SECURITY AGREEMENT
EXECUTED
COPY
This
SECURITY AGREEMENT, dated as of September 22, 2005 (the “Agreement”)
is by
and among American United Global, Inc., a corporation duly organized and validly
existing under the laws of the State of Delaware (the “Company”),
the
Purchasers identified on the signature pages hereto (each, a “Purchaser”
and
collectively, the “Purchasers”)
and
Iroquois Master Fund Ltd., as agent for the Purchasers (in such capacity,
together with its successors in such capacity, the “Purchaser
Representative”).
The
Company and each of the Purchasers are parties to a Securities Purchase
Agreement dated as of September 21, 2005 (as modified and supplemented and
in
effect from time to time, the “Purchase
Agreement”),
that
provides, subject to the terms and conditions thereof, for the issuance and
sale
by the Company to each of the Purchasers, severally and not jointly, Notes
and
Common Stock as more fully described in the Purchase Agreement.
To
induce
each of the Purchasers to enter into the Purchase Agreement, and for other
good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company has agreed to pledge and grant a security interest
in
the Collateral (as hereinafter defined) as security for the Secured Obligations
(as hereinafter defined). Accordingly, the parties hereto agree as
follows:
Section
1. Definitions.
Each
capitalized term used herein and not otherwise defined shall have the meaning
assigned to such term in the Purchase Agreement. In addition, as used
herein:
“Accounts”
shall
have the meaning ascribed thereto in Section 3(d) hereof.
“Business”
shall
mean the businesses from time to time, now or hereafter, conducted by the
Company and its Subsidiaries.
“Collateral”
shall
have the meaning ascribed thereto in Section 3 hereof.
“Copyright
Collateral”
shall
mean all Copyrights, whether now owned or hereafter acquired by the Company,
that are associated with the Business.
“Copyrights”
shall
mean all copyrights, copyright registrations and applications for copyright
registrations, including, without limitation, all renewals and extensions
thereof, the right to recover for all past, present and future infringements
thereof, and all other rights of any kind whatsoever accruing thereunder or
pertaining thereto.
“Documents”
shall
have the meaning ascribed thereto in Section 3(j) hereof.
“Equipment”
shall
have the meaning ascribed thereto in Section 3(h) hereof.
“Event
of Default”
shall
have the meaning ascribed thereto in Section 8 of the Notes.
“Excluded
Collateral”
shall
mean the assets of the Company which secure the Permitted Indebtedness and
the
assets listed on Annex
2
hereto.
“Instruments”
shall
have the meaning ascribed thereto in Section 3(e) hereof.
“Intellectual
Property”
shall
mean, collectively, all Copyright Collateral, all Patent Collateral and all
Trademark Collateral, together with (a) all inventions, processes, production
methods, proprietary information, know-how and trade secrets used or useful
in
the Business; (b) all licenses or user or other agreements granted to the
Company with respect to any of the foregoing, in each case whether now or
hereafter owned or used including, without limitation, the licenses or other
agreements with respect to the Copyright Collateral, the Patent Collateral
or
the Trademark Collateral; (c) all customer lists, identification of suppliers,
data, plans, blueprints, specifications, designs, drawings, recorded knowledge,
surveys, manuals, materials standards, processing standards, catalogs, computer
and automatic machinery software and programs, and the like pertaining to the
operation by the Company of the Business; (d) all sales data and other
information relating to sales now or hereafter collected and/or maintained
by
the Company that pertain to the Business; (e) all accounting information which
pertains to the Business and all media in which or on which any of the
information or knowledge or data or records which pertain to the Business may
be
recorded or stored and all computer programs used for the compilation or
printout of such information, knowledge, records or data; (f) all licenses,
consents, permits, variances, certifications and approvals of governmental
agencies now or hereafter held by the Company pertaining to the operation by
the
Company and its Subsidiaries of the Business; and (g) all causes of action,
claims and warranties now or hereafter owned or acquired by the Company in
respect of any of the items listed above.
“Inventory”
shall
have the meaning ascribed thereto in Section 3(f) hereof.
“Issuers”
shall
mean, collectively, the respective entities identified on Annex
1
hereto,
and all other entities formed by the Company or entities in which the Company
owns or acquires any capital stock or similar interest.
“Lien”
shall
mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, easement or encumbrance,
or
preference, priority or other security agreement or preferential arrangement
of
any kind or nature whatsoever (including any lease or title retention agreement,
any financing lease having substantially the same economic effect as any of
the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest under the Uniform Commercial Code or comparable
law of any jurisdiction).
