EXHIBIT 4.2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made and entered into
effective as of the 28th day of March, 2002, by and between Front Porch Digital,
Inc., a Nevada corporation (the "Pledgor") and Rice Opportunity Fund L.L.C., a
Delaware limited liability company and Irl Xxxxxx (collectively, the "Secured
Party").
WHEREAS, as of even date herewith, Secured Party loaned Pledgor, as
Borrower, an aggregate of $350,000 subject to and in accordance with the terms
and conditions set forth in those certain $250,000 and $100,000 Convertible
Secured Promissory Notes of even date herewith (collectively, the "Note");
WHEREAS, in consideration of Secured Party accepting the Note, the
parties hereto desire to enter into this Agreement to further secure Pledgor's
obligations to Secured Party;
NOW, THEREFORE, for and in consideration of the premises and covenants
set forth herein and other valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. INDEBTEDNESS. The security interest is herein created to secure all
obligations and indebtedness to Secured Party, direct or indirect now existing
or hereafter arising of Pledgor or Borrower owed to Secured Party (hereinafter
referred to as "Indebtedness") under the following:
(a) that certain Convertible Secured Promissory Note, by and
between Pledgor, as Maker, and Rice Opportunity Fund L.L.C., as Payee,
in the original principal amount of $250,000.00, dated effective as of
even date herewith;
(b) that certain Convertible Secured Promissory Note, by and
between Pledgor, as Maker, and Irl Xxxxxx, as Payee, in the original
principal amount of $100,000.00, dated effective as of even date
herewith
(c) any further loans which may be made by Secured Party to
Pledgor, together with all other direct, indirect, contingent, primary
or secondary indebtedness of any character now or hereafter owing or to
be owing by Pledgor to Secured Party, regardless of how evidenced or
incurred, it being contemplated that Pledgor may become further
indebted to Secured Party in the future;
(d) all other sums recoverable by the Secured Party and all other
obligations of Pledgor or Borrower under the provisions of the above
Note, this Agreement, and/or any other instrument securing or relating
to the Indebtedness, whether presently existing or hereinafter entered
into (the "Loan Documents"); and
(e) any and all of the covenants, warranties, representations and
other obligations (other than to repay the Indebtedness) made or
undertaken by Pledgor under the Loan Documents (the "Obligations").
2. AGREEMENT AND COLLATERAL. For value received and acknowledged,
Pledgor hereby grants to Secured Party a security interest (hereinafter
"Security Interest") in the property wherever located including, without
limitation, all Collateral located at (i) 00000 Xxxxxxx Xxx, Xxxxx 000, Xx.
Xxxxxx, Xxx Xxxxxx 00000 and (ii) 0000 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxx 00000 and
(iii) any other location leased, owned, operated or used by Pledgor
(collectively, the "Premises") (hereinafter collectively referred to as
"Collateral"), to-wit:
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(a) all fixtures, furniture, leasehold improvements, appliances,
furnishings, materials, supplies, equipment, goods, machinery, general
intangibles, money, accounts, inventory, rental and lease agreements,
rental and/or lease accounts receivable, and all other personal
property of any kind whatsoever (and the proceeds therefrom) now owned
or hereafter acquired by Pledgor or its successors or assigns, wherever
located or attached to, installed in, used in connection with or
arising out of the Pledgor's business at the Premises (the "Business");
(b) all plans, specifications, and drawings relating to the Business;
(c) all contracts, contract rights, permits, licenses, deposits, bonds,
franchises, certificates, rights and privileges relating to the
Business; (d) all general intangibles relating to the Business,
including patents, patent rights, domain names, trademarks, trademark
rights, trade names, trade name rights, service marks, copyrights, and
any applications for any of the foregoing, maskworks, net lists,
schematics, industrial models, inventions, technology, know-how, trade
secrets, inventory, ideas, algorithms, processes, computer software
programs or applications (in both source code and object code form),
and tangible or intangible proprietary information or material; (e) all
rentals, deposits and other sums as may become due Pledgor as lessor
under any and all leases, rental contracts, written or verbal, with
respect to the Business; (f) deposits for taxes, insurance, licenses,
permits or otherwise, made under any instrument securing payment of
indebtedness of Pledgor to Secured Party; (g) all claims and proceeds,
including without limitation, all condemnation or insurance proceeds,
arising out of or with respect to the Business or the lease of the
Premises; (h) all replacements, betterments, substitutions and renewals
of, and additions to, any of the Collateral; and (i) all proceeds of
the Collateral.
