SECURITY AGREEMENT
Exhibit
10.13
THIS
SECURITY AGREEMENT
(the
“Security
Agreement”)
is
dated as of the 22nd day of June 2007 by and among XA, Inc., a Nevada
Corporation (“XA”),
The
Experiential Agency, Inc., XA Scenes, Inc., XA Interactive, Inc., and Fiori
XA,
Inc. (collectively the with XA, the “Debtor”)
and
Sands Brothers Venture Capital LLC, Sands Brothers Venture Capital II LLC,
Sands
Brothers Venture Capital III LLC, Sands Brothers Venture Capital IV LLC and
Katie &
Xxxx Bridge Partners, L.P.
(the
“Secured
Party”).
W I T N E S S E T H
WHEREAS,
pursuant
to a Securities Purchase Agreement, dated as of the date hereof, as may be
amended or supplemented from time to time (the “SPA”),
the
Debtor is selling to the Secured Party an 11% Senior Secured Convertible
Promissory Note, in the principal amount of $200,000, which is part of $500,000
in 11% Senior Secured Convertible Promissory Note financing (the “Follow
On Notes”),
which
is in addition to an aggregate of $2,700,000 in 11% Senior Secured Convertible
Promissory Notes previously sold by the Debtor to certain parties (the
“Prior
Purchasers”)
in
August, September and October 2006 (the “Prior
Notes”)
and
along with the Follow On Notes, each, a “Note”:
and
collectively, the “Notes”)
sold
to certain parties (collectively with the “Prior
Purchasers,”
the
“Purchasers”);
and
WHEREAS,
Debtor
has agreed, pursuant to the terms and conditions of the SPA, in connection
with
the Financing described therein, to secure the repayment of the Note, as more
specifically provided herein;
NOW,
THEREFORE,
in
consideration of the foregoing, Debtor and the Secured Party agree as
follows:
SECTION
1. Definitions.
1.1 Certain
Defined Terms.
The
following terms, as used herein, have the meanings set forth below:
“Accounts”
means
all “accounts” (as defined in the UCC) now owned or hereafter created or
acquired by Debtor including all of the following now owned or hereafter created
or acquired by Debtor: (a) accounts receivable, contracts, contract rights,
book debts, notes, drafts and other obligations or indebtedness owing to Debtor
arising from the sale, lease or exchange of goods or other property or the
performance of services; (b) Debtor’s rights in, to and under all purchase
orders for goods, services or other property; (c) Debtor’s rights to any
goods, services or other property represented by any of the foregoing (including
returned or repossessed goods and unpaid sellers’ rights of rescission,
repletion, reclamation and rights to stoppage in transit); (d) monies due
to or to become due to Debtor under all contracts for the sale, lease or
exchange of goods or other property or the performance of services (whether
or
not yet earned by performance on the part of Debtor); and (e) Proceeds of
any of the foregoing and all collateral security and guaranties of any kind
given by any Person with respect to any of the foregoing.
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“Collateral”
has
the
meaning assigned to that term in Section 2.
“Computer
Software”
or
“Software”
means
a
computer program and any supporting information provided in connection with
a
transaction relating to the program.
“Contracts”
means
all contracts and agreements (as defined in the UCC).
“Copyrights”
means
collectively all of the following now owned or hereafter created or acquired
by
Debtor: (a) all literary works, derivative works, works for hire,
compositions, compilations of all or some of the foregoing, whether published
or
unpublished, all registrations or recordings thereof, and all applications
in
connection therewith including registrations, recordings and applications in
the
Copyright Office of the United States, or any other country; (b) all
reissues, extensions or renewals thereof; (c) all income, royalties,
damages and payments now or hereafter due or payable under any of the foregoing
or with respect to any of the foregoing including damages or payments for past
or future infringements of any of the foregoing; (d) the right to xxx for
past, present and future infringements or any of the foregoing; and (e) all
rights corresponding to any of the foregoing throughout the world.
“Debtor”
has
the
meaning assigned to that term in the introduction to this Security
Agreement.
“Documents”
means
all “documents” (as defined in the UCC) or other receipts covering, evidencing
or representing goods now owned or hereafter acquired by Debtor.
“Equipment”
means
all “equipment” (as defined in the UCC) now owned or hereafter acquired by
Debtor including all machinery, motor vehicles, trucks, trailers, vessels,
aircraft and rolling stock and all parts thereof and all additions and
accessions thereto and replacements therefor.