“Motor
Vehicles”
shall
mean motor vehicles, tractors, trailers and other like property, whether or
not
the title thereto is governed by a certificate of title or
ownership.
“Patent
Collateral”
shall
mean all Patents, whether now owned or hereafter acquired by the Company that
are associated with the Business.
“Patents”
shall
mean all patents and patent applications, including, without limitation, the
inventions and improvements described and claimed therein together with the
reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof, all income, royalties, damages and payments
now
or hereafter due and/or payable under and with respect thereto, including,
without limitation, damages and payments for past or future infringements
thereof, the right to xxx for past, present and future infringements thereof,
and all rights corresponding thereto throughout the world.
“Permitted
Indebtedness”
shall
mean the Company’s existing indebtedness, liabilities and obligations as
disclosed on Annex
5
hereto
and any future capitalized leases, purchase money indebtedness and the
Notes.
“Pledged
Stock”
shall
have the meaning ascribed thereto in Section 3(a) hereof.
“Real
Estate”
shall
have the meaning ascribed thereto in Section 3(l) hereof.
“Secured
Obligations”
shall
mean, collectively, (a) the principal of and interest on the Notes issued or
issuable (as applicable) by the Company and held by the applicable Purchaser
and
all other amounts from time to time owing to such Purchasers by the Company
under the Purchase Agreement and the Notes and (b) all obligations of the
Company to such Purchasers thereunder.
“Stock
Collateral”
shall
mean, collectively, the Collateral described in clauses (a) through (c) of
Section 3 hereof and the proceeds of and to any such property and, to the extent
related to any such property or such proceeds, all books, correspondence, credit
files, records, invoices and other papers.
“Trademark
Collateral”
shall
mean all Trademarks, whether now owned or hereafter acquired by the Company,
that are associated with the Business. Notwithstanding the foregoing, the
Trademark Collateral does not and shall not include any Trademark which would
be
rendered invalid, abandoned, void or unenforceable by reason of its being
included as part of the Trademark Collateral.
“Trademarks”
shall
mean all trade names, trademarks and service marks, logos, trademark and service
xxxx registrations, and applications for trademark and service xxxx
registrations, including, without limitation, all renewals of trademark and
service xxxx registrations, all rights corresponding thereto throughout the
world, the right to recover for all past, present and future infringements
thereof, all other rights of any kind whatsoever accruing thereunder or
pertaining thereto, together, in each case, with the product lines and goodwill
of the business connected with the use of, and symbolized by, each such trade
name, trademark and service xxxx.
“Uniform
Commercial Code”
or
“UCC”
shall
mean the Uniform Commercial Code as in effect in the State of New York from
time
to time.
Section
2. Representations
and Warranties.
The
Company represents and warrants to each of the Purchasers that:
| a. |
the
Company is the sole beneficial owner of the Collateral and no Lien
exists
or will exist upon any Collateral at any time (and, with respect
to the
Stock Collateral, no right or option to acquire the same exists in
favor
of any other Person) and the pledge and security interest in favor
of each
of the Purchasers created or provided for herein which pledge and
security
interest constitutes a first priority perfected pledge and security
interest in and to all of the Collateral (except such Collateral
as may be
subject to a Permitted Lien, in which case, a second priority perfected
security interest), assuming applicable financing statements are
been duly
and properly filed (other than Intellectual Property registered or
otherwise located outside of the United States of
America);
|
| b. |
the
Pledged Stock directly or indirectly owned by the Company in the
entities
identified in Annex
1
hereto is, and all other Pledged Stock, whether issued now or in
the
future, will be, duly authorized, validly issued, fully paid and
nonassessable, free and clear of all Liens and none of such Pledged
Stock
is or will be subject to any contractual restriction, preemptive
and
similar rights, or any restriction under the charter or by-laws of
the
respective Issuers of such Pledged Stock, upon the transfer of such
Pledged Stock (except for any such restriction contained
herein);
|
| c. |
the
Pledged Stock directly or indirectly owned by the Company in the
entities
identified in Annex
1
hereto constitutes all of the issued and outstanding shares of capital
stock of any class of such Issuers beneficially owned by the Company
on
the date hereof (whether or not registered in the name of the Company)
and
said Annex
1
correctly identifies, as at the date hereof, the respective Issuers
of
such Pledged Stock;
|
| d. |
the
Company owns and possesses the right to use, and has done nothing
to
authorize or enable any other Person to use, all of its Copyrights,
Patents and Trademarks, and all registrations of its material Copyrights,
Patents and Trademarks are valid and in full force and effect. Except
as
may be set forth in said Annex
3,
the Company owns and possesses the right to use all material Copyrights,
Patents and Trademarks, necessary for the operation of the
Business;
|
| e. |
to
the Company’s knowledge, (i) except as set forth in Annex
3
hereto, there is no violation by others of any right of the Company
with
respect to any material Copyrights, Patents or Trademarks, respectively,
and (ii) the Company is not, in connection with the Business, infringing
in any respect upon any Copyrights, Patents or Trademarks of any
other
Person; and no proceedings have been instituted or are pending against
the
Company or, to the Company’s knowledge, threatened, and no claim against
the Company has been received by the Company, alleging any such violation,
except as may be set forth in said Annex
3;