(b) Pledgor agrees that the security interest granted herein shall
continue in all Collateral until any and all indebtedness owing to
Secured Party by Pledgor hereunder shall be satisfied in full,
notwithstanding any payment in part or in full by Pledgor on account of
any individual item of Collateral or inventory.
(c) So long as Pledgor is not in default under this Agreement,
Pledgor may rent, lease, sell or exchange the Collateral or any part
thereof to others in the ordinary course of Pledgor's Business.
3. PLEDGOR'S WARRANTIES, COVENANTS AND FURTHER AGREEMENTS. Pledgor
hereby warrants, covenants and agrees that:
(a) TITLE AND AUTHORITY. Pledgor has authority to execute and
deliver this Agreement and Pledgor will, during the term of this
Agreement, at Pledgor's cost, keep the Collateral free from other
liens, security interests, encumbrances or claims, and timely service
any and all other indebtedness in connection with the Collateral, and
defend any action which may affect the Security Interest and Pledgor's
title to the Collateral. This Agreement and any account, instrument or
document which is, or shall be, included in the Collateral is, and
shall be, genuine and legally enforceable and free from any setoff,
counterclaim or defense.
(b) FINANCING STATEMENT. Except as provided to Secured Party, no
financing statement covering the Collateral or any part or proceeds
thereof is on file in any public office with the exception of financing
statements filed on behalf of or in favor of Secured Party, and, at
Secured Party's request, Pledgor will join in executing all such other
assignments, certificates, supplemental writings and powers, financing
statements and other instruments deemed necessary by Secured Party to
evidence and perfect the Security Interest.
(c) ASSIGNMENT. Except as specifically provided herein, Pledgor
will not process, sell, pledge, encumber, hypothecate, assign, lease or
otherwise dispose of all or any part of the
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Collateral without the express written consent of Secured Party.
Secured Party may assign or transfer all or part of its rights in, and
obligations, if any, under the Indebtedness, the Collateral and this
Agreement.
(d) MAINTENANCE. Pledgor will preserve the Collateral (at Pledgor's
own risk of loss), and will not waste, destroy, allow to deteriorate,
or materially modify the Collateral, or release any party liable
thereon. Pledgor will not exercise, or cause to be exercised, any
voting rights with regard to the Collateral, without the prior written
consent of Secured Party, if the direct or indirect effect of such vote
results in a adverse change to the Collateral or property in which the
Collateral evidences a legal or beneficial interest. Pledgor will not
allow the Collateral to be used in violation of any statute or
ordinance. Secured Party, or its agents, will have the right to
examine, audit, inspect and copy, as the case may be, any books or
records pertaining to the Collateral (which Pledgor agrees to keep in
an accurate and complete form, reflecting the assignment, if any, of
accounts hereunder) at any time. Upon demand, Pledgor shall furnish
reports, data and financial statements, including audits by certified
public accountants, in respect of the Collateral and Pledgor's business
and financial condition, as Secured Party may reasonably require.
Pledgor will pay promptly when due all taxes and assessments on the
Collateral or for its use and operation and all costs, expenses and
insurance premiums necessary to preserve, protect, maintain and collect
the Collateral. Upon the failure or refusal of Pledgor to do any of the
foregoing after demand, Secured Party may, at its option, discharge
such costs, expenses, and premiums for the preservation of the
Collateral, and all sums so expended shall be part of the Indebtedness.
