Exhibit 10.8
SECURITY AGREEMENT
This Security Agreement is made and entered into as of April 30, 2001, by
and among MediaBay, Inc., a Florida corporation ("MEDIABAY"), the subsidiaries
of MEDIABAY set forth in Schedule 2 annexed hereto (collectively, the
"Subsidiaries", and together with MEDIABAY, the "Companies"), each with its
principal office at 0 Xxxxxxxxx Xxxxxx, Xxxxx Xxxxxx, XX 00000, on the one hand,
and Huntingdon Corporation, a Florida corporation with an address at c/o The
Xxxxxxx Company, Inc., 0 Xxxxxxxxx Xxxxxx, Xxxxx Xxxxxx, XX 00000 (the "Secured
Party"), on the other hand. The Companies and the Secured Party are collectively
referred to hereinafter as the "Parties".
W I T N E S S E T H:
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WHEREAS, MEDIABAY will issue to the Secured Party its (i) Convertible
Senior Subordinated Promissory Note Due December 31, 2002 in the principal
amount of $800,000 (the "Advance Note") and (ii) Convertible Senior Subordinated
Promissory Note Due September 30, 2002 in the aggregate principal amount of up
to $2,500,000, or, at the option of the Secured party, $3,000,000 (the
"Additional Financing Notes"; and together with the Advance Note, the "Notes")
and the Subsidiaries have executed and delivered to Secured Party that certain
Subsidiary Guaranty dated as of the date hereof (the "Guaranty") whereby the
Subsidiaries have guaranteed all obligations of MEDIABAY under the Notes;
WHEREAS, as an inducement to the Secured Party to purchase the Notes from
MEDIABAY, the Companies have agreed to grant to the Secured Party a security
interest in their right, title and interest in and to the Collateral (as defined
herein) on the terms set forth herein.
NOW, THEREFORE, in consideration of the foregoing and upon the terms and
conditions hereinafter set forth, the Parties agree as follows:
1. Grant of Security Interests in Collateral.
To secure the Companies' prompt payment when due of all principal and
interest and all other amounts payable under the Notes and the Guaranty and
performance of all other obligations, covenants, liabilities, duties, loans and
advances of the Companies to the Secured Party under the Notes and the Guaranty
and to secure all amounts payable and performance of all other obligations,
covenants, liabilities and duties of the Companies arising under any preferred
stock issued to Secured Party in exchange for the Notes, or any portion thereof
(collectively, the "Obligations") the Companies hereby grant to the Secured
Party a continuing security interest (the "Lien") in all existing and future
assets (other than cash, accounts receivable and inventory) and all accessions,
additions and accretions thereto and products, proceeds and replacements and
substitutions thereof, including but not limited to the assets and properties
described on Schedule 1 attached hereto (collectively, the "Collateral").
Notwithstanding anything herein to the contrary, the term "Obligations" shall
include $3,300,000 of advances made by the Secured Party to the Companies from
October 2000 through the date hereof, which advances will be represented by a
portion of the Notes upon issuance of the Notes.
2. Lien.
(a) Continued Effectiveness of this Agreement. The terms of this Agreement,
and the obligations of the Companies arising hereunder, shall not be affected,
modified or impaired in any manner or to any extent by: (i) any amendment or
modification of or supplement to any documents evidencing any of the rights of
the Secured Party, or any instrument or document executed or delivered pursuant
to any of such documents other than this Agreement; (ii) the validity or
enforceability of any of such documents; (iii) any exercise or non-exercise of
any right, power or remedy under or in respect of any of such instruments or
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documents referred to in clause (i) above or in respect of any of the properties
or assets now or hereafter constituting the Collateral, whether or not the
Secured Party shall have had notice or knowledge of any of the foregoing and
whether or not it shall have consented thereto.