“Event
of Default”
has
the
meaning assigned to that term in Section 8(a).
“Fixtures”
means
all of the following now owned or hereafter acquired by Debtor: plant fixtures;
business fixtures; other fixtures and storage office facilities, wherever
located; and all additions and accessions thereto and replacements therefor.
“General
Intangibles”
means
all “general intangibles” (as defined in the UCC) now owned or hereafter
acquired by Debtor including all right, title and interest of Debtor in and
to:
(a) all Software of the Debtor, including all source code and object code
thereto; (b) all agreements, leases, licenses and contracts to which Debtor
is or may become a party; (c) all obligations or indebtedness owing to
Debtor (other than Accounts) from whatever source arising; (d) all tax
refunds; (e) Intellectual Property; and (f) all trade secrets and
other confidential information relating to the business of Debtor.
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“Instruments”
means
all “instruments” “chattel paper” or “letters of credit” (each as defined in the
UCC) including promissory notes, drafts, bills of exchange and trade
acceptances, now owned or hereafter acquired by Debtor.
“Intellectual
Property”
means
collectively all of the following: Copyrights, Copyright Licenses, Patents,
Trademarks and Trademark Licenses.
“Inventory”
means
all “inventory” (as defined in the UCC), now owned or hereafter acquired by
Debtor, wherever located including finished goods, raw materials, work in
process and other materials and supplies (including packaging and shipping
materials) used or consumed in the manufacture or production thereof and goods
which are returned to or repossessed by Debtor.
“Permitted
Senior Indebtedness”
shall
mean the prior first priority security interest of LaSalle Bank National
Association (“LaSalle”), and/or any other bank or institutional lending source
which shall replace and/or supersede the LaSalle loan and debt ; provided,
however,
that in
no case shall the aggregate amount of such Permitted Senior Indebtedness exceed
seven hundred and fifty thousand dollars ($750,000).
“Proceeds”
means
all proceeds of, and all other profits, rentals or receipts, in whatever form,
arising from the collection, sale, lease, exchange, assignment, licensing or
other disposition of, or realization upon, any Collateral including all claims
of Debtor against third parties for loss of, damage to or destruction of, or
for
proceeds payable under, or unearned premiums with respect to, policies of
insurance with respect to any Collateral, and any condemnation or requisition
payments with respect to any Collateral, in each case whether now existing
or
hereafter arising.
“Secured
Obligations”
has
the
meaning assigned to that term in Section 3.
“Security
Agreement”
means
this Security Agreement as it may be amended, supplemented or otherwise modified
from time to time.
“Security
Interests”
means
the security interest granted pursuant to Section 2,
as well
as all other security interests created or assigned as additional security
for
the Secured Obligations pursuant to the provisions of this Security
Agreement.
“Subsidiaries”
has
the
meaning assigned to that term in the introduction to this Security
Agreement.
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“Trademarks”
means
collectively all of the following now owned or hereafter created or acquired
by
Debtor: (a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks, logos,
domain names and domain name registrations, other business identifiers, prints
and labels on which any of the foregoing have appeared or appear, all
registrations and recordings thereof (to the extent Debtor can register such
corporate, company or business name as a trademark), and all applications
in
connection therewith
including registrations, recordings and applications in the Trademark Office
or
in any similar office or agency of the United States, any State thereof or
any
other country or any political subdivision thereof; (b) all reissues,
extensions or renewals thereof; (c) all income, royalties, damages and
payments now or hereafter due or payable under any of the foregoing or with
respect to any of the foregoing including damages or payments for past or
future
infringements of any of the foregoing; (d) the right to xxx for past,
present and future infringements of any of the foregoing; (e) all rights
corresponding to any of the foregoing throughout the world; and (f) all
goodwill associated with and symbolized by any of the foregoing.
“UCC”
means
the Uniform Commercial Code as in effect on the date hereof in the State of
Illinois, Nevada, California, New Jersey and New York or such state as property
and/or fixtures may be located, as the case may be, as amended from time to
time, and any successor statute; provided
that if
by reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the Security Interest in any Collateral is
governed by the Uniform Commercial Code as in effect on or after the date hereof
in any other jurisdiction, “UCC”
means
the Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provision hereof relating to such perfection or effect of perfection
or
non-perfection.
1.2 Other
Definition Provisions.