(e) ADDITIONAL PROPERTY. The Collateral includes all proceeds,
upgrades, improvements, fixes, increases, substitutions, products,
fixtures, accessories and attachments thereof including, without
limitation, all securities, subscription rights, dividends, or other
property or benefits which Pledgor is entitled to receive on account of
Pledgor's right, title, and interest in the Collateral; and equipment,
tools, parts and accessories used in connection therewith; and goods
covered by chattel paper, accounts or other items of the Collateral.
The Collateral also includes all money or property of Pledgor in
Secured Party's possession, held for, or owed to Pledgor; Secured Party
being granted herein the right to set off such money and property
against the Indebtedness after default and the failure of any party
obligated thereon to cure such default within any applicable grace
period. Upon demand, Pledgor will immediately deliver to Secured Party
all additional property, including any title and/or certificates of
ownership, if appropriate, upon receipt by Pledgor, with proper
instruments of transfer and assignment, if possession by Secured Party
is necessary to perfect Secured Party's interest or if otherwise
required pursuant to this Agreement.
(f) NOTICE OF CHANGES. Pledgor will immediately notify Secured
Party of any change occurring in or to the Collateral, of a change in
Pledgor's residence, or in any fact or circumstances warranted or
represented by Pledgor to Secured Party, or if any event of default
hereunder or under the Loan Documents occurs.
(g) REIMBURSEMENT. Pledgor shall reimburse Secured Party for
Secured Party's reasonable expenses and costs incurred in connection
with the Collateral inspections, costs incurred with audit and
verification of rental contracts, rental leases, or other rental or
lease agreements, and collection and administration costs (including
reasonable attorneys' fees).
4. RIGHTS OF SECURED PARTY. Pledgor hereby appoints Secured Party as
Pledgor's attorney-in-fact to do any act which rights, voting and otherwise, of
Pledgor in the Collateral (including, but not limited to, the right to receive,
on behalf of Pledgor, any and all payments due Pledgor by virtue of Pledgor's
ownership interest in and to the Collateral), and to do all things deemed
reasonably necessary by
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Secured Party to perfect the Security Interest and preserve, collect, enforce
and protect the Collateral and any insurance proceeds hereunder, all at
Pledgor's cost and without any obligation on Secured Party to so act, including,
but not limited to, transferring title into the name of Secured Party, or its
nominee, or receipting for, settling, or otherwise realizing upon the
Collateral. Secured Party may, in its discretion, require Pledgor to give
possession or control of the Collateral to Secured Party; endorse as Pledgor's
agent any instruments, documents, or accounts in the Collateral, contact account
debtors directly to verify or collect accounts; take control of the Collateral
or proceeds thereof, and use cash proceeds to reduce any part of the
Indebtedness; it being understood that Secured Party shall not be responsible
for any depreciation in value of the Collateral or for preservation of any
rights against prior parties. The foregoing rights and powers of Secured Party
shall be in addition to, and not a limitation upon, any rights and powers of
Secured Party given herein or by law, custom, or otherwise.
The two Notes described in SECTION 1 above and the rights of the two
Secured Parties and Xxxxxx shall be equivalent and treated PARI PASSU for all
purposes and in accordance with an intercreditor agreement by and between the
two Secured Parties of even date herewith.