|
| f. |
the
Company does not own any material Trademarks registered in the United
States of America to which the last sentence of the definition of
Trademark Collateral applies; and
|
Section
3. Collateral.
As
collateral security for the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the Secured Obligations, the Company
hereby pledges, grants, assigns, hypothecates and transfers to the Purchaser
Representative on behalf of the Purchasers as hereinafter provided, a security
interest in and Lien upon all of the Company’s right, title and interest in, to
and under all personal property and other assets of the Company, whether now
owned or hereafter acquired by or arising in favor of the Company, whether
now
existing or hereafter coming into existence, whether owned or consigned by
or to
the Company, or leased from or to the Company and regardless of wherever
located, except for the Excluded Collateral, (all being collectively referred
to
herein as “Collateral”)
including:
| a. |
the
Company’s direct or indirect ownership interest in the respective shares
of capital stock of the Issuers and all other shares of capital stock
of
whatever class of the Issuers, now or hereafter owned by the Company,
together with in each case the certificates evidencing the same
(collectively, the “Pledged
Stock”);
|
| b. |
all
shares, securities, moneys or property representing a dividend on
any of
the Pledged Stock, or representing a distribution or return of capital
upon or in respect of the Pledged Stock, or resulting from a split-up,
revision, reclassification or other like change of the Pledged Stock
or
otherwise received in exchange therefor, and any subscription warrants,
rights or options issued to the holders of, or otherwise in respect
of,
the Pledged Stock;
|
| c. |
without
affecting the obligations of the Company under any provision prohibiting
such action hereunder or under the Purchase Agreement or the Notes,
in the
event of any consolidation or merger in which any Issuer is not the
surviving corporation, all shares of each class of the capital stock
of
the successor corporation (unless such successor corporation is the
Company itself) formed by or resulting from such consolidation or
merger
(the Pledged Stock, together with all other certificates, shares,
securities, properties or moneys as may from time to time be pledged
hereunder pursuant to clause (a) or (b) above and this clause (c)
being
herein collectively called the “Stock
Collateral”);
|
| d. |
all
accounts and general intangibles (each as defined in the Uniform
Commercial Code) of the Company constituting any right to the payment
of
money, including (but not limited to) all moneys due and to become
due to
the Company in respect of any loans or advances for the purchase
price of
Inventory or Equipment or other goods sold or leased or for services
rendered, all moneys due and to become due to the Company under any
guarantee (including a letter of credit) of the purchase price of
Inventory or Equipment sold by the Company and all tax refunds (such
accounts, general intangibles and moneys due and to become due being
herein called collectively “Accounts”);
|
| e. |
all
instruments, chattel paper or letters of credit (each as defined
in the
Uniform Commercial Code) of the Company evidencing, representing,
arising
from or existing in respect of, relating to, securing or otherwise
supporting the payment of, any of the Accounts, including (but not
limited
to) promissory notes, drafts, bills of exchange and trade acceptances
(herein collectively called “Instruments”);
|
| f. |
all
inventory (as defined in the Uniform Commercial Code) of the Company
and
all goods obtained by the Company in exchange for such inventory
(herein
collectively called “Inventory”);
|
| g. |
all
Intellectual Property and all other accounts or general intangibles
of the
Company not constituting Intellectual Property or
Accounts;
|
| h. |
all
equipment (as defined in the Uniform Commercial Code) of the Company
(herein collectively called “Equipment”);
|
| i. |
each
contract and other agreement of the Company relating to the sale
or other
disposition of Inventory or
Equipment;
|
| j. |
all
documents of title (as defined in the Uniform Commercial Code) or
other
receipts of the Company covering, evidencing or representing Inventory
or
Equipment (herein collectively called “Documents”);
|
| k. |
all
rights, claims and benefits of the Company against any Person arising
out
of, relating to or in connection with Inventory or Equipment purchased
by
the Company, including, without limitation, any such rights, claims
or
benefits against any Person storing or transporting such Inventory
or
Equipment;
|
| l. |
all
estates in land together with all improvements and other structures
now or
hereafter situated thereon, together with all rights, privileges,
tenements, hereditaments, appurtenances, easements, including, but
not
limited to, rights and easements for access and egress and utility
connections, and other rights now or hereafter appurtenant thereto
("Real
Estate");
|
| m. |
all
other tangible or intangible property of the Company, including,
without
limitation, all proceeds, products and accessions of and to any of
the
property of the Company described in clauses (a) through (l) above
in this
Section 3 (including, without limitation, any proceeds of insurance
thereon), and, to the extent related to any property described in
said
clauses or such proceeds, products and accessions, all books,
correspondence, credit files, records, invoices and other papers,
including without limitation all tapes, cards, computer runs and
other
papers and documents in the possession or under the control of the
Company
or any computer bureau or service company from time to time acting
for the
Company.
