SECURITY AGREEMENT
This
SECURITY AGREEMENT (the “Agreement”)
is
entered into as of September 25, 2008 by and among Driftwood Ventures, Inc.,
a
Delaware corporation (the “Company”),
and
the persons and entities named on the Schedule of Purchasers attached hereto
(each individually a
“Purchaser”
and
collectively, the “Purchasers”).
WHEREAS,
on or about the date hereof the Purchasers have purchased from the Company
certain convertible secured term promissory notes issued by the Company
(together with any replacements thereof or substitutions therefor, the
“Notes”);
and
WHEREAS,
it is a condition to the obligation of the Purchasers to purchase the Notes
that
the Company shall have executed and delivered this Agreement to the
Purchasers.
NOW,
THEREFORE, in consideration of the premises and to induce the Purchasers to
purchase the Notes and for other good and valuable consideration, the Company
hereby agrees with the Purchasers as follows:
1. Defined
Terms.
The
following terms shall have the following meanings:
“Accounts”,
“Chattel Paper”, “Documents”, “Equipment”, “Fixtures”, “General Intangibles”,
“Goods”, “Instruments”, “Inventory”, “Proceeds” and
“Securities”
shall
have the respective meanings as defined in the Code.
“Code”
shall
mean the Uniform Commercial Code as from time to time in effect in the State
of
New York.
“Collateral”
shall
have the meaning assigned to such term in Section 2(a) of this
Agreement.
“Copyrights”
mean
all copyrights (registered or otherwise) and registrations and applications
for
registration thereof, and all rights therein provided by multinational treaties
or conventions.
“Event
of Default”
shall
mean the Company’s failure to pay or discharge the Obligations in full in
accordance with the terms of the Notes and this Agreement, the occurrence of
an
Event of Default (as defined in the Notes) or the Company’s breach of any
provision of this Agreement.
“Intellectual
Property”
shall
mean, without limitation, any
and
all Patents,
trade
secrets, confidential business information, formula, Copyrights, mask works,
claims of infringement against third parties, licenses, permits, license rights
to or of technologies, contract rights with employees, consultants or third
parties, Trademarks, databases, computer programs and other computer software
interfaces, know-how, customer lists, inventions and discoveries, and other
such
rights generally classified as intangible, intellectual property assets in
accordance with GAAP possessed or owned by Company, or which the Company now
or
hereafter has a right to use or in which the Company now or hereafter has an
interest.
“Patents”
mean
all national (including the United States) and multinational statutory invention
registrations, patents, patent registrations and patent applications, including
all reissues, divisions, continuations, continuations-in-part, extensions and
reexaminations, and all rights therein provided by multinational treaties or
conventions and all improvements to the inventions disclosed in each such
registration, patent or application.
“Requisite
Holders”
shall
mean the holders of Notes representing at least seventy-five percent (75%)
of
the outstanding principal amount of all Notes then outstanding.
“Obligations”
shall
mean the unpaid principal amount of, and interest on, the Notes.
“Ratably”
shall
mean in the ratio that the outstanding principal amount of the Note held by
each
Purchaser bears to the aggregate outstanding principal of all Notes held by
all
Purchasers.
“Trademarks”
mean
all trademarks, service marks, trade dress, logos, trade names and corporate
names, whether or not registered, including all common law rights, and
registrations and applications for registration thereof, including, but not
limited to, all marks registered in the United States Patent and Trademark
Office, the Trademark Offices of the States and Territories of the United States
of America, and the Trademark Offices of other nations throughout the world,
and
all rights therein provided by multinational treaties or
conventions.
2. Grant
of Security Interest; Action by Requisite Holders.