5. EVENTS OF DEFAULT. Pledgor shall be in default under this Agreement
upon the happening of any of the following events or conditions:
(a) Default in the timely payment or performance of any obligation,
covenant or agreement contained within the Indebtedness and/or any
agreement securing the Indebtedness, and/or the Loan Documents, or
otherwise made or owed to Secured Party;
(b) If any warranty, representation, or statement knowingly made to
Secured Party in the Loan Documents or made on behalf of Pledgor proves
to have been false in any material respect when made;
(c) Any event which results in the acceleration of the maturity of
any indebtedness of Pledgor to others under any indenture, agreement or
undertaking;
(d) Adverse material change in any fact warranted or represented in
this Agreement;
(e) Constructive or actual sale, loss, theft, destruction,
encumbrance, or uninsured damage to any of the Collateral;
(f) Upon the insolvency, or business failure of Pledgor; the
appointment of a receiver for any part of the Collateral; the
commission of an act of bankruptcy, assignment for the benefit of
creditors or the commencement of any proceeding under any bankruptcy or
insolvency law by or against Pledgor, any entity of which Pledgor is a
general partner or principal, or any maker, guarantor, or other person
liable upon or for any part of the Indebtedness or Collateral;
(g) Levy on, seizure, or attachment of all or part of the
Collateral;
(h) Judgment in excess of $50,000.00 against Pledgor which remains
unpaid for ten (10) days; or
(i) Any time Secured Party reasonably believes the prospect of
payment of all or part of the Indebtedness or the performance of this
Agreement or any of the Loan Documents are materially impaired.
6. REMEDIES OF SECURED PARTY. When an event of default occurs and such
default has not been cured within any applicable grace period, and at any time
thereafter, Secured Party may declare all
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or a part of the Indebtedness immediately due and payable and may proceed to
enforce payment of same and to exercise any and all of the rights and remedies
provided by the Uniform Commercial Code as codified under the laws of the States
of Texas or New Jersey, as the case may be (hereinafter referred to as the
"Code") as well as all other rights and remedies possessed by Secured Party
under this Agreement or otherwise at law or in equity, Pledgor understands that
sales of Collateral hereunder may be restricted by the requirement of the
obtaining of certain consents to such transactions and that private sales of the
Collateral or sales in other transactions may be necessary, which sales Pledgor
recognizes as commercially reasonable. Secured Party may require Pledgor to
assemble the Collateral and make it available to Secured Party at any place
designated by Secured Party that is reasonably convenient to both parties. For
purposes of the notice requirements of the Code, Secured Party and Pledgor agree
that notice given at least five (5) days prior to the related action hereunder
is reasonable. Secured Party shall be entitled to immediate possession of the
Collateral and all books and records evidencing same and shall have authority to
enter upon any premises upon which said items may be situated and remove same
therefrom. Expenses of retaking, holding, preparing for sale, selling, or the
like, shall include without limitation, Secured Party's reasonable attorneys'
fees and all such expenses shall be recovered by Secured Party before applying
the proceeds from the disposition of the Collateral toward the Indebtedness. To
the extent allowed by the Code, Secured Party may use its discretion in applying
the proceeds of any disposition of the Collateral. Secured Party shall account
to Pledgor for any surplus remaining after the disposition of the Collateral.
All rights and remedies of Secured Party hereunder are cumulative and may be
exercised singularly or concurrently. The exercise of any right or remedy will
not be a waiver of any other.
Without declaring the Note terminated, Secured Party may enter upon the
Pledgor's property located at the Premises and take possession of such property,
by picking or changing locks if necessary, and lockout, expel or remove Pledgor
and any other person whom may be occupying all or any part of such premises
without being liable for any claim for damages, and do whatever Pledgor is
obligated to do under any and all agreements, including without limiting the
generality of the foregoing, the lease agreement covering such premises, and
Pledgor agrees to reimburse Secured Party on demand for any expenses which
Secured Party may incur in effecting compliance with Pledgor's obligations under
such lease; further, Pledgor agrees that Secured Party shall not be liable for
any damages resulting to Pledgor from effecting compliance with Pledgor's
obligations under such lease caused by the negligence of Secured Party or
otherwise; further, Pledgor agrees that Secured Party may hold, lease, manage,
operate or otherwise use or permit the use of the leased premises, the
Collateral, and Pledgor's business, either by itself or by other persons, firms
or entities, in such manner, for such time and upon such other terms as Secured
Party may deem prudent under the circumstances (making such repairs,
alterations, additions and improvements thereto and taking such other action
from time to time as Secured Party shall deem necessary or desirable), and apply
all monies collected from such acts to the obligations arising under the
Indebtedness, after first deducting Secured Party's costs and expenses in
connection with such acts, including without limitation, reasonable fees and
operating charges in connection with the operation and maintenance of the
Pledgor's business.
