoing instrument, and who, being duly sworn by me, did
depose and say that s/he is the of , a
, and that s/he executed the foregoing instrument in the firm name of
, and that s/he had authority to sign the same, and s/he
acknowledged to me that he executed the same as the act and deed of said firm for the uses and
purposes therein mentioned.
Exh. A-3
SCHEDULE 1A TO ASSIGNMENT FOR SECURITY
| [Trademarks and Trademark Applications] | ||||
| [Patent and Patent Applications] | ||||
| [Copyright and Copyright Applications] | ||||
Owned by |
||||