(a) To
secure
the Company’s prompt, punctual, and faithful performance of all and each of the
Obligations (whether at the stated maturity, by acceleration or otherwise),
the
Company hereby grants to the Purchasers a continuing security interest in and
to
and assigns to the Purchasers all of the Company’s right, title and interest in
and to all of the Company’s property, assets and rights of every kind and
nature, wherever located and whether now owned or hereafter acquired or arising,
including, without limitation the following, and all products, Proceeds,
substitutions, and accessions of or to the same, (collectively, the “Collateral”):
(1) All
Accounts and accounts receivable;
(2) All
Inventory;
(3) All
contract rights;
(4) All
General Intangibles;
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(5) All
Goods;
(6) All
Chattel Paper;
(7) All
Fixtures;
(8) All
Intellectual Property;
(9) All
Equipment;
(10) All
books, records, and information relating to the Collateral and/or to the
operation of the Company’s business, and all rights of access to such books,
records, and information, and all property in which such books, records, and
information are stored, recorded, and maintained;
(11) All
Instruments, documents of title, Documents, policies and certificates of
insurance, Securities, deposits, deposit accounts, money, cash, or other
property;
(12) All
federal, state and local tax refunds and/or abatements to which the Company
is,
or becomes entitled, no matter how or when arising, including, but not limited
to any loss carry back tax refund;
(13) All
insurance proceeds, refunds, and premium rebates, including, without limitation,
proceeds of fire and credit insurance, whether any of such proceeds, refunds
and
premium rebates arise out of any of the foregoing, or otherwise;
(14) All
liens, guaranties, rights, remedies, and privileges pertaining to any of the
foregoing, including the right of stoppage in transit; and
(15) All
other
assets of every nature and description, whether they be now existing or
hereafter arising and whether now or hereafter belonging to the
Company.
(b) Notwithstanding
anything to the contrary contained elsewhere in this Agreement or the Notes,
each Purchaser by its execution and delivery of this Agreement hereby: (i)
irrevocably authorizes and appoints each other Purchaser, acting with the
consent or authorization of the Requisite Holders, to take on behalf of all
Purchasers, any and all actions required or permitted to be taken by the
Purchasers under this Agreement and (ii) agrees with each other Purchaser that
any and all actions required or permitted to be taken by the Purchasers or
any
of them under this Agreement may be taken only upon the written consent or
authorization of the Requisite Holders and that such Purchaser will not take
any
action required or permitted to be taken by the Purchasers under this Agreement,
or otherwise take any action to enforce any of the terms of this Agreement,
in
the absence of such written consent or authorization. The Company may rely
on
any such written consent or authorization given to it and signed by the
Requisite Holders until such consent or authorization is withdrawn or replaced
by another such consent or authorization signed by the Requisite
Holders.
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(c) Notwithstanding
anything to the contrary contained elsewhere in this Agreement, the Purchasers
shall share Ratably all proceeds from or distributions of or with respect to
the
Collateral.
Notwithstanding
the foregoing provisions of this Section 2, the grant, assignment and transfer
of a security interest as provided herein shall not extend to, and the term
“Collateral” shall not include any Contract, Instrument or Chattel Paper in
which the Company has any right, title or interest if and to the extent such
Contract, Instrument or Chattel Paper includes a provision containing a
restriction on assignment such that the creation of a security interest in
the
right, title or interest of the Company therein would be prohibited and would,
in and of itself, cause or result in a default thereunder enabling another
person party to such Contract, Instrument or Chattel Paper to enforce any remedy
with respect thereto; provided that the foregoing exclusion shall not apply
if
(i) such prohibition has been waived or such other person has otherwise
consented to the creation hereunder of a security interest in such Contract,
Instrument or Chattel Paper or (ii) such prohibition would be rendered
ineffective pursuant to Sections 9-408(a) or 9-409(a) of the Code, as applicable
and as then in effect in any relevant jurisdiction, or any other applicable
law
(including the Bankruptcy Code) or principles of equity); provided further
that
immediately upon the ineffectiveness, lapse or termination of any such
provision, the Collateral shall include, and the Company shall be deemed to
have
granted a security interest in, all its rights, title and interests in and
to
such Contract, Instrument or Chattel Paper as if such provision had never been
in effect; and provided further that the foregoing exclusion shall in no way
be
construed so as to limit, impair or otherwise affect any Purchasers
unconditional continuing security interest in and to all rights, title and
interests of the Company in or to any payment obligations or other rights to
receive monies due or to become due under any such Contract, Instrument or
Chattel Paper and in any such monies and other proceeds of such Contract,
Instrument or Chattel Paper.
3. Rights
of Purchasers; Limitations on Purchasers’ Obligations.
(a) Company
Remains Liable under Accounts.