7. GENERAL.
(a) RIGHTS AS TO CHATTEL PAPER OF INSTRUMENTS. With respect to
chattel paper or instruments which are a part of the Collateral,
Secured Party without notice to Pledgor, shall have the right at any
time and from time to time to notify and direct the account debtor or
obligor thereon to thereafter make all payments on such Collateral
directly to Secured Party, regardless of whether Pledgor was previously
making collections thereon, and with respect to such instruments which
are stock certificates, bonds, or other securities, Secured Party shall
have the authority, without notice to Pledgor, either to have them
registered in Secured Party's name, or in the name of a nominee;
provided, however, notwithstanding the foregoing, Secured Party shall
not have the right, prior to default, to have transferred into itself
or its nominee any equity security (as defined
in Rule 13D-1(d) of the General Rules and Regulations under the
Securities Exchange Act of 1934 or any successor thereto) comprising
the Collateral or any part thereof. With or without such registration,
Secured Party shall have the authority to demand of the corporate
obligor issuing the same, and receipt for, any and all dividends and
other distributions payable in respect thereof, regardless of the
medium in which paid and whether they are ordinary or extraordinary.
Each account debtor and obligor making payment to Secured Party
hereunder shall be fully protected in relying on the written statement
of Secured Party that it then holds a secured interest which entitles
it to receive such payment and the receipt of Secured Party for such
payment shall be full acquittance therefor to the one making such
payment.
(b) DILIGENCE BY SECURED PARTY. Secured Party shall never be liable
for its failure to use due diligence in the collection of the
Indebtedness, or any part thereof, or for its failure to give notice to
Pledgor of default in the payment of the Indebtedness, or any part
thereof, or in the payment of, or upon any security, whether pledged
hereunder or otherwise. Secured Party shall have no duty to fix or
preserve rights against prior parties to the Collateral, and shall
never be liable to use diligence in collecting any amount payable with
respect to the Collateral, but shall be liable only to account to
Pledgor for what it may actually collect or receive thereon. Without
limiting the generality of the immediately preceding sentence, it is
specifically understood and agreed that Secured Party shall have no
responsibility for ascertaining any maturities, calls, conversions,
exchanges, offers, tenders, or similar matters relating to any of the
Collateral or for informing Pledgor with respect to any of such matters
(irrespective of whether Secured Party actually has, or may be deemed
to have, knowledge thereof). Secured Party shall not be required to
take any steps or actions with regard to the Collateral as may be
requested or authorized by Pledgor unless (i) Secured Party shall
determine, in its sole and absolute discretion, that such steps or
actions will not adversely affect the value as Collateral of the
Collateral, and (ii) such request or authorization by Pledgor is made
in writing and is actually received by Secured Party. The foregoing
provisions of this paragraph shall be fully applicable to all stock
certificates, bonds, or other securities held in pledge hereunder,
irrespective of whether Secured Party may or may not have exercised any
right under SECTION 7(a) above, to have such stock certificates, bonds,
or other securities registered in its name or in the name of a nominee.
(c) MODIFICATION OF LOANS. Concerning the Indebtedness, Secured
Party, in its discretion, without in any manner impairing its rights
and powers hereunder, may, at any time and from time to time, without
further consent of or notice to Pledgor, and with or without valuable
consideration, (i) renew or extend the maturity of or accept partial
payments upon the Indebtedness or any part thereof; (ii) release any
person primarily or secondarily liable in respect thereof; (iii) alter
in any manner that Secured Party may elect the terms of any instrument
evidencing the Indebtedness or any part thereof either as to the
maturity thereof, rate of interest, method of payment, parties thereto
or otherwise; (iv) renew, extend or accept partial payments upon,
release or permit substitutions for or withdrawals of, any security
(other than the Collateral) at anytime directly or indirectly,
immediately or remotely, securing the payment of the Indebtedness or
any part thereof; and (v) release or pay to any person entitled to
receive any amount paid or payable in respect of any direct or indirect
security for the Indebtedness, or any part thereof.