|
Section
4. Further
Assurances; Remedies.
In
furtherance of the grant of the pledge and security interest pursuant to Section
3 hereof, the Company hereby agrees with the Purchaser Representative and each
of the Purchasers as follows:
4.01 Delivery
and Other Perfection.
The
Company shall:
| a. |
if
any of the above-described shares, securities, monies or property
required
to be pledged by the Company under clauses (a), (b) and (c) of Section
3
hereof are received by the Company, forthwith either (x) transfer
and
deliver to the Purchaser Representative such shares or securities
so
received by the Company (together with the certificates for any such
shares and securities duly endorsed in blank or accompanied by undated
stock powers duly executed in blank) all of which thereafter shall
be held
by the Purchaser Representative, pursuant to the terms of this Agreement,
as part of the Collateral or (y) take such other action as the Purchaser
Representative shall reasonably deem necessary or appropriate to
duly
record the Lien created hereunder in such shares, securities, monies
or
property referred to in said clauses (a), (b) and (c) of Section
3;
|
| b. |
deliver
and pledge to the Purchaser Representative, at the Purchaser
Representative's request, any and all Instruments, endorsed and/or
accompanied by such instruments of assignment and transfer in such
form
and substance as the Purchaser Representative may request; provided,
that
so long as no Event of Default shall have occurred and be continuing,
the
Company may retain for collection in the ordinary course any Instruments
received by it in the ordinary course of
business;
|
| c. |
give,
execute, deliver, file and/or record any financing statement, notice,
instrument, document, agreement or other papers that may be necessary
or
desirable (in the reasonable judgment of the Purchaser Representative)
to
create, preserve, perfect or validate any security interest granted
pursuant hereto or to enable the Purchaser Representative to exercise
and
enforce their rights hereunder with respect to such security interest,
including, without limitation, causing any or all of the Stock Collateral
to be transferred of record into the name of the Purchaser Representative
or its nominee (and the Purchaser Representative agrees that if any
Stock
Collateral is transferred into its name or the name of its nominee,
the
Purchaser Representative will thereafter promptly give to the Company
copies of any notices and communications received by it with respect
to
the Stock Collateral), provided that notices to account debtors in
respect
of any Accounts or Instruments shall be subject to the provisions
of
Section 4.09 below;
|
| d. |
upon
the acquisition after the date hereof by the Company of any Equipment
covered by a certificate of title or ownership cause the Purchaser
Representative to be listed as the lienholder on such certificate
of title
and within 120 days of the acquisition thereof deliver evidence of
the
same to the Purchaser
Representative;
|
| e. |
keep
accurate books and records relating to the Collateral, and stamp
or
otherwise xxxx such books and records in such manner as the Purchaser
Representative may reasonably require in order to reflect the security
interests granted by this
Agreement;
|
| f. |
furnish
to the Purchaser Representative from time to time (but, unless an
Event of
Default shall have occurred and be continuing, no more frequently
than
quarterly) statements and schedules further identifying and describing
the
Copyright Collateral, the Patent Collateral and the Trademark Collateral,
respectively, and such other reports in connection with the Copyright
Collateral, the Patent Collateral and the Trademark Collateral, as
the
Purchaser Representative may reasonably request, all in reasonable
detail;
|
| g. |
permit
representatives of the Purchaser Representative, upon reasonable
notice,
at any time during normal business hours to inspect and make abstracts
from its books and records pertaining to the Collateral, and permit
representatives of the Purchaser Representative to be present at
the
Company’s place of business to receive copies of all communications and
remittances relating to the Collateral, and forward copies of any
notices
or communications by the Company with respect to the Collateral,
all in
such manner as the Purchaser Representative may reasonably require;
and
|
| h. |
upon
the occurrence and during the continuance of any Event of Default,
upon
request of the Purchaser Representative, promptly notify each account
debtor in respect of any Accounts or Instruments that such Collateral
has
been assigned to the Purchaser Representative hereunder, and that
any
payments due or to become due in respect of such Collateral are to
be made
directly to the Purchaser
Representative.
|
4.02 Other
Financing Statements and Liens.