References to “Sections”
“subsections,”
“Exhibits”
and
“Schedules”
shall
be to Sections, subsections, Exhibits and Schedules, respectively, of this
Security Agreement unless otherwise specifically provided. References to the
words “including,” “includes” and “include” shall be deemed to be followed by
the words “without limitation;” and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” Any of the
terms defined in subsection 1.1 may, unless the context otherwise requires,
be used in the singular or the plural depending on the reference. All references
to statutes and related regulations shall include any amendments of same and
any
successor statutes and regulations.
SECTION
2. Grant
of Security Interest.
In
order
to secure the payment and performance of the Secured Obligations in accordance
with the terms thereof, except as otherwise specifically provided in this
Security Agreement, the Debtor hereby grants to the Secured Party, a continuing
first priority security interest and lien in and to all right, title and
interest of Debtor in the following property, whether now owned or existing
or
hereafter acquired or arising and regardless of where located, which first
priority security interest shall be pari passu to the first priority security
interest of the Purchasers and the other purchasers who invest during the
offering to which this Security Agreement is a part), and subject only to the
Permitted Senior Indebtedness (all being collectively referred to as the
“Collateral”).
(a) Accounts;
(b) Inventory;
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(c) Computer
Software;
(d) General
Intangibles;
(e) Documents;
(f) Instruments;
(g) Equipment;
(h) Fixtures;
(i) Contracts;
(j) All
deposit accounts of Debtor maintained with any bank or financial
institution;
(k) All
books, records, ledger cards, files, correspondence, computer programs, tapes,
disks and related data processing software that at any time evidence or contain
information relating to any of the property described in subparts (a)
- (j)
above or
are otherwise necessary or helpful in the collection thereof or realization
thereon;
(l) any
and
all other assets of the Debtor, whether currently held or hereafter acquired;
and
(m) Proceeds
of all or any of the property described in subparts (a)
- (l)
above.
Notwithstanding
the foregoing, so long as no Event of Default has occurred and is continuing,
Debtor shall have the exclusive, non-transferable right and license to use
the
Collateral and the exclusive right to sell, transfer, convey, rent, lease,
and
grant to third parties licenses and sublicenses with respect to the Collateral,
provided that any such sale, transfer, conveyance, rental, lease, license or
sublicense is effected in the Debtor’s ordinary course of business. In the event
that the Debtor sells any of its inventory in the ordinary course of business,
such shall be transferred without any liens under the terms of this Security
Agreement.
SECTION
3. Security
for Obligations.
This
Security Agreement secures the payment and performance of all obligations,
liabilities, duties and covenants of Debtor to the Secured Party with respect
to
the Notes, plus any and all accrued (and accruing) but unpaid interest on all
such indebtedness (all such debts, obligations and liabilities of Debtor being
collectively called the “Secured
Obligations”).
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SECTION
4. Debtor
Remains Liable.
Anything
herein to the contrary notwithstanding: (a) Debtor shall remain liable
under the contracts and agreements included in the Collateral to the extent
set
forth therein to perform all of its duties and obligations thereunder to the
same extent as if this Security Agreement had not been
executed; (b) the exercise by the Secured Party of any of the rights
hereunder shall not release Debtor from any of its duties or obligations under
the contracts and agreements included in the Collateral; and (c) the
Secured Party shall not have any obligation or liability under the contracts
and
agreements included in the Collateral by reason of this Security Agreement,
nor
shall the Secured Party be obligated to perform any of the obligations or duties
of Debtor thereunder or to take any action to collect or enforce any claim
for
payment assigned hereunder.
SECTION
5. Representations
and Warranties.
Debtor
represents and warrants as follows:
5.1. Binding
Obligation; Authorization.
This
Security Agreement and the Note are legally valid and binding obligations of
Debtor, enforceable against it in accordance with their terms, except as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other
laws
of general application affecting enforcement of creditors’ rights generally. The
execution, delivery and performance of this Security Agreement and the Note
by
the Debtor has been duly approved by the Board of Directors of the Debtor and
all other actions required to authorize and effect the granting of the Security
Interests and the issuance of the Note has been duly taken and approved by
the
Debtor.
5.2. Location
of Equipment and Inventory.
All of
the Equipment and Inventory is located at the places specified on Schedule I.
5.3. Ownership
of Collateral; Outstanding Loans.
The
Company owns the Collateral free and clear of any liens, security interests,
charges or other encumbrances (collectively, “Liens”).