(d) EFFECT OF SECURITIES LAWS. Because of the Securities Act of
1933, as amended, or any other laws or regulations, there may be legal
restrictions or limitations affecting Secured Party in any attempts to
dispose of certain portions of the Collateral in the enforcement of its
rights and remedies hereunder. For these reasons Secured Party is
hereby authorized by Pledgor but not obligated, in the event of any
default hereunder giving rise to Secured Party's rights to sell or
otherwise dispose of the Collateral, to sell all or any part of the
Collateral at private sale, subject to investment letter or in any
other manner which will not require the Collateral, or any
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part thereof, to be registered in accordance with the Securities Act of
1933, as amended, or the Rules and Regulations promulgated thereunder,
or any other law, regulation, at the best price reasonably obtainable
by Secured Party at any such private sale or other disposition in the
manner mentioned above. Secured Party is also authorized by Pledgor,
but not obligated, to take such actions, give such notices, obtain such
consents, and do such other things as Secured Party may deem required
or appropriate in the event of the sale or disposition of any of the
Collateral. Pledgor clearly understands that Secured Party may in its
discretion approach a restricted number of potential purchasers and
that a sale under such circumstances may yield a lower price for the
Collateral, or any part or parts thereof, than would otherwise be
obtainable if same were registered and sold in the open market. Pledgor
agrees (i) that in the event Secured Party shall, upon any default
hereunder sell the Collateral, or any part thereof, at such private
sale or sales, Secured Party shall have the right to rely upon the
advice and opinion of any member firm of a national securities exchange
as to the best price reasonably obtainable upon such private sale
thereof, and (ii) that such reliance shall be conclusive evidence that
Secured Party handled such matter in a commercially reasonable manner
under the Code.
(e) WAIVER BY SECURED PARTY. No waiver by Secured Party of any
right hereunder or of any default by Pledgor shall be binding upon
Secured Party unless in writing. Failure or delay by Secured Party to
exercise any right hereunder or waiver of any default of Pledgor shall
not operate as a waiver of any other right, or further exercise of such
right, or of any further default.
(f) PARTIES BOUND. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors,
receivers, trustees and assigns. All representations and warranties and
agreements of Pledgor are joint and several. This Agreement shall
constitute a continuing agreement, applying to all future as well as
existing transactions, such future transactions being contemplated by
Pledgor and Secured Party.
(g) LAW TO APPLY. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE CODE (THE DEFINITIONS OF WHICH APPLY HEREIN) AND OTHER
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA AND IS FULLY
PERFORMABLE IN XXXX COUNTY, ILLINOIS.
(h) NOTICE. Any notice, tender, report, or delivery to be given
under this Agreement shall be conclusively deemed received if in
writing and either (i) personally delivered, or in the alternative,
(ii) upon deposit in the United States Mail, postage prepaid, certified
or registered, return receipt requested, to the addresses of the
parties hereto as set forth on the signature page hereof, or at such
other addresses as the parties hereto may, in writing, direct in
accordance herewith.
(i) MODIFICATIONS. This Agreement shall not be amended in any way
except by a written agreement signed by the parties hereto.
(j) SEVERABILITY. The unenforceability of any provision of this
Agreement shall not affect the enforceability or validity of any other
provision hereof.
(k) CONSTRUCTION. If there is any conflict between the provisions
hereof and the provisions of the Indebtedness, the latter shall
control. The captions herein are for convenience of reference only and
not for definition or interpretations of any substantive matters
herein.