Except
with respect to Permitted Indebtedness, without the prior written consent of
the
Purchaser Representative, the Company shall not file or suffer to be on file,
or
authorize or permit to be filed or to be on file, in any jurisdiction, any
financing statement or like instrument with respect to the Collateral in which
the Purchaser Representative is not named as the sole secured party for the
benefit of each of the Purchasers.
4.03 Preservation
of Rights.
The
Purchaser Representative shall not be required to take steps necessary to
preserve any rights against prior parties to any of the Collateral.
4.04 Special
Provisions Relating to Certain Collateral.
| a. |
Stock
Collateral.
|
| (1) |
The
Company will cause the Stock Collateral to constitute at all times
100% of
the total number of shares of each class of capital stock of each
Issuer
then outstanding that is owned directly or indirectly by the Company.
|
| (2) |
So
long as no Event of Default shall have occurred and be continuing,
the
Company shall have the right to exercise all voting, consensual and
other
powers of ownership pertaining to the Stock Collateral for all purposes
not inconsistent with the terms of this Agreement, the Purchase Agreement,
the Notes or any other instrument or agreement referred to herein
or
therein, provided that the Company agrees that it will not vote the
Stock
Collateral in any manner that is inconsistent with the terms of this
Agreement, the Purchase Agreement, the Notes or any such other instrument
or agreement; and the Purchaser Representative shall execute and
deliver
to the Company or cause to be executed and delivered to the Company
all
such proxies, powers of attorney, dividend and other orders, and
all such
instruments, without recourse, as the Company may reasonably request
for
the purpose of enabling the Company to exercise the rights and powers
which it is entitled to exercise pursuant to this Section
4.04(a)(2).
|
| (3) |
Unless
and until an Event of Default has occurred and is continuing, the
Company
shall be entitled to receive and retain any dividends on the Stock
Collateral paid in cash out of earned
surplus.
|
| (4) |
If
any Event of Default shall have occurred, then so long as such Event
of
Default shall continue, and whether or not the Purchaser Representative
exercises any available right to declare any Secured Obligations
due and
payable or seeks or pursues any other relief or remedy available
to it
under applicable law or under this Agreement, the Purchase Agreement,
the
Notes or any other agreement relating to such Secured Obligations,
all
dividends and other distributions on the Stock Collateral shall be
paid
directly to the Purchaser Representative and retained by it as part
of the
Stock Collateral, subject to the terms of this Agreement, and, if
the
Purchaser Representative shall so request in writing, the Company
agrees
to execute and deliver to the Purchaser Representative appropriate
additional dividend, distribution and other orders and documents
to that
end, provided that if such Event of Default is cured, any such dividend
or
distribution theretofore paid to the Purchaser Representative shall,
upon
request of the Company (except to the extent theretofore applied
to the
Secured Obligations) be returned by the Purchaser Representative
to the
Company.
|
| b. |
Intellectual
Property.
|
| (1) |
For
the purpose of enabling the Purchaser Representative to exercise
rights
and remedies under Section 4.05 hereof at such time as the Purchaser
Representative shall be lawfully entitled to exercise such rights
and
remedies, and for no other purpose, the Company hereby grants to
the
Purchaser Representative, to the extent assignable, an irrevocable,
non-exclusive license (exercisable without payment of royalty or
other
compensation to the Company) to use, assign, license or sublicense
any of
the Intellectual Property (other than the Trademark Collateral or
goodwill
associated therewith) now owned or hereafter acquired by the Company,
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.
|
| (2) |
Notwithstanding
anything contained herein to the contrary, so long as no Event of
Default
shall have occurred and be continuing, the Company will be permitted
to
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 the business of the Company. In furtherance of
the
foregoing, unless an Event of Default shall have occurred and is
continuing, the Purchaser Representative shall from time to time,
upon the
request of the Company, execute and deliver any instruments, certificates
or other documents, in the form so requested, which the Company shall
have
certified are appropriate (in its judgment) to allow it to take any
action
permitted above (including relinquishment of the license provided
pursuant
to clause (1) immediately above as to any specific Intellectual Property).