No
financing statement or other form of Lien notice covering all or any part of
the
Collateral is on file in any recording office, except for those in favor of
the
Secured Party.
5.4. Office
Locations; Fictitious Names. The
chief
place of business, the chief executive office and the office where Debtor keeps
its books and records are located at the places specified on Schedule I.
5.5. Perfection.
This
Security Agreement creates a valid and perfected security interest in the
Collateral, securing the payment of the Secured Obligations, and all filings
and
other actions necessary or desirable to perfect and protect such security
interest have been duly taken (or will be taken immediately after the Closing
,
as defined in the SPA, by the Debtor at the request of the Secured Party);
provided,
nothing
herein constitutes a representation as to actions that must be taken, if any,
to
perfect a security interest in any item of Equipment, the ownership of which
is
evidenced by a certificate of title.
5.6. Governmental
Authorizations.
No
authorization, approval or other action by, and no notice to or filing with,
any
governmental authority or regulatory body is required either (a) for the
grant by Debtor of the Security Interests granted hereby or for the execution,
delivery or performance of this Security Agreement and/or the Note by Debtor
or
(b) for the perfection of or the exercise by the Secured Party of its
rights and remedies hereunder (except as may have been taken by or at the
direction of Debtor or the Secured Party).
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5.7. Accurate
Information.
All
information heretofore, herein or hereafter supplied to the Secured Party by
or
on behalf of Debtor with respect to the Collateral is and will be accurate
and
complete in all material respects.
SECTION
6. Further
Assurances; Covenants.
6.1. Other
Documents and Actions.
Debtor
will, from time to time, at its expense, immediately execute and deliver all
further instruments and documents and take all further action that may be
necessary or desirable, or that the Secured Party may request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Secured Party to exercise and enforce their rights
and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, Debtor will immediately upon request of the Secured
Party: (a) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as the Secured Party may request, in order to perfect and
preserve the security interests granted or purported to be granted hereby (in
such jurisdictions and with such officers as the Secured Party so request);
(b) upon demand by the Secured Party exhibit the Collateral to allow
inspection of the Collateral by the Secured Party or persons designated by
the
Secured Party; and (c) upon the Secured Party’s request, appear in and
defend any action or proceeding that may affect Debtor’s title to or the Secured
Party’s security interest in the Collateral.
6.2. Business
Locations.
Debtor
will keep the Collateral at the locations specified on Schedule I
hereto.
6.3. Insurance.
At
its
sole expense, the Debtor shall insure the Collateral at all times for the full
insurable value thereof against casualty and theft and against such other risks,
in such form and with such insurers, as may be satisfactory to the Secured
Party
from time to time. In addition, each such policy shall (i) name the Secured
Party as mortgagee and loss payee as its interest may appear and name the
Secured Party as an additional insured relating to liability risks,
(ii) provide that no act of omission or commission or misrepresentation or
breach of warranty by the Debtor shall affect the Secured Party’s rights
thereunder, (iii) provide that the Secured Party shall not be liable for
any premiums or other amounts and (iv) upon the agreement of the insurer,
at the Debtor’s request, provide that the insurer shall give the Secured Party
not less than twenty (20) days’ prior written notice of cancellation or lapse.
If the Debtor shall fail at any time to maintain such insurance, the Secured
Party may obtain such insurance coverage and the Debtor agrees to reimburse
the
Secured Party therefor on demand with interest thereon at the rate specified
in
the Note. The Debtor shall notify the Secured Party promptly if any loss or
casualty relating to the Collateral occurs.
6.4. Taxes
and Claims.
Debtor
will pay promptly when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims against, the
Collateral (including claims for labor, materials and supplies), except to
the
extent the validity thereof is being contested in good faith.
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6.5. Use
of Collateral.
Debtor
will not use or permit any Collateral to be used unlawfully or in violation
of
any provision of this Security Agreement or any applicable statute, regulation
or ordinance or any policy of insurance covering any of the
Collateral.
6.6. Condition
of Collateral.
The
Debtor shall maintain the Collateral in good condition and operate the
Collateral with reasonable care and caution and the Debtor hereby indemnifies
and holds the Secured Party harmless from any and all loss, damage and liability
suffered, incurred or asserted by or against the Secured Party as a result
of
the use and operation of the Collateral.
6.7. Records
Relating to Collateral.