(l) AMBIGUITIES. In the event it shall be determined that there is
any ambiguity contained herein, said ambiguity shall not be construed
against either party hereto as a result of
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such party's preparation of or amendments to this Agreement, but shall
be entered in favor or against either of the parties hereto in light of
all the facts, circumstances and intentions of the parties at the time
this Agreement comes into effect.
(m) WAIVER OF PLEDGOR. Except as expressly set forth in the
Indebtedness or herein, Pledgor hereby waives presentment, demand,
notice of dishonor, grace, protest, notice of protest, notice of
intention to accelerate, and notice of acceleration, and all other
notices with respect to collection, or acceleration of maturity, of the
Collateral and Indebtedness.
(n) FILING AS FINANCING STATEMENT. Secured Party shall have the
right, at any time, to execute and file this Agreement as a financing
statement, but the failure of Secured Party to do so shall not impair
the validity or enforceability of this Agreement.
(o) ADDITIONAL TERMS. All annexes and schedules attached hereto, if
any, are hereby made a part hereof by reference.
(p) REMEDIES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees, costs, and necessary
disbursements in addition to any other relief to which such party may
be entitled.
(q) USURY. It is the intention of the Secured Party, the Pledgor
and any holder of this Agreement to conform strictly to the usury laws
of the state whose laws have application to this Agreement and the
transactions contemplated herein. All agreements between the Pledgor
and Secured party whether now existing or hereafter arising and whether
written or oral, are hereby expressly limited so that, in no
contingency or event whatsoever, shall the amount paid, or agreed to be
paid, to the Secured Party for the use, forbearance, or detention of
the money to be loaned hereunder or otherwise or for the payment or
performance of any covenant or obligation contained herein or in any
other document evidenced hereby, exceed the maximum amount permissible
under applicable law. If from any circumstances whatsoever, fulfillment
of any provision hereof or of any other document at the time
performance of such provision shall be due, shall involve transcending
the limit of validity prescribed by law, then IPSO FACTO, the
obligation shall be reduced to the limit of such validity in the
following sequence: First, all sums paid or agreed to be paid by the
Pledgor for the use, forbearance or detention of the indebtedness of
the Pledgor to the Secured Party shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread
throughout the full state term of such indebtedness until payment in
full so that the actual effective rate of interest contracted for,
collected or charged on account of such indebtedness is not greater
than the maximum lawful rate of interest during the full term of the
indebtedness; and Second, to the extent that, after application of the
preceding "First" step, there shall ever be an amount deemed to be
interest by applicable law which shall exceed the highest lawful rate,
such amount which would be excessive interest shall be applied to the
reduction of the principal indebtedness of the Pledgor to the Secured
Party, and not to the payment of interest. If such excessive interest
exceeds the unpaid balance of principal hereof and such other
indebtedness (if any), the excess shall be refunded to the Pledgor. The
terms and provision of this paragraph shall control and supersede every
other provision of all agreements between the Pledgor and the Secured
Party applicable to the contracting for, collecting and charging of
interest.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
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SECURED PARTY:
RICE OPPORTUNITY FUND, L.L.C.
a Delaware limited liability company
By: Minamax LLC, Managing Member
By: /S/ XXXX X. XXXX
--------------------------------------
Xxxx X. Xxxx, Managing Member
Address: 000 Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
/S/ IRL XXXXXX
-----------------------------------------
IRL XXXXXX
Address: Irl Xxxxxx
c/o Xxxxxx X. Xxxxxxx
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
PLEDGOR:
FRONT PORCH DIGITAL, INC.,
a Nevada corporation
By: /S/ XXXXXX XXXXX
--------------------------------------
Name: XXXXXX XXXXX
------------------------------------
Title: CHIEF EXECUTIVE OFFICER
----------------------------------
Address: 00000 Xxxxxxx Xxx, Xxxxx 000
Xx. Xxxxxx, Xxx Xxxxxx 00000
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