Further, upon the payment in full of all of the Secured Obligations
or
earlier expiration of this Agreement or release of the Collateral,
the
Purchaser Representative shall grant back to the Company the license
granted pursuant to clause (1) immediately above. The exercise of
rights
and remedies under Section 4.05 hereof by the Purchaser Representative
shall not terminate the rights of the holders of any licenses or
sublicenses theretofore granted by the Company in accordance with
the
first sentence of this clause (2).
|
4.05 Events
of Default, etc.
During
the period during which an Event of Default shall have occurred and be
continuing:
| a. |
the
Company shall, at the request of the Purchaser Representative, assemble
the Collateral owned by it at such place or places, reasonably convenient
to both the Purchaser Representative and the Company, designated
in its
request;
|
| b. |
the
Purchaser Representative may make any reasonable compromise or settlement
deemed desirable with respect to any of the Collateral and may extend
the
time of payment, arrange for payment in installments, or otherwise
modify
the terms of, any of the
Collateral;
|
| c. |
the
Purchaser Representative shall have all of the rights and remedies
with
respect to the Collateral of a secured party under the Uniform Commercial
Code (whether or not said Code is in effect in the jurisdiction where
the
rights and remedies are asserted) and such additional rights and
remedies
to which a secured party is entitled under the laws in effect in
any
jurisdiction where any rights and remedies hereunder may be asserted,
including, without limitation, the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Collateral as if the Purchaser Representative were
the
sole and absolute owner thereof (and the Company agrees to take all
such
action as may be appropriate to give effect to such
right);
|
| d. |
the
Purchaser Representative in its discretion may, in its name or in
the name
of the Company or otherwise, demand, xxx for, collect or receive
any money
or property at any time payable or receivable on account of or in
exchange
for any of the Collateral, but shall be under no obligation to do
so;
and
|
| e. |
the
Purchaser Representative may, upon 10 Business Days, prior written
notice
to the Company of the time and place, with respect to the Collateral
or
any part thereof which shall then be or shall thereafter come into
the
possession, custody or control of the Purchaser Representative, or
any of
its respective agents, sell, lease, assign or otherwise dispose of
all or
any of such Collateral, at such place or places as the Purchaser
Representative deems best, and for cash or on credit or for future
delivery (without thereby assuming any credit risk), at public or
private
sale, without demand of performance or notice of intention to effect
any
such disposition or of time or place thereof (except such notice
as is
required above or by applicable statute and cannot be waived) and
the
Purchaser Representative or anyone else may be the purchaser, lessee,
assignee or recipient of any or all of the Collateral so disposed
of at
any public sale (or, to the extent permitted by law, at any private
sale),
and thereafter hold the same absolutely, free from any claim or right
of
whatsoever kind, including any right or equity of redemption (statutory
or
otherwise), of the Company, any such demand, notice or right and
equity
being hereby expressly waived and released. In the event of any sale,
assignment, or other disposition of any of the Trademark Collateral,
the
goodwill of the Business connected with and symbolized by the Trademark
Collateral subject to such disposition shall be included, and the
Company
shall supply to the Purchaser Representative or its designee, for
inclusion in such sale, assignment or other disposition, all Intellectual
Property relating to such Trademark Collateral. The Purchaser
Representative may, without notice or publication, adjourn any public
or
private sale or cause the same to be adjourned from time to time
by
announcement at the time and place fixed for the sale, and such sale
may
be made at any time or place to which the same may be so
adjourned.
|
The
proceeds of each collection, sale or other disposition under this Section 4.05,
including by virtue of the exercise of the license granted to the Purchaser
Representative in Section 4.04(b)(1) hereof, shall be applied in accordance
with
Section 4.09 hereof.
The
Company recognizes that, by reason of certain prohibitions contained in the
Securities Act of 1933, as amended, and applicable state securities laws, the
Purchaser Representative may be compelled, with respect to any sale of all
or
any part of the Collateral, to limit purchasers to those who will agree, among
other things, to acquire the Collateral for their own account, for investment
and not with a view to the distribution or resale thereof. The Company
acknowledges that any such private sales to an unrelated third party in an
arm’s
length transaction may be at prices and on terms less favorable to the Purchaser
Representative than those obtainable through a public sale without such
restrictions, and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that the Purchaser Representative shall have no obligation to engage
in public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit the respective Issuer thereof to register
it
for public sale.