(b) Intercreditor Agreement. The terms of this Agreement are subject to the
terms and conditions of (i) the Huntingdon Financing Intercreditor Agreement, as
defined in that certain Amended and Restated Credit Agreement by among the
Companies, the banks, financial institutions and other institutional lenders
named therein and ING (U.S.) Capital LLC, as administrative agent (the "Credit
Agreement"), (ii) the Huntingdon Secured Subordinated Intercreditor Agreement,
as defined in the Credit Agreement and (iii) an Intercreditor Agreement among
the Companies, Secured Party and Xxxxxx Xxxxxxx (collectively, the
"Intercreditor Agreements"). In the event of any conflict between the terms of
this Agreement and the terms of any of the Intercreditor Agreements, the terms
of the Intercreditor Agreements shall govern.
3. Location of Collateral; Location of Books and Records.
The Companies warrant and covenant that each Company's jurisdiction of
organization is as set forth on Schedule 2 and that the Collateral and the books
and records concerning the Collateral are and shall be kept at the locations set
forth on Schedule 2 attached hereto, which may be amended from time to time by
the Companies upon ten (10) days prior written notice to the Secured Party.
4. Title.
Except for the security interest hereby granted in the Collateral and
except for security interests otherwise described in the Intercreditor
Agreement, the Companies have and at all times during the Term (as defined
herein) will retain full title to the Collateral, free and
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clear of any lien, security interest, encumbrance, or claim, and the Companies
will, at their cost and expense, defend any action which may affect the Secured
Party's security interest in, or the Companies' title to, the Collateral. If the
Companies do not make a timely election to undertake the good faith defense of
any action as aforesaid, or if the Companies fail to proceed with the good faith
defense of such action after making such election, then, in either such event,
the Secured Party shall have the right to defend such action at the expense of
the Companies.
5. Financing Statement.
Each Company shall simultaneously execute and file all necessary UCC-1
financing statements in favor of the Secured Party in order for the Secured
Party to perfect and continue its security interest in the Collateral, and each
Company shall pay (or reimburse Secured Party for) the cost of filing fees for
filing the same and shall further execute all other instruments or take all
further actions reasonably deemed necessary by the Secured Party for the
perfection and continuation of its security interest in the Collateral and shall
pay (or reimburse Secured Party for) the cost of filing fees for filing the
same.
6. Property Insurance, Public and Products Liability Insurance.
The Companies shall maintain insurance (a) on all insurable tangible
property against fire, flood, casualty and such other hazards (including,
without limitation, extended coverage, workmen's compensation, boiler and
machinery, with inflation coverage by endorsement) and (b) against public
liability, product liability and business interruption, in each case in such
amounts, with such deductibles and with such insurers as are customarily used by
companies operating in the same industry as the Companies. In the event the
Companies fail to procure or cause to be procured any such insurance or to
timely pay or cause to be paid the premium(s) on any such insurance, Secured
Party may do so for the Companies, but the
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Companies shall continue to be liable for the same and any amounts so advanced
shall be part of the Obligations. The Companies hereby appoint Secured Party as
the Companies' attorney-in-fact, exercisable at Secured Party's option to
endorse any check which may be payable to the Companies in order to collect the
proceeds of such insurance and any amount or amounts collected by Secured Party
pursuant to the provisions of this Section may be applied by Secured Party, in
its sole discretion, to any Obligations or to repair, reconstruct or replace the
loss of or damage to Collateral as Secured Party in its discretion may from time
to time determine. The Companies further covenants that all insurance premiums
owing under its current policies have been paid. The Companies shall notify
Secured Party, immediately, upon the Companies' receipt of a notice of
termination, cancellation, or non-renewal from its insurance company of any such
policy.
7. Representations and Warranties of the Companies.
The Companies hereby jointly and severally represent and warrant that this
Security Agreement is a valid and binding obligation of the Companies and is
enforceable in accordance with its terms. The execution and delivery hereof has
been duly authorized by the Board of Directors of each of the Companies, and
neither the execution nor performance of this Security Agreement will conflict
with any other agreement to which the Companies are a party or by which they are
bound.