Anything herein to the contrary notwithstanding, the Company shall remain liable
under each of the Accounts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise to each such Account. The Purchasers
shall not have any obligations or liability under any Account (or any agreement
giving rise thereto) by reason of or arising out of this Agreement or the
receipt by the Purchasers of any payment relating to such Account pursuant
hereto, nor shall the Purchasers be obligated in any manner to perform any
of
the obligations of the Company under or pursuant to any Account (or any
agreement giving rise thereto), to make any payment, to make any inquiry as
to
the nature or the sufficiency of any payment received by them or as to
sufficiency of any performance by any party under any Account (or any agreement
giving rise thereto), to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may
have
been assigned to them or to which they may be entitled at any time or
times.
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(b) Notice
to Account Debtors.
Upon
the request of the Purchasers at any time after the occurrence and during the
continuance of an Event of Default, the Company shall notify account debtors
on
the Accounts that the Accounts have been assigned to the Purchasers and that
payments in respect thereof shall be made directly to the Purchasers. The
Purchasers may in their own name or in the name of others communicate with
account debtors on the Accounts to verify with them to their satisfaction the
existence, amount and terms of any Accounts.
(c) Collection
on Accounts.
The
Purchasers hereby authorize the Company to collect the Accounts, subject to
the
Purchasers’ rights to curtail or terminate said authority at any time after the
occurrence and during the continuance of an Event of Default.
4. Covenants
of the Company.
The
Company covenants and agrees with the Purchasers that from and after the date
of
this Agreement until the Obligations are paid or otherwise discharged in
full:
(a) Location
of Collateral; Other Liens.
The
Company will notify the Purchasers, at least twenty (20) days prior to any
such
event, of any change in the Company’s exact legal name, any change in its place
of business or location of the Collateral or its establishment of any new place
of business or location of Collateral or office where its records concerning
Accounts and other assets are kept. The Company is the owner of the Collateral
and will be the owner of the Collateral hereafter acquired free from any adverse
lien, security interest or encumbrance (other than is permitted pursuant to
Section 4(f) hereof), and the Company will defend the Collateral against the
claims and demands of all persons at any time claiming the same or any interest
therein. Except as permitted by Section 4(f) hereof, no financing statements
covering any Collateral or any proceeds thereof are on file in any public
office.
(b) Further
Documentation; Pledge of Instruments and Chattel Paper.
At any
time and from time to time, upon the written request of the Purchasers, and
at
the sole expense of the Company, the Company will promptly and duly execute
and
deliver such further instruments and documents and take such further action
as
the Purchasers may reasonably request for the purpose of obtaining or preserving
the full benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Code in effect in any jurisdiction with respect to the
liens created hereby. The Company also hereby authorizes the Purchasers to
file
any such financing or continuation statement without the signature of the
Company to the extent permitted by applicable law. A carbon, photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction if so permitted by applicable law.
If
any amount payable under or in connection with any of the Collateral shall
be or
become evidenced by any Instrument or Chattel Paper, such Instruments or Chattel
Paper shall be immediately delivered to the Purchasers or their duly appointed
agent, duly endorsed in a manner satisfactory to the Purchasers, to be held
as
Collateral pursuant to this Agreement.
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(c) Maintenance
of Records; Inspection of Collateral.
The
Company will keep and maintain at its own cost and expense satisfactory and
complete records of the Collateral, including without limitation, a record
of
all payments received and all credits granted with respect to the Accounts.
The
Company will permit the Purchasers to inspect the Collateral at any reasonable
time.
(d) Compliance
with Laws, Etc.
The
Company will comply in all material respects with all laws, rules, regulations
and orders of any governmental authority applicable to the Collateral or any
part thereof, provided, however, that the Company may contest any such law,
rule, regulation or order in any reasonable manner which shall not, in the
reasonable opinion of the Purchasers, adversely affect the Purchasers’ rights or
the priority of their liens on the Collateral.
(e) Payment
of Obligations.
The
Company will pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon the Collateral or in respect of its income or
profits therefrom as well as all claims of any kind (including, without
limitation, claims for labor, materials and supplies) against or with respect
to
the Collateral, except that no such charge need be paid if (i) the validity
thereof is being contested in good faith by appropriate proceedings, (ii) such
proceedings do not involve any material danger of the sale, forfeiture or loss
of any of the Collateral or any interest therein and (iii) such charge is
adequately reserved against on the Company’s books in accordance with generally
accepted accounting principles.
(f) Limitation
on Liens on Collateral.