The
Debtor will keep its records concerning the Collateral at its address designated
on Schedule
I
hereof
or at such other place or places of which the Secured Party shall have been
notified in writing upon no less than ten (10) days’ advance written notice. The
Debtor (a) will hold and preserve such records and will permit representatives
of the Secured Party at any time during normal business hours without disrupting
the Debtor’s business to examine, inspect and to make abstracts from such
records and (b) will furnish to the Secured Party such information and reports
regarding the Collateral as the Secured Party may from time to time
request.
6.8. Other
Information.
Debtor
will, promptly upon request, provide to the Secured Party all information and
evidence they may reasonably request concerning the Collateral, and in
particular the Accounts, to enable the Secured Party to enforce the provisions
of this Security Agreement.
SECTION
7. Transfers
and Other Liens.
Except
in
the ordinary course of business, Debtor shall not:
(a) Sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant
any
option with respect to, any of the Collateral; or
(b) Create
or
suffer to exist any Liens with respect to any of the Collateral to secure
indebtedness of any Person except for (i) the Security Interests created by
this
Security Agreement, (ii) any Liens and/or security interests existing prior
to
the date of this Security Agreement; (iii) any security interests that are
junior and subordinate to the Security Interests created by this Security
Agreement, and (iv) any purchase money security interests required in connection
with Debtor’s purchase or lease of Equipment.
-8-
SECTION
8. Events
of Default; Remedies
(a) Each
of
the following events shall be an “Event
of Default”
(i) the non-payment of any of the Secured Obligations; (ii) the
failure of the Debtor to observe or perform any other term, provision or
condition of the Transaction Documents (as defined in the SPA), or this Security
Agreement, after receipt of notice from the Secured Party of such failure
to
observe or perform and the failure of the Debtor to cure such non-performance
or
non-observance within fifteen (15) days after receipt thereof;
(iii) dissolution or termination of existence of, or the suspension or
termination
of operations of the Debtor; (iv) the inability of the Debtor, or the
Debtor’s admission that it is unable, to pay its debts as they become due or any
petition in bankruptcy is filed by or against the Debtor, or any proceeding
in
bankruptcy, or under any other laws of any jurisdiction relating to the relief
of debtors is commenced against the Debtor for the relief or readjustment
of any
indebtedness of the Debtor, either through reorganization, composition,
extension or otherwise, (v) the appointment of a receiver of any property
of the Debtor, (vi) the making by the Debtor of any assignment for the
benefit of creditors or the taking advantage of any insolvency law;
(vii) any seizure, vesting, or intervention by or under authority of a
government, by which the management of the Debtor is displaced or its authority
in the conduct of its business is curtailed; (viii) any representation or
warranty contained the Note or this Security Agreement, shall prove to be
materially false when made; or (ix) if an event of default shall occur for
whatever reason under the any of the Notes.
(b) If
any
Event of Default shall have occurred and be continuing, the Secured Party may
exercise in respect of the Collateral, in addition to all other rights and
remedies provided for herein or otherwise available to them, all the right
and
remedies of a secured party on default under the UCC (whether or not the UCC
applies to the affected Collateral) and also may: (a) require Debtor to,
and Debtor hereby agrees that it will, at its expense and upon request of the
Secured Party forthwith, assemble all or part of the Collateral as directed
by
the Secured Party and make it available to the Secured Party at a place to
be
designated by the Secured Party which is reasonably convenient to the Debtor;
(b) without notice or demand or legal process, enter upon any premises of
Debtor and take possession of the Collateral; and (c) without notice except
as specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at such time or times, for cash, on credit
or
for future delivery, and at such price or prices and upon such other terms
as
the Secured Party may deem commercially reasonable. Debtor agrees that, to
the
extent notice of sale shall be required by law, at least two (2) days’ notice to
Debtor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. At any
sale
of the Collateral, if permitted by law, the Secured Party may bid (which bid
may
be, in whole or in part, in the form of cancellation of indebtedness) for the
purchase of the Collateral or any portion thereof for the account of the Secured
Party. The Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Secured Party may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at
the
time and place to which it was so adjourned. To the extent permitted by law,
Debtor hereby specifically waives all rights of redemption, stay or appraisal
which it has or may have under any law now existing or hereafter enacted. All
cash proceeds received by the Secured Party resulting from the disposition
of or
collection from the Collateral may be held by the Secured Party as collateral
for the Secured Obligations and/or then or at any time thereafter applied in
payment of all or any of the Secured Obligations in such order as the Secured
Party shall elect. The balance of such cash proceeds held by the Secured Party
and remaining after payment in full of the Secured Obligations shall be paid
over to the Debtor or to the person who may be lawfully entitled to such
balance. The remedies provided in this Security Agreement are cumulative and
not
exclusive of any other remedies provided by law including, without limitation,
any rights of setoff available to the Secured Party.