8. Term.
This Agreement commenced on the date first set forth above and shall only
terminate upon the payment in full of all of the Obligations. Such period is the
"Term." Upon the termination of this Agreement and the security interest granted
to the Secured Party hereunder, Secured Party shall execute and deliver to the
Companies, at the Companies' expense,
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UCC-3 termination statements and all other documents or instruments and take all
further action necessary to release the Lien and all of Secured Party's rights
in the Collateral.
9. Change of Place of Business.
The Companies shall provide ten (10) days prior written notice to the
Secured Party in the event of any change of any of the Companies' jurisdiction
of organization, principal places of business, or places where the Collateral
and records concerning same are kept.
10. Default.
The Companies shall be in default under this Security Agreement on the
happening and during the continuance of one or more of the events or conditions
defined as an Event of Default in the Notes (each an "Event of Default").
11. Remedies.
(a) Subject to the provisions of the Notes and the Intercreditor
Agreements, upon the occurrence of an Event of Default, the Secured Party shall
give the Companies written notice of occurrence of such Event of Default and an
opportunity to cure such Event of Default within ten (10) days after such
written notice (to the extent such Event of Default is curable). If the
Companies fail to cure such Event of Default within such ten (10) day period,
the Secured Party shall have and may exercise all rights and remedies of a
secured party after default under the Uniform Commercial Code (the "Code"), at
law, in equity or otherwise, with respect to the Collateral, all such rights and
remedies being cumulative, not exclusive and enforceable alternatively,
successively or concurrently.
(b) Subject to the provisions of the Intercreditor Agreements, the Secured
Party shall apply the cash proceeds actually received from any sale or other
disposition
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of the Collateral (i) to the reasonable expenses of retaking, holding, preparing
for sale, selling, leasing and the like, to reasonable attorneys' fees and all
legal, travel and other expenses which may be incurred by the Secured Party in
attempting to collect the Obligations or enforce this Security Agreement or in
the prosecution or defense of any action or proceeding related to the subject
matter of this Security Agreement; and then (ii) to the entire unpaid amount of
the Obligations. The Companies shall remain liable and will pay the Secured
Party on demand any deficiency remaining on the Obligations and the balance of
any expenses unpaid, with any surplus to be paid to MEDIABAY, subject to any
duty of the Secured Party imposed by law to the holder of any subordinate
security interest in the Collateral known to the Secured Party.
12. Power of Attorney.
Subject to the provisions of the Intercreditor Agreements, the Secured
Party or its representative is hereby irrevocably made, constituted and
appointed the true and lawful attorney for the Companies (without requiring it
to act as such) with full power of substitution to do the following during the
continuance of an uncured Event of Default and upon the acceleration of the
Obligations in accordance with the provisions of the Notes (a) endorse the name
of the Companies upon any and all checks, drafts, money orders and other
instruments for the payment of monies that are payable to the Companies and
constitute collections on Collateral; and (b) do such other and further acts and
deeds in the name of the Companies that Secured Party may reasonably deem
necessary or desirable to enforce its rights set forth in Section 11(b) hereof.
13. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial messenger or
courier service, or
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mailed by registered or certified mail (return receipt requested) or sent via
facsimile (with acknowledgment of complete transmission) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
if to the Companies, to:
MediaBay, Inc.
0 Xxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Attn: Chief Financial Officer
with a copy to:
Blank Rome Xxxxxx Xxxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to the Secured Party, to:
Huntingdon Corp.
c/o The Xxxxxxx Company, Inc.
0 Xxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Attn: Mr. Xxxxxx Xxxxxxx
14. Miscellaneous Provisions.
(a) Parties Bound. This Security Agreement shall be binding on and inure to
the benefit of the Parties and their respective successors, assigns,
subsidiaries and affiliates.
(b) Legal Construction. In case any one or more of the provisions contained
in this Security Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any
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other provision hereof and this Security Agreement shall be construed as if such
invalid, illegal, or unenforceable provision had never been contained herein.