The
Company will not create, incur or permit to exist, will defend the Collateral
against, and will take such other action as is necessary to remove, any lien
or
claim on or to the Collateral, except for (i) liens to secure taxes, assessments
and other governmental charges in respect of obligations not overdue or liens
on
properties to secure claims for labor, material or supplies in respect of
obligations not overdue; (ii) deposits or pledges made in connection with,
or to
secure payment of, workmen’s compensation, unemployment insurance, old age
pensions or other social security obligations; (iii) liens in respect of
judgments or awards that have been in force for less than the applicable period
for taking an appeal so long as execution is not levied thereunder or in respect
of which the Company shall at the time in good faith be prosecuting an appeal
or
proceedings for review and in respect of which a stay of execution shall have
been obtained pending such appeal or review; (iv) liens of carriers,
warehousemen, mechanics and materialmen or other like liens arising in the
ordinary course of business which secure amounts not overdue for a period of
more than sixty (60) days or which are being contested in good faith by
appropriate proceedings; (v) purchase money security interests in, or lease
obligations incurred to finance the acquisition of, property acquired after
the
date hereof, which security interests or lease obligations cover only the
property so acquired; (vi) liens that are subordinate to the security interest
granted in the Collateral pursuant to this Agreement; (vii) liens to Xxxxxx
Management, LLC in connection with the $750,000 debt owed to Xxxxxx Management,
LLC that will be pari
passu
with the
liens granted to the Purchasers hereunder; (viii) any existing liens of Zoo
Games, Inc. (“Zoo Games”) and its subsidiaries as of the consummation of the
transactions contemplated by that certain Agreement and Plan of Merger, by
and
among the Company, DFTW Merger Sub, Inc., Zoo Games and Xxxx Xxxxxxx as the
successor Representative, dated as of July 7, 2008, as amended on September
12,
2008; (ix) the lien created in connection with the issuance of the Company’s
senior secured convertible notes to the purchasers set forth on the schedule
of
purchasers to that certain Security Agreement, dated as of July 7, 2008, as
amended on August 12, 2008 (which lien will be pari
passu
with the
lien of the Purchasers); and (x) extensions, refinancings, modifications,
amendments and restatements of items (v) and (vi) above, provided that the
principal amount of any obligation secured by such lien is not increased or
the
terms thereof are not modified to impose more burdensome terms upon the Company
and no other material term or provision is materially modified, and will defend
the right, title and interest of the Purchasers in and to any of the Collateral
against the claims and demands of all persons whomsoever.
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(g) Limitations
on Dispositions of Collateral.
The
Company will not sell, transfer, lease or otherwise dispose of any of the
Collateral, or attempt, offer or contract to do so, except in the ordinary
course of business and except for the loan to Zoo Games as contemplated under
the use of proceeds in Section 8(e) of the Note Purchase Agreement, by and
among
the Company and the Purchasers named on the Schedule of Purchasers attached
thereto, dated July 7, 2008.
(h) Further
Identification of Collateral.
The
Company will furnish to the Purchasers from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Purchasers may reasonably
request, all in reasonable detail.
(i) UCC-1.
The
Company represents, warrants, and covenants that upon the filing of the
financing statements as required by the Uniform Commercial Code to perfect
each
Purchaser’s security interest in the Collateral, the security interest granted
herein is, and shall at all times continue to be, a first priority perfected
security interest in the Collateral.
5. Purchasers’
Appointment as Attorney-in-Fact.
(a) Powers.