4.06 Deficiency.
If the
proceeds of sale, collection or other realization of or upon the Collateral
pursuant to Section 4.05 hereof are insufficient to cover the costs and expenses
of such realization and the payment in full of the Secured Obligations, the
Company shall remain liable for any deficiency.
4.07 Removals,
etc.
Without
at least 30 days’ prior written notice to the Purchaser Representative, the
Company shall not (i) maintain any of its books or records with respect to
the
Collateral at any office or maintain its chief executive office or its principal
place of business at any place, or permit any Inventory or Equipment to be
located anywhere other than at the address indicated for the Company in the
Purchase Agreement or at one of the locations identified in Annex
4
hereto
or in transit from one of such locations to another or (ii) change its corporate
name, or the name under which it does business, from the name shown on the
signature page hereto.
4.08 Private
Sale.
The
Purchaser Representative shall incur no liability as a result of the sale of
the
Collateral, or any part thereof, at any private sale to an unrelated third
party
in an arm’s length transaction pursuant to Section 4.05 hereof conducted in a
commercially reasonable manner. The Company hereby waives any claims against
the
Purchaser Representative arising by reason of the fact that the price at which
the Collateral may have been sold at such 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 Secured Obligations, even if the Purchaser Representative accepts
the first offer received and does not offer the Collateral to more than one
offeree.
4.09 Application
of Proceeds.
Except
as otherwise herein expressly provided, the proceeds of any collection, sale
or
other realization of all or any part of the Collateral pursuant hereto, and
any
other cash at the time held by the Purchaser Representative under this Section
4, shall be applied by the Purchaser Representative:
First,
to the
payment of the costs and expenses of such collection, sale or other realization,
including reasonable out-of-pocket costs and expenses of the Purchaser
Representative and the fees and expenses of its agents and counsel, and all
expenses, and advances made or incurred by the Purchaser Representative in
connection therewith;
Next,
to the
payment in full of the Secured Obligations in each case equally and ratably
in
accordance with the respective amounts thereof then due and owing to each of
the
Purchasers; and
Finally,
to the
payment to the Company, or its successors or assigns, or as a court of competent
jurisdiction may direct, of any surplus then remaining.
As
used
in this Section 4, “proceeds”
of
Collateral shall mean cash, securities and other property realized in respect
of, and distributions in kind of, Collateral, including any thereof received
under any reorganization, liquidation or adjustment of debt of the Company
or
any issuer of or obligor on any of the Collateral.
4.10 Attorney-in-Fact.
Without
limiting any rights or powers granted by this Agreement to the Purchaser
Representative while no Event of Default has occurred and is continuing, upon
the occurrence and during the continuance of any Event of Default, the Purchaser
Representative is hereby appointed the attorney-in-fact of the Company for
the
purpose of carrying out the provisions of this Section 4 and taking any action
and executing any instruments which the Purchaser Representative may deem
necessary or advisable to accomplish the purposes hereof, which appointment
as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, so long as the Purchasers shall be entitled
under this Section 4 to make collections in respect of the Collateral, the
Purchaser Representative shall have the right and power to receive, endorse
and
collect all checks made payable to the order of the Company representing any
dividend, payment, or other distribution in respect of the Collateral or any
part thereof and to give full discharge for the same.
4.11 Perfection.
(i)
Prior to or concurrently with the execution and delivery of this Agreement,
the
Company shall file or deliver to Purchaser Representative for filing such
financing statements and other documents in such offices as the Purchaser
Representative may request to perfect the security interests granted by Section
3 of this Agreement, and (ii) at any time requested by the Purchaser
Representative, the Company shall deliver to the Purchaser Representative all
share certificates of capital stock directly or indirectly owned by the Company
in the entities identified in Annex
1
hereto,
accompanied by undated stock powers duly executed in blank.
4.12 Termination.
When
all Secured Obligations shall have been paid in full under the Purchase
Agreement, this Agreement shall terminate, and the Purchaser Representative
shall forthwith cause to be assigned, transferred and delivered, against receipt
but without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect thereof, to or on the order of the
Company and to be released and cancelled all licenses and rights referred to
in
Section 4.04(b)(1) hereof. The Purchaser Representative shall also execute
and
deliver to the Company upon such termination such Uniform Commercial Code
termination statements, certificates for terminating the Liens on the Motor
Vehicles and such other documentation as shall be reasonably requested by the
Company to effect the termination and release of the Liens on the
Collateral.