Notwithstanding anything to the contrary herein, nothing contained in this
Agreement shall be deemed to restrict, limit, modify, impair, impede or
otherwise affect in any manner any of Secured Party's (including all of its
successors and assigns) rights in, to or under the Notes, it being expressly
understood that Secured Party may enforce all of his rights in, to and under the
Notes without regard to the terms hereof. This Agreement shall solely and
exclusively relate to Secured Party's rights in and to the Collateral, and shall
not extend to any other contractual rights it may have.
(c) Prior Agreements Superseded. Except for the Intercreditor Agreements
and the Note, which agreements shall remain in full force and effect, this
Agreement constitutes the sole and only agreement of the Parties hereto with
respect to the subject matter hereof, and supersedes any prior understandings or
written or oral agreements between the parties, respecting the subject matter
hereof.
(d) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH
STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER
THAN SUCH STATE
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IN WITNESS WHEREOF, the undersigned have executed this Security Agreement
as of the date first above written.
MEDIABAY, INC.
By: _______________________________
Name:
Title:
Audio Book Club, Inc.
By: _______________________________
Name:
Title:
XXXXX XXXXXXX, INC.
By: _______________________________
Name:
Title:
HUNTINGDON CORPORATION
By: _______________________________
Name:
Title:
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SCHEDULE 1
COLLATERAL
The "Collateral" shall include, without limitation, all right, title and
interest in and to all of the following assets and properties:
(a) Contract Rights, Etc. All of the Companies' now owned and hereafter
acquired, created, or arising contract rights, Chattel Paper, Documents
(including documents of title), Instruments, letters of credit and Goods;
(b) General Intangibles. All of the Companies' now owned and hereafter
acquired, created or arising General Intangibles of every kind and description,
including, but not limited, to all existing and future indemnification rights,
rights to commissions, customer lists, choses in action, claims, books, records,
patents and patent applications, copyrights, trademarks, tradenames,
tradestyles, trademark applications, source codes, blueprints, drawings, designs
and plans, trade secrets, contracts, contract rights, license agreements
(including, without limitation, rights to payment under any license agreement),
formulae, tax and any other types of refunds, returned and unearned insurance
premiums, rights and claims under insurance policies including, without
limitation, credit insurance and key man life insurance policies, and computer
information, software, records and data;
(c) Equipment. All of the Companies' now owned and hereafter acquired
Equipment, including, without limitation, machinery, vehicles, furniture and
Fixtures, wherever located, and all replacements, parts, accessories,
substitutions and additions thereto;
(d) Property in Lender's Possession. All real and personal property of the
Companies, now or hereafter in Secured Party's possession;
(e) Investment Property. All of the Companies' now owned or hereafter
acquired Investment Property whether registered or unregistered; and
(f) Notwithstanding anything to the contrary contained in this Schedule 1,
the foregoing shall not include, and the Companies shall not be deemed to have
granted a security interest in, any of the Companies' respective right, title or
interest in, or any rights under, any (i) cash, (ii) all of the Companies' now
owned or hereafter acquired Inventory of every nature and kind, wherever
located, and (iii) all of the Companies' now owned and hereafter acquired,
created, or arising accounts receivable.
(g) The terms used herein to identify all property described in
subparagraphs (a) though (f) shall have the same meaning as are assigned to such
terms as of the date hereof in the Uniform Commercial Code.
SCHEDULE 2
JURISDICTIONS OF ORGANIZATION
LOCATION OF COLLATERAL
1. MediaBay
MediaBay, Inc., a Florida corporation
0 Xxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
2. Subsidiaries
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Subsidiary Address of Principal Office Jurisdiction of Incorporation
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Audio Book Club, Inc. 0 Xxxxxxxxx Xxxxxx Xxxxxxxx
Xxxxx Xxxxxx, XX 00000
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Xxxxx Xxxxxxx, Inc. 0 Xxxxxxxxx Xxxxxx Xxxxxxxx
Xxxxx Xxxxxx, XX 00000
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