The
Company hereby appoints the Purchasers and any officer or agent thereof, with
full power of substitution, as its true and lawful attorney-in-fact with full
power and authority in the place and stead of the Company and in the name of
the
Company or in its own name, from time to time in the discretion of the
Purchasers so long as an Event of Default has occurred and is continuing, for
the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all instruments which may be necessary
or desirable to accomplish the purposes of this Agreement, and, without limiting
the generality of the foregoing, the Company shall grant the Purchasers the
power and right, on behalf of the Company, without notice to or assent by the
Company, to do the following:
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(i) In
the
name of the Company or its own name, or otherwise, to take physical possession
of the Collateral and to maintain such possession on the Company’s premises or
to remove the Collateral or any part thereof to such other places as the
Purchasers may desire;
(ii) In
the
name of the Company or its own name, or otherwise, to endorse and collect any
checks, drafts, notes, acceptances or other instruments for the payment of
moneys due under any Account, Instrument, General Intangible or with respect
to
any other action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Purchasers for the purpose of collecting any and all such
moneys due under any Account, Instrument, General Intangible or with respect
to
any other Collateral whenever payable;
(iii) To
pay or
discharge taxes and liens levied or placed on or threatened against the
Collateral;
(iv) To
direct
any party liable for any payment under any of the Collateral to make payment
of
any and all moneys due or to become due thereunder directly to the Purchasers
or
as the Purchasers shall direct;
(v) To
ask or
demand for, collect, receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect of or
arising out of any Collateral;
(vi) To
sign
and endorse any invoices, freight or express xxxx, bills of lading, storage
or
warehouse receipts, drafts against debtors, assignments, verifications, notices
and other documents in connection with any of the Collateral;
(vii) To
open
mail addressed to the Company and to change the Post Office Box or mailing
address of the Company and use the Company’s stationery and billing forms or
facsimiles thereof, for the purpose of collecting Accounts and realizing upon
the Collateral;
(viii) To
commence and prosecute any suits, actions or proceedings at law or in equity
in
any court of competent jurisdiction to collect the Collateral or any part
thereof and to enforce any other right in respect of any
Collateral;
(ix) To
defend
any suit, action or proceeding brought against the Company with respect to
any
Collateral;
(x) To
settle, compromise or adjust any suit, action or proceeding described in
Subsection (ix) above and, in connection therewith, to give such discharges
or
releases as the Purchasers may deem appropriate;
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(xi) To
assign
any patent or trademark of the Company (along with the goodwill of the business
to which any such patent or trademark pertains), throughout the world for such
term or terms, on such conditions, and in such manner, as the Purchasers shall
in their sole discretion determine; and
(xii) Generally,
to sell, transfer, pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the Purchasers
were the absolute owners thereof for all purposes, and to do, at the Purchasers’
option and the Company’s expense, at any time, or from time to time, all acts
and things which the Purchasers deem necessary to protect, preserve or realize
upon the Collateral and the Purchasers’ liens thereon and to effect the intent
of this Agreement, all as fully and effectively as the Company might
do.
The
Company hereby ratifies all that said attorneys shall lawfully do or cause
to be
done by virtue hereof. This power of attorney shall be a power coupled with
an
interest and shall be irrevocable.
(b) No
Duty on Part of the Purchasers.
The
powers conferred on the Purchasers hereunder are solely to protect the
Purchasers’ interests in the Collateral and shall not impose any duty upon them
to exercise any such powers. The Purchasers shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers,
and neither they nor any of their officers, directors, employees or agents
shall
be responsible to the Company for any act or failure to act hereunder, except
for gross negligence or willful misconduct.
6. Performance
by Purchasers of the Company’s Obligations.
If the
Company fails to perform or comply with any of its agreements contained herein
and the Purchasers, as provided for by the terms of this Agreement, shall
perform or comply, or otherwise cause performance or compliance, with such
agreement, the expenses of the Purchasers incurred in connection with such
performance or compliance shall be payable by the Company to the Purchasers
on
demand and shall constitute Obligations secured hereby.
7. Remedies.
If an
Event of Default shall occur and be continuing, the Purchasers may exercise,
in
addition to all other rights and remedies granted to them in this Agreement
and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Purchasers, without demand of
performance or other demand, presentment, protest, advertisement or notice
of
any kind (except any notice required by law referred to below) to or upon the
Company or any other person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do
any
of the foregoing), in one or more parcels at public or private sale or sales,
at
any exchange, broker’s board or office of the Purchasers or elsewhere upon such
terms and conditions as they may deem advisable and at such prices as they
may
deem best, for cash or on credit or for future delivery without assumption
of
any credit risk. The Purchasers shall have the right upon any such public sale
or sales, and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of the Collateral so sold, free of
any
right or equity of redemption in the Company, which right or equity is hereby
waived or released. The Company further agrees, at the Purchasers’ request, to
assemble the Collateral and make it available to the Purchasers at places that
the Purchasers shall reasonably select, whether at the Company’s premises or
elsewhere. The Purchasers shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental
to
the care or safekeeping of any of the Collateral or in any way relating to
the
Collateral or the rights of the Purchasers hereunder, including, without
limitation, reasonable attorney’s fees and disbursements, to the payment in
whole or in part of the Obligations, in such order as the Purchasers may elect,
and only after such application and after the payment by the Purchasers of
any
other amount required by any provision of law, need the Purchasers account
for
the surplus, if any, to the Company. To the extent permitted by applicable
law,
the Company waives all claims, damages and demands it may acquire against the
Purchasers arising out of the exercise by the Purchasers of any of their rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper
if
given at least five (5) days before such sale or other disposition. The Company
shall remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations and the
fees and disbursements of any attorneys employed by the Purchasers to collect
such deficiency.