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SECTION
9. Limitation
on Duty of the Secured Party with Respect to Collateral.
Beyond
the safe custody thereof, the Secured Party shall have no duty with respect
to
any Collateral in their possession or control (or in the possession or control
of the Secured Party or bailee) or with respect to any income thereon or the
preservation of rights against prior parties or any other rights pertaining
thereto. The Secured Party shall be deemed to have exercised reasonable care
in
the custody and preservation of the Collateral in their possession if the
Collateral is accorded treatment substantially equal to that which they accord
their own property. The Secured Party shall not be liable or responsible for
any
loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by the Secured
Party in good faith.
SECTION
10. Secured
Party Appointed Attorney-In-Fact.
Debtor
hereby irrevocably appoints the Secured Party as Debtor’s attorney-in-fact, with
full authority in the place and stead of Debtor and in the name of Debtor to
take any action and to execute any instrument that the Secured Party may deem
necessary and/or advisable as follows:
(a) to
obtain
and adjust insurance required to be paid to the Secured Party if Debtor has
not
done so in the ordinary course of its business;
(b) to
ask,
demand, collect, xxx for, recover, compound, receive and give receipts for
moneys due and to become due under or in respect of any of the Collateral upon
the occurrence of an Event of Default;
(c) to
receive, endorse, and collect any drafts or other instruments, documents and
chattel paper, in connection with clauses (a) and (b) above upon the
occurrence of an Event of Default;
(d) to
file
any claims or take any action or institute any proceedings that the Secured
Party may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of the Secured Party with respect
to any of the Collateral if Debtor has not done so in the ordinary course of
its
business;
(e) to
pay or
discharge taxes or liens, levied or placed upon or threatened against the
Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Secured Party in its sole discretion,
and such payments made by the Secured Party to become obligations of Debtor
to
the Secured Party, due and payable immediately without demand if Debtor has
not
done so in the ordinary course of its business;
(f) to
sign
and endorse any invoices, freight or express bills, bills of lading, storage
or
warehouse receipts, assignments, verifications and notices in connection with
Accounts and other documents relating to the Collateral upon the occurrence
of
an Event of Default;
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(g) generally
to sell, transfer, pledge, make any agreement with respect to or otherwise
deal
with any of the Collateral as fully and completely as though the Secured Party
were the absolute owner thereof for all purposes, and to do, at the Secured
Party’s option and Debtor’s expense, at any time or from time to time, all acts
and things that the Secured Party deems necessary to protect, preserve or
realize on the Collateral upon the occurrence of an Event of Default;
and
(h) to
accomplish the purposes of this Security Agreement if Debtor has not done so
in
the ordinary course of its business.
Neither
the Secured Party nor any person designated by the Secured Party shall be liable
for any acts or omissions or for any error of judgment or mistake of fact or
law. This power, being coupled with an interest, is irrevocable so long as
this
Security Agreement shall remain in force.
SECTION
11. Expenses.
Debtor
shall pay all insurance expenses and all expenses of protecting, storing,
warehousing, appraising, insuring, handling, maintaining and shipping the
Collateral, all costs, fees and expenses of perfecting, and maintaining the
Security Interest, any and all excise, property, sales and use taxes imposed
by
any state, federal or local authority on any of the Collateral, or with respect
to periodic appraisals and inspections of the Collateral, or with respect to
the
sale or other disposition thereof. If Debtor fails to promptly pay any portion
of the above expenses when due or to perform any other obligation of Debtor
under this Security Agreement, the Secured Party may, at their option, but
shall
not be required to, pay or perform the same and charge Debtor’s account for all
costs and expenses incurred therefor, and Debtor agrees to reimburse the Secured
Party therefor on demand. All sums so paid or incurred by the Secured Party
for
any of the foregoing, any and all other sums for which Debtor may become liable
hereunder and all costs and expenses (including reasonable and documented
attorneys’ fees, legal expenses and court costs) incurred by the Secured Party
in enforcing or protecting the Security Interests or any of their rights or
remedies under this Security Agreement, the Notes, the Warrants and/or other
Transaction Documents shall be payable on demand, shall constitute Secured
Obligations and shall be secured by the Collateral.