4.13 Expenses.
The
Company agrees to pay to the Purchaser Representative all out-of-pocket expenses
(including reasonable expenses for legal services of every kind) of, or incident
to, the enforcement of any of the provisions of this Section 4, or performance
by the Purchaser Representative of any obligations of the Company in respect
of
the Collateral which the Company has failed or refused to perform upon
reasonable notice, or any actual or attempted sale, or any exchange,
enforcement, collection, compromise or settlement in respect of any of the
Collateral, and for the care of the Collateral and defending or asserting rights
and claims of the Purchaser Representative in respect thereof, by litigation
or
otherwise, including expenses of insurance, and all such expenses shall be
Secured Obligations to the Purchaser Representative secured under Section 3
hereof.
4.14 Further
Assurances.
The
Company agrees that, from time to time upon the written request of the Purchaser
Representative, the Company will execute and deliver such further documents
and
do such other acts and things as the Purchaser Representative may reasonably
request in order fully to effect the purposes of this Agreement.
4.15 Indemnity.
Each of
the Purchasers hereby jointly and severally covenants and agrees to reimburse,
indemnify and hold the Purchaser Representative harmless from and against any
and all claims, actions, judgments, damages, losses, liabilities, costs,
transfer or other taxes, and expenses (including, without limitation, reasonable
attorneys’ fees and expenses) incurred or suffered without any bad faith or
willful misconduct by the Purchaser Representative, arising out of or incident
to this Agreement or the administration of the Purchaser Representative’s duties
hereunder, or resulting from its actions or inactions as Purchaser
Representative.
Section
5. Miscellaneous.
5.01 No
Waiver.
No
failure on the part of the Purchaser Representative or any of its agents to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Purchaser Representative or any
of
its agents of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided
by
law.
5.02 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the law of
the
State of New York.
5.03 Notices.
All
notices, requests, consents and demands hereunder shall be in writing and
facsimile (facsimile confirmation required) or delivered to the intended
recipient at its address or telex number specified pursuant to Section 7.4
of
the Purchase Agreement and shall be deemed to have been given at the times
specified in said Section 7.4.
5.04 Waivers,
etc.
The
terms of this Agreement may be waived, altered or amended only by an instrument
in writing duly executed by the Company and the Purchaser Representative. Any
such amendment or waiver shall be binding upon each of the Purchasers and the
Company.
5.05 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the respective
successors and assigns of the Company and each of the Purchasers (provided,
however, that the Company shall not assign or transfer its rights hereunder
without the prior written consent of the Purchaser Representative).
5.06 Counterparts.
This
Agreement may be executed in any number of counterparts, all of which together
shall constitute one and the same instrument and any of the parties hereto
may
execute this Agreement by signing any such counterpart.
5.07 Purchaser
Representative.
Each
Purchaser agrees to appoint Iroquois Master Fund, Ltd. as its Purchaser
Representative for purposes of this Agreement. The Purchaser Representative
may
employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
5.08 Severability.
If any
provision hereof is invalid and unenforceable in any jurisdiction, then, to
the
fullest extent permitted by law, (i) the other provisions hereof shall remain
in
full force and effect in such jurisdiction and shall be liberally construed
in
favor of the Purchasers in order to carry out the intentions of the parties
hereto as nearly as may be possible and (ii) the invalidity or unenforceability
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
be
duly executed as of the day and year first above written.
| COMPANY: | AMERICAN UNITED GLOBAL, INC. | |
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| Date: | By: | /s/ |
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| Title | ||
| AGENT: IROQUOIS MASTER FUND LTD. | IROQUOIS MASTER FUND LTD. | |
| |
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| Date: | By: | /s/ |
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||
| Title | ||
| PURCHASERS: | IROQUOIS MASTER FUND LTD. | |
| |
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| Date: | By: | /s/ |
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| Title | ||
| OTHER PURCHASERS | ||
| |
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| Date: | By: | /s/ |
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| Title | ||
ANNEX
1
ENTITIES
IN WHICH THE COMPANY IS PLEDGING ITS CAPITAL STOCK
|
Entity
|
Approximate Percentage
Interest
|
|
ANNEX
2
EXCLUDED
COLLATERAL
ANNEX
3
EXCEPTIONS
FOR COPYRIGHTS, PATENTS AND TRADEMARKS
ANNEX
4
LIST
OF
LOCATIONS
ANNEX
5
EXISTING
INDEBTEDNESS
ANNEX
6
EXISTING
LIENS