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8. Term
of Agreement.
This
Agreement and the security interest in the Collateral granted by the Company
to
the Purchasers hereunder shall terminate on the date on which all payments
under
the Notes have been made in full or otherwise converted pursuant to the terms
thereof and all other Obligations have been paid or discharged in full. Promptly
following such termination, the Purchasers will join in executing any
termination statement and other filings with respect to any financing statement
executed and filed pursuant to this Agreement or required for evidencing
termination of this Agreement or the Purchasers’ security interest in the
Collateral and file any such termination statements or other filings with the
appropriate agencies.
9. Limitation
on Duties Regarding Preservation of Collateral.
The
Purchasers’ sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Code or otherwise, shall be to deal with it in the same manner as the Purchasers
deal with similar property for their own account. Neither the Purchasers nor
any
of their directors, officers, employees or agents shall be liable for failure
to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Company or otherwise.
10. Powers
Coupled with an Interest.
All
authorizations and agencies herein contained with respect to the Collateral
are
irrevocable and powers coupled with an interest.
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 hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any
other jurisdiction.
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12. Headings.
The
headings used in this Agreement are for convenience of reference only and are
not to affect the construction hereof or be taken into consideration in the
interpretation hereof.
13. No
Waiver; Cumulative Remedies.
The
Purchasers shall not by act (except by a written instrument pursuant to Section
14 hereof), delay, indulgence, omission or otherwise be deemed to have waived
any right or remedy hereunder or to have acquiesced in any default or Event
of
Default or in any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of the Purchasers, any
right, power or privilege hereunder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. A waiver by the Purchasers of any right or remedy hereunder on
any
one occasion shall not be construed as a bar to any right or remedy that the
Purchasers would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and
are
not exclusive of any rights or remedies provided by law.
14. Waivers
and Amendments; Successors and Assigns.
None of
the terms or provisions of this Agreement may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the Company
and
the Requisite Holders; provided,
however,
that no
provision of this Agreement may be waived, amended, supplemented or otherwise
modified without the consent of any Purchaser if such waiver, amendment,
supplement or other modification would materially adversely affect the rights
of
such Purchaser in a manner different than it affects the rights of the Requisite
Holders. This Agreement shall be binding upon the successors and assigns of
the
Company and shall inure to the benefit of the Purchasers and their respective
successors and permitted assigns, provided that this Agreement may not be
assigned by a Purchaser without the prior written consent of the
Company.
15. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the law of
the
State of New York without giving effect to the conflicts of laws principles
thereof.
16. Termination.
The
security interest granted hereunder shall continue and remain in full force
and
effect until the payment or other discharge in full of all
Obligations.
17. Counterparts.
This
Agreement may be executed in multiple counterparts and by the various parties
hereto on separate counterparts, each of which when so executed and delivered
shall be an original, but all of which shall together constitute one and the
same agreement.
11
18. Notices.
All
notices, requests, consents and other communications required or permitted
to be
given under this Agreement shall be in writing and shall be deemed to be duly
given if (a) personally delivered or (b) if sent by facsimile, registered or
certified mail (return receipt requested) postage prepaid or by reputable
overnight courier and designated for next day delivery, addressed to such party
at the address set forth below or such other address as may hereafter be
designated by a party to all other parties to this Agreement by proper notice
in
accordance with this Section 18:
|
If
to the Company:
|
||
|
2121
Avenue of the Stars
|
||
|
Xxxxx
0000
|
||
|
Xxx
Xxxxxxx, XX 00000
|
If
to any
Purchaser: at
its
address shown on the Schedule of Purchasers attached hereto.
All
such
notices, requests, consents and other communications shall be deemed delivered
and received (a) in the case of personal delivery or facsimile transmission,
when received as evidenced by an acknowledgment of receipt thereof, (b) if
sent
by registered or certified mail, three (3) Business Days after mailing and
(b)
if sent by courier, one (1) Business Day after delivery to the courier. For
purposes hereof, a “Business
Day”
is any
day other than a Saturday, Sunday or other day on which commercial banks are
authorized or required by law to close in New York City.