SECTION
12. Termination
of Security Interests; Release of Collateral.
Upon
payment in full of all Secured Obligations, including the aggregate principal
amount of the Notes, including all Interest, the Security Interests shall
immediately terminate and all rights to the Collateral shall revert to Debtor
automatically and without the need for further action to be taken on the part
of
the Debtor or the Secured Party. Upon such termination of the Security Interests
or release of any Collateral, the Secured Party will, at the expense of Debtor,
execute and deliver to Debtor such documents as Debtor shall reasonably request
to evidence the termination of the Security Interests or the release of such
Collateral, as the case may be.
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SECTION
13. Notices.
All
notices, requests, demands and other communications provided for hereunder
shall
be in writing and directed to the applicable party at the addresses set forth
on
the signature page hereof or, as to each party, at such other address as shall
be designated by such party in a written notice to the other parties complying
as to delivery with the terms of this Section. Notice to the Secured Party
on
terms designated in this Section
13
shall be
deemed proper notice the Secured Party. All such notices, requests, demands
and
other communication shall be deemed given upon the earlier to occur of (i)
the
third day following deposit thereof with the United States Postal Service for
mailing via certified or registered mail, return receipt requested, or (ii)
the
actual receipt by the party to whom such notice is directed.
SECTION
14. Waivers,
Non-Exclusive Remedies.
No
failure on the part of the Secured Party to exercise, and no delay in exercising
and no course of dealing with respect to, any right under the Note or this
Security Agreement shall operate as a waiver thereof; nor shall any single
or
partial exercise by the Secured Party of any right under the Note or this
Security Agreement preclude any other or further exercise thereof or the
exercise of any other right. The rights in this Security Agreement and/or the
Note are cumulative and are not exclusive of any other remedies provided by
law.
SECTION
15. Successors
and Assigns.
This
Security Agreement is for the benefit of the Secured Party and each of its
successors and assigns, and in no event shall the Debtor without the prior
express written consent of the Secured Party, assign all or any portion of
the
Secured Obligations, the rights hereunder, or the Note. This Security Agreement
shall be binding on Debtor and its successors and all permitted
assigns.
SECTION
16. Severability.
If
any
provisions hereof are invalid or unenforceable in any jurisdiction, the other
provisions hereof shall remain in full force and effect in such jurisdiction
and
shall be liberally construed in favor of the Secured Party.
SECTION
17. Changes
in Writing.
No
amendment, modification, termination or waiver of any provision of this Security
Agreement or consent to any departure by Debtor therefrom, shall in any event
be
effective without the written concurrence of the Secured Party, and the
Debtor.
-12-
SECTION
18. Applicable
Law, Etc.
This
Security Agreement will be governed by and construed exclusively under the
laws
of the State of New York as applied to agreements among New York
residents entered into and to be
performed entirely within New York. Each of the parties hereto
(1) agree that any legal suit, action or proceeding arising out of or
relating to this Agreement will be instituted exclusively in New York State
Supreme Court, County of New York, or in the United States District Court
for the Southern District of New York, (2) waive any objection which
the Company may have now or hereafter to the venue of any such suit, action
or
proceeding, and (3) irrevocably consent to the jurisdiction of the
New York State Supreme Court, County of New York, and the United
States District Court for the Southern District of New York in any such
suit, action or proceeding. Each of the parties hereto further agrees to
accept
and acknowledge service of any and all process which may be served in any
such
suit, action or proceeding in the New York State Supreme Court, County of
New York, or in the United States District Court for the Southern District
of New York and agree that service of process upon it mailed by certified
mail to its address will be deemed in every respect effective service of
process
upon it, in any such suit, action or proceeding.
SECTION
19. Actions
by Secured Party;
Distributions.
Unless
otherwise specifically provided herein, wherever this Security Agreement
provides for actions to be taken by the Secured Party, or any determination
to
be made by the Secured Party, the actions of those Holders representing, in
the
aggregate, more than 50% of the outstanding Notes shall represent the actions
or
agreement of the Secured Party. In addition, whenever the Secured Party is
entitled to the distribution of monies, Collateral or any other property,
pursuant to the terms of this Security Agreement, such monies, Collateral and/or
other property shall be distributed to the Secured Party, on a pro-rata basis,
based on the outstanding principal amounts under the Note.