19.
Additional
Purchasers.
Notwithstanding anything to the contrary contained herein, any party who shall
become a Note holder by virtue of a transfer in accordance with the terms
thereof, or a Purchaser at a Subsequent Closing (as defined in the Note Purchase
Agreement, by and among the Company and the purchasers named on the schedule
of
purchasers attached thereto, dated September 25, 2008 (the “Note Purchase
Agreement”)), pursuant to the terms of the Note Purchase Agreement, may become a
party to this Security Agreement by executing and delivering a counterpart
signature page to this Security Agreement and shall be deemed a “Purchaser” for
all purposes under this Security Agreement. This Security Agreement, including,
without limitation, the Schedule of Purchasers attached hereto, may be amended
by the Company without the consent of the Purchasers to include any additional
Purchasers and to reflect the Notes issued thereto.
[Remainder
of Page Intentionally Left Blank]
12
IN
WITNESS WHEREOF,
each
Purchaser and the Company have caused this Security Agreement to be executed
as
an instrument under seal by their authorized representatives as of the date
first written above.
|
COMPANY:
|
||
|
By:/s/
Xxxxxxx Xxxxx
|
||
|
Name:
Xxxxxxx Xxxxx
|
||
|
Title:
Chief Financial Officer
|
[Additional
Signature Page Follows]
13
IN
WITNESS WHEREOF,
each
Purchaser and the Company have caused their respective signature page to this
Security Agreement to be duly executed as of the date first written
above.
|
PURCHASERS:
|
|
|
SANDOR
CAPITAL MASTER FUND LP
|
|
|
By:
/s/
Xxxx X.
Xxxxx
|
|
|
Name:
Xxxx X. Xxxxx
|
|
|
Title:
Manager
|
|
|
XXXXXX
CAPITAL MASTER FUND, LTD.
|
|
|
By:
/s/
Xxx
Xxxx
|
|
|
Name:
Xxx Xxxx
|
|
|
Title:
Managing Director of Xxxxxx Management, LLC, its
Manager
|
|
|
BACK
BAY LLC
|
|
|
By:
/s/
Xxxxxx
Xxxxxxxx
|
|
|
Name:
Xxxxxx Xxxxxxxx
|
|
|
Title:
CFO of Roxbury LLC, its Manager
|
|
|
/s/
Xxxx X.
Xxxxx
|
|
|
Xxxx
X. Xxxxx
|
[Additional
Signature Page Follows]
14
Counterpart
Signature Page
to
By
execution and delivery of this Counterpart Signature Page, the undersigned
does
hereby become a party to that certain Security Agreement by and among Driftwood
Ventures, Inc., a Delaware corporation (the “Company”), the Agent (as defined
therein) and the Purchasers (as defined therein) dated as of September 25,
2008
(the “Security Agreement”), as a Purchaser, and is entitled to all of the
benefits under and is subject to all of the obligations, restrictions and
limitations set forth in the Security Agreement that are applicable to the
Purchasers. This Counterpart Signature Page shall take effect and shall become
a
part of said Security Agreement immediately upon execution.
|
PURCHASER:
|
|
|
By:
____________________________________
|
|
|
Name:
|
|
|
Title:
|
[Additional
Signature Page Follows]
2
SCHEDULE
OF PURCHASERS
|
Name
and Address
|
Loan Amount
|
|||
|
Sandor
Capital Master Fund LP
c/o
Xxxx X. Xxxxx
0000
Xxxxx Xx.
Xxxxx
000
Xxxxxx,
XX 00000
|
$
|
300,000
|
||
|
Xxxxxx
Capital Master Fund, Ltd.
0000
Xxxxxx xx xxx Xxxxx
Xxxxx
0000
Xxx
Xxxxxxx, XX 00000
|
$
|
500,000
|
||
|
Back
Bay LLC
c/o
Roxbury LLC
0000
Xxxxxxx Xxxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxxxx
Xxxxx, XX 00000
|
$
|
500,000
|
||
|
Xxxx
X. Xxxxx
0000
Xxxxx Xx.
Xxxxx
000
Xxxxxx,
XX 00000
|
$
|
100,000
|
||
3