SECTION
20. Headings.
Section and
subsection headings in this Security Agreement are included herein for
convenience of reference only and shall not constitute a part of this Security
Agreement for any other purpose or be given any substantive effect.
SECTION
21. Execution.
This
Agreement may be executed simultaneously in two or more counterparts, each
of
which shall be deemed an original but all of which together shall constitute
one
and the same instrument.
SECTION
22. Waiver
of Jury Trial.
DEBTOR
AND SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SECURITY AGREEMENT.
DEBTOR AND SECURED PARTY ALSO WAIVE ANY BOND OR INDEMNITY OR SECURITY UPON
SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF DEBTOR OR THE SECURED
PARTY HERETO. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF
ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. DEBTOR AND SECURED
PARTY ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING
INTO THIS SECURITY AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER
IN THEIR RELATED FUTURE DEALINGS. DEBTOR AND SECURED PARTY FURTHER WARRANT
AND
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SECURITY
AGREEMENT. IN THE EVENT OF LITIGATION. THIS SECURITY AGREEMENT MAY BE FILED
AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
Signature
Page Follows
-13-
WITNESS
the due
execution hereof by the respective duly authorized officers of the undersigned
as of the day first above written.
DEBTORS:
By:
/s/ Xxxxxx Xxxxxx
Name:
Xxxxxx
Xxxxxx
Title:
President and CEO
XA
Scenes, Inc.
By:
/s/ Xxxxxx Xxxxxx
Name:
Xxxxxx
Xxxxxx
Title:
President and CEO
The
Experiential Agency, Inc.
By:
/s/ Xxxxxx Xxxxxxxx
Name:
Xxxxxx
Xxxxxxxx
Title:
President
XA
Interactive, Inc.
By:
/s/ Xxxxxx Xxxxxx
Name:
Xxxxxx
Xxxxxx
Title:
President and CEO
Fiori
XA, Inc.
By:
/s/ Xxxxxx Xxxxxxxx
Xxxxxx
Xxxxxxxx
President
-14-
SECURED
PARTY:
Sands
Brothers Venture Capital LLC
By:
/s/ Xxxxx
Xxxxx
Name:
Xxxxx Xxxxx
Title:
COO
Sands
Brothers Venture Capital II LLC
By:
/s/ Xxxxx
Xxxxx
Name:
Xxxxx Xxxxx
Title:
COO
Sands
Brothers Venture Capital III LLC
By:
/s/ Xxxxx
Xxxxx
Name:
Xxxxx Xxxxx
Title:
COO
Sands
Brothers Venture Capital IV LLC
By:
/s/ Xxxxx
Xxxxx
Name:
Xxxxx Xxxxx
Title:
COO
Katie
& Xxxx Bridge Partners, L.P.
By:
/s/ Xxxxx
Xxxxx
Name:
Xxxxx Xxxxx
Title:
COO
-15-
SCHEDULE
I TO SECURITY AGREEMENT
Locations
of Equipment, Inventory, Books and Records, Chief Executive Officer
Locations
of Equipment and Inventory:
●
Chicago,
Illinois - Event decor, furniture and fixtures
|
○
|
Office
- Xxxx Xxxxxxx Center, 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx 00000 - The Experiential Agency,
Inc.
|
|
○
|
Design
Center - 0000 Xxxxx Xxxxxxx, Xxxxxxx, XX 00000
Fiori,
XA, Inc.
|
●
Bergen,
New Jersey (warehouse) - Event decor, furniture and fixtures
0000
00xx
Xxxxxx
Xxxxx
Xxxxxx, XX - The Experiential Agency, Inc.
●
New
York,
New York and Manhattan, New York - (office space and warehouse),- Event decor,
furniture and fixtures
|
○
|
New
York Office and venue - 000 Xxxx 00xx Xxxxxx, Xxxxx 0, Xxx Xxxx,
XX 00000
XA
Scenes, Inc.
|
● Los
Angeles, California (office equipment)
|
○
|
000
X. Xxxxxxx, Xxxxx 000, Xxx Xxxxxxx, XX 00000
|
The Experiential Agency, Inc.
Location
of Books and Records and Chief Executive Officer:
●
Xxxx
Xxxxxxx Center, 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000
-
The Experiential Agency, Inc.
-16-
